tharmon, you are correct, there is no provision to convert the $2 million dollar note to stock, per the 8K and a copy of the note (reference filing copy below). I'm glad to see the company put out the 8K information for shareholders before the vote, because of some posts fearing a stock conversion feature; however that was dropped when AMEP became a BDC, and assigned the note with the leases as collateral and it's new terms to Bend Arch. The note also shows that the leases held by the note are in Comanche and Eastland counties 'only' (contrary to some posts), and are much further out from the Newark East Barnett core area than the Hart and Padgett leases in Palo Pinto County where all the new drilling activity has been (there is a reason).
...hawk
---start of 8K copy---
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 25, 2007
AMERICAN ENERGY PRODUCTION, INC.
(Exact name of registrant as specified in its charter)
Delaware 333-52812 74-2945581
(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer Identification No.)
6073 Hwy 281 South
Mineral Wells, Texas 76067
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (210) 410-8158
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
-1-
--------------------------------------------------------------------------------
Section 1 -- Registrant's Business and Operations
Item 1.01 Entry into a Material Definitive Agreement
Effective July 25, 2007, Bent Arch Petroleum, Inc. (“Bend Arch”), a wholly-owned subsidiary of Registrant, executed a Modification and Extension Agreement (the “Agreement”) in relation to a $2,000,000 Promissory Note (Note”) that became due and payable on the same date. The Note is issued to Proco Operating Co., Inc. (“Proco”), a company controlled by the brother of the Company’s Chief Executive Officer and a director. The purpose of the Note is to secure payment for oil and gas leases and wells located in Comanche and Eastland counties in the State of Texas sold to Bend Arch by Proco on June 15, 2004. The Note replaced a $2,000,000 convertible debenture dated January 5, 2004.
The original term of the Note included (i) the payment of interest at a rate of eight percent (8%) per annum (ii) principal and interest due and payable on July 25, 2007 (iii) no prepayment penalty (iv) payment made in excess of sixty (60) days after the due date of July 25, 2007 is a default of the Note and Bend Arch will forfeit all ownership of the related leases and wells and relinquish operations on the lease and wells to Proco, and (v) upon a default of the Note, Bend Arch will vacate the leases with no rights of ownership and execute the necessary documents to transfer the leases and wells to Proco or its assigns.
The Agreement modifies the terms of the Note as follows:
· The maturity date of the Note is extended to September 25, 2007.
· Bend Arch covenants that as long as the Note is outstanding and unpaid, no transfer, assignment or sale of the underlying leases and wells securing the payment of the Note will be allowed without the written approval of Proco.
The documents comprising the above items are filed as Exhibit 99.1 and 99.2 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1 Modification and Extension Agreement dated July 25, 2007
99.2 Promissory Note dated June 15, 2004 by and between Bend Arch Petroleum, Inc. and Proco Operating Co., Inc.
-2-
--------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
AMERICAN ENERGY PRODUCTION, INC.
Date: August 1, 2007 By: /s/ Charles Bitters
Charles Bitters
Chief Executive Officer
-3-
--------------------------------------------------------------------------------
MODIFICATION AND EXTENSION AGREEMENT
This MODIFICATION AND EXTENSION AGREEMENT (the “Agreement”) is made and entered into as of July 25, 2007 by and between Bend Arch Petroleum, Inc., a Texas corporation (the “Company”) and Proco Operating Co., Inc. (the “Note Holder”).
WHEREAS, the Company has previously entered into a promissory note (the “Note”) with the Note Holder dated June 15, 2004; and
WHEREAS, the Company and the Note Holder desire to extend the terms and provisions of the Note as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the Company and the Note Holder agree as follows:
1. Extension of Term of Note.
The term of the Note is hereby extended by sixty (60 days) and the Note shall be due and payable in full, on or before September 25, 2007.
2. Covenant not to transfer, assign or sale .
The Company covenants that as long as the Note is outstanding and unpaid, no transfer, assignment or sale of the underlying leases and wells securing the payment of the Note will be allowed without the written approval of Note Holder.
IN WITNESS WHEREOF, each of the Company and the Note Holder has caused this Agreement to be executed as of the date first set forth hereinabove.
THE COMPANY:
Bend Arch Petroleum, Inc.
By: /s/ Charles Bitters
Charles Bitters
Director
NOTE HOLDER:
Proco Operating Co., Inc.
By: /s/ Johnnie Lee Bitters
Johnnie Lee Bitters
President
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, BEND ARCH PETROLEUM INC. through its Director Charles Bitters ('Debtor"), promises to pay to the order of PROCO OPERATING CO. INC. ("Lender") the principal sum of two million dollars ($2,000,000) at eight percent (8%) interest per annum. The purpose of said Promissory Note is to secure Payment for an Oil and Gas Lease and wells in Comanche and Eastland counties Texas, sold to Bend Arch Petroleum Inc. by Proco Operating on June 15,2004. Said leases and welts are described in Exhibits "A" attached hereto and made a part hereof for all purposes.
TERMS AND CONDITIONS
THE TERMS AND CONDITIONS OF SAID PROMISSORY NOTE are as follows:
Timely payments will be made to Lender, should Debtor fail to make or be delinquent in making payments in excess of Sixty (60) days to Lender, debtor will be considered in default of the conditions of this Promissory Note and the conditions of sale of the leases and wells noted above and Debtor will forfeit ALL ownership of said leases and wells as described in Exhibit "A" and will relinquish Operations on said leases and wells to Lender. Further Debtor will immediately vacate the leases with no rights of ownership to any of saidproperty or leases and will execute the necessary documents to transfer the leases and wells to Lender or to his assigns.
THE INDEBTEDNESS evidenced hereby is due and payable on July 25, 2007 or may be prepaid in whole or in part at any time without penalty. Debtor way pay the Promissory Note in full at his discretion, any partial pre-payment shall not defer the principal and/or interest due following such pre-payment. Any pre-payment shall be applied first to interest due and then to principal.
DEBTOR:
Bend Arch Petroleum Inc.
Date: June 15, 2004 By: /s/ Charles Bitters
Charles Bitters
Director
Market Data 
Markets 
AI
