Feb. 18, 2011 (TheNewswire.ca) --
CALGARY, ALBERTA (February 18, 2011) On February 17, 2011, Action Energy Inc. (TSXV:AEC.H) (TSXV:AEC) (OOTC:AECFF) ("Action")(NEX:AEC.H) and Cavalon Capital Partners Inc. ("Cavalon") executed a Financial Support and Forbearance Agreement (the "Support Agreement"). Action is presently indebted to Cavalon in the approximate principal amount of $2,746,604 with interest accruing thereon at the rate of prime plus 2.5% (the "Debt") and Cavalon holds various security interests granted by Action to secure repayment of the Debt (the "Security"). Pursuant to the Support Agreement, Cavalon has agreed to provide the financial support Action requires to enter into and perform the terms of the agreement Action and 2980622 Canada Inc. entered into with a group of labour and management services companies ("Labour Companies"), as a component of a labour restructuring being undertaken by the Labour Companies (the "Agreement"). The particulars of the Agreement were disclosed in a press release issued by Action on February 15, 2011. In addition, Cavalon has agreed to provide Action with ongoing financial support as Action undertakes the reorganization and revitalization of its business and affairs. Cavalon has also agreed to deliver to Action an income producing oil and gas property (the "Property") in order to provide Action with monthly cash flow. Cavalon has agreed that it will forbear in the enforcement of its Security so as to permit Action to retain as working capital a portion of the proceeds that may be received under the terms of the Agreement, to retain the income derived from the Property and to retain future receipts. Cavalon has also agreed to terminate the interest accruing on the Debt. Cavalon's financial support and forbearance are conditional upon Action repaying a portion of the Debt from the proceeds that may be derived from the Agreement. Action and Cavalon have agreed that the most efficient way to achieve most of the Debt repayment and the transfer of the Property from Cavalon to Action is for Action to acquire all of the issued and outstanding shares of Cavalon. At the time of the acquisition of the Cavalon shares, Cavalon will hold a portion of the Action Debt and the Property. The Action Debt will be reduced by the purchase price of the Cavalon shares. The balance of the Debt and the Security will be assigned to a corporation to be formed and to be named Cavalon Capital Corp. ("Corp."). Following the acquisition of the Cavalon shares, Action will also make a payment to a third party at the direction of Cavalon and Corp. and the Debt will be further reduced by the amount of that payment. The balance of the Debt and the Security will continue to be held by Corp. and Corp. will adopt and implement the support and forbearance terms contained in the Support Agreement. A director and officer of Action, Greg Matthews, is a shareholder of Cavalon and Action's purchase of the Cavalon shares will be a related party transaction. The determination of the amount of the Debt repayment and Action's acquisition of the Cavalon shares will occur following the closing of the Agreement.
For further information, contact:
David Tonken, President
Action Energy Inc.
Telephone: 778.426.3329
Email: tonken@icrossroads.com
Forward Looking Statements:
This press release contains forward‐looking statements. More particularly, this press release contains statements concerning the anticipated completion of certain transactions. Although Action believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Action can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to; the failure to satisfy conditions set out in the Agreement and the Support Agreement, including satisfactory due diligence review, the attainment of sufficient financing by all parties, the receipt of all required consents and approvals and the failure by any party to comply with its obligations under the Agreement and the Support Agreement or otherwise.
The forward-looking statements contained in this document are made as of the date hereof and Action undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Neither the TSX venture exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX venture exchange) accepts responsibility for the adequacy or accuracy of this RELEASE.
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.
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