Mar. 3, 2011 (TheNewswire.ca) --
CALGARY, ALBERTA (March 3, 2011) Action Energy Inc. (OOTC:AECFF) ("Action")(NEX:AEC.H) is pleased to announce that it has completed the acquisition of Cavalon Capital Partners Inc. ("Cavalon") and has reduced its secured indebtedness by approximately $1.88 million as contemplated by the Financial Support and Forbearance Agreement ("Support Agreement") entered into by Action with Cavalon, its secured lender, and announced on February 18, 2011.
Action completed the acquisition of all of the issued and outstanding shares of Cavalon ("Cavalon Shares") for a purchase price of $1,713,440. Upon closing, the assets of Cavalon consisted of an interest in a non-operated oil and gas property located in the area of Clive, Alberta, and secured indebtedness of Action to Cavalon in an amount equal to the purchase price for the Cavalon Shares. Cavalon reduced the outstanding balance of the secured indebtedness by the amount of the purchase price and by an additional $168,100 to be paid to an arm's length third party and assigned the balance of approximately $865,064 and related security to Cavalon Capital Corp. ("Corp."). In connection with the assignment of the remaining secured debt, Corp. agreed to forbear in the enforcement of the security, to terminate the accrual of interest on the debt and to provide Action with ongoing financial support as Action undertakes the reorganization and revitalization of its business and affairs. The acquisition of the Cavalon Shares and the repayment of indebtedness was completed using funds received from Action's participation in a restructuring involving a group of labour and management service companies which was completed and announced by way of a press release issued on March 1, 2011 (the "LMS Transaction").
The acquisition of Cavalon was a related party transaction within the meaning of applicable Canadian securities laws as the shareholders of Cavalon were Greg Matthews, a director of Action, and the spouse of David Tonken, a director and officer of Action. The board of directors (excluding Messrs. Tonken and Matthews) approved the acquisition on the basis that it was necessary to reduce Action's secured indebtedness, obtain continued forbearance in relation to the remaining secured debt and to enable Action to continue efforts to reorganize its business and affairs. Additional information relating to exemptions from the valuation and minority approval requirements applicable to related party transactions is contained in a material change report to be filed in accordance with applicable Canadian securities laws. The acquisition of Cavalon was completed in fewer than 21 days from the announcement of the Support Agreement in order to coordinate with the closing of the LMS Transaction and to enable Action to proceed expeditiously with efforts to reorganize its affairs.
For further information please 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 reorganization of the business and affairs of Action, the enforcement of security relating to the assets of Action and the provision of financial support to Action. 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 agreements relating to outstanding indebtedness and security, the attainment of sufficient financing, the receipt of all required consents and approvals and the failure by any party to comply with its obligations under forbearance agreements 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.
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