Form 8-K for UNIVERSAL PROPERTY DEVELOPMENT & ACQUISITION CORP
24-Apr-2007
Entry into a Material Definitive Agreement, Com
Item 1.01 Entry Into a Material Definitive Agreement
Secured Loan from Sheridan Asset Management LLC
On April 20, 2007 (the Closing Date"), Universal Property Development and Acquisition Corporation ("UPDA" or the "Registrant"), a Nevada corporation, closed a term loan pursuant to the terms and conditions of a Loan Agreement, dated as of April 6, 2007, between UPDA and its majority owned subsidiaries Canyon Creek Oil & Gas, Inc. and Catlin Oil & Gas, Inc. (collectively the "borrower"), Messrs. Kamal Abdallah and Christopher McCauley, as guarantors, and Sheridan Asset Management, LLC, a Delaware limited liability company, as the lender ("Sheridan" or the "Lender") (the "Loan Agreement"). Pursuant to the terms and conditions of the Loan Agreement, and the ancillary Senior Secured Promissory Note (the "Note"), Security Agreement (the "Security Agreement") and other related documents (all of which are collectively referred to herein as the "Loan Documents"), UPDA agreed to borrow and Sheridan agreed to lend the aggregate principal amount of Three Million, Six Hundred and Thirty Five Thousand Dollars ($3,635,000) cash (the Term Loan") under the terms and conditions described below.
The Term Loan is due and payable on April 6, 2008 and is secured by a lien, more fully described in the Security Agreement, on all the assets of the Registrant and the assets of its subsidiaries, and is further secured by the pledges, mortgages and other security interests set forth in the Loan Documents. The Registrant will not pay interest on the principal of the Term Loan. Instead, the Term Loan was subject to an original issuance discount of twenty-five (25%) percent. Furthermore, the Registrant paid a closing fee of One Hundred Thousand Dollars ($100,000) and agreed to pay certain fees of the Lender that were incurred in the preparation of the Loan Documents and the closing of the Term Loan. On the Closing Date, after the payment of the issuance discount and related fees, the Registrant received Two Million Five Hundred and Sixty-Six Thousand, Two Hundred and Fifty Dollars ($2,566,250.00) in gross proceeds from the Term Loan.
Pursuant to the terms of the Loan Documents, Mr. Kamal Abdallah, the Registrant's Chief Executive Officer and a member of the board of directors, and Mr. Christopher McCauley, the Registrant's Vice President and General Counsel and a member of the board of directors, each agreed to the use of their respective shares of the Registrant's Series A Convertible Preferred Stock and other personal assets, as additional collateral for the Term Loan and to execute and provide personal guarantees for the repayment of the principal of the Term Loan and for the completion of the other commitments of the Registrant under the terms of the Loan Documents.
On the Closing Date, and as part of the agreed terms of the Term Loan, the Registrant issued warrants for the purchase of 22,343,821 shares of its common stock to the Lender. The exercise price of the warrants is $0.05483 per share and the warrants expire on April 6, 2012. The Registrant further agreed to use its best efforts to register the shares of common stock underlying the warrants issued to the Lender and could be liable for the payment of certain cash payments to the Lender in the event that a registration statement covering those common shares has not been filed and declared effective by certain deadlines.
The foregoing description of the Loan Documents, and the transactions contemplated thereby, is a summary of terms, is not intended to be complete and is qualified in its entirety by the complete text of those agreements, copies of which are attached hereto as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7, 10.8, 10.9 and 10.10 to this Report.
The proceeds of the Term Loan were used to finance the acquisition of 50,631,764 shares of the common stock of Heartland Oil and Gas Corp. ("Heartland") from Heartland and the acquisition of certain outstanding Heartland promissory notes with an aggregate principal amount of Four Million, Seven Hundred and Fifty-six Thousand Dollars ($4,756,000) from SDS Capital LLC and Baystar Capital, LLC. The terms of the acquisitions of the Heartland common stock and promissory notes are described in more detail in Item 2.01 of this Report.
Item 2.01 Completion of Acquisition of Assets
Acquisition of Common Stock of Heartland Oil & Gas Corp.
On April 20, 2007, the Registrant closed a stock purchase transaction (the "Stock Purchase") pursuant to the terms and conditions of a Stock Purchase Agreement, dated April 19, 2007, between the Registrant and Heartland Oil & Gas Corp., a Nevada corporation ("Heartland"), whereby the Registrant purchased 50,631,764 restricted shares of Heartland's common stock (the "Heartland Shares") for an aggregate purchase price of $1,000,000 in cash (the "Stock Purchase Price"). Based upon Heartland having had 46,737,013 shares of common stock outstanding prior to the closing of the Stock Purchase, and 97,368,777 shares of Heartland common stock outstanding after the Stock Purchase, the Registrant currently owns 52% of the outstanding common stock of Heartland. The Stock Purchase transaction therefore constitutes a change of control transaction for Heartland and the Registrant intends to hereafter operate Heartland as a majority owned subsidiary of the Registrant.
The Heartland Shares issued to the Registrant are restricted shares and cannot be resold unless they are subsequently registered pursuant to the Securities Act of 1933, as amended, or such sale is pursuant to a valid exemption from such registration. The Stock Purchase transaction referred to above did not involve an underwriter or placement agent and there were no underwriter's discounts or commissions, or placement agent fees or commissions, paid in connection with the transaction. The Registrant is an accredited investor, as defined by Rule 501 of Regulation D, and has the business and financial knowledge to analyze the risks associated with an investment in the Heartland Shares. The Stock Purchase transaction referred to above was an exempt transaction in accordance with the provisions of Section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving any public offering.
As part of the terms of the Stock Purchase, at the closing of the Stock Purchase transaction Messrs. Kamal Abdallah and Christopher McCauley were each appointed to the board of directors of Heartland to fill vacancies on that board caused by the resignations of previous board members. Mr. Abdallah, is the Registrant's Chief Executive Officer and a member of its board of directors, and Mr. McCauley, is the Registrant's Vice President and General Counsel and a member of its board of directors.
The Registrant financed the payment of the Stock Purchase Price from the partial proceeds of the Term Loan from Sheridan as described in Item 1.01 of this Report.
The foregoing descriptions of the Stock Purchase Agreement is not intended to be complete and is qualified in its entirety by the complete text of that agreement, a form of which is attached as Exhibit 10.11 to this Report.
Heartland is a publicly traded company whose shares currently trade on the Over-the-Counter Bulletin Board under the trading symbol "HOGC.OB". Heartland is also a Securities and Exchange Commission ("SEC") reporting company. Therefore, information on the business and financial condition of Heartland can be obtained by visiting the SEC's website at www.sec.gov.
Acquisition of Outstanding Promissory Notes of Heartland Oil & Gas Corp.
On April 20, 2007, the Registrant closed a note purchase transaction (the "Note Purchase") pursuant to the terms and conditions of a Note Purchase Agreement, dated April 19, 2007, between the Registrant as the buyer and SDS Capital Group SPC, Ltd. and Baystar Capital II, L.P. (together the "Sellers") whereby the Registrant purchased Four Million, Seven Hundred and Fifty-six Thousand Dollars ($4,756,000) in face amount of outstanding Convertible Senior Secured Promissory Notes of Heartland (the "Heartland Notes") for an aggregate purchase price of $1,500,000 in cash and 26,260,504 restricted shares of common stock of the Registrant, valued on the Closing Date for the purposes of the Note Purchase Agreement at $1,250,000 (collectively the "Note Purchase Price"). The Heartland Notes are secured by all the assets of Heartland and its subsidiaries and mature on December 31, 2007.
As additional consideration for the Heartland Notes, the Registrant has agreed to cause Heartland to issue the Sellers 5% of Heartland's common stock after giving effect to the issuance of the Heartland Shares, or approximately 5,125,000 shares of Heartland's common stock.
As part of the terms of the Note Purchase transaction, the Sellers assigned to the Registrant all of their rights under the Security Agreement between Heartland and the Sellers (the "Heartland Security Agreement") pursuant to which the Heartland Notes are securitized by all of the assets of Heartland and its subsidiaries. As a condition to the closing of the Note Purchase, Heartland executed consents to the transfer of the Heartland Notes and the assignment by the Sellers of their security interests under the Heartland Security Agreement.
The Heartland Notes do not pay interest but are convertible into shares of Heartland's common stock based on a conversion price of $0.04 per share. Under the terms of this conversion provision, the Heartland Notes acquired by the Registrant are convertible into 118,900,000 shares of Heartland's common stock. In the event of a full conversion of the Heartland Notes to Heartland common stock, the Registrant would hold 169,521,764 shares of Heartland common stock, equal to approximately 70% of the then outstanding Heartland common shares.
The Heartland Notes purchased by the Registrant, and the underlying common shares to be issued upon conversion, are restricted securities and cannot be resold unless they are subsequently registered pursuant to the Securities Act of 1933, as amended, or such sale is pursuant to a valid exemption from such registration. The Note Purchase transaction referred to above did not involve an underwriter or placement agent and there were no underwriter's discounts or commissions, or placement agent fees or commissions, paid in connection with the transaction. The Registrant is an accredited investor, as defined by Rule 501 of Regulation D, and has the business and financial knowledge to analyze the risks associated with an investment in the Heartland Notes. The Note Purchase transaction referred to above was an exempt transaction in accordance with the provisions of Section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving any public offering.
The Registrant financed the cash portion of the Note Purchase Price from the partial proceeds of the Term Loan from Sheridan as described in Item 1.01 of this Report.
The foregoing descriptions of the Heartland Notes and the Note Purchase transaction, and the agreements executed in connection therewith, are not intended to be complete and are qualified in their entirety by the complete text of those documents and agreements, forms of which are attached as Exhibits 10.12, 10.13, 10.14 and 10.15 to this Report.
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