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): March 2, 2007
ISRAMCO, INC.
(Exact name of registrant as specified in its charter)
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Delaware 0-12500 13-3145265
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
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11767 KATY FREEWAY, HOUSTON, TX 77079
(Address of principal executive offices, including Zip Code)
713-621-3882
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] 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))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
As previously described in the Current Report on Form 8-K of Isramco
Inc. (the "Company") filed on February 26, 2007, the Company and Five States
Energy Company, L.L.C. ("Five States") entered into a certain Purchase and Sale
Agreement (the "Purchase Agreement"), pursuant to which the Company agreed to
purchase from Five States, through Isramco Energy LLC, a Texas limited liability
company that is wholly owned by the Company ("Isramco Energy"), certain oil and
gas properties (including 650 oil and gas wells) located in Texas and New
Mexico.
The closing of the transactions contemplated in the Purchase Agreement
was completed on March 2, 2007 for an aggregate purchase price of $92 million
(the "Purchase Price"). According to an engineering report prepared by an
independent consulting company relating to the properties purchased under the
Purchase Agreement, the estimated proved developed producing reserves are
1,447,161 net barrels of oil and 20,078,174 net MMCF's of natural gas and
1,305,705 net of liquid products.
The Company funded $7.7 million of the Purchase Price from working
capital and the balance from a combination of commercial bank loans and loans
from related parties. The loans are discussed below.
The Company obtained loans in the total principle amount of $42 million
from Naphtha Israel Petroleum Corp. Ltd., the parent company (including through
its wholly owned subsidiary IOC-Israel Oil Company Ltd) ("Naphtha") with terms
and conditions as below:
Pursuant to a Loan Agreement dated as of February 27, 2007 (the "Loan
Agreement"), the Company obtained $18.5 million. The outstanding principal
amount of the loan accrues interest at per annum rate equal to the London
Inter-bank Offered Rate (LIBOR) plus 5.5%, not to exceed 11% per annum. Interest
is payable at the end of each loan year. Principal plus any accrued and unpaid
interest are due and payable on February 26, 2014. Interest after the maturity
date accrues at the per annum rate of LIBOR plus 12% until paid in full. At any
time, the Company is entitled to prepay the outstanding amount of the loan
without penalty or prepayment. To secure its obligations that may be incurred
under the Loan Agreement, the Company agreed to grant to Naphtha a security
interest in certain specified properties held by Jay Petroleum, its wholly owned
subsidiary. Naphtha can accelerate the loan and exercise its rights under the
collateral upon the occurrence any one or more of the following events of
default: (i) the Company's failure to secure the indebtedness as provided for in
the agreement, pay any amount that may become due in connection with the loan
within five (5) days of the due date (whether by extension, renewal,
acceleration, maturity or otherwise) or fail to make any payment due under any
hedge agreement entered into in connection with the transaction, (ii) the
Company's material breach of any of the representations or warranties made in
the loan agreement or security instruments or any writing furnished pursuant
thereto, (iii) the Company's failure to observe any undertaking contained in
transaction documents if such failure continues for 30 calendar days after
notice, (iv) the Company's insolvency or liquidation or a bankruptcy event or(v)
the Company's criminal indictment or conviction under any law pursuant to which
such indictment or conviction can lead to a forfeiture by the Company of any of
the properties securing the loan. Mr. Jackob Maimon, the Company's president and
director is a director of Naphtha and Mr. Haim Tsuff, the Company's Chief
Executive Officer and Chairman is a controlling shareholder of Naphtha.
Pursuant to a Loan Agreement dated as of February 27, 2007 (the "Second
Loan Agreement") the Company obtained a loan from Naphtha, in the principal
amount of $10.5 million, repayable at the end of seven years. Interest accrues
at a per annum rate of LIBOR plus 6%. At any time the Company can make
prepayments without premium or penalty .The Second Loan is not secured. The
other terms of the Second Loan Agreement are identical to the terms of the Loan
Agreement.
Pursuant to a Loan Agreement dated as of February 27, 2007 (the "Third
Loan Agreement ") the Company obtained a loan from Naphtha, in the principal
amount of $12 million, repayable at the end of five years. Interest accrues at a
per annum rate of LIBOR plus 6%. At any time the Company can make prepayments
without premium or penalty. The Third Loan is not secured. The other terms of
the Third Loan Agreement are identical to the terms of the Loan Agreement.
Pursuant to a Loan Agreement dated as of February 26, 2007 the Company
obtained a loan from J.O.E.L Jerusalem Oil Exploration Ltd,.a related party ("
JOEL"), in the principal amount of $ 7 million, repayable at the end of 3
months. Interest accrues at a per annum rate of 5.36%.. Mr. Jackob Maimon, the
Company's president and director is a director of JOEL and Mr. Haim Tsuff, the
Company's Chief Executive Officer and Chairman is a controlling shareholder of
JOEL.
Pursuant to a Credit Agreement, dated as of March 2, 2007 (the "Credit
Agreement") between Isramco Energy and Wells Fargo Bank NA, as administrative
agent, Isramco Energy obtained a $35.3 million credit line from Wells Fargo.
Amounts outstanding under the credit line are payable by March 1,2011. Interest
on amounts outstanding accrue at a per annum rate equal
to LIBOR plus 2%. An Event of Default under the Credit Agreement shall be deemed
to have occurred in the event of any one or more of the following:
(a) Isramco Energy shall default in the payment or prepayment when
due of any principal of or interest on any loan, or any
reimbursement obligation for a disbursement made under any
letter of credit, or any fees or other amount payable by it
under the Credit Agreement or any of the documents entered into
in connection therewith (the "Credit Agreement Documents");
(b) Isramco Energy or any of its subsidiaries shall default in the
payment when due of any principal of or interest on any of its
other debt, or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such
debt shall occur if the effect of such event is to cause, or
(with the giving of any notice or the lapse of time or both) to
permit the holder or holders of such debt (or a trustee or agent
on behalf of such holder or holders) to cause, such debt to
become due prior to its stated maturity;
(c) Any representation, warranty or certification made or deemed
made pursuant to the Credit Agreement or any other Credit
Agreement Document, or any certificate furnished pursuant to the
provisions thereof, shall prove to be have been false or
misleading as of the time made or furnished in any material
respect;
(d) Isramco Energy shall (i) default in the performance of any of
its obligations under the Credit Agreement (including the
obligation to provide audited financial statements on an annual
basis and the obligation to report any default, but excluding
other affirmative covenants) or (ii) default in the performance
of any of the affirmative covenants under the Credit Agreement
(excluding the obligation to provide audited financial
statements on an annual basis and the obligation to report any
default) or in the performance of its obligations under any
other Credit Agreement Document (other than payment obligations,
which are governed by clause (a) above) and such default shall
continue unremedied for a period of thirty (30) days after the
earlier to occur of (A) Isramco Energy receiving notice thereof
or (B) Isramco Energy otherwise becoming aware of such default;
(e) The Company or any of Isramco Energy's subsidiaries shall
default in the performance of any of their respective
obligations under the guaranty agreements entered into pursuant
to the Credit Agreement (other than the payment of amounts due,
which shall have no grace period) and such default shall
continue unremedied for a period of thirty (30) days after the
earlier to occur of (i) the Company receiving notice thereof or
(ii) the Company, Isramco Energy or any of its subsidiaries
otherwise becoming aware of such default;
(f) Isramco Energy shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due;
(g) Isramco Energy shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or all or a substantial part of
its property, (ii) make a general assignment for the benefit of
creditors, (iii) commence a voluntary case under the Federal
Bankruptcy Code (as now or hereafter in effect), (iv) file a
petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up, liquidation
or composition or readjustment of debts, (v) fail to controvert
in a timely and appropriate manner, or acquiesce in writing to,
any petition filed against it in an involuntary case under the
Federal Bankruptcy Code or (vi) take any corporate action for
the purpose of effecting any of the foregoing;
(h) A proceeding or case shall be commenced, without the application
or consent of Isramco Energy, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of Isramco Energy or all or
any substantial part of its assets, (iii) similar relief in
respect of Isramco Energy under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 days, or (iv) an
order for relief against Isramco Energy shall be entered in an
involuntary case under the federal bankruptcy code;
(i) A judgment or judgments for the payment of money in excess of
$100,000 in the aggregate shall be rendered by a court against
Isramco Energy or any subsidiary and the same shall not e
discharged (or provision shall not be made for such discharge),
or a stay of execution thereof shall not be procured by posting
of a bond or otherwise, within thirty (30) days from the date of
entry thereof and Isramco Energy or such subsidiary shall not,
within said period of 30 days, or such longer period during
which execution of the same shall have been stayed, appeal
therefrom and cause
the execution thereof to be stayed during such appeal;
(j) The Credit Agreement Documents after delivery thereof shall for
any reason, except to the extent permitted by the terms thereof,
cease to be in full force and effect and valid, binding and
enforceable in accordance with their terms, or cease to create a
valid and perfected lien of the priority required thereby on any
of the collateral purported to be covered thereby, except to the
extent permitted by the terms of the Credit Agreement, or the
Company, Isramco Energy or any of its subsidiaries shall so
state in writing;
(k) An event having a material adverse effect on Isramco Energy
shall occur;
(l) Isramco Energy discontinues its usual business or a change of
control occurs;
(m) The Company or any of Isramco Energy's subsidiaries takes,
suffers or permits to exist any of the events or conditions
referred to in paragraphs (f), (g), (h) or (i) or if any
provision of any guaranty agreement related thereto shall for
any reason cease to be valid and binding on such guarantor or if
such guarantor shall so state in writing;
(n) Isramco Energy defaults under certain management, operating and
consulting agreements entered into with respect to properties
for which the lender has a security interest..
In addition to including customary affirmative and negative covenants,
the Credit Agreement requires Isramco Energy to: (a) maintain a ratio of
consolidated current assets to consolidated current liabilities of no less than
1.0 to 1.0 at all times; (b) ensure that its leverage ratio is no more than 3.50
to 1.0 as of the end of each fiscal quarter; (c) ensure that its interest
coverage ratio is no more than 2.50 to 1.0 as of the end of each fiscal quarter;
(d) ensure that its capital expenditures in any fiscal year do not exceed
$2.500,000.; ensure that COPAS charges do not exceed $250 per well per month.
Amounts outstanding under the Credit Agreement are secured by a
guarantee from the Company and a pledge by the Company of the shares of Isramco
Energy.
Additionally, pursuant to an agreement between Sigma Energy Corporation
("Sigma"), an unrelated party that originated the transaction with Five States,
the Company and Isramco Energy, Isramco Energy paid to Sigma on March 2, 2007,
the amount of $300,000 and after Payout (as defined in the Agreement with
Sigma), Isramco Energy undertook to assign to Sigma a direct ownership interests
equal to 3.75% of the interests acquired by Isramco Energy under the Purchase
Agreement.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT
The information set forth under Item 1.01 of this Current Report on Form
8-K is hereby incorporated by reference into this Item 2.03
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits:
None
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.
DATED: MARCH 8, 2007 ISRAMCO, INC.
BY: /s/ Haim Tsuff
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HAIM TSUFF
CHIEF EXECUTIVE OFFICER