JMG Exploration, Inc. previously announced that the share exchange with Newco Group Ltd., a company organized under the laws of the British Virgin Islands ("Newco") contemplated by the Share Exchange Agreement by and among JMG, Newco, ESAPI Ltd., a company organized under the laws of the Commonwealth of the Bahamas ("ESAPI"), and certain other parties, dated September 5, 2007, had failed to close as of December 31, 2007, and that JMG elected to exercise its right under the Share Exchange Agreement to terminate such agreement.
JMG reported previously that Newco had failed to repay a $3 million loan and accrued interest that was due December 31, 2007 and that the loan was in default. A previous offer to allow Newco until March 31, 2008 to repay the $3 million loan subject to certain conditions was not accepted. JMG intends on exercising its remedies as a secured creditor, which remedies include transferring the Iris shares that secure the loan into the name of JMG.
In the event Newco does not repay the loan and JMG transfers the pledged Iris shares into JMG's name, JMG would have effective majority control of Iris because of the 39% equity interest in Iris represented by the pledged Iris shares and JMG's irrevocable proxy from ESAPI representing an additional 14.5% equity interest in Iris. If Newco does not repay the loan and the pledged Iris shares are transferred into the name of JMG, the intent of JMG's Board of Directors' would be to either: (1) sell the investment; or (2) explore retaining, and perhaps increasing, the investment in Iris.
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