Island has finalized terms with Mr. Benitz, Chairman of Island, and the Gascoigne Trust, a family trust connected to Mr. Benitz, (together the "Lenders") for the provision of funds which will be used for working capital purposes. In addition the Board of Directors has agreed terms with Longreach Oil and Gas Ventures Limited for the provision of US $150,000 to cover a bank guarantee given to the government of the Kingdom of Morocco to secure Island's position in the Zag Concession, onshore Morocco, where the Reconnaissance License awarded to the Company has recently been converted to a full Exploration License (the "License").
Mr. Benitz and Gascoigne have agreed to advance a loan of £300,000 to Island, [comprised of £100,000 from Mr Benitz in his personal capacity and £200,000 from Gascoigne] (the "Chairman Loan"). The principal terms of the detailed loan agreement are summarised below. The Chairman Loan is repayable on March 31, 2010 (the "Repayment Date") and shall bear interest at 10 percent per annum, accruing daily.
At any time during the period of the Chairman Loan, or in the event of any non-repayment out of a Company sale of assets or fundraising by the Repayment Date, or a change of control of Island, the Lenders may, at their absolute discretion, elect to have the Chairman Loan converted into ordinary shares in Island at a conversion price calculated as the volume weighted average of the closing price of Island's ordinary shares on the AIM market of the London Stock Exchange for the 20 days prior to service of notice by the Lenders. A fixed and floating charge over the assets of the Company will be given in favour of the Lenders as security for the Chairman Loan. Mr. Benitz, on account of his personal interest in this transaction and his connection with Gascoigne, absented himself from board consideration of the Chairman Loan.
Longreach has agreed to advance a loan of US $150,000 to Island (the "Longreach Loan"). The principal terms of the detailed loan agreement are the same as for the Chairman Loan. A charge over the assets of the Company will be given in favor of Longreach as security for the Longreach Loan. Mr. Benitz, who has a beneficial interest in Longreach, absented himself from board consideration of the Longreach Loan.
Related Party Transactions
The Chairman Loan and the Longreach Loan (the "Loans") are considered related party transactions pursuant to the AIM Rules for Companies. The Directors of the Company, with the exception of Mr. Benitz, having consulted with its nominated adviser, Davy, consider that the terms of the Loans are fair and reasonable insofar as its shareholders are concerned. In forming their opinion the Directors have taken into account that the Company has not been able to obtain sufficient funding from other sources for working capital purposes, together with the need to secure the License.
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