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Subsequent Events
3 Months Ended
Mar. 31, 2012
Subsequent Events [Abstract]  
Subsequent Events

11. Subsequent Events

On April 13, 2012, the Company signed a securities purchase agreement (the "Securities Purchase Agreement") with JCH Crenshaw Holdings, LLC (the "Investor"), for the sale (the "Preferred Stock Financing") of the Company's $5,000,000 of Series A Convertible Preferred Stock (1,000,000 Shares)(the "Series A Preferred Stock"), which are initially convertible into 1,000,000 shares of the Company's common stock at a conversion price of $5.00 per share, and Common Stock Purchase Warrants exercisable for 325,000 shares of common stock, 125,000 of such shares at an initial exercise price of $6.00 per share and 200,000 of such shares at an initial exercise price of $7.00 per share. On May 2, 2012 the Company completed the issuance of the $5,000,000 of Series A Convertible Preferred Stock.

On April 30, 2012, the Company filed an Articles of Amendment to our Articles of Incorporation designating 1,000,000 shares of the Company's authorized preferred stock as Series A Convertible Preferred Stock. The Company also entered into the Registration Rights Agreement and Investor Rights Agreement with the Investor on May 2, 2012.

The Series A Preferred Stock rank senior to all other equity instruments of the Company, include the Company's common stock. The Series A Preferred Stock accrue cumulative dividends at a rate of 6% per annum, whether or not dividends have been declared by the Board of Directors and whether or not there are profits, surplus or other funds available for the payment of such dividends. The Company may pay such dividends in shares of the Company's common stock based on the then current market price of the common stock. At any time following a material default by the Company, as defined in the Securities Purchase Agreement, or April 30, 2017, the holders of a majority of the outstanding Series A Preferred Stock may require the Company to redeem the Series A Preferred Stock at a redemption price equal to the lessor of (i) the liquidation preference per share (initially $5.00 per share, subject to adjustments for certain future equity transactions defined in the Securities Purchase Agreement) and (ii) the fair market value of the Series A Preferred Stock per share, as determined in good faith by the Company's Board of Directors. The redemption price, plus any accrued and unpaid dividends, shall be payable in 36 equal monthly installments plus interest at an annual rate of 6% per annum.

On May 1, 2012 the Company and Chase executed a consent and amendment to our revolving credit agreement, whereby Chase as lender agreed to consent to: the Securities Purchase Agreement; the issuance and sale of the Preferred Stock and Warrants; the payment of the preferred dividends required; and the redemption of the Preferred Stock, all subject to the terms and conditions set forth in the agreements and the associated Amended Articles of Incorporation.

The securities sold were offered and sold in a transaction exempt from registration under the Securities Act of 1933, in reliance on Section 4(2) thereof and Rule 506 of Regulation D thereunder. The Investor represented that it is an "accredited investor" as defined in Regulation D. Pursuant to the Registration Rights Agreement the Company agreed to register with the SEC for resale the common stock underlying the Series A Preferred Stock and the Warrants at the request of holders.

 

The description of the Preferred Stock Financing herein is not complete and is qualified in its entirety by reference to the full text of the Securities Purchase Agreement, the Articles of Amendment to Articles of Incorporation, the Warrants, the Registration Rights Agreement and the Investors Rights Agreement which were attached as exhibits to the Form 8-K filed on April 19, 2012 and are incorporated herein by this reference.