8K out.
7-Jul-2006
Entry into a Material Definitive Agreement, Creation of a Direct Financial
Item 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On June 30, 2006, the Registrant issued to Dutchess Private Equities Fund, II L.P. ("Dutchess") a promissory note (the "Note") in the amount of $1,495,000 for a purchase price of $1,150,000.
As previously reported, on September 28, 2004, the Registrant entered into an Investment Agreement (the "Investment Agreement") with an affiliate of Dutchess, pursuant to which Dutchess has committed to purchase common stock of the Registrant up to an aggregate purchase price of $35 million over a two year period. The Dutchess Agreement provides that the Registrant from time to time may deliver a put notice to Dutchess, and Dutchess is obliged to purchase the dollar amount of common stock set forth in the notice.
The Note is due and payable in full on June 29, 2007. Other than the discount inherent in its purchase price, the Note is noninterest-bearing. The Note will be repaid using 100% of the proceeds of each put notice delivered by the Registrant to Dutchess under the Investment Agreement. The Note is also secured by a security interest in substantially all of the Registrant's assets pursuant to a Security Agreement dated March 6, 2006 with Dutchess.
In connection with the Note, the Registrant also paid Dutchess a facility fee of $90,000 and issued to Dutchess a non-interest bearing convertible debenture in the amount of $373,750 payable on June 29, 2011. The shares of common stock underlying the debenture carry piggyback registration rights. The debenture may be converted at Dutchess's option at a conversion price equal to $0.01 per share.
