One Last Chance!!
Form 8-K for ADMIRALTY HOLDING CO
14-Mar-2008
Entry into a Material Definitive Agreement, Creation of a Direct Financial O
Item 1.01 Entry into a Material Definitive Agreement
Securities Purchase Agreements (February 25, 2008 and October 16, 2007
On February 25, 2008 and October 16, 2007, Securities Purchase Agreements (collectively, the "Purchase Agreement") were entered into by and among the Company, and AJW Partners, LLC, AJW Master Fund, Ltd., and New Millennium Capital Partners II, LLC (collectively, the "Buyers") as part of a single plan of financing for the Company. Under the terms of the Purchase Agreement, the Buyers purchased from the Company (i) three year 8% callable secured convertible notes (the "Convertible Notes"), in the aggregate principal amount of $915,000, convertible into shares of our common stock, and (ii) seven year warrants to purchase an aggregate of 20,000,000 shares of our common stock, with an exercise price of $0.002 per share (the "Warrants"). The aggregate purchase price (funding proceeds) was received by the Company in two tranches, the first for $450,000 being received on or about October 30, 2007 and the second for $465,000 being received on or about March 6, 2008.
Convertible Notes
Interest is payable on the Convertible Notes at the rate of 8% per annum and is payable quarterly in cash. However, the interest rate resets to 0% for any month in which the stock price is greater than $0.05, for each trading date during that month.
The full principal amount of the Convertible Notes, plus any accrued and unpaid interest, plus any default interest, plus certain penalties, if owed, under the Convertible Notes or the ancillary Registration Rights Agreement (the "Conversion Amount") is convertible into our common stock at any time, at the Buyer's option, at a conversion price equal to the lesser of:
. 25% multiplied by the average of the lowest three intraday trading prices during the twenty trading days ending one trading day prior to the date that the conversion notice is sent to the company, and
. $0.15 (the fixed conversion price).
The conversion price is subject to adjustment for any merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event, and the fixed conversion price is subject to adjustment in connection with any sale or deemed sale of our common stock for less than the fixed conversion price.
In the event that we issue shares of our common stock as a result of conversions of the Convertible Notes equal to 19.99% of our total shares outstanding (subject to adjustment for stock splits, stock dividends, combinations, capital reorganizations and similar events), and if we fail to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over us or any of our securities on our ability to issue shares of common stock in excess of 19.99% of our common stock outstanding, then in lieu of any further right to convert the Convertible Notes, and in full satisfaction of our obligations under the Convertible Notes, we shall pay to the Buyers, within fifteen (15) business days of day that we issue such shares, an amount equal to 130% times the sum of (a) the then outstanding principal amount of the Convertible Notes immediately following such date, plus (b) accrued and unpaid interest on the unpaid principal amount of the Convertible Notes to the date of payment, plus (c) default interest, if any, on the amounts referred to in clause (a) and/or (b) above, plus (d) any optional amounts that may be added thereto at such date by the Buyers in accordance with the terms of the Convertible Notes. In the event that the sum of (x) the aggregate number of shares of our common stock issued upon conversion of the Convertible Notes plus (y) the aggregate number of shares of Common Stock that remain issuable upon conversion of Convertible Notes, represents at least 19.99% of the total outstanding shares of common stock, we will use our best efforts to seek and obtain shareholder approval (or obtain such other relief as will allow conversions hereunder in excess of 19.99%) as soon as practicable thereafter and before the Convertible Notes are converted into 19.99% of our outstanding shares of common stock.
Upon a default under the Convertible Notes, we are required to pay the Buyers an amount equal to the greater of (i) 130% times the sum of (w) the then outstanding principal amount of the Convertible Notes plus (x) accrued and unpaid interest on the unpaid principal amount of the Convertible Notes to the date of payment plus (y) default interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) certain penalties, if any, owed to the Buyers pursuant to Convertible Notes or the May 30 Registration Rights Agreement (the "Default Sum"), or (ii) that amount equal to (a) the highest number of shares of our common stock issuable upon conversion of or otherwise pursuant to the Default Sum, treating the trading day immediately preceding the payment date as the conversion date for purposes of determining the lowest applicable conversion price, unless the default arises as a result of a breach in respect of a specific conversion date in which case such conversion date shall be the conversion date, multiplied by (b) the highest closing price for our common stock during the period beginning on the date of first occurrence of the default and ending one day prior to the payment date.
We have a call option under the terms of the Convertible Notes. The call option provides us with the right to prepay all of the outstanding Convertible Notes at any time, provided that (i) we have not suffered an event of default or failed to eliminate any prohibitions against issuing more that 19.99% of our common stock under the Convertible Notes, (ii) we have sufficient common stock reserved for issuance upon full conversion of the Convertible Notes, and (iii) our stock is trading at or below $0.15 per share. Prepayment of the notes is to be made in cash equal to either (i) 125% of the conversion amount for prepayments occurring within 30 days following the issue date of the Convertible Notes; (ii) 135% of the conversion amount for prepayments occurring between 31 and 60 days following the issue date of the Convertible Notes; and (iii) 150% of the conversion for prepayments occurring after the 60th day following the issue date of the Convertible Notes.
Our right to repay the Convertible Notes is exercisable on not less than ten trading days' prior written notice to the Buyers. Notwithstanding the notice of prepayment, the Buyers have the right at all times to convert all or any portion of the Convertible Notes prior to payment of the prepayment amount.
We also have a partial call option under the terms of the Convertible Notes in any month in which the current price of our common stock is below $0.15 for each day during such month. Under the terms of the partial call option, we have the . . .
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The sale of the Convertible Notes described in Item 1.01 were completed on March 6, 2008 , when the funding (purchase proceeds) was actually received by the Company.. The Convertible Notes represent a debt obligation arising other than in the ordinary course of business which constitute a direct financial obligation of the Company.
Item 3.02 Unregistered Sales of Equity Securities
The Convertible Notes and the Warrants described in Item 1.01 were offered and sold to the Buyers in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated thereunder. Each of the Buyers is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.
Item 9.01 Financial Statements and Exhibits
Exhibit No. Document
10.1 Securities Purchase Agreement by and among the Company, and AJW Partners,
LLC, AJW Master Fund, Ltd., and New Millennium Capital Partners II, LLC.
10.2 Form of Callable Secured Convertible Note
10.3 Form of Stock Purchase Warrant.
10.4 Security Agreement by and among the Company, AJW Partners, LLC, AJW
Master Fund, Ltd., and New Millennium Capital Partners II, LLC
10.5 Intellectual Property Security Agreement by and among the Company, AJW
Partners,LLC, AJW Master Fund, Ltd., and New Millennium Capital Partners
II LLC
10.6 Registration Rights Agreement by and among the Company, AJW Partners,
LLC, AJW Master Fund, Ltd., and New Millennium Capital Partners II, LLC
10.7 Subsidiary Guaranty by and among the Company, Admiralty Corporation,
Admiralty Marine Operations, Ltd., AJW Partners, LLC, AJW Master Fund,
Ltd., and New Millennium Capital Partners II
