Item 1.01. Entry into Material Definitive Agreements.
The Registrant, on the one hand, and Gehrig White and Arthur Lomax, on the other hand, entered into a Second Loan Modification Agreement, dated as of July 23, 2012 (the “Loan Modification Agreement”). Lomax and White are both directors and founders of the Registrant.
The Loan Modification Agreement amends and modifies the terms of the Note Purchase Agreement, dated as of March 21, 2008, as amended on September 10, 2009, and the Loan Modification Agreement, dated June 2, 2011, between the Registrant and Lomax and Gehrig White. Pursuant to the Loan Modification Agreement, the parties agreed as follows:
(i) $100,000 of the remaining principal balance ($700,000) would be converted into 133,334 shares of the Registrant’s common stock, reflecting a conversion price of $0.75 per share, the closing price of a share of Registrant’s common stock on Friday, July 20, 2012 as reported by the NASDAQ Capital Market.
(ii) The Registrant would pay interest only, calculated at the rate of 9% per annum, on the remaining principal balance ($600,000) through December 31, 2012.
(iii) Beginning February 1, 2013 and the first day of each calendar month thereafter until January 1, 2017, the Registrant will make monthly payments of interest and principal in the amount of $14,931.03, the amount required to fully amortize the remaining principal balance and the accrued interest thereon over 48 months. In the event of a prepayment, the monthly amount would be recalculated.
(iv) The remaining principal balance of the note and all accrued but unpaid interest thereon is finally due and payable on December 31, 2016.
The parties also executed a Second Amended and Restated Promissory Note and a Second Amended and Restated Security Agreement to reflect the terms of the Loan Modification Agreement.
The Loan Modification Agreement and the transactions contemplated therein were approved by the Board of Directors, including a majority of the independent directors.
The foregoing summary is qualified in its entirety by reference to the Loan Modification Agreement which is attached as Exhibit 10.1 hereto. Further, all terms used but not defined herein shall have the meanings ascribed in the Loan Modification Agreement.
