22. Pursuant to the Recapitalization Agreement, Chelsey exchanged all of the 1,622,111 shares of Series B Preferred Stock held by it for the issuance to it of 564,819 shares of newly-created Series C Preferred Stock and 81,857,833 additional shares of Common Stock. The shares of Series C Preferred Stock are entitled to vote with the shares of Common Stock on all matters on which the Common Stock votes and are entitled to one hundred (100) votes per share plus that number of votes as shall equal the dollar value of any accrued, unpaid and compounded dividends with respect to such shares. The Series C Preferred Stock is also entitled to vote as a class on any matter that would adversely affect such Series C Preferred Stock.
23. The Board of Directors of the Company was reconstituted, simultaneously with the
execution of the Recapitalization Agreement on November 18, 2003, so that the number of directors comprising the Board of Directors of the Company was fixed at eight, four of whom were designated by Chelsey. Upon the closing of the Recapitalization, the number of directors comprising the Board of Directors of the Company was fixed at nine, five of whom were designated by Chelsey. The Committees of the Board of Directors were also reconstituted, simultaneously with the execution of the Recapitalization Agreement on November 18, 2003, and again on the closing of the Recapitalization. Upon the issuance of the Series C Preferred Stock and the additional shares of Common Stock to Chelsey pursuant to the Recapitalization Agreement, Chelsey became the owner of 111,304,721 shares of Common Stock constituting approximately 51% of the outstanding
Common Stock, and 564,819 shares of Series C Preferred Stock, constituting all of the outstanding shares of preferred stock and with its Common Stock collectively representing approximately 61% of the combined voting power of the Company.
24. Regan Partners continued to be the holder of 38,728,350 shares of Common Stock of the Company, but its interest, along with the interests of the Company’s other public stockholders, was diluted and reduced to approximately 17.2% of the outstanding common stock.
25. Upon the reconstitution of the Board of Directors pursuant to the Recapitalization
Agreement, Chelsey had the ability to designate a majority of the members of the Board of Directors and Regan had the ability to designate one member of the Board of Directors for a period of two years. The Recapitalization was a "change in control" of the Company.
26. On July 8, 2004, the Company closed and funded a $20 million junior secured term
loan facility (the "Term Loan Facility") with Chelsey Finance, LLC ("Chelsey Finance"), an affiliate of its controlling shareholder, Chelsey. The Term Loan Facility is for a three-year term, subject to earlier maturity upon the occurrence of a change in control or sale of the Company, and carries an interest rate of 5% above the prime rate publicly announced by Wachovia Bank, N.A., payable currently. The Term Loan Facility is secured by a second priority lien on the assets of the Company.
In connection therewith, Chelsey Finance concurrently entered into an intercreditor and subordination agreement with the Company's senior secured lender, Congress Financial Corporation ("Congress").
