AHPC Holdings, Inc. Shares of Series B Convertible Preferred Stock and Common Stock Warrants SUBSCRIPTION AGREEMENT
Exhibit
99.2
Shares
of Series B Convertible Preferred Stock and Common
Stock Warrants
June
20, 2006
M.A.G. Capital, LLC
Monarch Pointe Fund, Ltd.
Mercator Momentum Fund, L.P.
Mercator Momentum Fund III, L.P.
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
AHPC
Holdings, Inc., a Maryland
corporation (the "Company"), hereby confirms its agreement with Monarch Pointe
Fund, Ltd. ("Monarch"), Mercator Momentum Fund, L.P. ("MMF"), Mercator Momentum
Fund III, L.P. ("MMF III" and, together with Monarch and MMF, the "Purchasers")
and M.A.G. Capital, LLC ("MAG"), as set forth below.
1.
The Securities. Subject to the terms and conditions herein contained, the
Company agrees to issue and sell (a) to the Purchasers an aggregate of Thirty
Thousand (30,000) shares of its Series B Convertible Preferred Stock (the
"Series B Stock"), which shall be convertible into
shares (the "Conversion Shares") of the Company's Common
Stock, par value $0.01 per share (the "Common Stock"),
in accordance with the formula set forth in the Articles Supplementary of
the
Series B Convertible Preferred Stock further described below and (b) to the
Purchasers and MAG, warrants, substantially in the form attached hereto as
Exhibit A (the "Warrants"), to acquire up to an
aggregate of 1,950,000 shares of Common Stock (the "Warrant
Shares"), in accordance with the terms and conditions set forth in
Section 3 hereof. The rights, preferences and privileges of the Series B
Stock are as set forth in the Articles Supplementary of Series B Convertible
Preferred Stock, as filed with the Maryland State Department of Assessments
and
Taxation (the "Articles Supplementary") in the form
attached hereto as Exhibit B. The number of Conversion Shares and
Warrant Shares that the Purchasers or MAG may acquire at any time is subject
to
limitation in the Articles Supplementary and in the Warrants, respectively,
so
that the aggregate number of shares of Common Stock of which such Purchaser
or
MAG and all persons affiliated with such Purchaser or MAG have beneficial
ownership (calculated pursuant to Rule 13d-3 of the Securities Exchange Act
of
1934, as amended) does not at any time exceed 9.99% of the Company's then
outstanding Common Stock.
The
Series B Stock and the
Warrants are sometimes herein collectively referred to as the
"Securities." This Agreement, the Articles
Supplementary, the Warrants, and the Registration Rights Agreement by and
among
the Company, the Purchasers and MAG entered into concurrently herewith and
attached hereto as Exhibit C, are sometimes herein collectively referred
to as the "Transaction Documents."
The
Securities will be offered
and sold to the Purchasers and MAG without such offers and sales being
registered under the Securities Act of 1933, as amended (together with the
rules
and regulations of the Securities and Exchange Commission (the
"SEC") promulgated thereunder, the
"Securities Act"), in reliance on exemptions
therefrom.
In
connection with the sale of
the Securities, the Company has made available (including electronically
via the
SEC's XXXXX system) to the Purchasers and MAG its periodic and current reports,
forms, schedules, proxy statements and other documents (including exhibits
and
all other information incorporated by reference) filed with the SEC under
the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company's Annual Report on Form 10-K for the year
ended June 30, 2005, its Quarterly Report on Form 10-Q for the quarter ended
March 31, 2006 and all reports, forms, schedules, statements, documents,
filings
and amendments filed by the Company with the SEC under the Exchange Act since
the filing of the Company's Annual Report on Form 10-K for the year ended
June
30, 2005, are collectively referred to as the "Disclosure
Documents." All references in this Agreement to financial
statements and schedules and other information which is "contained," "included"
or "stated" in the Disclosure Documents (or other references of like import)
shall be deemed to mean and include all such financial statements and schedules,
documents, exhibits and other information which is incorporated by reference
in
the Disclosure Documents.
2.
Representations and Warranties of the Company. Except as set forth
on the Disclosure Schedule (the "Disclosure Schedule")
delivered by the Company to Purchasers and MAG on the Closing Date (as defined
in Section 3 below), the Company represents and warrants to and agrees with
Purchasers and MAG as follows:
(a)
The Disclosure Documents as of their respective dates did not, and will not
(after giving effect to any updated disclosures therein) as of the Closing
Date,
contain any untrue statement of a material fact or omit to state a material
fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Disclosure Documents and
the documents incorporated or deemed to be incorporated by reference therein,
at
the time they were filed or hereafter are filed with the SEC, complied and
will
comply, at the time of filing, in all material respects with the requirements
of
the Securities Act and/or the Exchange Act, as the case may be, as
applicable.
(b)
Schedule A attached hereto sets forth a complete list of the subsidiaries
of the Company (the "Subsidiaries"). Each of the
Company and its Subsidiaries has been duly incorporated and each of the Company
and the Subsidiaries is, or will be as of the Closing, validly existing in
good
standing as a corporation under the laws of its jurisdiction of incorporation,
with the requisite corporate power and authority to own its properties and
conduct its business as now conducted as described in the Disclosure Documents
and is duly qualified to do business as a foreign corporation in good standing
in all other jurisdictions where the ownership or leasing of its properties
or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not, individually or in the aggregate, have
a
material adverse effect on the business, condition (financial or other),
properties or results of operations of the Company and the Subsidiaries,
taken
as a whole (any such event, a "Material Adverse
Effect"); as of the Closing Date, the Company will have the
authorized, issued and outstanding capitalization set forth on Schedule B
attached hereto (the "Company
Capitalization"); except as set forth
in
the Disclosure Documents or on Schedule A, the Company does not have any
subsidiaries or own directly or indirectly any of the capital stock or other
equity or long-term debt securities of or have any equity interest in any
other
person; all of the outstanding shares of capital stock of the Company and
the
Subsidiaries have been duly authorized and validly issued, are fully paid
and
nonassessable and were not issued in violation of any preemptive or similar
rights and the outstanding shares of capital stock of the
2
Subsidiaries
are owned free and clear of all liens, encumbrances, equities, and restrictions
on transferability (other than those imposed by the Securities Act and the
state
securities or "Blue Sky" laws) or voting; except as set forth in the Disclosure
Documents, all of the outstanding shares of capital stock of the Subsidiaries
are owned, directly or indirectly, by the Company; except as set forth in
the
Disclosure Documents, no options, warrants or other rights to purchase from
the
Company or any Subsidiary, agreements or other obligations of the Company
or any
Subsidiary to issue or other rights to convert any obligation into, or exchange
any securities for, shares of capital stock of or ownership interests in
the
Company or any Subsidiary are outstanding; and except as set forth in the
Disclosure Documents or on Schedule C, there is no agreement,
understanding or arrangement among the Company or any Subsidiary and each
of
their respective stockholders or any other person relating to the ownership
or
disposition of any capital stock of the Company or any Subsidiary or the
election of directors of the Company or any Subsidiary or the governance
of the
Company's or any Subsidiary's affairs, and, if any, such agreements,
understandings and arrangements will not be breached or violated as a result
of
the execution and delivery of, or the consummation of the transactions
contemplated by, the Transaction Documents.
(c)
The Company has the requisite corporate power and authority to execute, deliver
and perform its obligations under the Transaction Documents. Each of the
Transaction Documents has been duly and validly authorized by the Company
and,
when executed and delivered by the Company, will constitute a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms except as the enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally or (ii) general principles of equity
and the discretion of the court before which any proceeding therefore may
be
brought (regardless of whether such enforcement is considered in a proceeding
at
law or in equity) (collectively, the "Enforceability
Exceptions").
(d)
The Series B Stock and the Warrants have been duly authorized and, when issued
upon payment thereof in accordance with this Agreement, will have been validly
issued, fully paid and non-assessable. The Conversion Shares issuable have
been duly authorized and validly reserved for issuance, and when issued upon
conversion of the Series B Stock in accordance with the terms of the Articles
Supplementary, will have been validly issued, fully paid and
non-assessable. The Warrant Shares have been duly authorized and validly
reserved for issuance, and when issued upon exercise of the Warrants in
accordance with the terms thereof, will have been validly issued, fully paid
and
non-assessable. The Common Stock of the Company conforms to the
description thereof contained in the Disclosure Documents. The
stockholders of the Company have no preemptive or similar rights with respect
to
the Common Stock.
(e)
No consent, approval, authorization, license, qualification, exemption or
order
of any court or governmental agency or body or third party is required for
the
performance of the Transaction Documents by the Company or for the consummation
by the Company of any of the transactions contemplated thereby, or the
application of the proceeds of the issuance of the Securities as described
in
this Agreement, except for such consents, approvals, authorizations, licenses,
qualifications, exemptions or orders (i) as have been obtained on or prior
to the Closing Date, (ii) as are not required to be obtained on or prior to
the Closing Date that will be obtained when required, or (iii) the failure
to obtain which would not, individually or in the aggregate, have a Material
Adverse Effect.
(f)
Except as set forth on Schedule D, none of the Company or the
Subsidiaries is (i) in material violation of its articles of incorporation
or
bylaws (or similar organizational document), (ii) in breach or violation
of any
statute, judgment, decree, order, rule or regulation applicable to it or
any of
its properties or assets, which breach or violation would, individually or
in
the aggregate, have a Material Adverse Effect, or (iii) except as described
in
the Disclosure Documents, in default (nor has any event occurred which with
notice or passage of time, or both, would constitute a default) in the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit, certificate or agreement
or
instrument to which it is a party or to which it is subject, which default
would, individually or in the aggregate, have a Material Adverse Effect.
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(g)
The execution, delivery and performance by the Company of the Transaction
Documents and the consummation by the Company of the transactions contemplated
thereby and the fulfillment of the terms thereof will not (i) violate,
conflict with or constitute or result in a breach of or a default under (or
an
event that, with notice or lapse of time, or both, would constitute a breach
of
or a default under) any of (A) the terms or provisions of any contract,
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate or agreement or instrument to which
any
of the Company or the Subsidiaries is a party or to which any of their
respective properties or assets are subject, (B) the articles of
incorporation or bylaws of any of the Company or the Subsidiaries (or similar
organizational document) or (C) any statute, judgment, decree, order, rule
or regulation of any court or governmental agency or other body applicable
to
the Company or the Subsidiaries or any of their respective properties or
assets
or (ii) result in the imposition of any lien upon or with respect to any of
the properties or assets now owned or hereafter acquired by the Company or
any
of the Subsidiaries; which violation, conflict, breach, default or lien would,
individually or in the aggregate, have a Material Adverse Effect.
(h)
The audited consolidated financial statements included in the Disclosure
Documents present fairly the consolidated financial position, results of
operations, cash flows and changes in shareholders' equity of the entities,
at
the dates and for the periods to which they relate and have been prepared
in all
material respects in accordance with generally accepted accounting principles
applied on a consistent basis; the interim un-audited consolidated financial
statements included in the Disclosure Documents present fairly the consolidated
financial position, results of operations and cash flows of the entities,
at the
dates and for the periods to which they relate subject to year-end audit
adjustments and have been prepared in all material respects in accordance
with
generally accepted accounting principles applied on aconsistent basis with
the
audited consolidated financial statements included therein; the selected
financial and statistical data included in the Disclosure Documents present
fairly the information shown therein and have been prepared and compiled
in all
material respects on a basis consistent with the audited financial statements
included therein, except as otherwise stated therein; and each of the auditors
currently or previously (within the last three years) engaged by the Company
is
an independent certified public accountant as required by the Securities
Act for
an offering registered thereunder.
(i)
Except as described in the Disclosure Documents, there is not pending or,
to the
knowledge of the Company, threatened any action, suit, proceeding, inquiry
or
investigation, governmental or otherwise, to which any of the Company or
the
Subsidiaries is a party, or to which their respective properties or assets
are
subject, before or brought by any court, arbitrator or governmental agency
or
body, that, if determined adversely to the Company or any such Subsidiary,
would, individually or in the aggregate, have a Material Adverse Effect or
that
seeks to restrain, enjoin, prevent the consummation of or otherwise challenge
the issuance or sale of the Securities to be sold hereunder or the application
of the proceeds therefrom or the other transactions described in the Disclosure
Documents.
(j)
The Company and the Subsidiaries own or possess adequate licenses or other
rights to use all patents, trademarks, service marks, trade names, copyrights
and know-how that are necessary to conduct their businesses as described
in the
Disclosure Documents. None of the Company or the Subsidiaries has received
any written notice of infringement of (or knows of any such infringement
of)
asserted rights of others with respect to any patents, trademarks, service
marks, trade names, copyrights or know-how that, if such assertion of
infringement or conflict were sustained, would, individually or in the
aggregate, have a Material Adverse Effect.
(k)
Each of the Company and the Subsidiaries possesses all licenses, permits,
certificates, consents, orders, approvals and other authorizations from,
and has
made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts
and
other tribunals presently required or necessary to own or lease, as the case
may
be, and to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Disclosure
Documents ("Permits"), except where the failure to
obtain such Permits would not, individually or in the aggregate, have a Material
Adverse Effect and none of the Company or the Subsidiaries has received any
notice of any proceeding relating to revocation or modification of any such
Permit, except as described in the Disclosure Documents and except where
such
revocation or modification would not, individually or in the aggregate, have
a
Material Adverse Effect.
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(l)
Subsequent to March 31, 2006 and except as described in the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2006 or in the Company's
Annual Report on Form 10-K for the year ended June 30, 2005 or except as
contemplated by this Agreement, (i) the Company and the Subsidiaries have
not incurred any material liabilities or obligations, direct or contingent,
or
entered into any material transactions not in the ordinary course of business
or
(ii) the Company and the Subsidiaries have not purchased any of their
respective outstanding capital stock, or declared, paid or otherwise made
any
dividend or distribution of any kind on any of their respective capital
stock or
otherwise (other than, with respect to any of such Subsidiaries, the purchase
of
capital stock by the Company), (iii) there has not been any material
increase in the long-term indebtedness of the Company or any of the
Subsidiaries, (iv) there has not occurred any event or condition,
individually or in the aggregate, that has a Material Adverse Effect, and
(v) the Company and the Subsidiaries have not sustained any material loss
or interference with respect to their respective businesses or properties
from
fire, flood, hurricane, earthquake, accident or other calamity, whether
or not
covered by insurance, or from any labor dispute or any legal or governmental
proceeding.
(m)
There are no material legal or governmental proceedings nor are there any
material contracts or other documents required by the Securities Act to
be
described in a prospectus that are not described in the Disclosure
Documents. Except as described in the Disclosure Documts, none of the
Company or the Subsidiaries is in default under any of the contracts described
in the Disclosure Documents, has received a notice or claim of any such
default
or has knowledge of any breach of such contracts by the other party or
parties
thereto, except for such defaults or breaches as would not, individually
or in
the aggregate, have a Material Adverse Effect.
(n)
Each of the Company and the Subsidiaries has good and marketable title
to all
real property described in the Disclosure Documents as being owned by it
and
good and marketable title to the leasehold estate in the real property
described
therein as being leased by it, free and clear of all liens, charges,
encumbrances or restrictions, except, in each case, as described in the
Disclosure Documents or such as would not, individually or in the aggregate,
have a Material Adverse Effect. All material leases, contracts and
agreements to which the Company or any of the Subsidiaries is a party or
by
which any of them is bound are valid and enforceable against the Company
or any
such Subsidiary, are, to the knowledge of the Company, valid and enforceable
against the other party or parties thereto and are in full force and effect,
in
each case subject to the Enforceability Exceptions.
(o)
Each of the Company and the Subsidiaries has filed all necessary federal,
state
and foreign income and franchise tax returns, except where the failure
to so
file such returns would not, individually or in the aggregate, have a Material
Adverse Effect, and has paid all taxes shown as due thereon; and other
than tax
deficiencies which the Company or any Subsidiary is contesting in good
faith and
for which adequate reserves have been provided in accordance with generally
accepted accounting principles, there is no tax deficiency that has been
asserted against the Company or any Subsidiary that would, individually
or in
the aggregate, have a Material Adverse Effect.
(p)
None of the Company or the Subsidiaries is, or immediately after the Closing
Date will be, required to register as an "investment company" or a company
"controlled by" an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company
Act").
(q)
None of the Company or the Subsidiaries or, to the knowledge of any of
such
entities' directors, officers, employees, agents or controlling persons,
has
taken, directly or indirectly, any action for the purpose of causing the
stabilization or manipulation of the price of the Common Stock.
(r)
None of the Company, the Subsidiaries or any of their respective Affiliates
(as
defined in Rule 501(b) of Regulation D under the Securities Act)
directly, or through any agent, engaged in any form of general solicitation
or
general advertising (as those terms are used in Regulation D under the
Securities Act) in connection with the offering of the Securities or engaged
in
any other conduct that would cause such offering to be constitute a public
offering within the meaning of Section 4(2) of the Securities Act.
Assuming the accuracy of the representations and warranties of the Purchasers
in
Section 6 hereof, it is not necessary in connection with the offer, sale
and delivery of the Securities to the Purchasers in the manner contemplated
by
this Agreement to register any of the Securities under the Securities Act.
5
(s)
There is no strike, labor dispute, slowdown or work stoppage with the employees
of the Company or any of the Subsidiaries which is pending or, to the knowledge
of the Company or any of the Subsidiaries, threatened.
(t)
Each of the Company and the Subsidiaries carries general liability insurance
coverage comparable to other companies of its size and similar business.
(u)
Each of the Company and the Subsidiaries maintains internal accounting controls
which provide reasonable assurance that (i) transactions are executed in
accordance with management's authorization, (ii) transactions are recorded
as necessary to permit preparation of its financial statements and to maintain
accountability for its assets, and (iii) access to its material assets is
permitted only in accordance with management's authorization and (iv) the
values and amounts reported for its material assets are compared with its
existing assets at reasonable intervals.
(v)
Except with respect to services provided by Flagstone Securities, LLC (and
amounts owed related thereto), the Company does not know of any claims for
services, either in the nature of a finder's fee or financial advisory fee,
with
respect to the offering of the Securities and the transactions contemplated
by
the Transaction Documents.
(w)
The Common Stock is traded on the NASDAQ Capital Market (the
"Market"). Except as described in the Disclosure
Documents, the Company currently is not in violation of, and the consummation
of
the transactions contemplated by the Transaction Documents will not violate,
any
rule of the National Association of Securities Dealers.
(x)
The Company is eligible to use Form S-1 for the resale of the Conversion
Shares
by Purchasers or their transferees and the Warrant Shares by Purchasers,
MAG or
their transferees. The Company has no reason to believe that it is not
capable of satisfying the registration or qualification requirements (or
an
exemption therefrom) necessary to permit the resale of the Conversion Shares
and
the Warrant Shares under the securities or "blue sky" laws of any jurisdiction
within the United States.
(y)
Set forth on Schedule E is the Company's intended use of the proceeds
from this transaction.
(z)
Except as set forth on Schedule F, to the Company's knowledge, none of
the officers or directors of the Company (i) has been convicted of any crime
(other than traffic violations or misdemeanors not
involving fraud) or is currently under investigation or indictment
for any such crime, (ii) has been found by a court or governmental
agency to have violated any securities or commodities law or to have
committed fraud or is currently a party to any legal proceeding in which
either
is alleged, (iii) has been the subject of a proceeding under the
bankruptcy laws or any similar state laws, or (iv) has been an officer,
director, general partner, or managing member of an entity which has been
the subject of such a proceeding.
3.
Purchase, Sale, Exchange and Delivery of the Securities. On the
basis of the representations, warranties, agreements and covenants herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to Purchasers, and Purchasers agree to purchase
from
the Company, a total of 30,000 shares of Series B Stock at $100.00 per
share. In connection with the purchase and sale of Series B Stock, for no
additional consideration, the Purchasers and MAG will receive Warrants to
purchase an aggregate of 1,950,000 shares of Common Stock, as set forth below.
The closing of the transactions described herein (the
"Closing") shall take place at a time and on a date (the
"Closing Date") to be specified by the parties, which
will be no later than 5:00 p.m. (Pacific time) on June 20, 2006. On the
Closing Date, the Company shall (i) deliver share certificates in definitive
form for an aggregate of 30,000 shares of Series B Stock issued to Purchasers
in
the respective amounts set forth on the signature page hereto, and (ii) deliver
Warrants to Purchasers and MAG in the respective amounts set forth on the
signature page hereto, duly executed on behalf of the Company,
(iii) deliver this Subscription Agreement, duly executed on behalf of the
Company, (iv) deliver the Registration Rights Agreement, duly executed on
behalf
of the Company, and (v) file or cause to be filed the Articles Supplementary
with the Maryland State Department of Assessments and Taxation. On the
Closing Date, (i) Purchasers shall deliver Three Million Dollars ($3,000,000)
(the "Purchase Price") by wire transfer of immediately
available funds to an account as directed by the Company, and (ii) each of
the
Purchasers and MAG shall deliver this Subscription Agreement and Registration
Rights Agreement, each duly executed on behalf of each such Purchaser and
MAG. The Closing will occur when all documents and instruments necessary
or appropriate to effect the transactions contemplated herein are exchanged
by
the parties and all actions taken at the Closing will be deemed to be taken
simultaneously.
6
4.
Certain Covenants of the Company. The Company covenants and agrees
with Purchasers as follows:
(a)
None of the Company or any of its Affiliates will sell, offer for sale
or
solicit offers to buy or otherwise negotiate in respect of any "security"
(as
defined in the Securities Act) which would be integrated with the sale
of the
Securities in a manner which would require the registration under the Securities
Act of the Securities.
(b)
The Company will not become, at any time prior to the expiration of three
years
after the Closing Date, an open-end investment company, unit investment
trust,
closed-end investment company or face-amount certificate company that is
or is
required to be registered under the Investment Company Act.
(c)
None of the proceeds of the Series B Stock will be used to reduce or retire
any
insider note or convertible debt held by an officer or director of the
Company.
(d)
Subject to Section 9 of this Agreement, the Conversion Shares and the Warrant
Shares will be eligible for trading on the Market or such market on which
the
Company's shares are subsequently listed or traded, immediately following
the
effectiveness of the Registration Statement (as defined in Section 9).
(e)
The Company will use reasonable efforts to do and perform all things required
to
be done and performed by it under this Agreement and the other Transaction
Documents and to satisfy all conditions precedent on its part to the obligations
of the Purchasers to purchase and accept delivery of the Securities.
5.
Conditions of the Purchasers' Obligations. The obligations of the
Purchasers to consummate the Closing is subject to the following conditions
unless waived in writing by the Purchasers:
(a)
The representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects (other than representations
and warranties with a Material Adverse Effect qualifier, which shall be true
and
correct as written) on and as of the Closing Date; the Company shall have
complied in all material respects with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior
to the
Closing Date.
(b)
None of the issuance and sale of the Securities pursuant to this Agreement
or
any of the transactions contemplated by any of the other Transaction Documents
shall be enjoined (temporarily or permanently) and no restraining order or
other
injunctive order shall have been issued in respect thereof; and there shall
not
have been any legal action, order, decree or other administrative proceeding
instituted or, to the Company's knowledge, threatened against the Company
or
against any Purchaser relating to the issuance of the Securities or either
Purchaser's activities in connection therewith or any other transactions
contemplated by this Agreement, the other Transaction Documents or the
Disclosure Documents.
(c)
The Purchasers shall have received an opinion of counsel to the Company with
respect to the matters set forth on Exhibit D.
(d)
The Company shall have taken, or simultaneously with the Closing shall take,
all
actions necessary to restore the Company to good standing in with the Maryland
State Department of Assessment and Taxation, including, without limitation,
filing its 2006 Personal Property Return with the Maryland Department of
Assessments and Taxation and paying the applicable fees related thereto.
7
6.
Representations and Warranties of the Purchasers.
(a)
Each of the Purchasers and MAG represents and warrants to the Company that
the
Securities to be acquired by it hereunder (including the Conversion Shares
and
the Warrant Shares that it may acquire upon conversion or exercise of the
Series
B Stock or the Warrants, respectively) are being acquired for their own account
for investment and with no intention of distributing or reselling such
Securities (including the Conversion Shares and the Warrant Shares that it may
acquire upon conversion or exercise thereof, as the case may be) or any part
thereof or interest therein in any transaction which would be in violation
of
the securities laws of the United States of America or any State. Nothing
in this Agreement, however, shall prejudice or otherwise limit the right
of each
Purchaser or MAG to sell or otherwise dispose of all or any part of such
Conversion Shares or Warrant Shares under an effective registration statement
under the Securities Act or under an exemption from such registration and
in
each case in compliance with applicable state securities laws. By
executing this Agreement, each Purchaser and MAG further represents that
such
Purchaser or MAG, as the case may be, does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to any person with respect to any of the Securities.
(b)
Each of the Purchasers and MAG understands that the Securities (including
the
Conversion Shares and the Warrant Shares that it may acquire upon conversion
or
exercise thereof, as the case may be) have not been registered under the
Securities Act and may not be offered, resold, pledged or otherwise transferred
except (a) pursuant to an exemption from registration under the Securities
Act (and, if requested by the Company, based upon an opinion of counsel
acceptable to the Company) or pursuant to an effective registration statement
under the Securities Act and (b) in accordance with all applicable
securities laws of the states of the United States and other
jurisdictions.
Each
of the Purchasers and MAG
agrees to the imprinting, so long as appropriate, of the following legend
on the
Securities (including the Conversion Shares and the Warrant Shares that it
may
acquire upon conversion or exercise thereof, as the case may be):
The
shares of stock evidenced by
this certificate have not been registered under the U.S. Securities Act of
1933,
as amended, or under applicable state securities laws and may not be offered,
sold, pledged or otherwise transferred ("transferred") in the absence of
such
registration or an applicable exemption therefrom. In the absence of such
registration, such shares may not be transferred unless, if the Company
requests, the Company has received a written opinion from counsel in form
and
substance satisfactory to the Company stating that such transfer is being
made
in compliance with all applicable federal and state securities laws.
The legend set forth above may be removed if and when the Conversion Shares
or
the Warrant Shares, as the case may be, are disposed of pursuant to an effective
registration statement under the Securities Act or in the opinion of counsel
to
the Company experienced in the area of United States Federal securities laws
such legends are no longer required under applicable requirements of the
Securities Act. The Series B Stock, the Warrants, the Conversion Shares
and the Warrant Shares shall also bear any other legends required by applicable
Federal or state securities laws, which legends may be removed when in the
opinion of counsel to the Company experienced in the applicable securities
laws,
the same are no longer required under the applicable requirements of such
securities laws. The Company agrees that it will provide any Purchaser or
MAG, upon request, with a substitute certificate, not bearing such legend
at
suchtime as such legend is no longer applicable. Each of the Purchasers
and MAG agrees that, in connection with any transfer of the Conversion Shares
or
the Warrant Shares by it pursuant to an effective registration statement
under
the Securities Act, such Purchaser or MAG, as the case may be, will comply
with
all prospectus delivery requirements of the Securities Act. The Company
makes no representation, warranty or agreement as to the availability of
any
exemption from registration under the Securities Act with respect to any
resale
of the Series B Stock, the Warrants, the Conversion Shares or the Warrant
Shares.
8
(c)
Each of the Purchasers and MAG represents and warrants to the Company that
it is
an "accredited investor" within the meaning of Rule 501(a) of Regulation
D under
the Securities Act and that neither such Purchaser nor MAG is an "underwriter"
within the meaning of Section 2(11) of the Securities Act. Each of the
Purchasers and MAG represents and warrants to the Company that neither such
Purchaser nor MAG learned of the opportunity to acquire Securities or any
other
security issuable by the Company through any form of general advertising
or
public solicitation.
(d)
Each of the Purchasers and MAG represents and warrants to the Company that
it
has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, having been represented by counsel,
and has so evaluated the merits and risks of such investment and is able
to bear
the economic risk of such investment and, at the present time, is able to
afford
a complete loss of such investment.
(e)
Each of the Purchasers and MAG represents and warrants to the Company that
its
overall commitment to investments which are not readily marketable is not
disproportionate to its net worth, and its purchase of the Securities will
not
cause such overall commitment to become excessive.
(f)
Each of the Purchasers and MAG recognizes that the purchase of the Securities
involves a high degree of risk.
(g)
Each of the Purchasers and MAG represents and warrants to the Company that
all
information it has provided to the Company including, but not limited to,
its
financial position and its knowledge of financial and business matters is
true,
correct and complete as of the date of execution of this Subscription
Agreement. Each of the Purchasers and MAG undertakes to provide promptly
to the Company written notice of any material changes in its financial position
or otherwise, and such information shall be true, correct and complete as
of the
date given. Each of the Purchasers and MAG understands that the Company
will rely to a material degree upon the representations contained therein.
(h)
Each of the Purchasers and MAG represents and warrants to the Company that
(i)
the purchase of the Securities to be purchased by it has been duly and properly
authorized and this Agreement has been duly executed and delivered by it
or on
its behalf and constitutes the valid and legally binding obligation of such
Purchaser or MAG, enforceable against such Purchaser or MAG in accordance
with
its terms, subject to the Enforceability Exceptions, (ii) the purchase of
the Securities to be purchased by it does not conflict with or violate its
charter, by-laws or any law, regulation or court order applicable to it;
and
(iii) the purchase of the Securities to be purchased by it does not impose
any penalty or other onerous condition on such Purchaser or MAG under or
pursuant to any applicable law or governmental regulation.
9
(i)
Each of the Purchasers and MAG represents and warrants to the Company that
neither it nor any of its directors, officers, employees, agents, partners,
members, controlling persons or shareholders holding 5% or more of the Common
Stock outstanding on the Closing Date, has taken or will take, directly or
indirectly, any actions designed, or might reasonably be expected to cause
or
result in the stabilization or manipulation of the price of the Common
Stock.
(j)
Each of the Purchasers and MAG acknowledges it or its representatives have
reviewed and understand the Transaction Documents and Disclosure Documents
and
further acknowledges that it or its representatives have been afforded (i)
the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in
the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management
and
prospects sufficient to enable it to evaluate its investment in the Securities;
and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that
is
necessary to verify the accuracy and completeness of the information contained
in the Disclosure Documents.
(k)
Each of the Purchasers and MAG represents and warrants to the Company that
it
has based its investment decision solely upon the information contained in
the
Disclosure Documents and such other information as may have been provided
to it
or its representatives by the Company in response to their inquiries, and
has
not based its investment decision on any research or other report regarding
the
Company prepared by any third party ("Third Party
Reports"). Each of the Purchasers and MAG understands and
acknowledges that (i) the Company does not endorse any Third Party Reports
and
(ii) its actual results may differ materially from those projected in any
Third
Party Report.
(l)
Each of the Purchasers and MAG represents and warrants to the Company that
no
oral or written representations have been made and no oral or written
information has been furnished to them or their advisors in connection with
this
offering that were in any way inconsistent with the information set forth
in the
Disclosure Documents.
(m)
Each of the Purchasers and MAG understands and acknowledges that (i) any
forward-looking information included in the Disclosure Documents supplied
to
such Purchaser or MAG by the Company or its management is subject to risks
and
uncertainties, including those risks and uncertainties set forth in the
Disclosure Documents; and (ii) the Company's actual results may differ
materially from those projected by the Company or its management in such
forward-looking information.
(n)
Each of the Purchasers and MAG understands and acknowledges that (i) the
Securities are offered and sold without registration under the Securities
Act in
a private placement that is exempt from the registration provisions of the
Securities Act and (ii) the availability of such exemption depends in part
on, and that the Company and its counsel will rely upon, the accuracy and
truthfulness of the foregoing representations and each of the Purchasers
and MAG
hereby consents to such reliance.
10
(o)
Each of the Purchasers and MAG understands that no U.S. federal or state
agency,
or any agency or governmental or regulatory authority in any other country,
including without limitation, the U.S. Securities and Exchange Commission,
has
passed upon the Securities or made any finding or determination as to the
fairness of this investment.
(p)
Each of the Purchasers and MAG represents and warrants to the Company that
it is
not a prohibited investor under the anti-money laundering or anti-terrorism
laws
of any jurisdiction, including without limitation, any country, territory,
nation or national association.
(q)
Each of the Purchasers and MAG understands that the Company and its assets
may
be subject to the laws and regulations of many jurisdictions, including but
not
limited to anti-terrorism laws and anti-money laundering laws. Neither MAG
nor any Purchaser, nor any person or entity who controls MAG or any Purchaser,
nor, to the best of MAG's and the Purchasers' knowledge, any person or entity
who owns any direct equity interest in MAG or either Purchaser, is identified
on
the list of "Specially Designated Nationals and Blocked Persons"
("SDNs") maintained by the U.S. Department of Treasury's
Office of Foreign Assets Control ("OFAC"), and neither
MAG nor either Purchaser is owned or controlled by any SDN. Neither MAG nor
either Purchaser is involved in business arrangements or otherwise engaged
in
transactions with or involving countries subject to economic or trade sanctions
imposed by the United States Government, or with or involving SDNs in violation
of the regulations maintained by the OFAC. Each of the Purchasers and MAG
is in full compliance with the Bank Secrecy Act (31 U.S.C. § 5311 et. seq.) and
18 U.S.C. §§ 1956 and 1957 and the regulations under such statutes; and any
other applicable anti-terrorist or anti-money laundering Laws and
regulations.
(r)
Each of the Purchasers and MAG represents and warrants to the Company that
neither MAG nor any of the Purchasers, nor any of their affiliates has, directly
or indirectly, offered to "short sell", contracted to "short sell," otherwise
engaged in any "short selling" or encouraged others to "short sell" the
securities of the Company.
7.
Covenants of Purchasers. Each of the Purchasers and MAG, on behalf
of itself, its affiliates, its successors and assigns and any other direct
or
indirect transferee holding any of the Warrants, the Series B Stock or the
Registrable Securities, hereby covenants and agrees not to, directly or
indirectly, offer to "short sell", contract to "short sell" or otherwise
"short
sell" or encourage others to "short sell" the securities of the Company.
8.
Termination.
(a)
This Agreement may be terminated in the sole discretion of the Company by
notice
to Purchasers and MAG if at the Closing Date:
(i)
the representations and warranties made by Purchasers or MAG in Section 6
are
not true and correct in all material respects; or
(ii)
as to the Company, the sale of the Securities hereunder (i) is prohibited
or
enjoined by any applicable law or governmental regulation or (ii) subjects
the
Company to any penalty, or in its reasonable judgment, other onerous condition
under or pursuant to any applicable law or government regulation that would
materially reduce the benefits to the Company of the sale of the Securities
to
Purchasers, so long as such regulation, law or onerous condition was not
in
effect in such form at the date of this Agreement.
11
(b)
This Agreement may be terminated by either Purchaser or by MAG by notice
to the
Company given in the event that the Company shall have failed, refused or
been
unable to satisfy all material conditions on its part to be performed or
satisfied hereunder on or prior to the Closing Date, or if after the execution
and delivery of this Agreement and immediately prior to the Closing Date,
trading in securities of the Company on the Market shall have been
suspended.
(c)
This Agreement may be terminated by mutual written consent of all parties.
9.
Registration. The Company shall prepare and file on or before
September 13, 2006 with the SEC a registration statement (the
"Registration Statement"), covering the resale of the
maximum number of Conversion Shares issuable upon conversion of the Series
B
Stock then issued to Purchasers and the Warrant Shares issuable upon exercise
of
the Warrants (collectively, the "Registrable
Securities"), and shall use its best efforts to have the
Registration Statement declared effective within 90 days after the initial
filing, as set forth in the Registration Rights Agreement.
10.
Right of First Refusal. Commencing on the Closing Date and
continuing until the earlier of (a) eighteen (18) months after the Closing
Date,
or (b) the date upon which all of the Series B Stock has been converted into
Common Stock (the "Right of First Refusal Period"), the
Purchasers shall have a right of first refusal on any financing in which
the
Company is the issuer of debt or equity securities. Such right of first
refusal will be exercised within ten (10) trading days after delivery of
written
notice by the Company to Purchasers of the terms of the prospective
financing.
11.
Covenants of the Company.
(a) Equity Financings.
The Company shall not issue any shares of Common Stock or any securities
convertible, exchangeable or exercisable for shares of Common Stock where
the
purchase, conversion or exercise price is less than $1.55 per share of Common
Stock.
(b)
Food Service Division. The Company agrees to enter into a letter of
intent (the "LOI") to sell or transfer its food service
division to a third party purchaser (containing such terms of sale or transfer
as a necessary for the Company's Board of Directors to satisfy its fiduciary
obligations) on or prior to August 31, 2006. In the event the Company does
not enter into the LOI by August 31, 2006, then the Company agrees to wind
down
and liquidate the food service division and the assets comprising such division
within a reasonable time after such date.
(c)
Cash Flow Considerations. The Company covenants and agrees to
consult with MAG in the event the Company has negative cash flows greater
than
what is projected in the forecasted statement of cash flows which was agreed
to
by the Company, MAG and the Purchasers.
12
No
Purchaser need provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, and any Purchaser may immediately and
without expiration of any grace period enforce any and all of its rights
and
remedies hereunder and all other remedies available to it under applicable
law.
Such declaration may be rescinded and annulled by such Purchaser at any time
prior to payment hereunder. No such rescission or annulment shall affect
any
subsequent Event of Default or impair any right consequent thereon.
An
"Event of Default" shall include the commencement by the
Company of a voluntary case or proceeding under the bankruptcy laws or the
Company's failure to: (i) discharge or stay a bankruptcy proceeding within
60 days of such action being taken against the Company, (ii) file the
Registration Statement with the SEC on or before September 13, 2006, (iii)
have
the Registration Statement declared effective within 90 days after its initial
filing or maintain the effectiveness thereafter, (iv) maintain trading of
the
Company's Common Stock on the Market except for any periods when the stock
is
listed on the NASDAQ National Market, the AMEX or the NYSE, (v) pay the fees
required by Section 15 hereof when due; or (vi) deliver to either Purchaser,
or
such Purchaser's broker, as directed, Common Stock that such Purchaser has
converted within three (3) business days of such conversion.
13.
Notices. All communications hereunder shall be in writing and shall
be hand delivered, mailed by first-class mail, couriered by next-day air
courier
or by facsimile and confirmed in writing (i) if to the Company, at the addresses
set forth below, or (ii) if to a Purchaser or MAG, to the address set forth
for
such party on the signature page hereto.
If to the
Company:
AHPC Holdings, Inc.
80 International Boulevard, Unit A
80 International Boulevard, Unit A
Xxxxxxxx Xxxxxxx,
Xxxxxxxx 00000
Telephone No.:
_____________
Facsimile No.:
_____________
Attention: Xxxx Xxxxxx
Attention: Xxxx Xxxxxx
All
such
notices and communications shall be deemed to have been duly given: (i)
when delivered by hand, if personally delivered; (ii) five business days
after
being deposited in the mail, postage prepaid, if mailed certified mail, return
receipt requested; (iii) one business day after being timely delivered to
a
next-day air courier guaranteeing overnight delivery; (iv) the date of
transmission if sent via facsimile to the facsimile number as set forth in
this
Section or the signature page hereof prior to 6:00 p.m. on a business day,
or
(v) the business day following the date of transmission if sent via facsimile
at
a facsimile number set forth in this Section or on the signature page hereof
after 6:00 p.m. or on a date that is not a business day. Change of a
party's address or facsimile number may be designated hereunder by giving
notice
to all of the other parties hereto in accordance with this Section.
14.
Survival Clause. The respective representations, warranties,
agreements and covenants of the Company and each Purchaser and MAG set forth
in
this Agreement shall survive until the second anniversary of the Closing.
13
15.
Fees and Expenses. Within three (3) days of Closing, the Company
agrees to pay (i) Purchasers' legal expenses incurred in connection with
the
preparation and negotiation of the Transaction Documents in the amount of
$25,000 and (ii) to MAG a due diligence fee in the amount of $100,000.
16.
Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the Warrants or the Articles
Supplementary, the prevailing party or parties shall be entitled to receive
from
the other party or parties reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which the prevailing party
or
parties may be entitled.
17.
Successors. This Agreement shall inure to the benefit of and be
binding upon each Purchaser, MAG and the Company and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or
any
provisions herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit
of such
persons and for the benefit of no other person. The Company may not assign
this
Agreement or any rights or obligation hereunder without the prior written
consent of the Purchasers.
18.
No Waiver; Modifications in Writing. No failure or delay on the
part of the Company, MAG or either Purchaser in exercising any right, power
or
remedy hereunder shall operate as a waiver thereof, nor shall any single
or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to the Company, MAG or either
Purchaser at law or in equity or otherwise. No waiver of or consent to any
departure by the Company, MAG or either Purchaser from any provision of this
Agreement shall be effective unless signed in writing by the party entitled
to
the benefit thereof, provided that notice of any such
waiver shall be given to each party hereto as set forth below. Except as
otherwise provided herein, no amendment, modification or termination of any
provision of this Agreement shall be effective unless signed in writing by
or on
behalf of each of the Company and MAG, and each Purchaser. Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by the Company, MAG or any Purchaser from the terms of any provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically
required by this Agreement, no notice to or demand on the Company in any
case
shall entitle the Company to any other or further notice or demand in similar
or
other circumstances.
19.
Entire Agreement. This Agreement, together with the Transaction
Documents, constitutes the entire agreement among the parties hereto and
supersedes all prior agreements, understandings and arrangements, oral or
written, among the parties hereto with respect to the subject matter hereof
and
thereof.
20.
Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability
of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby.
21.
APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT
TO
PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF
THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE PARTIES HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR PROCEEDINGS
ARISING
OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN STATE OR FEDERAL
COURTS LOCATED IN THE CITY OF LOS ANGELES, CALIFORNIA AND HEREBY SUBMIT TO
THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE.
14
22.
Counterparts. This Agreement may be executed in two or more
counterparts and may be delivered by facsimile transmission, each of which
shall
be deemed an original, but all of which together shall constitute one and
the
same instrument.
23.
If the foregoing correctly sets forth our understanding, please indicate
your
acceptance thereof in the space provided below for that purpose, whereupon
this
Agreement shall constitute a binding agreement among the Company, the Purchasers
and MAG.
Very truly
yours,
By: /s/
Xxxx X.
Xxxxxx
Name: Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Chief
Executive Officer
15
ACCEPTED AND
AGREED:
|
Monarch Pointe Fund Ltd. By: M.A.G. CAPITAL,
LLC
Its: General Partner By: /s/ Xxxxx
Xxxxxxxxx
Xxxxx Xxxxxxxxx
Portfolio Manager
Shares
of Series B Stock: 19,686
Warrant Shares: 639,795
total
319,898 at $1.75
319,898 at $1.85
|
Mercator Momentum Fund, L.P. By: M.A.G. CAPITAL,
LLC
Its: General Partner By: /s/ Xxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx
Portfolio Manager
Shares
of Series B Stock: 0
Warrant
Shares: 0
|
|
M.A.G.
Capital, LLC
By:
/s/
Xxxxx
Xxxxxxxxx
Xxxxx Xxxxxxxxx
Portfolio Manager
Warrant Shares: 975,000
total
487,500
at $1.75
487,500
at $1.85
|
Mercator
Momentum Fund III, L.P.
By: M.A.G. CAPITAL,
LLC
Its: General Partner By: /s/ Xxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx
Portfolio Manager
Shares
of Series B Stock: 10,314
Warrant
Shares: 335,205 total
167,603
at $1.75
167,603
at $1.85
|
|
Addresses
for Notice to Purchasers and MAG:
M.A.G. Capital, LLC 000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000 Xxx Xxxxxxx, Xxxxxxxxxx 00000 Attention: Xxxxx Xxxxxxxxx Facsimile: (000) 000-0000 with copy to (which shall not constitute
notice):
Xxxxx X. Xxxxx, Esq. Sheppard, Mullin, Xxxxxxx & Hampton LLP 000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000 Facsimile: (000) 000-0000 |
16
Schedules
Schedule
A– Subsidiaries
1. Subsidiaries: American Health Products Corporation,
which is
wholly-owned by the Company.
Schedule B– Capitalization
|
Class
of Stock
|
Number
of Shares Authorized
|
Number
of Shares
Outstanding
|
|
Preferred Stock, $0.01 per
share
|
2,000,000
|
|
|
Series A Convertible Preferred Stock,
$0.01 par value
|
220,000 shares
|
None
|
|
Series B Convertible Preferred Stock,
$0.01 per share
|
30,000 shares
|
30,000 shares
|
|
Common Stock, $0.01 per share
|
50,000,000 million
|
1,251,246
shares
|
Schedule C– Agreements Governing
Ownership of Stock
1. Secured Debt Placement Agreement between
the Company and LaSalle
St. Securities, LLC, a copy of which is attached as an exhibit to the
Company's Form 8-K filed with the Securities and Exchange Commission on October
7, 2005.
2. Warrants to purchase shares of the Common
Stock issued to the
subscribers and placement agent in connection with the Company's $1.2 million
private placement of subordinated promissory notes completed on September
29,
2005, forms of which are attached as exhibits to the Company's Form 8-K filed
with the Securities and Exchange Commission on October 7, 2005.
3. Registration Rights Agreement made as of
September 21, 2005 by
and between the Company and the investors a party thereto, a copy of which
is attached as an exhibit to the Company's Form 8-K filed with the Securities
and Exchange Commission on October 7, 2005.
17
Schedule D– Conflicts
None.
Schedule E– Use of Proceeds
The Company shall use the proceeds to redeem
all outstanding subordinated
promissory notes issued in connection with the Company's $1.2 million private
placement of subordinated promissory notes completed on September 29,
2005. The remaining portion of the proceeds from issuance of the Series B
Stock will be used for general working capital purposes.
Schedule F– Certain Proceedings
None.
18
Exhibit
A
Form
of
Warrant
19
Exhibit
B
Form
of
Articles Supplementary
of
of
Series
B
Convertible Preferred Stock
20
Exhibit
C
Form
of
Registration Rights Agreement
21
Exhibit
D
Form
of
Opinion of Counsel
22
