AHPC HOLDINGS, INC. 7% SECURED NOTES WITH ATTACHED WARRANTS SECURED DEBT PLACEMENT AGREEMENT
Exhibit
99.8
7%
SECURED NOTES WITH ATTACHED WARRANTS
THIS
SECURED DEBT PLACEMENT AGREEMENT (the “Agreement”) is entered into as of the
date set forth on the signature page hereof by and between AHPC Holdings, Inc.,
a Maryland corporation (the “Company” or “AHPC”), and LaSalle St. Securities,
LLC, a Delaware limited liability company (“LaSalle”) (collectively, the
“Parties”).
The
Company proposes to offer and sell, through LaSalle, up to $1,000,000 of
two-year 7% secured notes (the “Secured Notes”) solely to “Accredited Investors”
as such term is defined in Regulation D (“Regulation D”) promulgated under the
Securities Act of 1933, as amended (the “Securities Act”), upon the terms and
subject to the conditions set forth in this Agreement. The offering may be
increased to $1,400,000.00 but only upon written acceptance by both AHPC and
LaSalle.
1)
Engagement
as Placement Agent
(a)
Appointment.
The
Company hereby appoints LaSalle as its Placement Agent for the sale of up to
$1,000,000 of 7% Secured Notes (with attached warrants to purchase AHPC common
stock) pursuant to a Private Placement Memorandum (“PPM”) to be jointly prepared
by LaSalle and AHPC, and in compliance with its terms and conditions. The
minimum value of Secured Notes that LaSalle may place with a subscriber is
$50,000, such minimum as may be waived at the discretion of AHPC.
(b)
Description
of the Secured Notes.
The
Secured Notes shall bear interest at a rate of 7% per annum (computed on the
basis of a 360-day year of twelve 30-day months for actual days elapsed) with
a
maturity date of two years after the date of the issuance of the Secured Notes.
Interest shall be paid to holders of the Secured Notes (“Noteholders”)
quarterly, such dates as shall appear in the Secured Notes themselves. The
Secured Notes will also have attached Class A warrants (“A-Warrants”) and Class
B warrants (B-Warrants) entitling the Noteholders to purchase shares of AHPC
common stock (“Common Stock”). Class A warrants have an exercise term of three
years from the Closing Date (as hereafter defined). Class B warrants have an
exercise term of five years from the Closing Date (as hereafter defined). The
number of shares of Common Stock represented by the A-Warrants shall be equal
to
16% of the value of the Secured Note with an exercise price equal to $3.50.
The
number of shares of Common Stock represented by the B-Warrants shall be equal
to
10% of the value of the Secured Note with an exercise price equal to $4.50.
The
Warrant (and the Warrant Shares) shall carry the same anti-dilutive rights
as
the Company’s Class A Preferred Shares. The Secured Notes with attached Warrants
shall be offered subject to the right of the Company to reject any subscription
in whole or in part for any reason whatsoever or to sell to any prospective
investor less than the dollar value of Secured Notes subscribed for. Any
reference herein to the Secured Notes shall also be deemed to refer to the
attached Warrants, even if the Warrants are not mentioned in each
instance.
(c)
Forced
Exercise.
In the
event that the common stock of the Company trades at or above $8.75 for fifteen
(15) consecutive business days, the Noteholders will have five (5) business
days
to exercise Class A warrants or the Company will do a cashless exercise and
issue shares to the warrant holders common shares based on the closing price
of
the common stock on the 15th
business
day. In the event that the common stock of the Company trades at or above $11.25
for fifteen (15) consecutive business days, the Noteholders will have five
(5)
business days to exercise Class B warrants or the Company will do a cashless
exercise and issue common shares to the warrant holders based on the closing
price of the common stock on the 15th
business
day.
(d)
Mandatory
Redemption.
If
during the two year period, the Company completed an equity offering with net
proceeds in excess of $6 million, the Company will be required to redeem all
the
Secured Notes within fifteen (15) business days of the closing of such an equity
offering.
(e)
Commissions.
As
compensation for services rendered in soliciting and obtaining purchasers for
the Secured Notes, the Company shall pay LaSalle commissions and warrants as
described in Paragraph 4, below. To the extent permitted by applicable law
and
regulations, LaSalle may pay a portion of the compensation received by it from
the Company to its representatives who sell the Secured Notes to which such
compensation is attributable.
(f)
Registration.
LaSalle
represents that it is registered and in good standing with the NASD as a
broker-dealer in a capacity which permits it to participate in sales of the
Secured Notes. LaSalle also represents that it is duly registered as a
broker-dealer under the applicable statutes and regulations of each state in
which the Secured Notes will be offered and sold.
(g)
Undertakings.
LaSalle
shall use its best efforts to locate persons and/or legal entities eligible
to
purchase the Secured Notes with attached Warrants on the terms stated herein
and
in the PPM. It is understood that LaSalle has no commitment with regard to
the
sale of the Secured Notes other than to use its best efforts. In connection
with
its offer and sale of the Secured Notes, LaSalle represents that it will comply
fully with all applicable laws, and the rules of the NASD, the SEC, and state
securities administrators in states in which the Secured Notes are offered
and
sold.
AHPC
shall establish or otherwise secure access to an escrow account for the proceeds
until such time as the transaction shall close. Such escrow account shall be
in
a form and through a company acceptable to LaSalle.
There
shall be only one closing of the sale of the Secured Notes (the “Closing”) and
it shall occur on the earlier of i) the business day following the day on which
AHPC has accepted subscriptions for all $1,000,000 of Secured Notes, ii) the
business day following written notice by LaSalle that it does not expect to
place any additional Secured Notes, such notice as is acknowledged and accepted
in writing by AHPC, or iii) the business day following written notice by AHPC
that it wishes to proceed with the closing of the sale of the Preferred Shares,
such notice as is acknowledged and accepted in writing by LaSalle (the “Closing
Date”). On the Closing Date, LaSalle shall wire funds to the Company’s
designated bank account equal to the purchase price for the Secured Notes
subscribed for less the commission payable to LaSalle as described in paragraph
4, below. Subsequently, the Company shall deliver to LaSalle promissory notes
and Warrants for further distribution to the subscribers.
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The
transaction described in this Paragraph 1(g) shall be referred to herein as
the
“Offering.”
(h)
Public
Offerings.
AHPC
agrees that LaSalle shall have the right to participate as an underwriter in
any
secondary public offering of the Company’s securities, and that LaSalle shall
receive a fee not less than that of any company participating in the public
offering as a co-manager. This provision shall survive the expiration of any
other provisions of this Agreement.
2.
Blue
Sky Filings.
As
the
Preferred Shares will be offered and sold only to Accredited Investors, as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act,
the
Company will prepare, execute and file all "blue sky" qualification,
registration or exemption documents in order to qualify the Secured Notes for
offer and sale under the securities or "blue sky" laws of such jurisdictions
within the United States.
3.
Representations
and Warranties.
AHPC
represents and warrants to LaSalle that:
(a)
The
PPM will be prepared pursuant to Section 4(2) and Regulation D of the Securities
Act relating to the private offering of the Secured Notes, in conformity with
all of the requirements of the Securities Act, and the rules and regulations
of
the Securities and Exchange Commission (the “Commission”) promulgated
thereunder;
(b)
The
PPM will contain all material statements and information required to be included
therein by the Securities Act and will not include any untrue statement of
a
material fact or omit any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which such statements are made, not misleading;
(c)
The
Company is duly organized and validly existing as a corporation under the laws
of the State of Maryland and has full power and authority to conduct its
business in the State of Illinois as shall be described in the PPM, and to
issue, sell and deliver the Secured Notes;
(d)
The
Secured Notes, when issued and sold pursuant to the terms hereof and of the
PPM,
will be validly issued, fully paid and non-assessable, and the Company will
apply the net proceeds received from their issuance and sale in the manner
to be
set forth in the PPM;
(e)
The
Company has all required governmental, regulatory and exchange approvals and
licenses and has effected all filings and registrations required to conduct
its
business and perform its obligations as may be described in the
PPM;
(f)
The
Offering is undertaken by LaSalle on a "best efforts" basis, in a commercially
reasonable manner, and that LaSalle makes no representation as to the success
of
the Offering, and will not be held responsible for damages (including
consequential damages) or other liabilities in the event the Offering is not
successful;
(g)
Except as disclosed in the PPM, there are no actions, suits, proceedings or
investigations pending or, to the best of AHPC's knowledge, threatened against
or affecting the Company which could prevent or interfere with or adversely
affect the performance by the Company of its obligations hereunder or the
offering, issuance and sale of the Secured Notes, or which, individually or
in
the aggregate, would have a material adverse effect on the value of the assets
or the operation of the business of the Company;
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(h)
The
Company represents and warrants that financial statements included in the PPM
will have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods covered thereby, and
present fairly the financial position of the Company as of the dates, and for
the periods, indicated therein, subject to normal year-end adjustments. In
the
opinion of management, all adjustments (consisting only of normal year-end
adjustments) will have been made which are considered necessary for a fair
presentation of such information for the periods presented. AHPC will advise
LaSalle of any material adverse change in the condition of the Company,
financial or otherwise, from that as shall be set forth in the PPM.
4.
Security.
The
Secured Notes shall be collateralized by a security interest in all the assets
of the Company that are not secured by the Company’s existing credit facility.
5.
Compensation.
As
compensation for LaSalle’s placement of Secured Notes, AHPC agrees to pay
LaSalle a selling commission (the “Commission”) equal to three percent (1%) of
the aggregate gross sale proceeds received from the sale of the Secured Notes
to
institutional investors (“Institutional Investors”) and six percent (4%) of the
aggregate gross sale proceeds received from the sale of the Secured Notes to
retail investors (“Retail Investors”). LaSalle will not be entitled to a
Commission with respect to any tendered subscriptions that are rejected by
the
Company or in which it is determined that the solicitation or obtaining of
purchasers was made in violation of the securities laws of the United States
or
any state or other jurisdiction or this Agreement. In addition, LaSalle shall
be
paid a 2% non-accountable expense allowance.
In
addition to the Commission, within three business days of the Closing Date
the
Company will issue to LaSalle a warrant (the “LaSalle Warrant”) entitling
LaSalle to purchase shares of AHPC’s Common Stock (the “Warrant Shares”)
identical to the Warrants that will attach to the Secured Notes. The number
of
LaSalle Warrant Shares shall be equal to three percent (4%) of the aggregate
value of the Secured Notes placed by LaSalle divided by an exercise price equal
to the greater of $3.50 or the closing market price of the Company’s common
stock on the Closing Date. The LaSalle Warrant (and the Warrant Shares) shall
carry the same anti-dilutive rights as the Company’s Class A Preferred Shares.
The LaSalle Warrant shall be exercisable starting from the six months after
the
date of issuance and shall expire, if not exercised, five (5) years from the
Closing Date.
LaSalle
shall be entitled to collect fees described under this paragraph 5 for a period
of twelve (12) months after the Closing Date with regard to any private purchase
of the securities of AHPC by a party introduced by LaSalle pursuant to this
Agreement. LaSalle shall maintain full piggyback rights with respect to the
Warrant Shares.
LaSalle
shall reimbursed for all accountable expenses associated with the offering
including escrow fees, printing, and legal to file the security
agreement.
6.
Registration
Rights.
LaSalle
and the Noteholders shall be entitled to have all Warrant Shares registered
by
the Company at the Company’s sole expense at such time as the Company next
undertakes to files a registration statement (on any form then available to
the
Company) after the Closing Date. LaSalle and the Noteholders shall have the
right to make a single request to register the Warrant Shares if AHPC has not
filed a registration statement within twelve months of the Closing Date (the
“Demand Registration”), and the Company agrees to file a registration statement
so as to register the Warrant Shares after such demand is made in writing and
delivered to the Company. The Company agrees to bear all costs and expenses
of
any such Demand Registration.
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7.
Indemnification.
(a)
The
Company agrees to indemnify and hold harmless LaSalle and each person, if any,
who controls LaSalle within the meaning of Section 15 of the Securities Act,
from and against any and all losses, claims, damages, liabilities and expenses
(including any investigation, legal and other expenses incurred in connection
therewith, and any amount paid in settlement of, any action, suit or proceeding
or any claim asserted) to which, jointly or severally, they, or any of them,
may
become subject under the Securities Act, the Securities Exchange Act of 1934,
as
amended, any other federal or state statutory or foreign law or regulation,
at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or
expenses (or actions with respect thereto) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in
the
PPM, or any amendment or supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to
make the statements therein not misleading; except insofar as any such untrue
statement or omission was made in such PPM in reliance upon and in conformity
with information furnished in writing to the Company by LaSalle expressly for
use therein.
(b)
LaSalle agrees to indemnify and hold harmless the Company and each person,
if
any, who controls the Company within the meaning of Section 15 of the Securities
Act, to the same extent as the indemnity from the Company set forth in Section
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hereof, but only insofar as the losses, claims, damages, liabilities or expenses
indemnified against arise out of or are based upon any untrue statement or
omission which was made in the PPM in reliance upon and in conformity with
information furnished in writing by LaSalle expressly for use therein; provided
however, that LaSalle’s obligation to indemnify the Company or any person who
controls any of them, hereunder shall be limited to the total price of the
Preferred Shares sold to the public by LaSalle.
(c)
Any
party which proposes to assert the right to be indemnified under this Section
shall, promptly after receipt of notice of commencement of any action, suit
or
proceeding against such party in respect of which a claim is to be made against
an indemnifying party under this Section, notify each such indemnifying party
of
the commencement of such action, suit or proceeding, enclosing a copy of all
papers served, but the failure to so notify such indemnifying party of any
such
action, suit or proceeding shall not relieve it from any liability which it
may
have to any indemnified party other than under this Section. In case any such
action, suit or proceeding shall be brought against any indemnified party and
it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, if it so
elects, individually or jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying party
shall not be liable to such indemnified party for any legal or other expenses,
other than reasonable costs of investigation requested by the indemnifying
party, subsequently incurred by such indemnified party in connection with the
defense thereof. The indemnified party shall have the right to employ its own
counsel in any such action in which the indemnifying party has so assumed the
defense, but the fees and expenses of such counsel shall be at the expense
of
such indemnified party unless: (i) the employment of counsel by such indemnified
party has been authorized by the indemnifying party; (ii) the indemnified party
shall have reasonably concluded that there may be a conflict of interest between
the indemnifying party and the indemnified party in the conduct of the defense
of such action (in which case the indemnifying party shall not have the right
to
direct the defense of such action on behalf of the indemnified party); or (iii)
the indemnifying party shall not in fact have employed counsel to assume the
defense of such action; in each of which cases the fees and expenses of counsel
of the indemnified party shall be at the expense of the indemnifying party.
An
indemnifying party shall not be liable for any settlement of any action or
claim
effected without its consent. In the case of (ii) above, the indemnified party
shall not be liable for the expenses of more than one separate counsel for
each
of the following groups: (y) LaSalle and any person who controls LaSalle within
the meaning of Section 15 of the Securities Act, and (z) the Company and any
person who controls the Company within the meaning of Section 15 of the
Securities Act.
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8.
Notices.
Any
notices under this Agreement shall be given or confirmed in writing and sent
by
registered or certified mail, postage prepaid and addressed as follows or as
specified by any party hereto by written notice to all other Parties hereto:
(i)
if to AHPC, 00 Xxxxxxxxxxxxx Xxxx., Xxxxxxxx Xxxxxxx Xxxxxxxx 00000 and (ii)
if
to LaSalle, 0000 Xxxx Xxxxxx, Xxxxx, Xxxxxxxx 00000.
9.
Entire
Agreement.
This
Agreement contains the entire understanding of the Parties hereto with respect
to the subject matter contained herein.
10.
Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original agreement, but all of which together shall constitute one
and
the same instrument.
11.
Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Illinois.
IN
WITNESS WHEREOF, this Agreement has been executed by the Parties hereto as
of
the _____ day of July, 2005.
AHPC
HOLDINGS,
INC.
LASALLE
ST. SECURITIES, LLC
__________________________________ __________________________________
By:
Xxxx
Xxxxxx
By:
Xxxxxxx Xxxxx
Its:
Chief Executive
Officer
Its:
Director of Corporate Finance
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