Item 1.01 Entry into a Material Definitive Agreement.
On
Each Convertible Debenture shall mature thirteen (13) months after the date of issuance, unless extended by the Yorkville, and accrues interest at the rate of 10% per annum. Principal, interest and any other payments due under the Convertible Debentures shall be paid in cash. The debenture holder may convert all or part of the Convertible Debentures into shares of common stock at any time after issuance at a conversion rate equal to 85% of the lowest daily volume weighted average price of the Common Stock during the 10 consecutive trading days immediately preceding the conversion date or other date of determination. The debenture holder may not convert the Convertible Debenture if such conversion would result in such holder holding in excess of in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest, unless waived by the holder with at least 65 days prior notice to the Company (the "Ownership Cap"). The Company also has the option to redeem, in part or in whole, the outstanding principal and interest under a Convertible Debenture prior to the maturity date. The Company shall pay an amount equal to the principal and interest amount being redeemed plus a redemption premium equal to 15% of the outstanding principal amount. Standard events of default are included in the Convertible Debenture, pursuant to which the holder may declare it immediately due and payable. During an event of default, the interest rate shall increase to 15% per annum until the event of default is cured; the holder also has the right to convert the Convertible Debenture into shares of common stock during an event of default.
The Convertible Debentures are secured by all assets of the Company and its
subsidiaries subject to (i) that certain amended and restated security agreement
by and between Yorkville, the Company and the Company's subsidiaries (all such
security agreements shall be referred to as the "Security Agreement") pursuant
to which the Company and its wholly owned subsidiaries agree to provide
Yorkville a security interest in all personal property of the Prodigy Textiles,
the Company's subsidiary organized under the laws of
In connection with the Securities Purchase Agreement, the Company also entered into a Registration Rights Agreement with Yorkville, pursuant to which the Company agreed to register all of the shares of Common Stock underlying the Convertible Debentures and warrants and with respect to subsequent Registration Statements, if any, such number of shares of Common Stock as requested by Yorkville not to exceed 300% of the maximum number of shares of Common Stock issuable upon conversion of all Convertible Debentures then outstanding (assuming for purposes hereof that (x) such Convertible Debentures are convertible at the then current conversion price and (y) any such conversion shall not take into account any limitations on the conversion of the Convertible Debentures set forth therein, in each case subject to any cutbacks set forth in the Registration Rights Agreement. .
Upon signing the letter of intent for the Yorkville Transaction, the Company
paid
The Securities Purchase Agreement also contains customary representation and warranties of the Company and the Investor, indemnification obligations of the Company, termination provisions, and other obligations and rights of the parties.
The foregoing description of the Securities Purchase Agreement, Convertible Debentures, Warrant, Security Agreement, IP Security Agreement, Registration Rights Agreement, Guaranty Agreement and A&R Convertible Debenture is qualified by reference to the full text of the forms of Securities Purchase Agreement, . . .
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
The disclosures set forth in Item 1.01 of this Current Report are incorporated by reference herein.
Item 8.01 Other Events.
The Company issued a press release on
Item 9.01 Financial Statements and Exhibits.
Exhibit No. Description 4.1 Form of Convertible Debenture 4.2 Form of Warrant 10.1 Form of Securities Purchase Agreement 10.2 Form of Amended and Restated Guaranty Agreement 10.3 Form of Amended and Restated Security Agreement 10.4 Form of Amended and Restated IP Security Agreement 10.5 Form of Registration Rights Agreement 99.1 Press release 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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