Item 1.01 Entry into a Material Definitive Agreement.
Credit Facility for $2 Million
Effective on March 29, 2013, we entered into a Senior Secured Credit Facility Agreement (the “Credit Agreement”) dated as of February 28, 2013, with TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership. Pursuant to the Agreement, TCA agreed to loan up to $2 million to us for working capital purposes. A total of $600,000 was funded by TCA in connection with the closing. The amounts borrowed pursuant to the Credit Agreement are evidenced by a Convertible Promissory Note (the “Note”), the repayment of which is secured by a Security Agreement executed by us and each of our wholly-owned subsidiaries. Pursuant to the Security Agreements, the repayment of the Note is secured by a security interest in substantially all of our assets in favor of TCA.
The initial Note in the amount of $600,000 is due and payable along with interest thereon on June 14, 2014, and bears interest at the rate of 12% per annum, increasing to 18% per annum upon the occurrence of an event of default. The Note is convertible into our common stock at eighty five percent (85%) of the lowest VWAP during the five (5) business days immediately prior to the conversion date, subject to TCA not being able to beneficially own more than 4.99% of our outstanding common stock upon any conversion.
We have the right to prepay the Note, in whole or in part, provided, that we pay TCA an amount equal to the then outstanding amount of the Revolving Note plus 5% for repayments up until 180 days following the Closing and the then outstanding amount of the Revolving Note plus 2.5% for repayments subsequent to 180 days following the Closing.
We also agreed to pay TCA various fees during the term of the Credit Agreement, including a commitment fee of 3% of the loan commitment and 2% of any increase in the amount thereof, a due diligence fee of $5,000, and document review fees of $12,500 in connection with the closing. In total, we paid $66,450 in fees, taxes, expenses and closing costs, and netted $528,550 in connection with the execution of the Credit Agreement.
We also agreed to pay TCA an investment banking fee of $100,000, payable in the form of 6,666,667 shares of common stock (the “Commitment Shares”).
During the term of the Credit Agreement, we are prohibited from incurring any indebtedness (other than in connection with the Credit Agreement or as otherwise approved by TCA). We are permitted to issue or distribute shares of common stock, partnership interests, or other securities without the consent of TCA, as long as a change of control in the company does not occur.
Amendment to Prior Revolving Credit Facility
On March 29, 2013, we entered into Amendment No. 2 to Senior Secured Revolving Credit Facility Agreement for the purpose of adding our new subsidiaries to the previously entered into Senior Secured Revolving Credit Facility.
