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and $8.0 million of common stock and Warrants.
We sold $17.6 million, $2.2 million, $0.8 million, $0.8 million
and $0.8 million principal amount of Subordinated Notes; 2,909,092,
363,636, 121,212, 121,212 and 121,212 shares of our common stock
and 2,208,152, 276,019, 92,006, 92,006 and 92,006 Warrants to CB
Capital Investors, L.P. (now known as J.P. Morgan Partners (23A
SBIC), L.P.), Mellon Ventures, L.P., Paul B. Loyd, Jr., Steven A.
Webster and Douglas A.P. Hamilton, respectively. The Subordinated
Notes were sold at a discount of $0.7 million, which is being amortized
over the life of the notes. Interest payments are due quarterly
commencing on March 31, 2000. We may, until December 2004, elect,
and historically have elected, to increase the amount of the Subordinated
Notes for 60% of the interest which would otherwise be payable in
cash. As a result, our cash obligation on the Subordinated Notes
will increase significantly after December 2004. As of December
31, 2002 and 2003, the outstanding balance of the Subordinated Notes
had been increased by $3.9 million and $5.3 million, respectively,
for such interest paid in kind. Concurrently with the sale of the
Subordinated Notes, we sold to the same purchasers 3,636,364 shares
of our common stock at a price of $2.20 per share and warrants expiring
in December 2007 to purchase up to 2,760,189 shares of our common
stock at an exercise price of $2.20 per share. For accounting purposes,
the warrants were valued at $0.25 each. In the first quarter of
2004, Mellon Ventures exercised 69,199 of its 1999 warrants on a
cashless basis and received 49,135 shares which it sold in the 2004
public offering.
We are subject to certain covenants under
the terms under the Subordinated Notes securities purchase agreement,
including but not limited to, (a) maintenance of a specified tangible
net worth, (b) maintenance of a ratio of EBITDA (earnings before
interest, taxes, depreciation and amortization) to quarterly Debt
Service (as defined in the agreement) of not less than 1.00 to 1.00,
and (c) a limitation of our capital expenditures to an amount equal
to our EBITDA for the immediately prior fiscal year (unless approved
by our Board of Directors and a J.P. Morgan Partners (23A SBIC),
L.P. appointed director).
Series B Preferred Stock
In February 2002, we consummated the
sale of 60,000 shares of Series B Preferred Stock and 2002 Warrants
to purchase 252,632 shares of common stock for an aggregate purchase
price of $6.0 million. We sold $4.0 million and $2.0 million of
Series B Preferred Stock and 168,422 and 84,210 warrants to Mellon
Ventures, Inc. and Steven A. Webster, respectively. The Series B
Preferred Stock is convertible into common stock by the investors
at a conversion price of $5.70 per share, subject to adjustment
for transactions including issuance of common stock or securities
convertible into or exercisable for common stock at less than the
conversion price, and is initially convertible into 1,052,632 shares
of common stock. The approximately $5.8 million net proceeds of
this financing were used to fund our ongoing exploration and development
program and general corporate purposes. In the first quarter of
2004, Mellon Ventures exercised all 168,411 of its 2002 warrants
on a cashless basis and received 36,570 shares which it sold in
the 2004 public offering.
Dividends on the Series B Preferred Stock
will be payable in either cash at a rate of 8% per annum or, at
our option, by payment in kind of additional shares of the Series
B Preferred Stock at a rate of 10% per annum. At December 31, 2002
and 2003 the outstanding balance of the Series B Preferred Stock
had been increased by $0.5 million (5,294 shares) and $1.2 million
(11,987 shares), respectively, for dividends paid in kind. In addition
to the foregoing, if we declare a cash dividend on our common stock,
the holders of shares of Series B Preferred Stock are entitled to
receive for each share of Series B Preferred Stock a cash dividend
in the amount of the cash dividend that would be received by a holder
of the common stock into which such share of Series B Preferred
Stock is convertible on the record date for such cash dividend.
Unless all accrued dividends on the Series B Preferred Stock shall
have been paid and a sum sufficient for the payment thereof set
apart, no distributions may be paid on any Junior Stock (which includes
the common stock) (as defined in the Statement of Resolutions for
the Series B Preferred Stock) and no redemption of any Junior Stock
shall occur other than subject to certain exceptions.
We must redeem the Series B Preferred
Stock at any time after the third anniversary of our initial issuance
upon request from any holder at a price per share equal to Purchase
Price/Dividend Preference (as defined below). We may redeem the
Series B Preferred Stock after the third anniversary of its issuance
at a price per share equal to the Purchase Price/Dividend Preference
and, prior to that time, at varying preferences to the Purchase
Price/Dividend Preference. "Purchase Price/Dividend Preference"
is defined to mean, generally, $100 plus all cumulative and accrued
dividends.
In the event of any dissolution, liquidation
or winding up or specified mergers or sales or other disposition
by us of all or substantially all of our assets, the holder of each
share of Series B Preferred Stock then outstanding will be entitled
to be paid per share of Series B Preferred Stock, prior to the payment
to holders of our common stock and out of our assets available for
distribution to our shareholders, the greater of:
- $100 in cash plus all cumulative and
accrued dividends; and
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