ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
Effective April 13, 2006, Veridium entered into a Securities Purchase Agreement with Cornell Capital Partners, LP, under which Cornell purchased a Convertible Debenture in the amount of $4,400,000. The Debenture was issued as of April 13, 2006. Cornell paid the $4,400,000 purchase price on April 19, 2006.
The conversion price of the Debenture shall be equal to the lesser of $0.10 per share or the average of the three lowest closing market prices of the Company's Common Stock for the thirty days preceding conversion. Cornell will be entitled to convert the Debenture on the basis of the conversion price into Veridium common stock, provided that Cornell cannot convert into shares that would cause Cornell to own more than 4.9% of Veridium's outstanding common stock.
The Debenture will bear interest at 5% per annum. Accrued interest and the principal amount will be payable on April 1, 2009. Veridium's obligations under the Debenture are secured by a pledge of all of its assets, subject to Cornell's agreement to subordinate its security interest to any line of credit that Veridium obtains from a bank or other financial institution. The proceeds of the Debenture may only be used by Veridium to support the deployment by Veridium's wholly owned subsidiary, Veridium Industrial Design Corporation ("VIDC"), of its various technologies, specifically including VIDC's Corn Oil Extraction and CO2 BioReactor technologies.
Veridium will pay a commitment fee of $400,000 and a $55,000 structuring fee to Yorkville Advisors Management, LLC. Accordingly, Veridium will receive net proceeds of $3,945,000 upon issuance of the Debenture. Veridium will also issue to Cornell a five year Warrant to purchase 10,000,000 common shares at $0.10 per share, a five year Warrant to purchase 10,000,000 common shares at $0.15 per share, a five year Warrant to purchase 10,000,000 common shares at $0.20 per share, a five year Warrant to purchase 20,000,000 common shares at $0.25 per share, and a five year Warrant to purchase 25,000,000 common shares at $0.50 per share.
Veridium agreed to file with the Securities and Exchange Commission a registration statement to enable Cornell to resell to the public the common stock issuable on conversion of the Debenture and the common stock issuable on exercise of the Warrants.
Item 9.01 Financial Statements and Exhibits
Exhibits:
10-a Securities Purchase Agreement effective April 13, 2006 among Veridium
Corporation and Cornell Capital Partners LP
10-b Form of Convertible Debenture due April 2008
10-c Security Agreement effective April 13, 2006 between Veridium
Corporation and Cornell Capital Partners LP
10-d Form of Warrant to Purchase Common Stock to be issued to Cornell
Capital Partners
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