Item 1.01 Entry into a Material Definitive Agreement.
(a) Series D Exchange Agreement
On February 18, 2013, VHGI Holdings, Inc. (the “Company”) entered into an agreement (the “Exchange Agreement”) with Paul R. Risinger, our Chief Executive Officer and sole director (“Risinger”). Pursuant to the Exchange Agreement, the Company issued to Risinger 500,000 shares of the Company’s Series D Convertible Preferred Stock in exchange for the assignment to the Company of $3,000,000 in principal amount of a promissory note in the original principal amount of $17,000,000, made by the Company’s wholly-owned subsidiary, VHGI Coal, Inc., in favor of Risinger.
Lily Group Loan Agreement
Pursuant to a Loan Agreement dated as of February 26, 2013 (the “Loan Agreement”)—which was entered into by and among the Company, Lily Group Inc., an Indiana corporation (“Lily”), Lily Group Holdings Company, an Indiana corporation (“LGHC”), Risinger, James W. Stuckert and Diane V. Stuckert (together, the “Stuckerts”), and Solomon Oden Howell, Jr. (“Howell” and, together with the Stuckerts, the “Lenders”)—Lily secured a total of $6,000,000 in revolving debt (the “Loan”) pursuant to: (i) a Secured Drawdown Promissory Note in the original principal amount of up to $5,000,000 (the “Secured Note”), and (ii) an unsecured Drawdown Promissory Note in the principal amount of up to $1,000,000 (the “Secondary Note,” and, collectively with the Secured Note, the “Notes”).
As evidenced by a Subordination Agreement, dated as of February 26, 2013, by and among Platinum Partners Credit Opportunities Master Fund LP (“Platinum”), the Lenders, and Lily (and agreed and consented to by the Company and its remaining subsidiaries), amounts under the Secured Note will be secured by a first priority lien on up to $5,000,000 of the equipment portion of collateral (excluding fixtures) by which certain debt held by Platinum under that certain Note Purchase Agreement, dated as of February 16, 2012 (the “Platinum Agreement”), is currently secured. Pursuant to a fourth amendment to the Platinum Agreement, dated as of February 26, 2013, $500,000 of the proceeds of the Notes will be used to retire $500,000 of principal owed by Lily to Platinum under the Platinum Agreement.
The Lenders are making the Loan out of the proceeds received from a Revolving Loan and Security Agreement entered into as of February 15, 2013, with Regions Bank (the “Regions Loan Agreement”). In connection with and as inducement for Regions Bank to enter into the Regions Loan Agreement, each of Risinger and LGHC has entered into a guaranty under which they will be liable for all obligations under the Regions Loan Agreement. As consideration for such guaranty, and for Lenders’ entrance into the transactions described above, each of Risinger, Howell, and the Stuckerts was issued a warrant for purchase of 2,000 shares of the Company’s Series E Convertible Preferred Stock (as described in Item 5.03 below), subject to certain antidilution provisions as set forth therein.
Pursuant to a payoff letter dated as of February 26, 2013, an additional portion of the proceeds of the Drawdown Note is being used to pay amounts owed by Lily in favor of HEB Ventures, LLC, pursuant to a loan agreement, and secured by a security agreement, of even date therewith.
Item 3.02 Unregistered Sales of Equity Securities.
As described in further detail in Item 1.01 above:
|
·
|
On February 18, 2013, the Company issued a total of 500,000 shares of its Series D Convertible Preferred Stock to Risinger in connection with the Exchange Agreement.
|
|
·
|
On February 26, 2013, the Company issued the Warrants in connection with the Loan Agreement.
|
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
(a)
Effective February 14, 2013, the Company filed a Certificate of Designations, Preferences, Rights and Limitations designating 100,000 shares of a new Series E Convertible Preferred Stock.