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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
August 17, 2006 (August 16, 2006)
MILLENNIUM BIOTECHNOLOGIES GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-3338 22-1558317
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
665 Martinsville Road, Suite 219, Basking Ridge, NJ 07920
(Address of Principal Executive Offices, including Zip Code)
Registrant's telephone number, including area code: (908) 604-2500
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01 Entry into a Material Definitive Agreement.
Item 3.02 Unregistered Sales of Equity Securities.
Item 3.03 Material Modification of Rights of Security Holders.
On August 16, 2006, Millennium Biotechnologies Group, Inc. (the "Company")
entered into a Securities Purchase Agreement ("Purchase Agreement") with 6
accredited investors for the sale of 13,000 Units. Each Unit consists of (a) one
share of the Company's new Series E Senior Convertible Preferred Stock (the
"Series E Preferred Stock"), (b) warrants to acquire 800 shares of Common Stock
(the "Warrants") and (d) additional investment rights to acquire one share of
Series E Preferred Stock and Warrants to acquire 800 shares of Common Stock. In
addition, the lead investor, Iroquois Master Fund, Ltd. (the "Lead Investor")
agreed to purchase 100 shares of the Company's new Series F Senior Convertible
Preferred Stock (the "Series F Preferred Stock"). The securities to be issued
pursuant to the Purchase Agreement are to be issued in an exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.
Securities Purchase Agreement
Pursuant to the terms of the Purchase Agreement, the purchase price of
each Unit is $200 and the purchase price of each share of Series F Preferred
Stock is $1.00, for an aggregate purchase price of $2.6 million for the Units
and of $100 for the Series F Preferred Stock. In addition, the Purchase
Agreement contemplates the issuance of approximately 14,630 Units to convert not
less than $2,926,000 of the Company's existing indebtedness by execution of a
Supplemental Purchase Agreement by the holders of such indebtedness and the
issuance of 2,000 additional Units upon the same terms as set forth in the
Purchase Agreement. The closing (the "Closing") of the transactions contemplated
in the Purchase Agreement is to occur simultaneous with the consummation of the
previously reported anticipated sale by the Company's wholly owned subsidiary of
all of the assets used in the Company's nutraceutical business.
Pursuant to the Purchase Agreement, the Company may not (a) subject to
certain exceptions, offer or sell any equity securities or other rights
convertible or exchangeable into equity securities (a "Subsequent Placement")
until the effective date (the "Effective Date") of the registration statement
covering the Common Stock underlying the securities purchased pursuant to the
Purchase Agreement (see "Registration Rights Agreement" below); (b) subject to
certain exceptions, make any Subsequent Placement, at any time from the
Effective Date until the later of the date no Series E Preferred Stock is
outstanding or the second anniversary of the Effective Date, without first
offering the purchasers of the Units the opportunity to participate in such
Subsequent Placement; (c) so long as the Series E Preferred Stock is
outstanding, without the consent of the Lead Investor, issue or incur any debt
or equity that is senior to or pari passu with the Series E Preferred Stock; or
(d) so long as the Lead Investor is the holder of at least 3,000 shares of
Series E Preferred Stock, without the consent of the Lead Investor, (i) change
the number of directors of the Company from five, (ii) redeem any capital stock
of the Company (subject to certain exceptions), (iii) acquire another entity,
(iv) enter into any merger or consolidation, (v) sell all or substantially all
of its assets, (vi) make a tender offer for or exchange its Common Stock, or
(vii) incur indebtedness in excess of $250,000. In addition, in the event of a
change of control of the Company (as defined in the Purchase Agreement), a
holder of the Series E Preferred Stock may require the Company to repurchase
such holder's Series E Preferred Stock; provided, however, so long as the Lead
Investor is the holder of at least 3,000 shares of Series E Preferred Stock, all
of the holders' right to such redemption may be waived by the Lead Investor.
In addition to customary closing conditions, the purchasers' obligation to
consummate the transactions contemplated by the Purchase Agreement is contingent
upon the Company effectuating the conversion of at least $2,926,000 of its debt
into the Units, the election of three members of the directors to be selected by
the Lead Investor, the closing of the sale of the Company's nutraceutical
business and the Company issuing 2,000 additional Units upon the same terms as
set forth in the Purchase Agreement.
1
Series E Preferred Stock
The Stated Value of each share of the Series E Preferred Stock is $200,
and the holder thereof is entitled to receive cash dividends at the rate of 10%
per annum payable quaterly; provided, subject to certain conditions, the Company
may, at its option, pay such dividends in the form of its Common Stock.
In all matters other than the election of directors, the holders of the
Series E Preferred Stock are entitled vote together with the holders of the
Common Stock as a single class. Each share of Series E Preferred Stock is
entitled to such number of votes equal to the number of shares of Common Stock
into which the Series E Preferred Stock is convertible, subject to the
conversion limitations described below.
The Series E Preferred Stock, including any accrued but unpaid dividend,
is convertible into shares of Common Stock at a conversion price of $.25 per
share. Such conversion price is subject to anti-dilution and adjustment
provisions.
In the event of a liquidation, dissolution or winding up of the Company,
the Series E Preferred Stock is entitled to a liquidation preference (senior to
all other capital stock of the Company) in an amount equal to the Stated Value
plus all accrued but unpaid dividends. At the option of the Lead Investor, a
merger, consolidation, recapitalization, reorganization or sale of substantially
all of the assets may be deemed a liquidation event.
The Series E Preferred Stock is redeemable, at the option of the holder
thereof, at any time on and after the three year anniversary of the issue date
thereof at a price equal to the Stated Value plus all accrued but unpaid
dividends. The Series E Preferred Stock also is subject to mandatory redemption
on the five year anniversary of the issue date at a price equal to the Stated
Value plus all accrued but unpaid dividends. In addition, in the event of
certain triggering events, such as bankruptcy of the Company or a breach by the
Company of certain of its covenants or representations, a holder may require the
Company to repurchase such holder's Series E Preferred Stock.
Series F Preferred Stock
The holders of the Series F Preferred Stock are not entitled to receive
any dividends.
In all matters other than the election of directors, the holders of the
Series F Preferred Stock are entitled to vote together with the holders of the
Common Stock as a single class. Each share of Series F Preferred Stock is
entitled to such number of votes equal to the number of shares of Common Stock
into which the Series F Preferred Stock is convertible, subject to the
conversion limitations described below. In addition, the holders of the Series F
Preferred Stock, as a separate class, are entitled to elect three of the five
members of the Board of Directors of the Company.
Each share of Series F Preferred Stock is convertible into one share of
Common Stock of the Company, subject to anti-dilution and adjustment provisions.
In the event of a liquidation, dissolution or winding up of the Company,
the Series F Preferred Stock is entitled to a liquidation preference (senior to
all other capital stock of the Company other than the Series E Preferred Stock)
in an amount equal to the Stated Value. At the option of the Lead Investor, a
merger, consolidation, recapitalization, reorganization or sale of substantially
all of the assets may be deemed a liquidation event.
2
In the event of certain triggering events, such as bankruptcy of the
Company or a breach by the Company of certain of its covenants or
representations, a holder may require the Company to repurchase such holder's
Series F Preferred Stock.
Warrants
The Warrants are exercisable by the holder at a price of $.25 per share
(subject to anti-dilution and adjustment provisions) for a period of five years
from the date such Warrants are issued. The Warrants, the Series E Preferred
Stock and the Series F Preferred Stock may not be exercised or converted by the
holder if following such exercise or conversion the holder will beneficially own
more than 4.99% of the total number of outstanding Common Stock of the Company.
Additional Investment Rights
The Additional Investment Rights contained in the Units are exercisable by
the holder at a price equal to the Stated Value of the Series E Preferred Stock
(subject to anti-dilution and adjustment provisions) for a period of three
years.
Registration Rights Agreement
In connection with the Purchase Agreement, the Company also entered into a
Registration Rights Agreement whereby the Company has agreed to file a
registration statement to register the re-sale of the shares of Common Stock
issuable upon conversion of the Series E Preferred Stock and the Series F
Preferred Stock and exercise of the Warrants. Under the Registration Rights
Agreement, the Company is obligated to file the registration statement within 30
days of the Closing and to use its best efforts to cause such registration
statement declared effective within 90 days (120 days in the event that the
Company receives comments from the Securities and Exchange Commission) of the
Closing and to keep such registration statement effective for a period of five
years. If the Company fails to comply with these or certain other provisions,
the Company will be required to pay as liquidated damages of 2% of the aggregate
purchase price paid by the purchasers plus 1% of the aggregate purchase price
for each month the failure continues.
Amendment to Employment Agreement
Pursuant to the terms of existing employment agreements with various
employees of the Company, such employees are entitled to certain benefits and
payments upon a change of control of the Company and/or termination of their
employments. The consummation of the the transactions contemplated in the
Purchase Agreement and the previously reported anticipated sale of the Company's
nutraceutical business would have triggered such provisions. Accordingly, in
connection with the Purchase Agreement, the Company entered into amendments to
the employment agreements as described below.
Jerry Swon
The employment agreement between the Company and Jerry Swon (its President
and Chief Executive Officer) had provided that Mr. Swon will continue as an
employee of the Company until December 31, 2010, at an annual salary of
$300,000. In the event Mr. Swon's employment is terminated by the Company
without cause, he was entitled to receive certain termination benefits including
a payment of 2.5 times his base salary. In addition, options to purchase
5,000,000 shares of Common Stock at an exercise of $.50 per share was to vest
automatically upon, among other things, a change of control.
3
Pursuant to the amendment to his employment agreement, upon the Closing,
Mr. Swon's employment term will be reduced to one year from the date of the
Closing, and his salary will be reduced to $100,000 per year. The 5,000,000
options referred above will automatically vest upon the Closing and the exercise
price thereof will be reduced to $.25 per share. In addition, Mr. Swon was
granted warrants to purchase 2,000,000 shares of Common Stock, exercisable for a
period of five years commencing January 1, 2007 at an exercise price of $.25 per
share. Mr. Swon further agreed not to sell, assign or transfer any such options
or warrants and not to sell, assign or transfer the underlying shares of Common
Stock for a period of one year after exercise thereof.
Frank Guarino
The employment agreement between the Company and Frank Guarino (its Chief
Financial Officer) had provided that Mr. Guarino will continue as an employee of
the Company until December 31, 2010, at an annual starting salary of $98,000,
subject to certain increases. In the event Mr. Guarino's employment was
terminated by the Company without cause, he was entitled to receive certain
termination benefits, including payment of his salary through the normal
expiration date of this employment term. In addition, options to purchase
200,000 shares of Common Stock at an exercise of $.01 per share was to vest
automatically upon, among other things, a change of control.
Pursuant to the amendment to his employment agreement, upon the Closing,
Mr. Guarino's employment term will be reduced to one year from the date of the
Closing at a salary of $150,000 per year, less any amounts to be paid to him by
the purchaser of the Company's nutraceutical business for consulting services.
The 200,000 options referred above will automatically vest upon the Closing and
the exercise price of 334,000 options which had previously vested will be
reduced from $.37 per share to $.25 per share. In addition, Mr. Guarino was
granted warrants to purchase 1,200,000 shares of Common Stock, exercisable for a
period of five years commencing January 1, 2007 at an exercise price of $.25 per
share. Mr. Guarino further agreed not to sell, assign or transfer the 200,000
options or 1,200,000 warrants and not to sell, assign or transfer the underlying
shares of Common Stock for a period of one year after exercise thereof.
John Swon
The employment agreement between the Company and John Swon had provided
that Mr. Swon will continue as an employee of the Company until December 31,
2010. In the event Mr. Swon's employment was terminated by the Company without
cause, he was entitled to receive certain termination benefits, including 2.5
times his base salary. In addition, options to purchase 200,000 shares of Common
Stock at an exercise of $.01 per share was to vest automatically upon, among
other things, a change of control.
Pursuant to the amendment to his employment agreement, upon the Closing,
Mr. Swon's employment term will terminate, and he shall not be entitled to any
termination benefits other than his accrued but unpaid salary. The 200,000
options referred above will automatically vest upon the Closing. Mr. Swon
further agreed not to sell, assign or transfer such options and not to sell,
assign or transfer the underlying shares of Common Stock for a period of one
year after exercise thereof.
Jerry T. Swon
The employment agreement between the Company and Jerry T. Swon had
provided that Mr. Swon will continue as an employee of the Company until
December 31, 2010. In the event Mr. Swon's employment was terminated by the
Company without cause, he was entitled to receive certain termination benefits,
including 2.5 times his base salary. In addition, options to purchase 200,000
shares of Common Stock at an exercise of $.01 per share was to vest
automatically upon, among other things, a change of control.
4
Pursuant to the amendment to his employment agreement, upon the Closing,
Mr. Swon's employment term will terminate, and he shall not be entitled to any
termination benefits other than his accrued but unpaid salary. The 200,000
options referred above will automatically vest upon the Closing. Mr. Swon
further agreed not to sell, assign or transfer such options and not to sell,
assign or transfer the underlying shares of Common Stock for a period of one
year after exercise thereof.
Christopher Swon
The employment agreement between the Company and Christopher Swon had
provided that Mr. Swon will continue as an employee of the Company until
December 31, 2010. In the event Mr. Swon's employment was terminated by the
Company without cause, he was entitled to receive certain termination benefits,
including payment of his salary through the normal expiration date of this
employment term. In addition, options to purchase 100,000 shares of Common Stock
at an exercise of $.01 per share was to vest automatically upon, among other
things, a change of control.
Pursuant to the amendment to his employment agreement, upon the Closing,
Mr. Swon's employment term will terminate, and he shall not be entitled to any
termination benefits other than his accrued but unpaid salary. The 100,000
options referred above will automatically vest upon the Closing. Mr. Swon
further agreed not to sell, assign or transfer such options and not to sell,
assign or transfer the underlying shares of Common Stock for a period of one
year after exercise thereof.
For a more detailed description of these transactions, see the (a)
Securities Purchase Agreement, (b) the Certificates of Designations, (c) the
form of the Warrants, (d) the form of the Additional Investment Rights, (e) the
Registration Rights Agreement, (f) the Amendments to Employment Agreements and
(g) the form of the Supplemental Purchase Agreement filed as Exhibits to this
Report and incorporated herein by reference.
5
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits:
4.1 Form of the Certificate of Designations of the Series E Senior
Convertible Preferred Stock
4.2 Form of the Certificate of Designations of the Series F Senior
Convertible Preferred Stock
4.3 Form of the Warrants
4.4 Form of the Additional Investment Rights
10.1 Securities Purchase Agreement, dated August 16, 2006
10.2 Registration Rights Agreement, dated August 16, 2006
10.3 Form of the Supplemental Purchase Agreement
10.4 Second Amendment to Employment Agreement with Jerry Swon,
dated August 16, 2006
10.5 Amendment to Employment Agreement with Frank Guarino, dated
August 16, 2006
10.6 Second Amendment to Employment Agreement with John Swon, dated
August 16, 2006
10.7 Second Amendment to Employment Agreement with Jerry T. Swon,
dated August 16, 2006
10.8 Amendment to Employment Agreement with Christopher Swon, dated
August 16, 2006
99.1 Press Release, dated August 17, 2006
6
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: August 17, 2006
MILLENNIUM BIOTECHNOLOGIES GROUP, INC.
/s/ Frank Guarino
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Name: Frank Guarino
Title: Chief Financial Officer
7