rim_8k-121007.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
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): December 5,
2007
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RIM
SEMICONDUCTOR COMPANY
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(Exact
name of registrant as specified in its
charter)
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Utah
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000-21785
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95-4545704
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(State
or other jurisdiction
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(Commission
File Number)
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(IRS
Employer
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of
incorporation)
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Identification
No.)
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305
NE 102nd Ave, Suite 350, Portland, Oregon
97220
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(Address
of principal executive offices, including Zip
Code)
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Registrant’s
telephone number, including area code (503)
257-6700
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(Former
name or former address, if changed since last
report)
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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):
0
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
0
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
0
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
0
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
On
December 5, 2007 (the “Closing Date”), Rim Semiconductor Company (the “Company”)
entered into a Subscription Agreement with certain institutional and individual
investors (the “Investors”), pursuant to which the Company sold to the Investors
10% Secured Convertible Notes due December 5, 2009 (the “Notes”) and Class A
Warrants (the “Warrants”) to purchase shares of the Company’s common stock, par
value $0.001 (the “Common Stock”).
As
of the
date of this report, the Company has raised gross proceeds of $3,175,000 from
the private placement to the Investors of $3,527,777.73 aggregate principal
amount of Notes (which amount reflects an original issue discount of
10%). In connection with the issuance of these Notes, the Company
issued to the Investors Warrants to purchase an aggregate of 146,532,832 shares
of Common Stock at an initial exercise price of $0.10 per
share. Under the Subscription Agreement, the Company may raise up to
an additional $2,825,000 through the sale of Notes (and issue related Warrants)
during the 20 day period after the Closing Date, although there is no assurance
that the Company will issue any such additional Notes or Warrants.
The
Company received net cash proceeds of approximately $1,730,000 from the proceeds
of the Notes issued through the date of this report, after the payment of
offering related fees and expenses of $345,000 and after the repayment in full
of $1,100,000 in principal and accrued interest on bridge loans issued in July
2007. Remaining proceeds received from the private placement of the
Notes will be used primarily for working capital and general corporate
purposes.
The
Notes
were issued on December 5, 2007 and have a term of two years. Each
holder has the right at any time until his Note is fully paid to convert any
outstanding and unpaid principal and accrued interest into shares of Common
Stock at the conversion price (the “Conversion Price”). The
Conversion Price per share is equal to 75% of the average of the closing bid
prices of the Common Stock for the 10 trading days preceding the conversion
date, however, the Conversion Price shall not exceed $0.05 per
share. The Conversion Price and number and kind of shares or other
securities to be issued upon conversion are subject to adjustment for certain
issuances, transactions or events that would result in “full ratchet” protection
to the holders.
If
the
Company fails to deliver stock certificates upon the conversion of the Notes
at
the specified time and in the specified manner, the Company may be required
to
make substantial payments to the holders of the Notes.
Interest
payable on the Notes accrues at an annual rate of 10% and is payable December
31, 2007 and quarterly thereafter, and on the Maturity Date, accelerated or
otherwise, when the principal and remaining accrued but unpaid interest is
due
and payable, unless previously converted into Common Stock.
Holders
of Notes are subject to certain limitations on their rights to convert the
Notes. The principal limitation is that the holder may not, with
certain limited exceptions, convert into a number of shares that would, together
with other shares held by the holder, exceed 4.99% of the then outstanding
shares of the Company after such conversion. The foregoing
restriction percentage may be increased by the Holder upon 61 days notice to
9.99% of the then outstanding shares of the Company after such
conversion.
The
Company has the option of prepaying the outstanding principal on the Notes,
in
whole or in part, by paying the Holder(s) 130% of the principal amount to be
redeemed, together with accrued but unpaid interest.
At
the
option of the Holders, all unpaid principal and interest on the Notes may be
made immediately due and payable, upon demand, upon the occurrence of any one
or
more of the following events of default: (i) the Company’s failure to pay
principal and interest when due (subject to a 5 day grace period), (ii) the
Company’s breach of any material covenant or material term or condition of the
Subscription Agreement (subject to a 10 day cure period); (iii) the Company’s
material breach of any of the representations or warranties made in the
Subscription Agreement or any other transaction documents executed in connection
with the transaction; (iv) the appointment of a receiver or trustee or the
Company’s assignment for the benefit of creditors or application for or consent
to the appointment of a receiver or trustee for the Company, or for a
substantial part of its property or business; (v) entry or filing of any
judgment against the Company for more than $100,000; (vi) bankruptcy,
insolvency, reorganization or liquidation, or the issuance of any notice in
relation to such event, instituted by or against the Company (that is not
dismissed within 45 days); (vii) delisting of the Company’s Common Stock; (viii)
failure to comply with the requirements for continued listing of the Common
Stock for more than three consecutive trading days; (ix) notification that
the
Company is not in compliance with conditions for continued listing; (x) default
by the Company of any obligation(s) in an aggregate amount in excess of $100,000
for more than 20 days after the due date (unless the Company contests the
validity of such obligation in good faith); (xi) issuance of a Securities and
Exchange Commission (“SEC”) or judicial stop trade order or trading suspension
that lasts for five or more consecutive trading days; (xii) the Company’s
failure to timely deliver Common Stock to a holder pursuant to the terms of
the
Subscription Agreement; (xiii) the Company’s failure to meet certain obligations
with respect to registration of Common Stock into which the Notes are
convertible as described in the Subscription Agreement (if such failure
continues for at least 15 consecutive days); (xiv) failure by the Company to
reserve for issuance upon conversion of the Notes the amount of Common Stock
set
forth in the Notes and the Subscription Agreement; (xv) a material negative
restatement of any financial statements included in certain of the Company’s
periodic reports filed with the SEC; and (xvi) any uncured default by the
Company of a material term, covenant, warranty or undertaking in any other
agreement to which the Company and the holder(s) are parties.
The
Warrants, issued as of December 5, 2007, are immediately exercisable at a per
share exercise price of $0.10 (which is subject to adjustment) through the
fifth
anniversary of the date of issuance. The warrants include a cashless exercise
provision as well as “full ratchet” antidilution provisions with respect to
certain securities issuances.
If
the
Company fails to deliver stock certificates upon the exercise of the Warrants
at
the specified time and in the specified manner, the Company may be required
to
make substantial payments to the holders of the Warrants.
Holders
of Warrants are subject to certain limitations on their rights to exercise
the
Warrants. The principal limitation is that the holder generally may
not exercise Warrants to purchase a number of shares that would, together with
other shares held by the holder, exceed 4.99% of the then outstanding shares
of
the Company after such exercise. The foregoing restriction percentage
may be increased by the Holder upon 61 days notice to 9.99% of the then
outstanding shares of the Company after such exercise.
To
secure
the Company’s obligations under the Notes and other obligations to the
Investors, the Company has granted a security interest in substantially all
of
its assets, including the stock and assets of its N V Entertainment, Inc.
subsidiary, in favor of the Investors under the terms and conditions of a
Security Agreement dated as of the date of the Notes. The security
interest terminates upon payment or satisfaction of all of the Company’s
obligations under the Notes and other obligations to the
Investors.
In
the
event (i) the Company is prohibited from issuing shares upon conversion of
the
Notes, (ii) upon the occurrence of any other Event of Default (as defined in
the
Note or Subscription Agreement) that continues for more than 20 days, (iii)
certain Changes in Control of the Company, or (iv) of the liquidation,
dissolution or winding up of the Company, then at the Investors’ election, the
Company must pay to each Investor an amount equal to 120% of the principal
amount of his respective Note, plus accrued but unpaid interest.
In
connection with the transaction, the Company agreed to prepare and file with
SEC
within 45 days following the Closing Date, a registration statement on Form
SB-2
(the “Registration Statement”) for the purpose of registering for resale a
number of shares of common stock equal to 125% of the shares issuable upon
conversion of the Notes. If the Company fails to file such
Registration Statement within such time, or if the registration statement is
not
declared effective within 150 days from the Closing Date, the Company must
pay
liquidated damages equal to 2% of the principal amount of the Notes and purchase
price of the Warrants for each 30 day period. Such liquidated damages
are payable in cash or registered shares of stock valued at 75% of the average
closing bid prices over the preceding 5 day period. The Purchasers were also
granted piggyback registration rights and certain demand registration
rights.
The
Company has further agreed not to file any other registration statements without
the consent of the Investors until the Registration Statement shall have been
effective for a period of 180 days or until the shares issuable upon the
conversion of the Notes and exercise of the Warrants have been resold, whichever
first occurs.
Pursuant
to the Subscription Agreement, the Company granted the Investors a right of
first refusal with respect to certain proposed sales of equity or debt
securities by the Company, subject to certain exceptions. The right
is effective until the earlier of one year from the effective date of the
Registration Statement or the date on which more than 75% of the principal
of
the Notes has been paid off.
The
Company also agreed that, if at any time while the Notes or Warrants are
outstanding, the Company issues or agrees to issue any common stock or
securities convertible into common stock at a per share price or conversion
price or exercise price that is less than the conversion price or exercise
price
of the Notes or Warrants without the consent of the Investors, then the Company
agrees on each such occasion, additional shares of common stock shall be issued
to the Investors in connection with the Notes and the Warrants and the shares
that remain outstanding at the time of the lower price issuance so that the
average per share purchaser price of the shares of common stock issued to each
Investor is equal to such other lower price.
Until
the
effectiveness of the Registration Statement or during an event of default,
the
Company agreed that, except for certain limited excepted issuances, it will
not
enter into any new agreement for the offer or sale of the Company’s securities
without the consent of the Investors.
The
Company also agreed that until the later of one year after the effective date
of
the Registration Statement and such time as more than 75% of the principal
of
the Notes has been paid off, it will not enter into any equity line of credit,
agreements to issue variable priced equity linked instruments or similar
agreements.
Pursuant
to the terms of the Subscription Agreement, Brad Ketch, President, Chief
Executive Officer and a Director of the Company, and Ray Willenberg Jr.,
Chairman of the Board, Executive Vice President and a Director of the Company,
have each executed Lockup Agreements pursuant to which they have agreed to
refrain from selling any securities of the Company from the date of the
Subscription Agreement until one year after the effective date of the
Registration Statement.
The
Company paid Blumfield Investments (the “Finder”) a cash finder’s fee equal to
$317,500 (10% of the aggregate Purchase Price for the Notes issued as of the
date of this report). An additional fee equal to 10% of any cash
proceeds received by the Company from exercise of the Warrants will be payable
to the Finder upon exercise of the Warrants. The Company also agreed
to issue to the Finder a Warrant, in substantially the same form as the Warrants
issued to the Investors, pursuant to which the Finder may purchase 10 shares
of
Common Stock for each 100 shares issuable upon conversion of the Notes and
Warrants as of the Closing Date. As a result, the Company has issued
a Warrant to the Finder pursuant to which the Finder may purchase up to
14,653,284 shares of Common Stock at an initial exercise price of $0.10 per
share.
The
12
Investors currently participating in the Offering are Bessie Weiss Family
Partnership LP, Bursteine & Lindsay Security Corp., CMS Capital,
Congregation Sharei Chaim, Brio Capital, L.P., John Fife, Alpha Capital Anstalt,
Bristol Investment Fund, Ltd., Double U Master Fund, L.P., (“Double U”)
Whalehaven Capital Fund Limited, Harborview Master Fund LP, and Monarch Capital
Fund Limited.
Ten
of
these 12 Investors invested in prior private placements of debentures by the
Company in 2003, 2004, 2005 or 2006 and were issued warrants in connection
with
the purchase of such debentures. Double U entered into two
bridge loan transactions with the Company in 2007 and received shares of Common
Stock and/or warrants to purchase Common Stock in connection with such
transactions. Except as set forth above, there is no
material relationship between the Investors, on the one hand, and the Company
or
any of its affiliates, on the other hand. See the Company's
Registration Statement on Form SB-2/A (Reg. No. 333-133508) and the Prospectus
filed by the Company dated August 16, 2006 for a description of the debentures
issued in March 2006 and the Company's agreements with the holders
thereof. See the Company's Registration Statement on Form SB-2/A
(Reg. No. 333-12648) and the Prospectus filed by the Company dated August 1,
2005 for a description of the debentures issued in May 2005 and the Company's
agreements with the holders thereof. See the Company's Registration
Statement on Form SB-2/A (Reg. No. 333-112643) filed by the Company dated August
16, 2004 for a description of the debentures issued in 2003-04 and the Company's
agreements with the holders thereof.
Copies
of
the Subscription Agreement, Form of Note, Form of Warrant, Security Agreement,
Funds Escrow Agreement, and Lockup Agreement relating to the above transactions
are attached hereto. The foregoing descriptions of the above
transactions are qualified in their entirety by reference to such exhibits,
which are incorporated by reference herein.
Item
2.03 Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant.
The
information contained in Item 1.01 of this Current Report is incorporated by
reference in this Section 2.03.
Item
3.02 Unregistered
Sales of Equity Securities.
The
information contained in Item 1.01 of this Current Report is incorporated by
reference into this Item 3.02. The securities described in Item 1.01
above were offered and sold in reliance upon exemptions from registration
pursuant to Section 4(2) under the Securities Act and Rule 506 promulgated
thereunder. The Subscription Agreements executed in connection therewith contain
representations to support the Company's reasonable belief that each of the
Investors had access to information concerning its operations and financial
condition, is acquiring the securities for its own account and not with a view
to the distribution thereof, and is an "accredited investor" as such term is
defined in Rule 501(a) of Regulation D promulgated under the Securities
Act. At the time of their issuance, the securities described in Item
1.01 above will be deemed to be restricted securities for purposes of the
Securities Act and the certificates representing the securities shall bear
legends to that effect.
Item
9.01. Financial
Statements and Exhibits
(d)
Exhibits:
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Exhibit
Number
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Description
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4.1
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Form
of Secured Convertible Note of Rim Semiconductor
Company
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4.2
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Form
of Class A Common Stock Purchase Warrant issued in connection with
the
Subscription Agreement
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10.1
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Form
of Subscription Agreement, dated as of December 5, 2007, by and among
Rim
Semiconductor Company and the Subscribers
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10.2
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Form
of Security Agreement, dated as of December 5, 2007, by and among
Rim
Semiconductor Company, NV Entertainment, Inc., and Barbara R. Mittman,
as
Collateral Agent
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10.3
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Form
of Funds Escrow Agreement, dated as of December 5, 2007
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10.4
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Form
of Lockup Agreement
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Rim
Semiconductor Company
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Dated:
December 11, 2007
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By:
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/s/
Brad Ketch
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Brad
Ketch
President
and Chief Executive Officer
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EXHIBIT
INDEX
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Exhibit
Number
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Description
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4.1
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Form
of Secured Convertible Note of Rim Semiconductor
Company
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4.2
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Form
of Class A Common Stock Purchase Warrant issued in connection with
the
Subscription Agreement
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10.1
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Form
of Subscription Agreement, dated as of December 5, 2007, by and among
Rim
Semiconductor Company and the Subscribers
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10.2
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Form
of Security Agreement, dated as of December 5, 2007, by and among
Rim
Semiconductor Company, NV Entertainment, Inc., and Barbara R. Mittman,
as
Collateral Agent
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10.3
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Form
of Funds Escrow Agreement, dated as of December 5, 2007
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10.4
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Form
of Lockup Agreement
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