Interesting Developments
TSIS Filed a preliminary proxy yesterday with the SEC.
TSIS is now getting financing from Hambrecht and Quist. These guys were one of the first VC firms that invested in Yahoo, AOL and Qualcomm.
On October 24, 2000, the Company and Hambrecht and Quist Guaranty Finance, LLC ("H&QGF") entered into a letter of intent whereby H&QGF will invest up to $4.0 million in the Company, $1.0 million by the purchase of a convertible note and up to $3.0 million pursuant to an equity line of credit. The $1.0 million convertible note will bear interest at 7.5% per annum, have a term of 3 years, and be convertible into the Company's convertible Preferred Stock at a price of $1.10 per share during the first year, $1.52 during the second year, and $2.00 per share during the third year.
Under the equity credit line, the Company is entitled to sell ("put"), from time to time to H&QGF up to $3 million of its Preferred Stock at a price equal to 83% of the lower of (x) the average of the closing bid prices of the Company's Common Stock for the five trading days immediately preceding notice, of the date of its notice to put the Stock or (x) the closing price of the day of the put. Each put creates a subseries of convertible Stock which will have a liquidation preference equal to the price paid. The equity line of credit will have a term
of 12 months and allow the Company to sell as much as $500,000 in Preferred Stock at any time, subject to certain conditions and the requirement that H&QGF hold no more than 9.9% of the Company's outstanding Stock at any time.
Each series of this convertible Preferred Stock will have a dividend rate equal to 7.5% of the Stock's liquidation preference payable at the election of the Company either in cash or in kind in Preferred Stock. All such convertible
Preferred Stock will be convertible into Common Stock on a one-per-one basis.
The convertible note and the convertible Preferred Stock will be adjusted to reflect any split, subdivision or combination of the Company's Common or convertible Preferred Stock.
In addition to authorizing the above-described Preferred Stock, management believes that it is in the best interests of the Company to increase the amount of its authorized capital Stock so as to allow the Board maximum flexibility in issuing additional shares in possible future public and private offerings, for cash and possibly as consideration for the acquisition of assets in purchase, merger and/or consolidation transactions.
If the proposal is approved, the potential capitalization of the Company will differ from that presently authorized by the Charter. Presently, the authorized capital Stock of the Company will be increased from 50,000,000 shares of Common Stock. Of these shares, 31,874,460 shares of which are issued and outstanding, with up to 4,000,000 of the remaining unissued shares reserved for issuance
under outstanding options and commitments under the June 12, 2000 Agreement with BH Capital Investments LP and Excalibur Limited Partner. If the proposal is approved, the authorized capital Stock of the Company will be 100,000,000 shares of Common Stock par value $.001 per share and 25,000,000 shares of Preferred Stock, par value $.001 per share (the "Preferred Stock"). No change in the number of outstanding or reserved shares of Common Stock will occur as a result of the proposal.
If the proposal is approved, the Company will authorize and issue such series of Preferred Stock to complete the sale of the convertible notes and establish the equity line of credit discussed above. If the amendment is approved, the Board will also be empowered by Articles to fix for each such series the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption on such other series of Preferred as are permitted by the Delaware General Corporations Law. Accordingly, if the Board so authorizes,
the holders of Preferred Stock may be entitled to vote separately as a class in connection with approval of certain extraordinary corporate transactions in
circumstances where the Delaware General Corporation Law does not ordinarily require such a class vote, or might be given a disproportionately large number of votes. Such Preferred Stock could also be convertible into a large number of shares of Common Stock under certain circumstances or have other terms which might make acquisition of a controlling interest in the Company more difficult or more costly, including the right to elect additional directors to the Board.
Potentially, the Company could issue its Preferred Stock to create voting impediments or to frustrate persons seeking to effect a merger or otherwise to gain control of the Company. Also, the Preferred Stock could be privately placed with purchasers which might side with the management in opposing a hostile tender offer or other attempt to obtain control of the Company. It is not the present intention of the Board to seek Stockholder approval prior to any issuance of any additional Preferred Stock or Common
Stock, except as required by law.
In the event the amendment is not approved, the Company would be unable to issue Preferred Stock under either the equity line of credit or upon conversion of the
convertible notes. In such event, the Company would not be able to obtain additional financing from the sale of its equity Stock, including the $4 million of financing as proposed from H&QGF, and would not have this capital available for its ASR hosting services capabilities and business. In the event the amendment is not approved, management intends to immediately seek approval of a
similar amendment to its charter authorizing Preferred Stock. |
