Just thought I would copy the only common sense answer to proposition #2 in the proxy. Thanks to Lawsys on Yahoo!
<Starting back on Berblady's post 11727 an in depth discussion of the proxy proposals began. In that post, Berblady did and wonderful job of summarizing and analyzing the issues before us. She also put forth several questions with regard to voting "yes" or "no" on Prop #2, i.e., the proposal to authorize the issuance of stock when needed against the $20M LOC. Without reading the actual agreement (8K) and further discussing the provisions contained therein many of us had an inclination to vote "no". However, after reading the document and learning the fact that no draws could be made against LOC if we didn't approve this proposal I felt it necessary to get further clarification before casting my vote. Accordingly, I called Greg Facktor. He answered some of my questions but I felt needed a more in-depth discussion on some of the points. As a result I asked Greg to set up a conference call with Lisa Frost at her convince. This was done the next business day. A summary of these discussions is presented below for you reading enjoyment. But, before, here are my disclaimers.
This call was initiated at my request and does not in anyway connoted special treatment by the company. Any one of you out there is entitled to receive and would have received the same consideration. In fact you are encouraged to call Tustin whenever you need clarifications on an issue, as I did. Secondly, the views expressed herein are mine and mine alone. They are not in any way shape or form intended to sway your vote one way or the other. There are present for your information only. Lastly, I invited three other stock holders to join me in the call. Berblady, because she initially did the analysis, Wild_Horses, because he and I visited Tustin recently, and Davis Marshall so he could advise me on how the investment community may react to a "no" vote. Our outstanding and dedicated in-house counsel, PT and Investor CG did not participate in the call because I didn't have any legal issues to discuss, otherwise I would have asked them to join in. The telephonic discussion was prefaced with my opening remarks stating the express purpose of the call was to have the company explain the ramifications of a "no". No other topics were discussed and no selective disclosures were made. Okay now to the summary....
First and foremost, two key provisions in this agreement are i) the company's unilateral right to take draws at its sole discretion, without advance notice to the LOC investors and ii) the fact that the stock price is set 10 days in advance of the call and not subsequent to the call; thereby, avoiding the possibility having to issues stock at prices manipulated by outside forces. The scenarios under which this could happen are countless. Suffice to say it is to the company's advantage to not "telegraph" their intentions to draw against the LOC in advance. It is this central issue that makes the compelling agreement to vote "yes". For if we ask them to come back to us and vote the increase when they approach the 20% limitation their intention will become public knowledge and the stock price could be manipulated over the ensuing 60-days it would take to obtain our approval. Additionally, there would be cost associated with a solicitation of our approval.
Secondly, the provision that says no approval of this proposal, no draw,was put in the agreement for the express purpose of getting us, the shareholders, to buy into this agreement up front thereby increasing institutional confidence by knowing that the shareholders as a whole are solidly behind management and we trust their judgment enough to vest in them the right to issue the necessary stock without having to come back to us for approval. A 'no" vote or a 'deferred yes" vote would have the opposite effect.
Thirdly, without a "yes" vote, the company cannot draw against this agreement therefore in the eyes of the financial community we are cash poor. A "no" vote would put the management in the position of having to negotiate future funding and partnering from a position of weakness rather than a position of strength. Typically in the Biotech Industry investors, institutions and potential partners like to see 18-24 months of financing locked in. Granting management the right to issue stock in accordance with this agreement, and with the sale of the property, we can demonstrate the requisite 18-14 months now.
So, in conclusion what it all boils down to is a simple matter of trust. Do we trust this management team to do what's best for the company and its shareholders or not? Or do we fell it is necessary to oversee their every move and bog them down as they attempt to move forward quickly and efficiently?
With that, I'll close, and leave the rest for the other conferees to add meat to the bones. For me I'm taking a break from the board and chat till Sunday nite. I'm going to fly out to Lake Tahoe this afternoon, set in the pines, look at the lake and majestic High Sierra's, and pick up a few bucks on the tables so I can come home and buy some more TCLN.
Cheers for Now,
LAWSYS>
Thanks for the clarification again, Lawsys, and for including me. For anyone interested in furthering the goals of Techniclone a Yea vote on prop #2 is the only vote.
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