I just spent some time reading the most recent 8-K: Here are some excerpts:
"(3.15) The Company acknowledges that its obligation to issue Conversion Shares upon conversion of the Convertible Securities and the Warrant Shares upon exercise of the Warrants is binding upon it and enforceable regardless of the dilution that such issuance may have on the ownership interests of other stockholders. "
That is probably in the agreement to prevent future possible complaints by VLNC in a case of excessive dilution. SDome victims of floorless turned and sued the bandits, and Castle Creek wants no part in such future litigations.
ISSUANCE OF OTHER SECURITIES. If, at any time after the Closing Date, the Company shall issue any securities which are convertible into or exchangeable for Common Stock ("CONVERTIBLE SECURITIES") either (i) at a conversion or exchange rate based on a discount from the market price of the Common Stock at the time of conversion or exercise or (ii) with a fixed conversion or exercise price less than the Fixed Conversion Price, then, at the Holder's option: (x) in the case of clause (i), the Variable Conversion Price in respect of any conversion of Preferred Stock after such issuance shall be calculated utilizing the greatest discount applicable to any such Convertible Securities; and (y) in the case of clause (ii), the Fixed Conversion Price shall be reduced to such lesser conversion or exercise price.
This clause assures that Castle creek gets as good a deal as any future "floorless" would get.
A. SHARE AUTHORIZATION. The Company shall, in the Proxy Statement
circulated by the Company in connection with the Company's next annual meeting of stockholders, but in any event not later than February 8, 1999, solicit by proxy the authorization (the "STOCKHOLDER APPROVAL") by the stockholders of the Company of the issuance of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to the terms hereof in the aggregate in excess of twenty (20) percent of the outstanding shares of Common Stock and to eliminate any prohibitions under the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Company or any of its securities on the company's ability to issue shares of Common Stock in excess of the Cap Amount and use its best efforts to obtain the Stockholder Approval no later than February 8, 1999.
If I read this paragraph correctly, after the next AGM, there will be no restriction on how much dilution can result from this transaction.
Somewhere else in this or the S-3, however, CC gave up on the floorless feature of its first financing (the preferred A) all together, probably because they may have already converted at $6.03 and sold into the rally earlier this month. In any event, the Preferred A are no longer a floorless concern at all, not even after July 28, 1999.
Zeev |
