Here is some information I found on Edgar regarding the Equity Line of Credit. Hope it sheds some light. Looks like the price is average of 85% of the three lowest closing bids in the previous three days, day of announcement and day after announcement. The most is can be is (2 7/32 + 2 13/16 + 3 1/8)/3 X 85% = $2.31 per share. This assumes that I have the correct five days. We have to wait until Monday's close to determine the three lowest closing bids.
C.J.
sec.gov
PROPOSAL 3 - TO APPROVE THE ISSUANCE OF THE COMPANY'S SECURITIES PURSUANT TO A PRIVATE EQUITY LINE OF CREDIT AGREEMENT GENERAL On May 13 1998, the Company entered into a Private Equity Line of Credit Agreement ("Agreement") with certain investors and with Settondown Capital International Ltd. ("Placement Agent") contemplating a potential funding of up to $7.1 million ("Funding"). The Funding provides for the private placement by the Company of (i) 444,444 shares of Common Stock for $900,000 together with warrants exercisable to purchase 18,000 shares of Common Stock;(ii) $1.2 million in stated value of 6% Series C Non-Voting Convertible Preferred Stock ("Preferred Stock"), together with warrants exercisable to purchase up to 24,000 shares of Common Stock; and (iii) up to $5 million forCommon Stock pursuant to certain put rights ("Equity Line of Credit"), together with warrants exercisable to purchase up to 30,000 shares of Common Stock(collectively, the "Securities").
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EQUITY LINE OF CREDIT The Equity Line of Credit provides for a maximum funding of $5,000,000, may be called upon at the election of the Company and is subject to various conditions. The Equity Line of Credit contemplates the issuance of (i)Common Stock required to be purchased from time to time by the investors over a two year period (a "Put") upon notice (a "Put Notice") from the Company, at a price equal to 85% of the Market Price (defined as the average of the three lowest closing bid prices of the Company's Common Stock over the five-day trading period beginning three trading days prior to a Put and ending on the trading day following a Put) of the Common Stock as of the date of the Put Notice, up to an aggregate of $5,000,000 in purchase price and (ii) warrants to purchase 30,000 shares of Common Stock with an exercise price equal to $3.20 per share exercisable for a period of five years commencing November 1998. The obligation of the investors to purchase Common Stock under a Put is subject to conditions relating to market price, trading volume and timing. For the commitment represented by the Equity Line of Credit, the Company has issued to the Placement Agent 20,000 shares of Common Stock.
REASON FOR STOCKHOLDER APPROVAL Under the rules of the National Association of Securities Dealers,issuers whose securities are listed on the Nasdaq SmallCap Market, the exchange on which the Company's Common Stock is listed, are required to obtain stockholder approval, prior to the issuance of securities, in the following limited circumstances, in connection with a transaction other than a public offering involving: (i) the sale or issuance by the issuer of common stock (or securities convertible into or exercisable for common stock) at a price less than the greater of book or market value which together with sales by officers, directors or substantial stockholders of the company equals 20 percent or more of common stock or 20 percent or more of the voting power outstanding before the issuance; or (ii) the sale or issuance by the Company of common stock (or securities convertible into or exercisable to purchase common stock) equal to 20 percent or more of the common stock or 20 percent or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock. Based on the closing bid price of the Common Stock on May 12, 1998,of $2.5625, if all conditions were met and the Company would exercise its right to call upon the entire Funding, the Common Stock issuable would be approximately 46% of the shares outstanding (assuming, and after taking into account, the full conversion of the Preferred Stock, the Company's full exercise of the Puts, and the exercise of all warrants issued pursuant to the Funding, but not including any Repricing Shares). In addition, if the closing bid price of the Common Stock were to decrease significantly, the exercise of the Reset Rights, the conversion of the Preferred Stock or the Company's full exercise of the Put pursuant to the Equity Line of Credit, or a combination of the foregoing, could conceivably effect a change in control of the Company. Therefore, the Board of Directors seeks stockholder approval of the proposed issuances of the Securities which, if issued to full extent, could potentially involve the Company issuing 20% or more of the shares of Common Stock outstanding. Stockholders are being asked to approve only the proposed issuances and are not being asked to approve any other aspect of the proposed Funding. VOTE REQUIRED A vote of the holders of a majority of the voting power of the issued and outstanding Common Stock of the Company, present in person or represented byproxy at the Annual Meeting and entitled to vote at the Annual Meeting, is required to approve the issuance of the Securities pursuant to the Funding. The Company's Board of Directors recommends a vote FOR this proposal.
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