More on Pfd. C terms from 3/25/98 proxy filing-
Holders of the Series C Preferred Shares are entitled to receive
cumulative dividends at the rate of 6% per annum, payable quarterly in cash or
Common Shares, at the option of the Company, when and as declared by the
Company's Board of Directors in preference and priority to any payment of any
dividend on Common Shares. In the event of any liquidation, dissolution or
winding up of the Company, holders of the Series C Preferred Shares are entitled
to receive, prior and in preference to any distribution of any assets of the
Company to the holders of Common Shares, the amount of $1,000 per share, plus
any accrued but unpaid dividends (the "Series C Liquidation Preference"). The
Series C Preferred Shares may be redeemed, subject to certain restrictions, at
any time beginning on the first anniversary after the date of issuance, at a
redemption price equal to 115% of the Stated Value of the Series C Preferred
Shares being liquidated. Such redemption price may be paid in cash or Common
Shares. The Stated Value of the Series C Preferred Shares is $1,000 per share.
However, the Company may not exercise its right of redemption unless the closing
sale price of the Common Shares exceeds 150% of the Fixed Conversion Price for
any consecutive ten trading days. Holders of the Series C Preferred Shares may
convert Series C Preferred Shares into Common Shares, subject to certain
limitations and procedures described in the Articles of Amendment. The number of
Common Shares that may be acquired upon conversion will equal the Stated Value
of the Series C Preferred Shares being converted divided by the applicable
Conversion Price. From the date of issuance through January 23,
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1998 (the "Fixed Conversion Price Period"), the conversion price was $8.80,
which is equal to 115% of the average of the closing sale prices of the
Company's Common Shares as reported on Nasdaq on the five trading days
immediately prior to but not including the date of issuance (the "Fixed
Conversion Price"). Following the Fixed Conversion Price Period, the conversion
price is the lesser of: (i) the Fixed Conversion Price, or (ii) a "floating"
conversion price equal to the average of the third to seventh lowest closing
sale prices for the Company's Common Shares during the 30 trading days
immediately prior to but not including the conversion date. On the fifth
anniversary of the date of issuance, or July 24, 2002, all Series C Preferred
Shares then outstanding will be automatically converted into the number of
Common Shares equal to the Stated Value of the Series C Preferred Shares being
converted divided by the applicable Conversion Price. In the event of certain
Mandatory Redemption Events, which events the Company believes are within its
control, each holder of Series C Preferred Shares will have the right to require
the Company to redeem those shares for cash at the Mandatory Redemption Price,
which will be equal to the Liquidation Preference of the Series C Preferred
Shares being redeemed multiplied by 120%, unless the Mandatory Redemption Event
relates to the Company's failure to deliver Common Shares in certain
circumstances, in which case the Mandatory Redemption Price will be equal to (a)
the Stated Value of the Shares being redeemed, plus (b) the Stated Value of such
Shares multiplied by 1.125% for each month elapsed between the date of issuance
and the Mandatory Redemption Date. Mandatory Redemption Events include, but are
not limited to, the failure of the Company to timely deliver Common Shares as
required under the terms of the Series C Preferred Shares or Warrants; the
Company's failure to satisfy registration requirements applicable to such
securities; the failure by the Company's shareholders to approve the
transactions contemplated by the agreement relating to the issuance of the
Series C Preferred Shares, including the issuance and sale of the Series C
Preferred Shares and the reservation for issuance and the issuance of the Common
Shares upon conversion of the Series C Preferred Shares, and the failure by the
Company, within 20 days following the meeting at which the shareholders failed
to approve such transactions to cause the Common Shares to be listed or quoted
on a national securities exchange or quotation system that does not require
stockholder approval of such transactions; the failure by the Company to
maintain the listing of its Common Shares on Nasdaq or another national
securities exchange; and certain transactions involving the sale of assets or
business combinations involving the Company.
The Company is utilizing the net proceeds of approximately $22,725,000
from the private placement of the Series C Preferred Shares for general
corporate purposes, including working capital, and has paid $9,000,000 to
Paracel Online Services, Inc. in connection with the purchase of certain assets
thereof.
The Company has filed with the Securities and Exchange Commission a
Registration Statement covering the resale by the holders of the Series C
Preferred Shares of the Common Shares which may be issued on conversion of the
Series C Preferred Shares, as a dividend, payment of a redemption price or
otherwise pursuant to the provisions thereof regarding determination of the
applicable conversion price, including adjustments to the conversion price to
prevent dilution resulting from stock splits, stock dividends or similar
transactions, or by reason of reductions in the conversion price in accordance
with the terms thereof (including, but not limited to, the terms which cause the
variable conversion price thereof to decrease to the extent the market price of
the Company's Common Shares declines). Such Registration Statement was declared
effective by the Securities and Exchange Commission on September 26, 1997.
The Company's Articles of Incorporation contain certain provisions that
could have the effect of delaying, deferring or preventing a change in control
of the Company. In addition, certain provisions of the Indiana Business
Corporation Law restrict business combinations with any "interested shareholder"
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as defined in such law. These provisions may discourage, delay, or prevent
certain types of transactions involving actual or potential change in control of
the Company, including transactions in which the shareholders might otherwise
receive a premium for their Common Shares over then-current market prices, and
may limit the ability of the Company's shareholders to approve transactions
which they may deem to be in their best interests. These provisions may have the
effect of delaying or preventing a change in control of the Company without
action by the shareholders, and therefore could adversely affect the price of
the Company's Common Shares.
The Company's Board of Directors has the authority to issue a total of
up to 10,000,000 shares of preferred stock and to fix the rates, preferences,
privileges, and restrictions, including voting rights, of such preferred stock,
without any further vote or action by the shareholders. The rights of the
holders of the Common Shares will be subject to, and may be adversely affected
by, the rights of the holders of the preferred stock that have been issued, or
might be issued in the future. The issuance of preferred stock, while providing
desired flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company, thereby
delaying, deferring, or preventing a change in control of the Company.
Furthermore, holders of such preferred stock may have other rights, including
economic rights senior to the Common Shares, and, as a result, the existence and
issuance thereof could have a material adverse affect on the market value of the
Common Shares. The Company has in the past issued, and may from time to time in
the future issue, preferred stock for financing or other purposes with rights,
preferences, or privileges senior to the Common Shares.
Tim |
