Put Rights
We may begin exercising puts on the date of this prospectus and continue for a three-year period. To exercise a put, we must have an effective registration statement on file with the SEC covering the resale to the public by Swartz of any shares that it acquires under the Swartz investment agreement. Also, we must give Swartz at least 10, but not more than 20, business days advance notice of the date on which we intend to exercise a particular put right. The notice must indicate the date we intend to exercise the put and the maximum number of shares of common stock we intend to sell to Swartz. At our option, we may also specify a maximum dollar amount (not to exceed $2 million) of common stock that we will sell under the put. We may also specify a minimum purchase price per share at which we will sell shares to Swartz. The minimum purchase price cannot exceed the lesser of (i) 80% of the closing bid price of the Company's common stock on the business day immediately preceding the date of the advance put notice, or (ii) the closing bid price of the Company's common stock on the business day immediately preceding the date of the advance put notice, minus $0.125.
The number of common shares we sell to Swartz may not exceed 15% of the aggregate daily reported trading volume of our common shares, excluding certain block trades, during the 20 business days before or after the date we exercise a put. Further, we cannot issue additional shares to Swartz that, when added to the shares Swartz previously acquired under the Swartz investment agreement during the 61 days before the date we exercise the put, will result in Swartz holding over 9.99% of our outstanding shares upon completion of the put.
Swartz will pay us a percentage of the market price for each share of common stock under the put. The market price of the shares of common stock during the 20 business days immediately following the date we exercise a put is used to determine the purchase price Swartz will pay and the number of shares we will issue in return. This 20 day period is the pricing period. For each share of common stock, Swartz will pay us the lesser of:
o the market price for each share, minus $.075; or
o 91% of the market price for each share.
The Swartz investment agreement defines market price as the lowest closing bid price for our common stock during the 20 business day pricing period. However, Swartz must pay at least the designated minimum per share price, if any, that we specify in our notice. If the price of our common stock is below the greater of the designated minimum per share price plus $.075, or 91% of the designated minimum per share price during any of the 20 days during the pricing period,
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that day is excluded from the 15% volume limitation described above. Therefore, the amount of cash that we can receive for that put may be reduced if our stock price declines.
We must wait a minimum of five business days after the end of the 20 business day pricing period for a prior put before exercising a subsequent put. We may, however, give advance notice of our subsequent put during the pricing period for the prior put. We can only exercise one put during each pricing period
