Details on the financing from the proxy.........................
Bolds are mine that cover the points I made earlier. My previous post this morning was very close on all the numbers. I did that out of memory ....
On April 30, 2003 (the "Original Issuance Date"), the Company issued 548.50 shares of its Series H Stock, in a private placement to a group of accredited investors for an aggregate purchase price of $5,485,000 (the "Financing").
The Series H Stock is initially convertible into 7,217,105 shares of the Company's Class A Common Stock at an initial conversion price of $0.76 per share. Pursuant to the Purchase Agreements, the conversion price will be proportionately decreased upon a stock split of the outstanding Class A Common Stock by the Company. The conversion price will be proportionately increased if the Company combines the outstanding Class A Common Stock. In the event the Company issues stock dividends, the conversion price shall be adjusted so that the holders of the Series H Stock shall receive upon conversion thereof, the number of additional shares of Class A Common Stock they would have received had their Series H Stock been converted into Class A Common Stock beforehand. Proportional adjustments are also made to the conversion price upon reclassifications, exchanges or substitutions of the Class A Common Stock. If the Company sells additional shares of Class A Common Stock or its equivalent at a price per share less than the current conversion price, such conversion price shall be adjusted using a weighted average basis for adjustment.
Dividends on the Series H Stock accrue on the initial liquidation preference amount of each share ($10,000) at an annual rate of 10%, increasing to 12% on April 30, 2004. Subject to certain conditions, each share of Series H Stock carries a mandatory conversion provision whereby if the closing bid on the Company's Class A Common Stock exceeds $1.90 for 15 of 20 consecutive trading days, the Series H Stock shall automatically convert into Class A Common Stock at the conversion price then in effect.
Also pursuant to the Purchase Agreements, the holders of the Series H Stock have the right of first offer and refusal in any subsequent offer or sale to, or exchange with any third party of Class A Common Stock or any securities convertible, exercisable or exchangeable into Class A Common Stock, except under certain circumstances. If the Company does a private equity or equity linked financing within the one-year period after April 30, 2003, the holders of the Series H Stock may exchange the Series H Stock for the securities in such financing. Upon the occurrence of certain major transactions (including (i) the consolidation, merger or other business combination of the Company with or into another entity; (ii) the sale or transfer of more than 50% of Wave's assets, other than (A) the sale or transfer of inventory in the ordinary course of business, (B) the sale or transfer of the stock or assets of WaveXpress, or (C) the sale or transfer of the assets of SignOnLine; or (iii) acquisition by a third party of more than 50% of the outstanding shares of Class A Common Stock), the holders of the Series H Stock shall have the right to redeem the Series H Stock at a price per share equal to 100% of the liquidation preference amount plus accrued and unpaid dividends. Upon the occurrence of certain triggering events (including (i) so long as any shares of Series H Stock are outstanding, the effectiveness of this registration statement lapses for any reason or is unavailable to the holder of the Series H Stock for sale of the shares of Class A Common Stock, and such lapse or unavailability continues for a period of ten (10) consecutive trading days, and the shares of Class A Common Stock into which such holder's Series H Stock can be converted cannot be sold in the public securities market pursuant to Rule 144(k), provided that the cause of such lapse or unavailability is not due to factors solely within the control of such holder of Series H Stock; (ii) the suspension from listing or the failure of the Class A Common Stock to be listed on The Nasdaq National Market, The Nasdaq SmallCap Market, OTC Bulletin Board, The New York Stock Exchange, Inc., The American Stock Exchange, Inc., or another securities exchange, quotation system or market, for a period of five (5) consecutive days; (iii) the Company's notice to any holder of Series H Stock, including by way of public announcement, at any time, of its inability to comply or its intention not to comply with proper requests for conversion of any Series H Stock into shares of Class A Common Stock; (iv) The Company's failure to comply with a conversion notice within ten (10) business days after the receipt by the Company of such conversion notice; or (v) the Company breaches any representation, warranty, covenant or other term or condition of the Purchase Agreements, or any other agreement, document, certificate or other instrument delivered in connection with the Financing, except to the extent that such breach would not have a material adverse effect and except, in the case of breach of a representation, warranty, covenant or other term or condition which is curable, only if such breach continues for a period of at least ten (10) days), the holders of the Series H Stock shall have the right to redeem the Series H Stock at a price per share equal to 120% of the liquidation preference amount, plus any accrued and unpaid dividends. The Company currently has no other commitments in place for future issuances of common stock or any other securities. The Company has a sufficient number of shares authorized in which to convert and exercise the Series H Securities up to the Share Cap.
Also, as part of the transaction, the Company issued to the investors the Series H Warrants. The Series H Warrants can initially be exercised for an aggregate of 3,608,553 shares of Class A Common Stock. The Series H Warrants have a five (5) year term and an initial exercise price equal to $1.13 per share. Commencing eighteen (18) months after April 30, 2003, the Company may call up to 100% of the Series H Warrants if the market value of its Class A Common Stock exceeds 250% of $1.13 (subject to adjustment pursuant to the terms of the Series H Warrants) for a minimum of fifteen (15) business days during any twenty (20) consecutive business day period. The number of shares of Class A Common Stock issuable upon conversion or exercise of the respective Series H Security, as described in these paragraphs, is limited by the Share Cap as set forth below.
Shareholders wishing further information concerning the rights, preferences, and terms of the securities are referred to the full description thereof contained in the Company's Current Report on Form 8-K filed with the Commission on May 7, 2003 and the exhibits to such report.
Pursuant to Nasdaq Rule 4350(i), the Company must obtain shareholder approval for the issuance or potential issuance of securities representing twenty percent or more of its outstanding listed securities or twenty percent or more of the voting power outstanding before the issuance. Pursuant to the terms of the Purchase Agreements, the Company is required to solicit such shareholder approval for the issuance of shares of Class A Common Stock upon conversion of or in lieu of cash dividends on the Series H Stock and upon the exercise of the Series H Warrants. Accordingly, absent shareholder approval, the terms of the Purchase Agreements provide that the Company can issue up to 10,031,095 shares of Class A Common Stock (the "Share Cap") upon conversion and exercise of the Series H Securities, and upon payment of dividends accruing on the Series H Stock. The Share Cap represents 19.99 percent of the shares of Class A Common Stock outstanding prior to the Original Issuance Date minus the shares of Class A Common Stock issuable upon the exercise of warrants issued to the placement agents and sub-placement agents for their services in connection with the issuance of the Series H Securities. If holders of the Series H Securities convert and or exercise such securities for the number of shares of the Company's Class A Common Stock equal to the Share Cap, the holders of the Series H Stock would hold 16.06% of the Company's outstanding Common Stock. If the Company obtains shareholder approval, it will only be limited in the number of shares of Class A Common Stock that could be issued upon conversion of or in lieu of cash dividends on the Series H Stock and upon exercise of the Series H Warrants by the amount of shares of Class A Common Stock authorized by the Restated Certificate of Incorporation and such issuance of shares of Class A Common Stock will no longer be subject to shareholder approval under Nasdaq Rule 4350(i). If all of the Series H Securities are converted and or exercised, in the event that Proposal No. 5 is approved, the holders of the Series H Stock will obtain approximately 17.12% of the Company's outstanding Common Stock. Additionally, in the event dividends are declared on the Series H Stock and the Company elects to pay such dividends in shares of Class A Common Stock, the dilutive effect of such issuance of shares would be approximately 1% per year. IF THE COMPANY DOES NOT OBTAIN SHAREHOLDER APPROVAL AND, THEREFORE, CANNOT ISSUE SHARES OF CLASS A COMMON STOCK IN EXCESS OF THE SHARE CAP DUE TO RESTRICTIONS RELATING TO NASDAQ RULE 4350(i), THE COMPANY MAY, AS OF AUGUST 15, 2003, BE REQUIRED TO REDEEM THE SERIES H SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE FOR CLASS A COMMON STOCK IN EXCESS OF THE SHARE CAP PURSUANT TO THE TERMS OF THE PURCHASE AGREEMENTS, IF ANY HOLDER OF SUCH SERIES H SECURITIES EXERCISES ITS OPTION TO CAUSE THE COMPANY TO REDEEM SUCH SERIES H SECURITIES.
If Proposal No. 5 is not approved, the Company would be required to redeem approximately 40.26 shares of Series H Stock at the greater of the liquidation preference amount or the liquidation preference amount proportionately increased by increases in the market value of the Company's Common Stock plus any accrued and unpaid dividends. Accordingly, the amount that the Company would be required to redeem in cash if Proposal No. 5 is not approved assuming all holders of Series H Stock elected to redeem the Series H Securities in excess of the share cap would be a minimum of $402,260 plus accrued and unpaid dividends.
An affirmative vote of a majority of the total votes cast on this Proposal No. 5 in person or by proxy is required to approve the proposed issuance of shares of Class A Common Stock.
The Board of Directors deems Proposal No. 5 to be in the best interests of the Company and its shareholders and recommends that the shareholders vote "FOR" approval of the proposed issuance of shares of Class A Common Stock.
