This looks alright to me?
Dear Stockholder:
We are writing to you today to request your authorization to make a portion of
our authorized and unissued Biophan shares preferred, to facilitate a potential
transaction between Biophan and a large biomedical device company. The
transaction with this potential strategic partner, which is in an advanced stage
of negotiation, may include license fees, milestone payments, and royalties, on
several product lines already in the market, with sizeable upside potential for
us. Part of the package being discussed involves an equity investment,
potentially at a premium over market, which will provide us an alternative to
the current financing package that we have available.
We have been informed by the prospective partner that any investment that it may
make must be in preferred stock. As you know, this gives a preference in the
event of a sale or liquidation. While the terms of the preferred stock will be
fixed in the future, we expect any preferred stock issued in the currently
contemplated transaction to be identical to common stock except for the
liquidation preference (i.e., it will have no special voting rights, etc.). At
the recent Biophan annual meeting the stockholders approved additional shares to
allow us to achieve corporate purposes including taking all or part of the SBI
financing, and/or a strategic investment. The shares already registered for
potential sale to SBI cannot be used for a sale to the strategic partner.
What we are seeking is your approval for us to substitute shares of preferred
stock for a portion of the shares of common stock that were authorized at the
annual meeting. We do not anticipate needing more than about 10 million shares
of preferred stock for the potential transaction currently being considered, but
to be safe, and because there is interest from other large companies, we are
requesting that you authorize up to 15 million of the CURRENTLY AUTHORIZED
shares to be authorized as preferred shares to provide the Board with
flexibility as it seeks to effect strategic transactions.
By getting your approval now, in advance, we can avoid the delays and
uncertainty associated with requiring a stockholders meeting at the time we want
to enter into a strategic transaction. If the potential transaction that is
currently contemplated does not occur, the preferred shares will be available
for similar transactions that may occur in the future.
Our recent announcement of the joint agreement with NASA on the biothermal
battery, our achieving a total of 80 patents issued, pending or licensed in, and
most importantly, the potential transaction being negotiated about which we are
writing to you, are exciting developments in our business.
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It is only with your continued, ongoing support that we have been able to make
this progress, and on behalf of our employees, board members, and future
customers, we thank you again.
Enclosed with this letter is a notice of a stockholders meeting and a proxy
statement describing in more detail the proposed authorization of preferred
stock. Please vote in the affirmative on the enclosed proxy card and return it
in the prepaid envelope.
Sincerely,
Michael L. Weiner
Chief Executive Officer
Guenter H. Jaensch
Chairman of the Board
It's a nice gesture to reduce the number of authorized common shares appropriately....many penny stocks would not have worried about that. As long as this deal includes the financial commitments (license fees, milestone payments, and royalties) to make sure this partner doesn't have the incentive to drive Biophan into bankruptcy to collect the intellectual property.....this seams alright. But now we pretty well know we have to wait another 2 months for good news....wish they had figured this out before the meeting this summer?
"Our houses are such unwieldy property that we are often imprisoned rather than housed in them." - Henry David Thoreau, Walden: Economy, 1854
