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This excerpt taken from the XIDE DEF 14A filed Jul 27, 2006. Certain
Effects of the Share Transaction
To the extent that holders of our common stock do not exercise
their subscription rights and shares of our common stock are
purchased by the Standby Purchasers and the Additional Standby
Purchaser pursuant to the Rights Offering, such non-exercising
holders’ proportionate equity and voting interest in our
company will be
Table of Contents
reduced. In addition, the equity and voting interests of the
holders of the common stock will be further reduced by the sale
of the additional shares of common stock for $50,000,000 to the
Standby Purchasers under the Standby Agreement.
In addition, the Share Transaction will result in further
dilution of the ownership percentage of the existing holders of
our common stock because the Share Transaction will trigger the
anti-dilution provisions under our Warrant Agreement and under
our convertible notes, which will result in the exercise and
conversion prices of the warrants and convertible notes being
reduced and a greater number of shares being issuable on
exercise or conversion thereof.
The Share Transaction may also result in a decrease in the
market value of our common stock. This decrease in market value
may continue after the completion of the Share Transaction.
Even if some shareholders other than the Standby Purchasers
exercise their subscription rights, the Standby Purchasers and
the Additional Standby Purchaser will have a substantial
ownership interest in our company after the Share Transaction.
As a result, the Standby Purchasers and the Additional Standby
Purchaser will have the voting power to significantly influence
the election of our Board of Directors and the approval of other
matters presented for consideration by the shareholders, which
could include mergers, acquisitions, amendments to our charter
and various corporate governance actions.
Under our senior credit facility, a “change of
control” is deemed to have occurred when any person or
group of persons acquires beneficial ownership of 30% or more on
a fully-diluted basis of the voting
and/or
economic interest in our common stock. Upon the occurrence of a
change of control, pursuant to the senior credit facility, the
holders of a majority of the commitments thereunder may
(a) terminate all commitments; (b) declare the
principle of and any accrued interest in respect to all loans
due and payable; (c) enforce any and all liens and security
interests created under the senior credit facility;
(d) terminate any letter of credit; or (e) exercise
any rights and remedies provided to the agent under the senior
credit facility documents or at law or equity.
The indentures for our senior secured notes and convertible
notes define a “change in control” to include, among
other things, the acquisition by any person or group of persons
of direct or indirect beneficial ownership of shares
representing more than 50% of the aggregate voting power of our
common stock. If a change in control were to occur, the holders
of the notes would have the right to require us to repurchase
all or any part of their notes at a purchase price equal to 101%
of the principal amount thereof for the senior notes and the
principal amount for the convertible notes, plus accrued and
unpaid interest, if any, to the date of purchase and any unpaid
liquidated damages on the convertible notes.
Although the Standby Agreement contain prohibitions on the
Standby Purchasers and the Additional Standby Purchaser
purchasing shares in the Share Transaction which would cause a
change of control under the senior credit facility or a change
in control under the senior notes and convertible notes, there
can be no assurance that the Standby Purchasers or the
Additional Standby Purchaser will not purchase additional
securities or form groups in the future which would cause a
change of control to occur and, if a change of control were to
occur, it would have a material adverse effect on our financial
condition.
We have 61,500,000 shares of common stock authorized for
issuance and, in order to enable us to proceed with the Share
Transaction, are seeking shareholder approval for the issuance
of an additional 38,500,000 shares of common stock. The use
of these authorized shares for the Share Transaction will reduce
the number of shares available for other issuances.
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