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
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.