This excerpt taken from the XIDE DEF 14A filed Jul 27, 2006.
In connection with the Rights Offering, we entered into the Standby Agreement with the Standby Purchasers and the Additional Standby Purchaser. A copy of the Standby Agreement is set forth in full in Appendix A to this proxy statement, and the following description of the Standby Agreement is qualified in its entirety by reference to Appendix A. The Standby Agreement obligates us to sell, and requires each of the Standby Purchasers and the Additional Standby Purchaser to subscribe for and purchase from us, a proportionate number of shares of common stock equal to the Shortfall (as defined below) divided by the Subscription Price (the Standby Commitments). Tontine, Legg Mason and Arklow will purchase, respectively 54%, 36% and 10% of the Shortfall (as defined below). The Shortfall is the amount by which $75,000,000 exceeds the aggregate subscription price to be paid by our shareholders who subscribe for and purchase shares in the Rights Offering. The Standby Purchasers and the Additional Standby Purchaser may elect to assign some or all of their rights to purchase shares of the Companys common stock under the
Standby Agreement to their designated affiliates. The price per share paid by the Standby Purchasers and the Additional Standby Purchaser for such common stock will be equal to the Subscription Price.
The obligation of any of the Standby Purchasers and the Additional Standby Purchaser to fulfill the Standby Commitments and of the Standby Purchasers to purchase additional shares under the Standby Agreement for $50,000,000 will be subject to (a) customary closing conditions, including: (i) that our representations and warranties in the Standby Agreement are true and correct in all material respects, (ii) that we deliver a duly executed copy of the Registration Rights Agreement, (iii) that subsequent to the execution of the Standby Agreement and prior to the closing of the Share Transaction, there has not been a material adverse effect on our financial condition, earnings, financial position, operations, assets, results of operation business or prospects or any event or circumstance which is reasonably likely to result in a material adverse effect on our financial condition, earnings, financial position, operations, assets, results of operation business or prospects, and (iv) that no market adverse effect (including (A) suspension by the SEC or the Nasdaq Global Market of trading in our common stock or suspension, limitation or establishment of minimum prices in the trading in securities generally on the New York Stock Exchange or the Nasdaq Global Market, (B) the declaration of a banking moratorium by United States federal or New York State authorities or (C) any material outbreak or material escalation of hostilities or any declaration by the United States of a national emergency or war or other calamity or crisis which has a material adverse effect on the U.S. financial markets each a (Market Adverse Effect)) has occurred and is continuing and (b) obtaining the approval by our shareholders of (i) the transactions contemplated by the Standby Agreement and (ii) the authorization of a sufficient number of additional shares of common stock for issuance (X) in the Rights Offering, and (Y) pursuant to the Standby Agreement.
The Standby Agreement contains limits on the number of shares that the Standby Purchasers and the Additional Standby Purchaser may acquire pursuant to the Rights Offering and that a Standby Purchaser may acquire pursuant to the Standby Agreement. Under the Standby Agreement, each Standby Purchaser and the Additional Standby Purchaser agree that it will not purchase shares of common stock which would result in it or any group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) of which it is a member owning (i) 30% or more of the issued and outstanding shares of our common stock on a fully diluted basis without the prior written consent of our lenders under our senior credit facility or (ii) greater than 50% of the issued and outstanding shares of our common stock. The Standby Agreement contains a limitation on our company and its affiliates which restricts our ability, subject to the fiduciary duties of our Board of Directors, to directly or indirectly, discuss, negotiate, enter into or otherwise contemplate or participate in any alternative transaction to the Share Transaction, including, without limitation, the sale of our industrial Europe and rest of the world business.
If the Share Transaction has not occurred on or prior to September 30, 2006, for any reason whatsoever, other than a material breach of the Standby Agreement by the Standby Purchasers or as a result of a Market Adverse Effect, or if we terminate the Standby Agreement prior to September 30, 2006 other than as a result of a material breach by the Standby Purchasers or if the Standby Purchasers terminate the Standby Agreement prior to September 30, 2006 in accordance with the terms of the Standby Agreement, other than as a result of a Market Adverse Effect, Standby Purchasers shall have the option to purchase an additional 14,285,714 shares in the aggregate of our common stock for $50,000,000 at the subscription price (the Additional Subscription Shares) for a period of 10 business days following the date the Standby Agreement was terminated (the Option Period) upon delivery of written notice to us. If our shareholders approve the Rights Offering and the sale of the Additional Subscription Shares to the Standby Purchasers, the Standby Purchasers may elect to purchase any or all of the such shares (the Complete Option), at the Subscription Price. If our shareholders do not approve the Rights Offering and the sale of the Additional Subscription Shares to the Standby Purchasers, the Standby Purchasers may elect to purchase a portion of the Additional Subscription Shares equal to up to 19.9% of our issued and outstanding common stock (the Partial Option), at a purchase price of $4.50 per share. With respect to the Partial Option, Tontine shall have the option to purchase 50% of the Additional Subscription Shares and Legg Mason shall have the option purchase 50% of the Additional Subscription Shares and with respect to the Complete Option, Tontine shall have the option to purchase 60% of the Additional Subscription Shares and Legg Mason shall have the option purchase 40% of the Additional
Subscription Shares, provided that Tontine and Legg Mason may jointly agree to reallocate the percentage of the Additional Subscription Shares purchased by either party.