0001012975-05-000115.txt : 20120614
0001012975-05-000115.hdr.sgml : 20120614
20050412165546
ACCESSION NUMBER: 0001012975-05-000115
CONFORMED SUBMISSION TYPE: SC 13D/A
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20050412
DATE AS OF CHANGE: 20050412
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: ANALEX CORP
CENTRAL INDEX KEY: 0000044800
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370]
IRS NUMBER: 112120726
STATE OF INCORPORATION: NY
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: SC 13D/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-32462
FILM NUMBER: 05746637
BUSINESS ADDRESS:
STREET 1: 5904 RICHMOND HIGHWAY
STREET 2: SUITE 300
CITY: ALEXANDRIA
STATE: VA
ZIP: 22303
BUSINESS PHONE: 703-329-9400
MAIL ADDRESS:
STREET 1: 5904 RICHMOND HIGHWAY
STREET 2: SUITE 300
CITY: ALEXANDRIA
STATE: VA
ZIP: 22303
FORMER COMPANY:
FORMER CONFORMED NAME: HADRON INC
DATE OF NAME CHANGE: 19920703
FORMER COMPANY:
FORMER CONFORMED NAME: BIORAD INC
DATE OF NAME CHANGE: 19710304
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: PEQUOT CAPITAL MANAGEMENT INC
CENTRAL INDEX KEY: 0001071955
IRS NUMBER: 061524885
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC 13D/A
BUSINESS ADDRESS:
STREET 1: 500 NYALA FARM ROAD
CITY: WESTPORT
STATE: CT
ZIP: 06880
BUSINESS PHONE: 2034292200
MAIL ADDRESS:
STREET 1: 500 NYALA FARM ROAD
CITY: WESTPORT
STATE: CT
ZIP: 06880
FORMER COMPANY:
FORMER CONFORMED NAME: PEQUOT CAPITAL MANAGEMENT INC/CT/
DATE OF NAME CHANGE: 19981118
SC 13D/A
1
e578268v4.txt
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
SCHEDULE 13D/A
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 4)
ANALEX CORPORATION
------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.02 PER SHARE
--------------------------------------
(Title of Class of Securities)
032653107
-----------
(CUSIP Number)
Aryeh Davis, General Counsel
Pequot Capital Management, Inc.
500 Nyala Farm Road, Westport, CT 06880
(203) 429-2200
------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
April 1, 2005
-----------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g),
check the following box. |_|
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Section 240.13d-7 for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934, as amended ("Act") or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
CUSIP No. 032653107
1 Names of Reporting Persons. Pequot Capital Management, Inc.
I.R.S. Identification Nos. of above
persons (entities only) 06-1524885
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions)
(a) |_|
(b) |X|*+
--------------------------------------------------------------------------------
3 SEC Use Only
--------------------------------------------------------------------------------
4 Source of Funds (See Instructions) 00
--------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) |_|
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization Connecticut
--------------------------------------------------------------------------------
7 Sole Voting Power 16,802,081*
NUMBERS OF
SHARES ------------------------------------------------------------
BENEFICIALLY 8 Shared Voting Power 0*
OWNED
------------------------------------------------------------
9 Sole Dispositive Power 16,802,081*+
------------------------------------------------------------
10 Shared Dispositive Power 0*+
------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting
Person 16,802,081*+
--------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
|_|*+
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11) 52.12*+
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions) IA
--------------------------------------------------------------------------------
*The Reporting Person may be deemed to be part of a group with the Stockholder
Parties (as defined herein) pursuant to certain terms of the Amended and
Restated Stockholders' Voting Agreement (as defined herein) described in Item 4.
The Reporting Person does not affirm to be part of a group and expressly
disclaims beneficial ownership of the 32,185,403 shares of Common Stock (as
defined herein), in the aggregate, beneficially owned by the Stockholder
Parties. Accordingly, such shares of Common Stock are not included in the
amounts specified by the Reporting Person above.
+The power of the Reporting Person to dispose of any of the securities
purchased under the Series B Purchase Agreement (as defined herein) are subject
to certain limitations and restrictions on transfer as set forth in the Co-Sale
Agreement described in Item 4.
2
This Amendment No. 4 is filed by Pequot Capital Management, Inc., a
Connecticut corporation (the "Reporting Person"), and amends Items 3, 4, 5 and 6
of the Statement on Schedule 13D filed by the Reporting Person on July 28, 2003,
as amended by (i)Amendment No. 1 ("Amendment No. 1") filed by the Reporting
Person on December 19, 2003,(ii) Amendment No. 2 ("Amendment No. 2") filed bythe
Reporting Person on June 7, 2004 and (iii) Amendment No. 3 ("Amendment No. 3")
filed by the Reporting Person on September 15, 2004 (as amended, the "Schedule
13D," and together with this Amendment No. 4, the "Statement"). This Amendment
No. 4 relates to the Common Stock, par value $0.02 per share (the "Common
Stock"), of Analex Corporation, a Delaware corporation (the "Issuer").
Capitalized terms used below and not otherwise defined herein shall have the
meaning set forth in the Schedule 13D.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Item 3 of the Statement is hereby amended and restated in its entirety as
follows:
As more fully described in Item 4 hereof, the Funds and the Issuer entered
into the Series A Purchase Agreement (as defined below) with respect to the
transactions contemplated thereby, pursuant to which the Reporting Person
acquired: (i) the Series A Preferred Stock, the Convertible Notes and the Series
A Warrants (each, as defined below), for aggregate consideration of $25,000,000.
As more fully described in Item 4 hereof, the Funds and the Issuer entered into
the Series B Purchase Agreement (as defined below) with respect to the
transactions contemplated thereby, pursuant to which the Reporting Person
acquired: (i) the Senior Subordinated Notes, which converted into the Initial
Series B Preferred Stock and the Common Stock Warrants (each, as defined below),
for aggregate consideration of $3,500,000; and (ii) the Additional Series B
Preferred Stock and the Additional Common Stock Warrants (each, as defined
below) for aggregate consideration of $7,500,000. The funds for the purchase of
such securities held by the Accounts were obtained from the contributions of the
Accounts' partners/shareholders.
A copy of the Series A Purchase Agreement was previously filed as Exhibit
1 to the Schedule 13D and is incorporated herein by reference. A copy of the
Series B Purchase Agreement was previously filed as Exhibit 11 to Amendment No.
2 and is incorporated herein by reference. The descriptions herein of the Series
A Purchase Agreement and the Series B Purchase Agreement are qualified in their
entirety by reference to such agreements.
ITEM 4. PURPOSE OF TRANSACTION
Item 4 of the Statement is amended and restated in its entirety as follows:
The Reporting Person acquired the Series A Preferred Stock, the
Convertible Notes and the Series A Warrants pursuant to the terms of the Series
A Purchase Agreement. The Reporting Person acquired the Senior Subordinated
Notes that converted into the Initial Series B Preferred Stock, the Common Stock
Warrants, the Additional Series B Preferred Stock and the Additional Common
Stock Warrants pursuant to the terms of the Series B Purchase Agreement. The
Reporting Person considers the shares of Common Stock that it beneficially owns
an investment made in the ordinary course of its business. The Reporting Person
intends to review on a continuing basis its investment in the Issuer, including
the Issuer's business, financial condition and operating results and general
market and industry conditions and, based upon such review, may acquire
additional Notes, Preferred Stock, Warrants (each, as defined below) or Common
Stock or dispose of Notes, Preferred Stock, Warrants or Common Stock, in the
open market, in privately negotiated transactions or in any other lawful manner.
On December 9, 2003 (the "Series A Closing Date"), pursuant to a
Subordinated Note and Series A Convertible Preferred Stock Purchase Agreement
dated July 18, 2003 (the "Series A Purchase Agreement"), with the Funds (with
respect to the ownership interests of the Funds in the Series A Preferred Stock,
Convertible Notes and Series A Warrants, the Funds are sometimes referred to as,
the "Series A Investors"), the Issuer: (i) issued and sold to the Funds an
aggregate of 6,726,457 shares of the Issuer's Series A Convertible Preferred
Stock, par value $0.02 per share (the "Series A Preferred Stock") for a purchase
price of $2.23 per share of Preferred Stock (the "Series A Purchase Price"),
representing an aggregate consideration of approximately $15,000,000; (ii) in
connection with the issuance and sale of the Series A Preferred Stock, issued
warrants to each of the Funds (the "Series A Preferred Warrants") exercisable to
purchase the Issuer's Common Stock, at a ratio of one share of Common Stock for
every five shares of Common Stock issued or issuable upon conversion of the
Preferred Stock; (iii) issued and sold to the Funds $10,000,000 in aggregate
principal amount of the Issuer's Secured Subordinated Convertible Promissory
Notes (the
3
"Convertible Notes"); and (iv) in connection with the issuance and sale of the
Convertible Notes, issued warrants to each of the Funds (the "Note Warrants,"
and together with the Series A Preferred Warrants, the "Series A Warrants")
exercisable to purchase Common Stock at a ratio of one share of Common Stock for
every five shares of Common Stock issued or issuable upon conversion of the
Convertible Notes.
SERIES B PURCHASE AGREEMENT
Pursuant to a Purchase Agreement (the "Series B Purchase Agreement") dated
May 28, 2004 (the " Senior Subordinated Notes Closing Date") with the Funds,
General Electric Pension Trust ("GEPT") and New York Life Capital Partners II,
L.P. ("NYL" and, together with the Funds and GEPT, collectively, the "Series B
Investors"), the Issuer: (i) issued and sold to the Funds $3,500,000 in
aggregate principal amount of the Issuer's Secured Senior Subordinated
Convertible Promissory Notes (the "Senior Subordinated Notes" and together with
the Convertible Notes, the "Notes"), the principal and accrued interest on which
are convertible in accordance with their terms into shares of the Issuer's
Series B Convertible Preferred Stock, par value $0.02 per share (the "Initial
Series B Preferred Stock") at a conversion price of $3.50 per share of Series B
Preferred Stock (the "Series B Original Issue Price") and (ii) in connection
with the issuance and sale of the Senior Subordinated Notes, issued warrants to
each of the Funds (the "Common Stock Warrants") exercisable to purchase Common
Stock at a ratio of one share of Common Stock for every five shares of Common
Stock issued or issuable on conversion of the Initial Series B Preferred Stock
issued or issuable upon conversion of the Senior Subordinated Notes. Capitalized
terms used but not defined in this Item 4 or elsewhere in the Statement shall
have the meanings assigned to such terms in the Series B Purchase Agreement.
Subject to certain approval rights by the holders of the Series A
Preferred Stock and the Initial Series B Preferred Stock, the Series B Purchase
Agreement provided that the Issuer may require the Series B Investors to
purchase up to an additional $25,000,000 of Series B Preferred Stock, with
additional warrants to purchase Common Stock, at any one or more times on or
prior to May 27, 2005 for the purpose of paying the cost of acquisition of the
stock or assets of one or more other entities in each case with an acquisition
value (not including transaction expenses) of at least $10,000,000. Pursuant to
the terms of the Series B Purchase Agreement, on April 1, 2005 (the "Subsequent
Closing Date"), for $7,500,000 in the aggregate, the Issuer: (i) issued and sold
to the Funds 2,142,857 shares of Series B Preferred Stock (the "Additional
Series B Preferred Stock," and together with the Initial Series B Preferred
Stock, the "Series B Preferred Stock," and together with the Series A Preferred
Stock, the "Preferred Stock") and (ii) in connection with the issuance and sale
of the Additional Series B Preferred Stock, issued to the Funds warrants to
purchase 535,714 shares of Common Stock in the aggregate (the "Additional Common
Stock Warrants," and together with the Series A Warrants and the Common Stock
Warrants, the "Warrants").
AMENDED AND RESTATED STOCKHOLDERS' VOTING AGREEMENT
On the Senior Subordinated Notes Closing Date, the Series B Investors, the
Series A Investors, the Issuer, and Joseph H. Saul, Arthur A. Hutchins, DRG
Irrevocable Trust, Peter Belford, J. Richard Knop, and C.W. Gilluly (Mr. Saul,
Mr. Knop, Mr. Gilluly, Mr. Belford, Mr. Hutchins, DRG Irrevocable Trust, who,
together with the Series A Investors and the Series B Investors will own a
majority of the Common Stock of the Issuer upon the Senior Subordinated Notes
Closing Date, are collectively referred to as the "Stockholder Parties") entered
into a Amended and Restated Stockholders' Voting Agreement ("Amended and
Restated Stockholders Agreement") pursuant to which the Series A Investors, the
Series B Investors and the other Stockholder Parties agreed to vote, or cause to
be voted, all securities of the Issuer they own or over which they have voting
control so that the number of directors of the Issuer will be nine, consisting
of: (i) the Issuer's chief executive officer ("CEO"), currently Sterling E.
Phillips, Jr.; (ii) two directors designated by the Funds (as the Series A
Investors and as Series B Investors); (iii) one non-employee director designated
by the Issuer's CEO and acceptable to the Series A Investors and Series B
Investors, who shall initially be Peter Belford; and (iv) five independent
directors nominated by the nominating committee of the Board of Directors of the
Issuer (the "Board"), which shall be comprised solely of the independent
directors then serving on the Board.
Under certain circumstances where the Funds hold less than certain
specified percentages of the securities the Funds originally purchased on the
Series A Closing Date and on the Senior Subordinated Notes Closing Date, the
right to designate two directors in (ii) above will be reduced to one or no
directors and the above voting provisions will be adjusted in the manner
described in the Amended and Restated Stockholders Agreement.
4
In certain circumstances, including the Issuer's failure to redeem the
Series B Preferred Stock as required, the Series B Investors or certain of their
transferees may designate additional directors so that the Funds' directors
comprise a majority of the Board. This right will terminate if the Issuer
redeems all of the Series B Preferred Stock as required. In addition, the right
to designate additional directors under similar circumstances granted to the
Series A Investors shall be subject to the rights granted to the holders of the
Series B Preferred Stock in the immediately preceding sentence.
REGISTRATION RIGHTS AGREEMENT
In connection with the transactions contemplated by the Series B Purchase
Agreement, the Issuer and the Series B Investors entered into a Registration
Rights Agreement (the "Registration Rights Agreement"), as of the Senior
Subordinated Notes Closing Date. Pursuant to the Registration Rights Agreement,
within 30 days following the Senior Subordinated Notes Closing Date, the Issuer
will be required to file a registration statement on Form S-3 registering the
resale of any Common Stock issuable upon conversion or exercise of the Senior
Subordinated Notes and Common Stock Warrants or issuable upon conversion of the
Series B Preferred Stock issued or issuable on conversion of the Senior
Subordinated Notes. The Issuer will be required to keep such registration
statement effective until all the Common Stock registered thereunder is sold or
the holders are entitled to sell such Common Stock under Rule 144(k) under the
Securities Act of 1933, as amended. The Registration Rights Agreement also
provides the Reporting Person with piggyback registration rights with respect to
certain underwritten offerings initiated by the Issuer.
CO-SALE AGREEMENT
In connection with the Series B Purchase Agreement, the Issuer and the
Series B Investors entered into that certain Co-Sale Agreement, as of the Senior
Subordinated Notes Closing Date (the "Co-Sale Agreement"), pursuant to which
each Series B Investor agreed to provide the other Series B Investors with
notice of, and the option to participate in, certain transfers of Senior
Subordinated Notes, Series B Preferred Stock, Common Stock Warrants, Additional
Common Warrants or Common Stock issued or issuable upon the conversion or
exercise of any of the foregoing or issued with respect to any such securities
by way of stock dividend, stock split or any reorganization affecting the
Issuer's capital stock (collectively, the "Co-Sale Securities").
The Co-Sale Agreement provides that for so long as any Series B Investor
holds any Co-Sale Securities, each such Series B Investor desiring to transfer
any Co-Sale Securities (each such Series B Investor, a "Transferring Investor")
other than in connection with transfers to the Issuer, transfers pursuant to a
public sale or transfers to certain affiliates must give each other Series B
Investor (the "Other Investors") and the Issuer written notice of the terms and
conditions of any proposed bona fide and arm's length sale at least twenty (20)
days prior to any proposed transfer. The Other Investors may elect to
participate in the proposed transfer within ten (10) business days of receiving
notice of the transfer (such Other Investors so electing, the "Electing Other
Investors"), who then have the right and obligation to sell to the proposed
transferee(s), at the same price and on the same terms and conditions as are
specified in the notice, the same type and up to the same percentage of Co-Sale
Securities (on an as converted basis including shares of Common Stock issuable
upon conversion of Series B Preferred Stock) owned by such Electing Other
Investors as the Co-Sale Securities represents with respect to the capital stock
of the Issuer owned by the Transferring Investor.
The Transferring Investor is not permitted to transfer any Co-Sale
Securities to prospective transferee(s) unless (x) such prospective
transferee(s) allow(s) the participation of the Electing Other Investors on the
terms specified in the transfer notice or (y) if such Transferring Investor does
not receive notice that the Other Investors intend to participate within the
ten-day period and transfers its Co-Sale Securities within sixty (60) days after
the expiration of the ten (10) business day period at a price and on the terms
no more favorable than those specified in the original transfer notice.
A copy of the Series A Purchase Agreement was previously filed as Exhibit
1 to the Schedule 13D and is incorporated herein by reference. A copy of the
Series B Purchase Agreement, the Voting Agreement, the Amended and Restated
Stockholders Agreement, the Registration Rights Agreement and the Co-Sale
Agreement were previously filed as Exhibits 11, 12, 13, 14 and 15, respectively,
to Amendment No. 2 and are incorporated herein by reference. The description
herein of such agreements are qualified in their respective entireties by
reference to such agreements.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
5
Item 5 of the Statement is amended and restated in its entirety as follows:
(a) The Reporting Person beneficially owns 16,802,081 shares of Common
Stock, representing 52.12% of shares of Common Stock outstanding as of April 1,
2005 (giving effect to the issuance of (i) 12,057,796 shares of Common Stock
issuable upon conversion of the Series A Preferred Stock, the conversion of the
Convertible Notes and the exercise of the Series A Warrants, (ii) 4,714,285
shares of Common Stock issuable upon conversion of the Series B Preferred Stock
(assuming a $2.80 conversion price for the Series B Preferred Stock) and the
exercise of the Common Stock Warrants and the Additional Common Stock Warrants,
(iii) 10,000 shares of Common Stock issuable upon exercise of the Initial
Directors Options (as defined below), (iv) 10,000 shares of Common Stock
issuable upon exercise of the New Directors Options (as defined below) and (v)
10,000 shares of Common Stock issuable upon exercise of the Additional Directors
Options (as defined below)).
In addition, by virtue of the Amended and Restated Stockholders Agreement,
it could be alleged that a "group," within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or Rule
13d-5(b)(1) thereunder, has been formed that includes the Stockholder Parties
and the Reporting Person. While the Reporting Person does not concede that such
a "group" has been formed, this filing is being made to ensure compliance with
the Exchange Act. Such group would be deemed to beneficially own, in the
aggregate, 32,185,403 shares of Common Stock (including shares underlying
options exercisable within 60 days of the date hereof), representing 67.6 % of
the Common Stock outstanding as of April 1, 2005. The Reporting Person expressly
disclaims beneficial ownership of Common Stock beneficially owned by the
Stockholder Parties and does not affirm that such a "group" exists.
(b) The Reporting Person has the sole power to vote, direct the vote,
dispose and direct the disposition of the 16,802,081 shares of Common Stock
(giving effect to the issuance of (i) 12,057,796 shares of Common Stock issuable
upon conversion of the Series A Preferred Stock, the conversion of the
Convertible Notes and the exercise of the Series A Warrants, (ii) 4,714,285
shares of Common Stock issuable upon conversion of the Series B Preferred Stock
(assuming a $2.80 conversion price for the Series B Preferred Stock) and the
exercise of the Common Stock Warrants and the Additional Common Stock Warrants,
(iii) 10,000 shares of Common Stock issuable upon exercise of the Initial
Directors Options (as defined below), (iv) 10,000 shares of Common Stock
issuable upon exercise of the New Directors Options (as defined below) and (v)
10,000 shares of Common Stock issuable upon exercise of the Additional Directors
Options (as defined below)).
Pursuant to, and to the extent set forth in, the Amended and Restated
Stockholders Agreement, it could be alleged that the Reporting Person shares
voting and dispositive power with respect to the shares of Common Stock
beneficially owned by the Stockholder Parties. To the knowledge of the Reporting
Person and based on documents publicly filed by the Stockholder Parties, (i) the
name, address and principal occupation of each of the Stockholder Parties is set
forth on Exhibit 16 to Amendment No. 2 and is incorporated herein by reference
and (ii) each of the Stockholder Parties is a citizen of the United States. To
the knowledge of the Reporting Person and based on documents publicly filed by
the Stockholder Parties, during the last five years, none of the Stockholder
Parties has been: (i) convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or (ii) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to Federal
or State securities laws or finding any violation with respect to such laws.
(c) Except for the information set forth, or incorporated by reference, in
Items 3 and 4, which is incorporated herein by reference, none of the Reporting
Persons has effected any transaction relating to the Common Stock during the
past 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, AGREEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
Item 6 of the Statement is amended and restated in its entirety as follows:
6
Reference is made to the Series A Purchase Agreement, the Series B
Purchase Agreement, the Voting Agreement, the Amended and Restated Stockholders
Agreement, the Registration Rights Agreement described in Items 3, and 4, which
are incorporated herein by reference. Reference is also made to that certain (i)
Amendment to Certificate of Designations, Powers, Preferences and Rights of the
Series A Convertible Preferred Stock, dated as of May 27, 2004 (the "Series A
Certificate of Designation") and (ii) Certificate of Designations, Powers,
Preferences and Rights of the Series B Convertible Preferred Stock, dated as of
May 27, 2004 (the "Series B Certificate of Designation"), which were previous
filed as Exhibits 18 and 19, respectively, to Amendment No. 2 and are
incorporated herein by reference. The descriptions of the Series A Certificate
of Designation and the terms of the Series A Preferred Stock and the Series B
Certificate of Designation and the terms of the Series B Preferred Stock are
qualified in their respective entireties by reference to such certificates.
In connection with the transactions contemplated by the Series A Purchase
Agreement, on December 9, 2003, the Issuer issued to the Funds the Series A
Preferred Stock, the Series A Warrants and the Convertible Notes. In connection
with the transactions contemplated by the Series B Purchase Agreement: (i) on
May 28, 2004, the Issuer issued to the Funds the Senior Subordinated Notes and
the Common Stock Warrants; (ii) on September 15, 2004, the Issuer issued to the
Funds the Initial Series B Preferred Stock upon the automatic conversion of the
Senior Subordinated Notes; and (iii) on April 1, 2005, the Issuer issued to the
Funds the Additional Series B Preferred Stock and the Additional Common Stock
Warrants.
SERIES A PREFERRED STOCK
The 6,726,457 shares of Series A Preferred Stock are convertible into
Common Stock at any time at the election of its holders, initially at a ratio of
one share of Common Stock for every share of Series A Preferred Stock and
subject to adjustments for certain dilutive equity issuances and for stock
splits, stock dividends and similar events. The Series A Preferred Stock will
automatically convert into Common Stock if: (i) any time following 18 months
after the Series A Closing, the average closing price of the Common Stock over a
20 consecutive trading day period exceeds 2.5 times the conversion price then in
effect for the Series A Preferred Stock; (ii) with respect to the Series A
Preferred Stock held by holders that do not accept an offer by the Issuer,
within 60 days of delivery of such offer, to purchase the Series A Preferred
Stock for at least 2.5 times the conversion price then in effect; or (iii) upon
the agreement of the holders of a majority of the then outstanding Series A
Preferred Stock; provided, that in each case, no shares of Series A Preferred
Stock shall be converted into Common Stock unless at the time of such proposed
conversion the Issuer has on file with the Securities and Exchange Commission an
effective registration statement with respect to shares of Common Stock issuable
to the holders (x) on conversion of all Series A Preferred Stock then issued or
issuable to such holders and (y) on exercise of all warrants issued pursuant to
the Series A Purchase Agreement and such shares are listed on the American Stock
Exchange ("AMEX"). Holders of Series A Preferred Stock are entitled to vote on
actions to be taken by the stockholders together with all other classes and
series of voting stock of the Issuer as a single class, except as otherwise
provided by applicable law or as described below. Each share of Series A
Preferred Stock is entitled to the number of votes equal to the number of shares
of Common Stock into which such share of Series A Preferred Stock is
convertible. Initially, each share of Series A Preferred Stock is entitled to
one vote. As long as 50% of the shares of Series A Preferred Stock issued on
December 9, 2003 remain outstanding, or, if the Issuer has failed to comply with
its redemption obligations, as long as any shares of Series A Preferred Stock
issued at December 9, 2003 remain outstanding, the Issuer will not be allowed to
take certain actions without the prior written consent of the holders of a
majority of the Series A Preferred Stock outstanding. The holders of Series A
Preferred Stock are entitled to customary preemptive rights and liquidation and
dissolution preferences.
DIVIDEND RIGHTS
Holders of the Series A Preferred Stock are entitled to receive cumulative
dividends on the Series A Preferred Stock each quarter from and after the date
of issuance of such shares at the per annum rate of 6% of the Series A Purchase
Price. The dividends are payable in cash; provided, however, that if at any time
after initial issuance of the Series A Preferred Stock: (i) the Issuer's
available cash for operations for the following twelve month period (calculated
from the date such quarterly dividend would be paid) is less than $1,000,000 in
excess of business projections approved by the Issuer's board of directors for
such twelve month period, or (ii) the Issuer's payment of the dividend in cash
will result in an event of default under the Issuer's senior indebtedness, then
the dividend, at the option of the Issuer, may be paid in shares of Series A
Preferred Stock valued at the Series A Purchase Price. Holders of the Series A
Preferred Stock are entitled to receive such dividends immediately after the
payment of any dividends to the
7
Series B Preferred Stock and any other senior securities, prior to any payment
of dividends to junior securities and the Common Stock and at the same time as
the payment of dividends to parity securities.
REDEMPTION
The Series A Preferred Stock shall be subject to redemption, at the option
of the holders of a majority of the then outstanding shares of Series A
Preferred Stock at any time after the Series B Redemption Date (as defined
below), in four equal quarterly installments, with the first installment being
made within sixty (60) days of the date of exercise of such option and the last
installment on the date that is 9 months thereafter, in whole or in part, at a
per share redemption price equal to the Series A Purchase Price (as adjusted for
any stock splits, stock dividends, combinations, recapitalizations involving
equity securities of the Issuer, reclassifications or other similar events
involving a change with respect to the Series A Preferred Stock) per share plus
any accrued but unpaid dividends, payable in immediately available funds. If the
Issuer is unable to effect any required quarterly redemption of Series A
Preferred Stock for a period of nine consecutive months after such redemption
was required, the holders of the Series A Preferred Stock will have the right to
designate additional directors so that directors designated by the holders
comprise a majority of the Issuer's board of directors, unless the holders of
the Series B Preferred Stock have exercised their right to designate additional
directors pursuant to the Series B Certificate of Designation. Notwithstanding
anything contained in the immediately preceding paragraph to the contrary, the
Issuer shall not be required to use such funds to pay the redemption price of
Series A Preferred Stock nor shall the holders of the Series A Preferred Stock
be entitled to any such designation rights unless the Issuer has paid, or
reserved funds sufficient to pay, the entire redemption price of Series B
Preferred Stock.
SERIES B PREFERRED STOCK
The Series B Preferred Stock will be convertible into Common Stock at any
time at the election of its holders. The per share conversion price (the "Series
B Conversion Price") of the Series B Preferred Stock is the lowest of (i) $3.10;
(ii) the price that reflects a 20% discount to the trailing average closing
price of the Common Stock for the 20 consecutive trading days immediately
preceding the Series B Issue Date (as defined below), but in no event less than
$2.80; and (iii) the closing price of the Common Stock on the day immediately
preceding the Series B Issue Date. On September 15, 2004, the Senior
Subordinated Notes converted into Series B Preferred Stock and the conversion
price of the Series B Preferred Stock was determined to be $2.80 (subject to
further adjustments as described below). The Series B Preferred Stock will
automatically convert into Common Stock if: (i) at any time following 18 months
after the Series B Issue Date, the average closing price of the Common Stock for
the immediately preceding 20 consecutive trading day period exceeds 2.5 times
the Series B Original Issue Price (as adjusted for any stock splits,
combinations, recapitalizations involving equity securities of the Issuer,
reclassifications or other similar events involving a change with respect to the
Series B Preferred Stock); (ii) with respect to the Series B Preferred Stock
held by holders that do not accept an offer by the Issuer, within 60 days of
delivery of such offer, to purchase the Series B Preferred Stock for at least
2.5 times the Series B Original Issue Price (as so adjusted); or (iii) upon the
agreement of the holders of 75% of the Series B Preferred Stock at the
conversion price then in effect; provided, that in each case, no shares of
Series B Preferred Stock shall be converted into Common Stock unless at the time
of such proposed conversion the Issuer has on file with the Securities and
Exchange Commission an effective registration statement with respect to shares
of Common Stock issuable to the holders (x) on conversion of all Series B
Preferred Stock then issued or issuable to such holders and (y) on exercise of
all warrants issued pursuant to the Series B Purchase Agreement and such shares
are listed on the American Stock Exchange ("AMEX"). Holders of Series B
Preferred Stock are entitled to vote together with all other classes and series
of voting stock of the Issuer on all actions to be taken by the stockholders of
the Issuer, except as otherwise provided by applicable law or as described
below. Initially, each share of Series B Preferred Stock is entitled to one
vote. As long as at least 25% of the shares of the Series B Preferred Stock
issued pursuant to the Series B Purchase Agreement remain outstanding, the
Issuer shall not take certain specified actions (including certain changes to
the Issuer's certificate of incorporation) without first obtaining the written
consent of holders of at least a majority of the then outstanding shares of
Series B Preferred Stock voting separately as a class. As long as 50% of the
shares of the Series B Preferred Stock issued pursuant to the Series B Purchase
Agreement remain outstanding, the Issuer shall not take certain other specified
actions (including declaration of dividends or distributions on the capital
stock other than dividends and distributions paid on the Series B Preferred
Stock and the Preferred Stock) without first obtaining the written consent of
holders of at least a majority of the then outstanding shares of Series B
Preferred Stock, voting as a separate class. The holders of Series B Preferred
Stock are entitled to customary preemptive rights and liquidation and
dissolution preferences.
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DIVIDEND RIGHTS
Holders of the Series B Preferred Stock are entitled to receive cumulative
dividends on the Series B Preferred Stock each quarter (beginning on the last
day of the calendar quarter following the date of initial issuance of any Series
B Preferred Stock, or September 15, 2004 (the "Series B Issue Date")) at the per
annum rate of 6% of the Series B Original Issue Price (as adjusted for any stock
splits, combinations, recapitalizations involving equity securities of the
Issuer, reclassifications or other similar events involving a change with
respect to the Series B Preferred Stock). The dividends are payable in cash;
provided, however, that if at any time after the Series B Issue Date: (i) the
Issuer's projected available cash for operations for the following twelve month
period (calculated from the date any such quarterly dividend would be paid) is
less than $1,000,000 in excess of business projections approved by the Issuer's
board of directors for such twelve month period, or (ii) the Issuer's payment of
the dividend in cash will result in an event of default under the Issuer's
senior indebtedness, then the dividend, at the option of the Issuer, may be paid
in shares of Series B Preferred Stock valued at the Series B Original Issue
Price (as adjusted for any stock splits, combinations, recapitalizations
involving equity securities of the Issuer, reclassifications or other similar
events involving a change with respect to the Series B Preferred Stock). Holders
of the Series B Preferred Stock are entitled to receive such dividends
immediately after the payment of any dividends to senior securities required by
the Issuer's certificate of incorporation, as amended or amended and restated
and in effect, including for this purpose any certificate(s) of designation,
prior and in preference to any payment of dividends to the Series A Preferred
Stock, any other junior securities and the Common Stock and at the same time as
the payment of dividends to parity securities.
REDEMPTION
The Series B Preferred Stock shall be subject to redemption, at the option
of the holders of 66 2/3% of the then outstanding shares of Series B Preferred
Stock at any time after the fourth anniversary of the Series B Issue Date (such
fourth anniversary of such Issue Date, the "Series B Redemption Date"), in four
equal quarterly installments, with the first installment being made within sixty
(60) days of the date of exercise of such option and the last installment on the
date that is 9 months thereafter, in whole or in part, at a per share redemption
price equal to the Series B Original Issue Price (as adjusted for any stock
splits, combinations, recapitalizations involving equity securities of the
Issuer, reclassifications of other similar events involving a change with
respect to the Series B Preferred Stock) per share plus any accrued but unpaid
dividends, payable in immediately available funds. If the Issuer is unable to
effect any required quarterly redemption of Series B Preferred Stock for a
period of nine consecutive months after such redemption was required, the
holders of the Series B Preferred Stock will have the right to designate
additional directors so that directors designated by the holders comprise a
majority of the Issuer's board of directors until all such installments that are
then past due are paid.
CONVERTIBLE NOTES
Pursuant to the terms of the Convertible Notes, at any time and from time
to time, the Reporting Person may, at its sole option, convert the outstanding
principal and accrued and unpaid interest on the Convertible Notes in whole or
in part into Series A Preferred Stock. The Convertible Notes may be converted in
the number of Series A Preferred Stock determined by dividing (i) the sum of the
aggregate principal amount and the accrued and unpaid interest, by (ii) an
amount equal to 135% of the Series A Purchase Price (subject to adjustments for
stock splits, stock dividends and similar events). Initially, the Convertible
Notes are convertible into an aggregate of 3,321,707 shares of Series A
Preferred Stock, which are convertible into shares of Common Stock initially at
a ratio of one share for every Series A Preferred Stock and are subject to
adjustments for certain dilutive equity issuances and for stock splits, stock
dividends and similar events. The Issuer may cause the automatic conversion of
the Convertible Notes into Common Stock if, any time following 18 months after
the Series A Closing, the average closing price for the Common Stock over the 20
consecutive trading day period prior to the date of conversion exceeds 2.5 times
the Series A Purchase Price, as adjusted for dilutive equity issuances, stock
splits, stock dividends and similar events. The Convertible Notes are subject to
certain events of default specified in the Convertible Notes. Subject to the
rights of the holders of the Senior Subordinated Notes, following an event of
default due to the nonpayment of principal, interest or other payments due under
the Convertible Notes that continues for a period of twelve consecutive months,
the holders of a majority of the Common Stock underlying the securities issued
to the Funds at the Series A Closing will have the right to designate a majority
of the Issuer's board of directors. This right will terminate upon the payment
of the amounts due under the Convertible Notes.
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INTEREST ON CONVERTIBLE NOTES
Interest on the Convertible Notes is payable at a rate of 7% per annum.
Interest is payable in cash quarterly in arrears; provided, that, at the
Issuer's option, interest will accrue and will be added to principal if: (i) the
Issuer's available cash for operations for the twelve month period following the
date any such quarterly interest payment is due is less than $1,000,000 in
excess of business projections approved by the Issuer's board of directors for
such twelve month period; or (ii) the interest payment in cash will result in a
default under the Issuer's senior indebtedness. The interest rate will increase
to 11% if the Issuer defaults on any principal or interest payment obligation
under the Convertible Notes following a five-day cure period.
PREPAYMENT OF CONVERTIBLE NOTES
Principal of and interest on the Convertible Notes may not be prepaid
without the prior consent of the holders of a majority of the principal amount
outstanding under the Convertible Notes until 18 months following the Series A
Closing. At any time after 18 months following the Series A Closing, the Issuer
may prepay principal and interest under the Convertible Notes by so notifying
the holders of the Convertible Notes. Any prepayment will be made, at the option
of the holders of a majority of the principal amount outstanding under the
Convertible Notes either: (i) in cash in an amount equal to the sum of (a) the
aggregate principal amount outstanding and (b) the net present value (discounted
at a rate of 7% per annum) of the interest that is accrued and unpaid as of the
prepayment date and the interest that would have been payable by the Issuer
through the maturity date of the Convertible Notes; or (ii) by conversion of the
Convertible Notes into Series A Preferred Stock at the Series A Purchase Price
(subject to adjustments for stock splits, dividends and similar events) and the
payment by the Issuer of all accrued and unpaid interest on the Convertible
Notes in cash or, at the option of the holder, in shares of Series A Preferred
Stock.
If any Convertible Note is prepaid, each Convertible Note will be prepaid,
in whole or in part, pro rata, based on the principal amount outstanding under
the respective Convertible Notes. Prepayment of the Convertible Notes may only
occur if the Issuer has an effective registration statement filed with the SEC
covering the resale of the shares of Common Stock issuable upon the conversion
of the Series A Preferred Stock and the Convertible Notes and upon the exercise
of the Series A Warrants and such shares are listed on AMEX or another stock
exchange approved by the holders of a majority of the Series A Preferred Stock.
SENIOR SUBORDINATED NOTES
The outstanding principal on the Senior Subordinated Notes was
automatically converted into the Initial Series B Preferred Stock upon
stockholders'approval at the annual meeting of the Issuer on September 15, 2004.
The per share conversion price of the Senior Subordinated Notes was $3.50. The
accrued interest on the Senior Subordinated Notes was paid to the holders in
cash.
WARRANTS
SERIES A WARRANTS
In connection with the transactions contemplated by the Series A Purchase
Agreement, on December 9, 2003, the Issuer issued the Series A Warrants to the
Funds. The Series A Preferred Warrants are immediately exercisable at an
exercise price of $3.28 per share to purchase one share of Common Stock for
every five shares of Common Stock issued or issuable upon the conversion of the
Series A Preferred Stock. Initially, the Series A Preferred Warrants are
convertible, in the aggregate, into 1,345,291 shares of Common Stock. The Note
Warrants will be immediately exercisable at an exercise price of $3.28 to
purchase one share of Common Stock for every five shares of Common Stock issued
or issuable upon conversion of the Convertible Notes. Initially, the Note
Warrants are convertible, in the agg regate, into 664,341 shares of Common
Stock. The exercise price of the Series A Warrants will be subject to adjustment
for stock splits, stock dividends and similar events. Cashless exercise will be
permitted. The Series A Warrants have substantially similar terms, a form of
which was previously filed as Exhibit 8 to the Schedule 13D.
COMMON STOCK WARRANTS
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In connection with the transactions contemplated by the Series B Purchase
Agreement, the Issuer issued the Common Stock Warrants to the Funds. The Common
Stock Warrants expire on May 28, 2014. Upon the receipt of stockholder approval,
the Common Stock Warrants became exercisable on September 15, 2004, at the
option of the Series B Investors to purchase one share of Common Stock for every
five shares of Common Stock issued or issuable upon conversion of the 1,000,000
shares of Series B Preferred Stock held by the Reporting Person. The exercise
price of the Common Stock Warrants is $4.32 per share (representing a 25%
premium to the trailing 20 day average closing price of the Common Stock of the
Issuer immediately preceding May 28, 2004). The exercise price of the Common
Stock Warrants will be subject to adjustment for stock splits, stock dividends
and similar events. Cashless exercise will be permitted. The Common Stock
Warrants have substantially similar terms, a form of which was previously filed
as Exhibit 22 to Amendment No. 2.
ADDITIONAL COMMON STOCK WARRANTS
In connection with the transactions contemplated by the Series B Purchase
Agreement, on April 1, 2005, the Issuer issued the Additional Common Stock
Warrants to the Funds. The Additional Common Stock Warrants are immediately
exercisable at the option of the Funds and will expire on April 1, 2015. As of
the Subsequent Closing Date, the Additional Common Stock Warrants are
exercisable to purchase an aggregate of 535,714 shares of Common Stock. The
exercise price of the Additional Common Stock Warrants is $4.29 per share
(representing a 25% premium to the trailing 20 day average closing price of the
Common Stock of the Issuer immediately preceding April 1, 2005). The exercise
price of the Additional Common Stock Warrants will be subject to adjustment for
stock splits, stock dividends and similar events. Cashless exercise will be
permitted. Except as described above, the Additional Common Stock Warrants have
substantially similar terms to the Common Stock Warrants, a form of which was
previously filed as Exhibit 22 to Amendment No. 2.
OPTIONS
In connection with the Reporting Person's participation (through its
employees) on the Issuer's Board of Directors, on December 9, 2003 (the "Initial
Grant Date"), the Issuer granted options to purchase 5,000 shares of Common
Stock to each of Martin M. Hale, Jr. and Gerald A. Poch (the "Original Directors
Options"), which have substantially similar terms and are issued pursuant to the
Issuer's 2002 Stock Option Plan, a copy of which was previously filed as Exhibit
20 to Amendment No. 2. The Original Directors Options were initially each
exercisable into 1,666 shares of Common Stock on the Initial Grant Date, with an
additional 1,667 shares per option vesting on each of the first and second
anniversary of the Initial Grant Date. On December 21, 2004, the Issuer's
compensation committee accelerated the vesting of the Original Directors Options
so that the remaining unvested portion of the Original Directors Options became
immediately exerciseable. The exercise price of the Original Directors Options
is $4.04 per share. The Original Directors Options expire on December 9, 2013.
In connection with the Reporting Person's participation (through its
employees) on the Issuer's Board, on March 1, 2004 (the "Subsequent Grant
Date"), the Issuer granted options to purchase 5,000 shares of Common Stock to
each of Martin M. Hale, Jr. and Gerald A. Poch (the "New Directors Options"),
which have substantially similar terms and are issued pursuant to the Issuer's
2002 Stock Option Plan, a copy of which was previously filed as Exhibit 19 to
Amendment No. 2. The New Directors Options are each exercisable into 1,666
shares of Common Stock on the Subsequent Grant Date. Initially, an additional
1,667 shares per option vested on each of the first and second anniversary of
the Subsequent Grant Date. On January 24, 2005, the Issuer's compensation
committee accelerated the vesting of the New Directors Options so that 1,667
shares vested on January 19, 2005 and the remaining 1,667 shares vested on March
1, 2005. The exercise price of the New Directors Options is $3.92 per share. The
New Directors Options expire on March 1, 2014.
In connection with the Reporting Person's participation (through its
employees) on the Issuer's Board, on February 16, 2005, the Issuer granted
options to purchase 5,000 shares of Common Stock to each of Martin M. Hale, Jr.
and Gerald A. Poch (the "Additional Directors Options"), which have
substantially similar terms and are issued pursuant to the Issuer's 2002 Stock
Option Plan, a copy of which was previously filed as Exhibit 19 to Amendment No.
2. The Additional Directors Options are immediately exercisable at an exercise
price of $3.89 per share. The Additional Directors Options expire on February
16, 2015.
A copy of the form of the Senior Subordinated Notes and the form of the
Common Stock Warrants and the Additional Common Stock Warrants were previously
filed as Exhibits 21 and 22, respectively, to Amendment No. 2
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and are incorporated herein by reference, and the description herein of such
agreements are qualified in their respective entireties by reference to such
agreements.
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S I G N A T U R E
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete, and
correct.
Date: April 12, 2005 Pequot Capital Management, Inc.
/S/ ARYEH DAVIS
------------------------------
Aryeh Davis, General Counsel
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