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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 30, 1998
YieldUP International Corporation
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(Exact name of registrant as specified in charter)
Delaware 0-27104 77-0341206
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
117 Easy Street, Mountain View, California 94043
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (650) 964-0100
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On March 30, 1998, the Registrant completed the initial closing (the
"Initial Closing") of a privately placed equity financing of Series A
Convertible Preferred Stock (the "Series A Shares") pursuant to a Securities
Purchase Agreement (the "Purchase Agreement") with seven (7) investors (the
"Investors"). At the Initial Closing, the Registrant raised gross proceeds of $6
million through the sale of 600 Series A Shares. After the satisfaction of
certain holding periods, each Series A Share is convertible, at the option of
its holder, into shares of Common Stock of the Registrant based upon a
conversion price equal to the lower of (i) 110% of the lowest closing market
price of the Registrant's Common Stock on the date the Series A Shares were
issued ($10.8625 for the Series A Shares issued at the Initial Closing) or (ii)
the lowest closing market price of the Registrant's Common Stock during the 20
consecutive trading days immediately preceding the date of conversion.
Subject to various additional conditions, including, but not limited to,
approval of the Registrant's stockholders, the Registrant has the option
("Company Put Option") to require the Investors to purchase additional Series A
Shares, and the Investors have the right to require that the Registrant sell to
them additional Series A Shares ("Investor Call Option"). The maximum number of
additional Series A Shares which the Registrant may require the Investors to
purchase is 600 Series A Shares, for an additional purchase price of $6 million.
Subject to certain conditions, the Investors may require that the Registrant
sell to them pursuant to the Investor Call Option a maximum of 600 additional
Series A Shares (1,200 if the Registrant exercises its right to sell the maximum
number of shares pursuant to the Company Put Option) for a purchase price of
$10,000 per share. The Series A Shares issued upon exercise of the Company Put
Option or the Investor Call Option will have the same terms and rights as the
Series A Shares issued at the Initial Closing.
Notwithstanding the above, in order to comply with the rules of the
Nasdaq Stock Market which require stockholder approval for issuances of 20% or
more of the Registrant's outstanding stock, the number of shares of the
Registrant's Common Stock issuable pursuant to this financing cannot exceed 20%
of the Registrant's outstanding Common Stock unless the Registrant obtains the
approval of the Registrant's stockholders.
TERMS OF THE SERIES A SHARES.
The following is a summary of the rights, preferences and privileges of
the Series A Shares and the rights granted pursuant to the Purchase Agreement,
attached hereto as Exhibit 10.1, the Certificate of Designation for Series A
Preferred Stock (the "Certificate of Designation"), attached hereto as Exhibit
3.1, and the Registration Rights Agreement for the Series A Preferred Stock
attached hereto as Exhibit 10.2.
DIVIDENDS. The Series A Shares do not bear cash dividends. However, the
Series A shares have a 5 percent cumulative annual dividend payable in Common
Stock upon conversion.
VOTING RIGHTS. The holders of the Series A Shares shall have no voting
rights, except as required by law. However, the affirmative vote of the holders
of the Series A Shares at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than two-thirds (2/3) of
the then outstanding Series A Shares, shall be required for (a) any change to
the Certificate of Designation or the Company's Certificate of Incorporation
which would amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Series A Shares, or (b) any issuance of Series A
Shares other than pursuant to the Securities Purchase Agreement.
LIQUIDATION PREFERENCE. Upon any liquidation, dissolution or winding up
of the affairs of the Registrant, the holder of each Series A Share shall be
entitled to be paid an amount per share equal to (i) $12,000 and (ii) an amount
equal to the product of (.05)(N/365)($12.00) out of the assets of the Registrant
where "N" equals the number of days since the initial issuance of such shares.
If the assets of the Registrant upon such event are insufficient to make such
payment in full, then the holders of Series A Shares shall be entitled to pro
rata distribution, along with holders of other preferred stock that are pari
passu with the holders of Series A Shares, of all
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the assets of the Registrant. After payment in full of the liquidation
preference to the holders of Series A Shares, such holders are entitled to no
further distributions.
CONVERSION. The Series A Shares are convertible into shares of Common
Stock at the election of the holder of such Series A Shares, at a price (the
"Conversion Rate") equal to the lower of 110% of the market price at the
original date of issuance of such share (the "Fixed Conversion Price") or the
lowest market price during the 20 consecutive days immediately preceding the
date a holder of Series A Shares delivers notice of his election to convert such
shares. The Series A Shares have a 5% annual cumulative dividend payable in
Common Stock which is reflected n the conversion formula. "Market price" is
generally determined by the closing price for the Company's Common Stock on the
applicable date.
As an example, using the Fixed Conversion Price, and assuming that the
Series A Shares had been held for one year such that the holder was entitled to
a 5% dividend payable in shares of Common Stock upon conversion, the formula for
conversion would be:
(.05)(365/365)(10,000) + 10,000 = 967
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10.8625
Therefore, one Series A Share would convert to 967 shares of the
Company's Common Stock.
The Investor(s) may convert, in aggregate, only up to a maximum of a
specified percentage of the Series A Shares according to the following schedule:
<TABLE>
<CAPTION>
Days from % of Shares
Closing Convertible
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<S> <C> <C>
1 through 90 0
91 through 135 20
136 through 180 40
181 through 225 60
226 through 270 80
271 through term 100
</TABLE>
Notwithstanding the foregoing, the conversion restrictions set forth
above shall not apply (x) if there shall have occurred a Material Adverse Change
(as defined below), (y) with respect to any conversion of Series A Shares at a
Conversion Price which is not less than the Fixed Conversion Price then in
effect, or (z) if there is an announcement of a pending Major Transaction (as
defined below). "Material Adverse Change" means any change, event, result or
happening involving, directly or indirectly, the Company or any of its
subsidiaries resulting in a material adverse effect on the business, prospects,
financial condition or results or operations of the Company and its
subsidiaries, taken as a whole, including, without limitation, an event
constituting a Major Transaction or a Triggering Event (as defined below) shall
have occurred or the Company shall have been notified by the exchange or
automated quotation system on which the Common Stock trades that it is beginning
or has begun proceedings or steps to delist or suspend the Common Stock from
trading on such market.
"Major Transaction" shall be deemed to have occurred at such time as any
of the following events:
(i) the consolidation, merger or other business combination of
the Company with or into another Person (other than (A) a consolidation, merger
or other business combination in which holders of the Company's voting power
immediately prior to the transaction continue after the transaction to hold,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities or (B)
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company) (a "Change of Control
Transaction");
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(ii) the sale or transfer of all or substantially all of the
Company's assets; or
(iii) a purchase, tender or exchange offer made to and accepted
by the holders of more than 50% of the outstanding shares of Common Stock.
A "Triggering Event" shall be deemed to have occurred at such time as
any of the following events:
(i) the failure of the Registration Statement required to be
filed by the Company pursuant to the Registration Rights Agreement to be
declared effective by the Commission on or prior to the date that is 180 days
after the Initial Issuance Date;
(ii) while the Registration Statement is required to be
maintained effective pursuant to the terms of the Registration Rights Agreement,
the effectiveness of the Registration Statement lapses for any reason
(including, without limitation, the issuance of a stop order) or is unavailable
to the holder of the Series A Shares for sale in accordance with the terms of
the Registration Rights Agreement, and such lapse or unavailability continues
for a period of ten consecutive trading days, provided that the cause of such
lapse or unavailability is not due to factors solely within the control of such
holder of Series A Shares;
(iii) suspension from listing or delisting of the Common Stock
from the Nasdaq SmallCap Market, The Nasdaq National Market or The New York
Stock Exchange, Inc. for a period of five consecutive days;
(iv) the Company's notice to any holder of Series A Shares,
including by way of public announcement, at any time, of its intention not to
comply with proper requests for conversion of any Series A Shares into shares of
Common Stock, or the Company's failure to deliver the Common Stock within
fifteen days of the conversion date; or
(v) the Company breaches any representation, warranty or covenant
of the Purchase Agreement, the Registration Rights Agreement, the Certificate of
Designation or the Irrevocable Transfer Agent Instructions (as defined in the
Purchase Agreement), except to the extent that such breach would not have a
material adverse effect and except, in the case of a breach of a covenant which
is curable, only if such breach continues for a period of at least ten days.
Any Series A Shares outstanding three years after the date such shares
were initially issued (the "Mandatory Conversion Date") will automatically
convert into shares of the Company's Common Stock at the then applicable
Conversion Rate.
Notwithstanding the foregoing, if the Common Stock is not designated for
quotation on the Nasdaq SmallCap Market, the Nasdaq National Market or listed on
The New York Stock Exchange, Inc. or The American Stock Exchange, Inc. but such
events do not constitute a Triggering Event, then the Mandatory Conversion Date
shall be extended until the Common Stock is so designated or listed.
ADJUSTMENTS TO CONVERSION RATE. The Conversion Rate is subject to
proportional adjustment upon any stock split, stock dividend or other similar
change to the capital stock of the Company as well other adjustments upon the
issuance, or deemed issuance, of other shares of Common Stock at a price below
the then effective Fixed Conversion Price.
MANDATORY CONVERSION. After the Company publicly discloses a Change of
Control Transaction, the Company shall have the right to require that all of the
outstanding Series A Shares be converted to Common Stock. To exercise this right
the Company must substantially meet the following conditions: (i) the
Registration Statement shall be effective and available for the sale of the
number of shares of Common Stock then issuable upon the conversion of all
outstanding Series A Shares; (ii) the Common Stock is designated for quotation
on The Nasdaq
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National Market or the Nasdaq SmallCap Market or listed on The New
York Stock Exchange, Inc. and is not suspended from trading; (iii) the Company
shall have delivered shares of Common Stock upon conversion of the Series A
Shares to the holders on a timely basis; and (iv) the Company otherwise has
satisfied its obligations in all material respects and is not in default in any
material respect under this Certificate of Designation, the Purchase Agreement
and the Registration Rights Agreement.
REDEMPTION. The holders of Series A Shares have a right to require the
Company to redeem the Series A Shares upon the occurrence of a Major
Transaction, or a Triggering Event.
REGISTRATION RIGHTS. The Company is obligated to promptly (and in any
event prior to April 30, 1998) file a registration statement (the "Registration
Statement") with the Commission to cover the resale of the Company's Common
Stock issuable upon the conversion of the Series A Shares. The Company is
obligated to use its reasonable best efforts to have the Registration Statement
declared effective by the Commission and remain effective until the Company's
Common Stock subject to the Registration Statement may otherwise be freely
traded without registration. The Company is also obligated to list such shares
on the Nasdaq SmallCap Market and to take certain actions to comply with
applicable state securities laws and regulations.
CLOSING AND OPTIONS
The Initial Closing of the sale of Series A Shares took place on March
30, 1998. At the Initial Closing, 600 Series A Shares were issued for aggregate
gross proceeds of $6 million.
COMPANY PUT OPTION. Beginning 180 days after the earlier of (x) the
effective date of the Registration Statement; or (y) 120 days after the Initial
Closing, the Company may require that the Investors purchase up to 600
additional Series A Shares, for a purchase price of $6 million, (pro rata per
Investor) under the same terms and conditions as the initial issuance of Series
A Shares. The Company's ability to exercise such option is subject to the terms
and conditions of the Purchase Agreement which requires, among other things,
that: (i) the Company has obtained stockholder approval for the issuance of
additional securities, (ii) the Registration Statement has been effective for at
least 60 consecutive calendar days; (iii) the Company's Common Stock has not
been delisted from the Nasdaq SmallCap Market and/or suspended from trading;
(iv) there has been neither a Major Transaction nor a Triggering Event; (v)
certain tests are met regarding minimum average daily trading price in the
Company's Common Stock; (vi) the Company has performed its obligations under the
Certificate of Designation; and (vii) a put closing date has not occurred
previously.
INVESTOR CALL OPTION. At any date which is 210 days from the Initial
Closing through the Mandatory Conversion Date, as defined in the Certificate of
Designation, each Investor has a right, subject to the terms and conditions of
the Purchase Agreement and payment for the additional Series A Shares, to
require the Company to issue and sell to each such Investor up to two times as
many Series A Shares as the Investor had initially purchased.
Any Investor may only exercise this right twice.
LIMITATIONS ON CONVERSION AND EXERCISE.
The Purchase Agreement provides that the number of shares of the
Registrant's Common Stock issuable upon conversion of the Series A Shares cannot
exceed 20% of the outstanding shares of the Registrant's Common Stock without
the approval of the stockholders of the Registrant. Likewise, the number of
shares of the Registrant's Common Stock issuable from to time to any single
Investor cannot exceed 4.99% or more of the Registrant's outstanding Common
Stock.
EFFECT ON RIGHTS OF EXISTING SECURITY HOLDERS.
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There is no change to the rights, preferences or privileges of the
holders of the Registrant's Common Stock as a result of the transactions which
are the subject of the Purchase Agreement. However, in addition to the dilutive
impact of the issuance of additional shares of capital stock, the Series A
Shares have a liquidation preference which entitles the holders thereof to
receive payment upon any dissolution or liquidation of the Registrant in
preference to the holders of Common Stock. The amount of such preference is
equal to $12,000 plus an amount equal to the product of (.05)(N/365)($12,000)
for each of the Series A Shares where "N" is the number of days since the
initial issuance of such shares.
ITEM 7. EXHIBITS.
(a) Financial statements of business acquired. Not applicable.
(b) Pro forma financial information. Not applicable.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
*3.1 Certificate of Designation for Series A Preferred Stock
*10.1 Form of Securities Purchase Agreement for Series A
Preferred Stock
*10.2 Form of Registration Rights Agreement for Series A
Preferred Stock
*99.1 Press Release of YieldUP International Corporation
dated March 31, 1998
</TABLE>
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* Previously filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
YIELDUP INTERNATIONAL CORPORATION
Date: June 19, 1998 By: /s/ ABHAY BHUSHAN
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Abhay Bhushan
Chief Financial Officer
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