In particular, in a telephone conversation on May 12, 2011, representatives of Pentwater Capital engaged in a discussion with the Issuer’s CEO concerning the operations, management, composition of the Issuer’s board of directors and management, and future plans of the Issuer. The representatives of Pentwater Capital also asked the Issuer’s CEO to provide the Reporting Persons with a seat on the Issuer’s board of directors and noted that if the request was denied, the Reporting Persons were prepared to seek to have one or more representatives of the Reporting Persons elected at the next shareholder meeting. As of the date of this Schedule 13D, except as set forth above, none of the Reporting Persons has any present plan or intention that would result in or relate to any of the events referred to in paragraphs (a) through (j) of Item 4 of Schedule 13D. |
Under a Securities Purchase Agreement entered into on or about January 26, 2010, the Funds other than MAP (the “Initial Funds”) purchased 500,000 shares of Common Stock at a price of $4.50 per share. Subsequently, the Initial Funds sold 49,227 of those shares. Under the Securities Purchase Agreement, the Initial Funds also received warrants to purchase an additional 500,000 shares of Common Stock at a price of $5.65 per share. Because the Issuer failed to file its Annual Report on Form 10-K for the year ended December 31, 2010 on a timely basis, the number of shares of Common Stock purchasable under the warrants has been increased from 500,000 shares to 1,225,550 shares, and the exercise price has been reduced from $5.65 per share to $2.25 per share. Each warrant provides that the applicable Initial Fund shall not have the right to exercise any portion of the warrant to the extent that after giving effect to such issuance after exercise, such Fund (together with such Fund’s affiliates), would beneficially own in excess of the Beneficial Ownership Limitation. The “Beneficial Ownership Limitation” is 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of the Initial Fund’s warrant. The Initial Fund, upon not less than 61 days’ prior notice to the Issuer, may increase the Beneficial Ownership Limitation, provided that the Beneficial Ownership Limitation cannot exceed 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of the warrant. Any such increase is not effective until the 61st day after such notice is delivered to the Issuer. The number of shares of Common Stock shown as beneficially owned by each Reporting Person other than MAP on its cover page to this Schedule 13D includes the number of shares purchasable under the applicable warrant, subject to the Beneficial Ownership Limitation, and assumes that the Beneficial Ownership Limitation has been increased to 9.9%, even though the Reporting Persons have not given notice to increase the Beneficial Ownership Limitation and in any event such increase will not become effective within 60 days under its express terms. Under an Escrow Agreement dated on or about January 26, 2010, the Initial Funds are entitled to up to an additional 500,000 shares upon the occurrence of certain events, including the failure of the Issuer to file its Annual Report on Form 10-K for the year ended December 31, 2010 on a timely basis. The Reporting Persons believe that the Initial Funds are now entitled to receive an additional 450,773 shares of Common Stock from the escrow. The Issuer has contested the Initial Funds’ right to those additional shares, and Pentwater Capital filed a lawsuit in the Supreme Court of the State of New York, County of New York on May 9, 2011 asking the court, among other things, to force the escrow agent to distribute those shares to Pentwater Capital and to order the Issuer to permit Pentwater Capital to vote those shares at any meeting of the shareholders of the Issuer if the shares have not been distributed to Pentwater Capital. In light of this ongoing litigation, and notwithstanding the Reporting Persons’ belief that the Initial Funds are entitled to the additional 450,773 shares, the number of shares of Common Stock shown as beneficially owned by each Reporting Person (other than MAP) on its cover page to this Schedule 13D does not include such Reporting Person’s portion of the 450,773 shares that Pentwater Capital is seeking to force the escrow agent to release. (a), (b) and (d) Each Reporting Person’s beneficial ownership of Common Stock on the date of this Schedule 13D is reflected on that Reporting Person’s cover page. By virtue of his position with Pentwater Capital, Mr. Halbower has the sole power to vote the shares of Common Stock owned by the Reporting Persons. Subject to restrictions, Mr. Halbower has the sole power to dispose of the shares of Common Stock owned by the Reporting Persons. No person other than the Reporting Persons is known to have the right to receive, or the power to direct the receipt of dividends from, or proceeds from the sale of, the shares of Common Stock. The percentage calculations on the cover pages are based upon 5,657,215 shares of Common stock issued and outstanding as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the SEC on November 22, 2010. (c) On April 28, 2011, Pentwater Equity purchased an additional 1,175 shares in the open market at a cost of $1.50 per share. On May 12, 2011, Pentwater Equity purchased an additional 742 shares in the open market at a cost of $1.50 per share. On May 20, 2011, MAP purchased 1,500 shares in the open market at a cost of $1.50 per share. Other than these purchases, there were no other transactions by the Reporting Companies in the Common Stock that were effected during the past 60 days. (e) Not Applicable. |
