SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) AUGUST 21, 2002
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CROSSROADS SYSTEMS, INC.
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(Exact name of registrant as specified in charter)
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DELAWARE 74-2846643
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(State of incorporation or organization) (Commission File Number) (IRS Employer Identification No.)
8300 NORTH MOPAC EXPRESSWAY, AUSTIN, TEXAS 78759
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (512) 349-0300
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NONE
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS.
On August 21, 2002, the board of directors of Crossroads Systems, Inc.
declared a dividend of one preferred share purchase right for each outstanding
share of the company's common stock. The dividend is payable on September 3,
2002 to the stockholders of record at the close of business on that date. Each
right entitles the registered holder to purchase from the company one unit
consisting of one-thousandth of a share of Series A junior participating
preferred stock of the company at a price of $12.00 per unit. The description
and terms of the rights are set forth in a rights agreement dated as of August
21, 2002 by and between the company and American Stock Transfer & Trust Company
as Rights Agent.
Until the earlier to occur of (i) the close of business on the tenth
day after a public announcement that a person or group of affiliated or
associated persons has acquired beneficial ownership of 15% or more of the
outstanding common stock or (ii) 10 business days (or such later date as may be
determined by action of the company's board of directors prior to such time as
any person becomes an acquiring person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the bidder's beneficial ownership of 15%
or more of the outstanding common stock (the earlier of such dates being called
the distribution date), the rights will be evidenced by the company's common
stock certificates. The rights agreement specifically provides that our
Chairman, President and Chief Executive Officer, Brian R. Smith, who currently
owns 11.9% of our common stock, may acquire up to an aggregate of 20% of the
company's common stock without triggering the exercisability of the rights.
Additionally, Austin Ventures and its affiliates currently beneficially own
16.7% of the company's common stock. The rights agreement provides that so long
as Austin Ventures and its affiliates do not acquire any additional shares of
the company's common stock, their ownership of our common stock will not trigger
the exercisability of the rights in the event that their ownership percentage
rises above 15%.
The rights agreement provides that, until the distribution date, the
rights will be transferred with and only with the common stock. Until the
distribution date (or earlier redemption or expiration of the rights), new
common stock certificates issued after the record date, upon transfer or new
issuance of common stock will contain a notation incorporating the rights
agreement by reference. Until the distribution date (or earlier redemption or
expiration of the rights), the surrender for transfer of any certificates of
common stock will also constitute the transfer of the rights associated with the
common stock represented by such certificate. As soon as practicable following
the distribution date, separate certificates evidencing the rights will be
mailed to holders of record of the common stock as of the close of business on
the distribution date and such separate rights certificates alone will evidence
the rights.
The rights are not exercisable until the distribution date. The rights
will expire at the close of business on September 3, 2012 unless the final
expiration date is extended or the rights are earlier redeemed or exchanged by
the company.
The purchase price payable, and the number of units of Series A
preferred stock or other securities or property issuable, upon exercise of the
rights are subject to adjustment from time to time to prevent dilution (a) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series A preferred stock, (b) upon the grant to holders
of the units of Series A preferred stock of certain rights or warrants to
subscribe for or purchase units of Series A preferred stock at a price, or
securities convertible into units of Series A preferred stock with a conversion
price, less than the then current market price of the units of Series A
preferred stock or (c) upon the distribution to holders of the units of Series A
preferred stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends paid out of earnings or retained earnings or dividends
payable in units of Series A preferred stock) or of subscription rights or
warrants.
The number of outstanding rights and the number of units of Series A
preferred stock issuable upon exercise of each right are also subject to
adjustment in the event of a stock split of the common stock or a stock dividend
on the common stock payable in common stock or subdivisions, consolidations or
combinations of the common stock occurring, in any such case, prior to the
distribution date.
Shares of Series A preferred stock purchasable upon exercise of the
rights will not be redeemable. Each share of Series A preferred stock will be
entitled to a dividend of 1,000 times the dividend declared per share of common
stock. In the event of liquidation, the holders of shares of Series A preferred
stock will be entitled to a
1.
payment of 1,000 times the payment made per share of common stock. Each share of
Series A preferred stock will have 1,000 votes, voting together with the common
stock. Finally, in the event of any merger, consolidation or other transaction
in which shares of common stock are exchanged, each share of Series A preferred
stock will be entitled to receive 1,000 times the amount received per share of
common stock. These rights are protected by customary anti-dilution provisions.
Because of the nature of the dividend, liquidation and voting rights,
the value of each unit of Series A preferred stock purchasable upon exercise of
each right should approximate the value of one share of common stock.
If, after the rights become exercisable, the company is acquired in a
merger or other business combination transaction with an acquiring person or one
of its affiliates, or 50% or more of its consolidated assets or earning power
are sold to an acquiring person or one of its affiliates, provision will be made
so that each holder of a right will have the right to receive, upon exercise at
the then current exercise price of the right, that number of shares of common
stock of the acquiring company which at the time of such transaction has a
market value of two times the exercise price of the right.
If any person or group of affiliated or associated persons becomes the
beneficial owner of 15% or more of the outstanding shares of common stock,
provision will be made so that each holder of a right, other than rights
beneficially owned by the acquiring person (which will be void), will have the
right to receive upon exercise that number of shares of Series A preferred stock
(or cash, other securities or property) having a market value of two times the
exercise price of the right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
shares of common stock and prior to the acquisition by such person or group of
50% or more of the outstanding common stock, the board of directors of the
company may exchange the rights (other than rights owned by that person or group
which have become void), in whole or in part, at an exchange ratio per unit of
Series A preferred stock which shall equal the purchase price divided by the
then current market price per unit of Series A preferred stock on the earlier of
(i) the date on which any person becomes an acquiring person and (ii) the date
on which a tender or exchange offer is announced that would result in the
bidder's beneficial ownership of 15% or more of the shares of common stock then
outstanding.
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments require an adjustment of at least 1% in
such purchase price. No fractional shares of Series A preferred stock will be
issued (other than fractions which are integral multiples of
one-hundred-thousandth of a share of Series A preferred stock, which may, at the
election of the company, be evidenced by depositary receipts) and, in lieu
thereof, an adjustment in cash for fractional shares will be made based on the
market price per unit of Series A preferred stock on the last trading day prior
to the date of exercise.
At any time on or prior to the earlier of (i) the close of business on
the tenth day after a public announcement that a person or group has acquired
beneficial ownership of 15% or more of the common stock or (ii) the tenth
business day after a person commences, or announces its intention to commence, a
tender offer or exchange offer that would result in the bidder's beneficial
ownership of 15% or more of the shares of common stock, the board of directors
of the company may redeem the rights in whole, but not in part, at a price of
$0.01 per right. The redemption of the rights may be made effective at such
time, on such basis and with such conditions as the board of directors in its
sole discretion may establish. Immediately upon any redemption of the rights,
the rights will no longer be exercisable and the only right of the holders of
rights will be to receive the redemption price. The rights are also redeemable
under other circumstances as specified in the rights agreement.
The terms of the rights may be amended by the board of directors of the
company without the consent of the holders of the rights except that from and
after a distribution date no amendment may adversely affect the interests of the
holders of the rights.
Until a right is exercised, the holder of a right will have no rights
by virtue of ownership as a stockholder of the company, including, without
limitation, the right to vote or to receive dividends.
2.
The rights have certain anti-takeover effects. The rights will cause
substantial dilution to a person or group that attempts to acquire the company
on terms not approved by the company's board of directors, except pursuant to an
offer conditioned on a substantial number of rights being acquired. The rights
should not interfere with any merger or other business combination approved by
the board of directors since the rights may be redeemed by the company at the
redemption price prior to the occurrence of a distribution date.
The Rights Agreement specifying the terms of the rights is attached as
an exhibit and is incorporated herein by reference. This description of the
rights is qualified in its entirety by reference to that exhibit. The
Certificate of Designation for the Series A preferred stock is attached as an
exhibit. This description of the Series A preferred stock is qualified in its
entirety by reference to that exhibit.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit 4 Rights Agreement, dated as of August 21, 2002, between
Crossroads Systems, Inc. and American Stock Transfer & Trust
Company, which includes the form of Certificate of Designation
for the Series A junior participating preferred stock as
Exhibit A, the form of Rights Certificate as Exhibit B and the
Summary of Rights to Purchase Series A Preferred Stock as
Exhibit C.
Exhibit 20 Press Release dated August 21, 2002.
3.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CROSSROADS SYSTEMS, INC.
Date: August 21, 2002 By: /s/ Brian R. Smith
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Brian R. Smith
Chairman, President and Chief
Executive Officer
EXHIBIT INDEX
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EXHIBIT
NUMBER DOCUMENT DESCRIPTION
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4 Rights Agreement, dated as of August 21, 2002, between
Crossroads Systems, Inc. and American Stock Transfer & Trust
Company, which includes the form of Certificate of Designation
for the Series A junior participating preferred stock as
Exhibit A, the form of Rights Certificate as Exhibit B and the
Summary of Rights to Purchase Series A Preferred Stock as
Exhibit C.
20 Press Release dated August 21, 2002.
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