UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
NOVEMBER 8, 2001
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
CRITICAL PATH, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 000-25331 91-1788300
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
532 FOLSOM STREET, SAN FRANCISCO, CALIFORNIA 94105
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(Address of principal executive offices)
(415) 808-8800
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(Registrant's telephone number, including area code)
-more-
ITEM 5. OTHER EVENTS.
(a) On Thursday, November 8, 2001, the Company announced that it signed
binding memoranda of understanding with respect to the settlement of securities
class action and shareholder derivative litigation pending against it in the
U.S. District Court for the Northern District of California. A copy of the
Company's Press Release is attached as Exhibit 99.1 to this Current Report on
Form 8-K.
(b) On Friday, November 9, 2001, the Company announced the closing of a
$95 million financing transaction from a group of investors and their affiliate
entities ("Buyers"). The financing transaction consists of $30 million in new
equity in the form of shares of Series D Cumulative Redeemable Convertible
Participating Preferred Stock ("Preferred Stock") at a conversion price per
share (into common stock) of $1.05, the retirement of $65 million in face value
of the Company's 5-3/4% Convertible Subordinated Notes (the "Notes") held by
General Atlantic Partners LLC and affiliates ("GA"), and the issuance to GA of
warrants to purchase 2.5 million shares of common stock (the "Warrants"). In the
transaction, the Company issued and sold (subject to the escrow described below)
approximately 4 million shares of Preferred Stock (convertible into
approximately 52.4 million shares of the Company's common stock) to a group of
investors led by GA and including Cheung Kong Limited and affiliates, Hutchison
Whampoa Limited and Vectis Group LLC.
In addition, a portion of GA's equity in the transaction (representing
6.2% of the ownership of the Company, on a pro forma basis after giving effect
to the transaction and the conversion of the shares into common stock) has been
placed in a separate escrow to be released to GA only upon either the approval
by the shareholders by a majority vote or approval by the Nasdaq Stock Market.
As previously announced, the Company has executed binding memoranda of
understanding to settle shareholder and derivative litigation pending in the
U.S. District Court for the Northern District of California. The receipt by the
Company of all financing proceeds from escrow is contingent upon the execution
of final settlement agreements in that litigation.
The Preferred Stock shall accrue and cumulate dividends at eight percent
(8%) per year, and is convertible into the Company's Common Stock at the option
of the holder. The conversion rights of the Preferred Stock do not include any
Common Stock trading price-related anti-dilution adjustments. Rather, the only
anti-dilution protection for the Preferred Stock is customary anti-dilution
protection in the event of stock splits, stock dividends, reorganizations or the
like.
In the event of a liquidation or change of control of the Company, the
Preferred Stock is entitled to a liquidation preference payment equal to the
purchase price of the Preferred Stock, plus accrued dividends to such date. The
Preferred Stock shall also participate with the Common Stock in the event of a
liquidation or change of control, after payment of the foregoing preference, up
to certain agreed upon amounts. After four years, the Company has the option to
redeem the Preferred Stock if the Common Stock trading price at such time is in
excess of certain agreed upon price levels. After five years, the Preferred
Stock shall be automatically redeemed.
GA, as lead investor, is entitled to elect one person to the Company's
Board of Directors. The Board size shall also increase to seven (7) directors
from the current five (5). The Preferred Stock also has certain voting rights in
connection with major corporate events, as well as preemptive rights in
connection with any future Company
private placements. The Buyers have also executed a seven (7) year standstill
agreement with the Company.
The offer and sale of these securities in the United States was
completed pursuant to the exemption from registration under the Securities Act
of 1933. In addition to the Preferred Stock and the Warrants, and in connection
with the investment, the Company and the Buyers have entered into a Stock and
Warrant Purchase and Exchange Agreement, an Escrow Agreement, a Stockholders
Agreement and a Registration Rights Agreement (these documents, together with a
Certificate of Designation, are referred to collectively herein as the
"Transaction Documents"). The Warrants are fully-vested and exercisable at any
time after November 8, 2002 until November 7, 2006. The exercise price for the
Common Stock underlying the Warrants is $1.05 with a four (4) year term.
Pursuant to the Registration Rights Agreement, the Company has granted demand
registration rights to certain of the investors, whereby under enumerated
circumstances the Company is obligated to file a registration statement for an
underwritten offering with the Securities and Exchange Commission, in addition
to the grant of "piggyback" registration rights for other underwritten
offerings.
In connection with this transaction, the Board of Directors has
approved an amendment to the Company's Preferred Stock Rights Agreement, dated
as of March 19, 2001 (the "Rights Agreement"), in order to permit the Buyers to
Beneficially Own (as such term is defined in the Rights Agreement) additional
shares of the Company's Common Stock without triggering the occurrence of a
Distribution Date (as such term is defined in the Rights Agreement).
The foregoing description of the transaction is only a summary and is
qualified in its entirety by reference to the Transaction Documents. The
proceeds from this investment will be used for working capital and general
corporate purposes.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
EXHIBIT NO. DESCRIPTION
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99.1 Press Release dated as of November 8, 2001
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CRITICAL PATH, INC.
Date: November 12, 2001 /s/ Laureen DeBuono
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Laureen DeBuono
Interim Chief Financial Officer
INDEX TO EXHIBITS FILED WITH
THE CURRENT REPORT ON FORM 8-K DATED NOVEMBER 8, 2001
Exhibit Description
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99.1 Press Release dated as of November 8, 2001