SEC Company Response from Inuvo, Inc. (INUV) (CIK 0000829323) (INUV) — Nov 15, 2007
Inuvo, Inc. (INUV) (CIK 0000829323)
Date: Nov. 15, 2007 · CIK: 0000829323 · Accession: 0001354488-07-001981
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-121761, 333-134823, 333-143299
Letter
Via EDGAR Filing Think Partnership Inc. (the “Company”) Registration Statement on Form S-3 Amendment 2 Filed July 23, 2007 File No. 333-143299
Dear Mr. Spirgel:
This letter is the Company’s response to the telephone comments received from Ms. Krebs and Mr. Zitko and again to the above-referenced SEC comment letter, dated July 12, 2007. Each primary paragraph number below setting forth the Company’s response corresponds to the comment number in your letter. In particular, we note that several of your comments relate to two of the selling stockholders, Magnetar Capital Master Fund, Ltd (“Magnetar”) and the Brewer entities.
General
The Company would like to clarify that the Company is seeking to register only 4,016,901 previously unregistered shares (such shares being referred to as the “New Shares”) on this registration statement. The remaining 7,246,894 shares (such shares being referred to as the “Currently Registered Shares”) the Company is also seeking to include in this registration statement are currently registered on a registration statement on Form SB-2, File Number 333-121761, which was declared effective more than one year ago on July 24, 2006 and is still currently effective (the “SB-2”). The Currently Registered Shares are being included by the Company solely at its option and for its own convenience so that there will no longer be a need for the Company to update the SB-2 through periodic filings.
1.
Below is the specific information you requested in your comment No. 1.
Number of Issued and Outstanding Shares Held
Magnetar
Magnetar currently holds an aggregate of 5,425,078 shares of the Company’s issued and outstanding common stock, 9,139 of which were purchased in open market transactions.
Such 5,425,078 shares do not include any shares issuable upon exercise of the warrants described below because each of the warrants contain “blocker” provisions that prohibit Magnetar from exercising such warrants if following the exercise thereof Magnetar would beneficially own greater than 4.90% or 4.99%, as applicable, of the common stock of the Company.
Page 1 of 12
The Brewer Entities
The seven entities affiliated with Karl Brewer (the “Brewer entities”) hold an aggregate of 5,109,010 shares of the Company’s issued and outstanding common stock, 1,109,010 of which were purchased in open market transactions. The number of such shares held by each of the Brewer entities is detailed in the following table:
Selling Shareholder
SHARES OWNED (Issued and Outstanding)
Mac & Co(G)(4)
167,650
Calhoun & Co FFC City of Dearborn Policemen and Firemen Revised Retirement Systems(G)(5)
51,660
Calhoun & Co FFC City of Dearborn General Employees Retirement Systems(G)(6)
26,500
William Blair Small Cap Growth Fund(G)(7)
4,626,270
Booth & Co FFC Hartmarx Retirement Income Trust(G)(8)
60,790
Booth & Co FFC Rush University Medical Center Endowment Account(G)(9)
79,910
Booth & Co FFC Rush University Medical Center Pension and Retirement(G)(10)
96,230
TOTAL
5,109,010
Number of Shares that may be Issued Pursuant to Convertible Securities
Magnetar
Magnetar holds (i) two Conversion Warrants (as defined below), one of which is exercisable for 693,144 Warrant Shares (as defined below) at an exercise price of $3.05 per share and one of which is exercisable for 346,572 Warrant Shares at an exercise price of $4.00 per share and (ii) a warrant exercisable for 1,000,000 shares of common stock of the Company which was acquired in the Preferred Stock Sale (as defined below). As explained in footnote (a) of the prospectus for the instant registration statement, because the exercise price of warrants may be adjusted pursuant to customary anti-dilution protection provisions (which is not currently the case), the Company has or is registering the resale of at least 125% of the number of shares of common stock issuable upon exercise of such warrants (the “Adjustment Effect”). Thus, the amounts stated in this paragraph are less than the amounts stated in the prospectus due to the Adjustment Effect.
These warrants are not currently exercisable because they contain “blocker” provisions that prohibit Magnetar from exercising such warrants if following the exercise thereof Magnetar would beneficially own greater than 4.90% or 4.99%, as applicable, of the common stock of the Company.
Page 2 of 12
The Brewer Entities
The Brewer entities hold an aggregate number of shares that may be issued pursuant to convertible securities as follows: (i) two Conversion Warrants (as defined below), one of which is exercisable for 503,833 Warrant Shares (as defined below) at an exercise price of $3.05 per share and one of which is exercisable for 251,918 Warrant Shares at an exercise price of $4.00 per share and (ii) a warrant exercisable for 1,600,000 shares of common stock of the Company which was acquired in the Preferred Stock Sale (as defined below). The amounts stated in this paragraph are less than the amounts stated in the prospectus due to the Adjustment Effect. The number of such shares held by each of the Brewer entities is detailed in the following table:
Selling Shareholder
No. Shares Preferred Stock Sale Warrant
No. Shares of $3.05 Conversion Warrant
No. Shares $4.00 Conversion Warrant
Mac & Co(G)(4)
64,400
20,280
10,140
Calhoun & Co FFC City of Dearborn Policemen and Firemen Revised Retirement Systems(G)(5)
16,800
5,291
2,646
Calhoun & Co FFC City of Dearborn General Employees Retirement Systems(G)(6)
10,600
3,338
1,669
William Blair Small Cap Growth Fund(G)(7)
1,424,000
448,409
224,205
Booth & Co FFC Hartmarx Retirement Income Trust(G)(8)
21,600
6,802
3,401
Booth & Co FFC Rush University Medical Center Endowment Account(G)(9)
28,400
8,943
4,472
Booth & Co FFC Rush University Medical Center Pension and Retirement(G)(10)
34,200
10,770
5,385
TOTAL
1,600,000
503,833
251,918
Number of Shares Registered on Prior Registration Statements
Magnetar
3,750,000 shares of common stock of the Company were registered for sale by Magnetar on the Preferred Stock Sale S-3 (as defined below). The amounts stated in this paragraph include the Adjustment Effect.
4,200,000 shares of common stock of the Company were registered for sale by Magnetar on the SB-2.
The Company is seeking to register an aggregate of 5,499,645 shares of common stock of the Company for sale by Magnetar on the instant registration statement, which includes 3,435,000 shares previously registered on the currently effective SB-2 and 1,299,645 shares issuable from exercise of the Conversion Warrants, including the Adjustment Effect.
Page 3 of 12
The Brewer Entities
6,000,000 shares of common stock of the Company were registered for sale by the Brewer entities on the Preferred Stock Sale S-3 (as defined below). The amounts stated in this paragraph include the Adjustment Effect. The number of such shares registered for each of the Brewer entities is detailed in the following table:
Selling Shareholder
No. Shares Registered under Preferred Stock Sale
Mac & Co(G)(4)
241,500
Calhoun & Co FFC City of Dearborn Policemen and Firemen Revised Retirement Systems(G)(5)
63,000
Calhoun & Co FFC City of Dearborn General Employees Retirement Systems(G)(6)
39,750
William Blair Small Cap Growth Fund(G)(7)
5,340,000
Booth & Co FFC Hartmarx Retirement Income Trust(G)(8)
81,000
Booth & Co FFC Rush University Medical Center Endowment Account(G)(9)
106,500
Booth & Co FFC Rush University Medical Center Pension and Retirement(G)(10)
128,250
TOTAL
6,000,000
Number of Shares Registered on Prior Registration Statements that have been Sold
Magnetar
Magnetar sold an aggregate of 765,000 shares of common stock of the Company that were registered on the SB-2. These shares were only sold by Magnetar in January and February 2007 to decrease its ownership percentage in the Company so that Magnetar could convert all of its Preferred Stock (5,000 shares) into 2,500,000 shares of common stock of the Company as requested by the Company as described further below. If Magnetar had not sold these 765,000 shares, it would have been unable to so convert its Preferred Stock into common stock as so requested by the Company because the terms of the Preferred Stock contained a “blocker” that prohibited conversions that would result in a holder thereof beneficially owning 10% or more of the Company’s common stock. The conversion was aggressively solicited by, and substantially benefited, the Company as further described below.
Magnetar also sold an aggregate of 519,061 shares of common stock of the Company that were registered on the Preferred Stock Sale S-3 from May through July 2007.
The Brewer Entities
The Brewer entities continue to hold all shares of Think Partnership Inc. that have been purchased to date. Not only have the Brewer entities not sold any shares acquired from the Company, but they have collectively purchased in open market transactions an additional 1,109,010 shares which the continue to hold.
Page 4 of 12
Circumstances under which the Shares were Received
Preferred Stock Sale (April 5, 2006)
On April 5, 2006 the Company issued a total of 26,500 shares of Series A convertible preferred stock (the “Preferred Stock”) and accompanying warrants to purchase up to 5,300,000 shares of common stock (the “Preferred Stock Sale”). The preferred stock and warrants were issued in a private placement to 17 institutional investors for an aggregate cash purchase price of $26,500,000. There was no syndicate or manager for this private placement. Magnetar and each of the Brewer entities purchased Preferred Stock. Each investor individually decided whether to invest, although certain families of investors (including the Brewer entities) each had a common investment advisor with authority to make investment decisions. The shares of common stock to be issued upon conversion of the Preferred Stock and exercise of the warrants are registered on Form S-3 file number 333-134823 which was declared effective more than a year ago on August 1, 2006 (the “Preferred Stock Sale S-3”).
Non-Issuer Sale (July 3, 2006)
On July 3, 2006, the Roberti Jacobs Family Trust (the “Trust”) and T. Benjamin Jennings (“Jennings”) sold to certain private investors an aggregate of 6,359,726 shares of the Company’s common stock (the “Non-Issuer Sale”). Jennings and a member of the Jacobs family were former executives of the Company who resigned in May 2006. The Company had no involvement in the Trust’s or Jennings’ decision to exercise the warrants and sell the underlying shares or in negotiating or otherwise arranging or participating in such sale. Nevertheless, the Company believed that it was in the best interests of the Company for the Trust and Jennings to sell their Company shares, and the Company agreed to help facilitate such sale by agreeing to register the subsequent resale of such shares by the purchasers thereof. Magnetar individually decided to purchase shares in the Non-Issuer Sale. None of the Brewer entities participated in any way.
All of such shares sold by the Trust and Jennings are Currently Registered Shares that are registered on the currently effective SB-2.
Warrant Issuance to Induce Conversion of Preferred Stock (December 28, 2006)
The Company desired that the remaining holders of Preferred Stock convert all their shares of Preferred Stock so that the Company could eliminate (i) the entire $19.1 million of Preferred Stock from the Company’s balance sheet, (ii) an estimated $5.9 million in annual preferred dividend payments and accretion in 2007 and (iii) the looming prospect of mandatory cash redemption on the second anniversary of issuance. In an effort to create an incentive for the voluntary conversion of the Preferred Stock by the holders thereof, the Company offered, and agreed, to issue additional warrants (the “Conversion Warrants”) to the converting holders, as disclosed in the instant registration statement, which were exercisable into 3,750,020 shares in the aggregate (such shares being the “Warrant Shares”), including the Adjustment Effect. As discussed above, Magnetar and each of the Brewer entities received Conversion Warrants upon their respective conversion of their shares Preferred Stock. The Warrant Shares comprise substantially all of the New Shares being registered on the instant registration statement (approximately 93.4%).
Magnetar
Magnetar purchased 5,000 shares of Preferred Stock in the Preferred Stock Sale on April 5, 2006 and converted all of such shares of Preferred Stock into 2,500,000 shares of common stock as described above on February 28, 2007. In connection with the Preferred Stock Sale, the Company issued Magnetar a warrant to purchase 1,000,000 shares of common stock on April 5, 2006 as described above. No portion of such warrant has been exercised by Magnetar.
Page 5 of 12
Magnetar purchased an aggregate of 4,200,000 shares of common stock from the Trust and Jennings in the Non-Issuer Sale on July 3, 2006.
Two Conversion Warrants were issued to Magnetar on December 28, 2006: one of which is exercisable for 693,144 Warrant Shares at an exercise price of $3.05 per share and one of which is exercisable for 436,572 Warrant Shares at an exercise price of $4.00 per share.
The Brewer Entities
The Brewer entities collectively purchased 8,000 shares of Preferred Stock in the Preferred Stock Sale on April 5, 2006 and converted all of such shares of Preferred Stock into 4,000,000 shares of common stock as described above on December 29, 2006. In connection with the Preferred Stock Sale, the Company issued the Brewer entities collectively a warrant to purchase 1,600,000 shares of common stock on April 5, 2006 as described above. No portion of such warrant has been exercised by the Brewer entities.
The Brewer entities purchased no shares of common stock from the Trust and Jennings in the Non-Issuer Sale on July 3, 2006.
Two Conversion Warrants were collectively issued to the Brewer entities on December 28, 2006: one of which is exercisable for 503,833 Warrant Shares at an exercise price of $3.05 per share and one of which is exercisable for 251,918 Warrant Shares at an exercise price of $4.00 per share.
The number of such shares acquired by each of the Brewer entities is detailed in the following table:
Selling Shareholder
No. PIPE Shares Upon Conv. S-3 (Issued and Outstanding)
No. Shares Preferred Stock Sale Warrant
No. Shares of $3.05 Conversion Warrant
No. Shares $4.00 Conversion Warrant
Mac & Co(G)(4)
161,000
64,400
20,280
10,140
Calhoun & Co FFC City of Dearborn Policemen and Firemen Revised Retirement Systems(G)(5)
42,000
16,800
5,291
2,646
Calhoun & Co FFC City of Dearborn General Employees Retirement Systems(G)(6)
26,500
10,600
3,338
1,669
William Blair Small Cap Growth Fund(G)(7)
3,560,000
1,424,000
448,409
224,205
Booth & Co FFC Hartmarx Retirement Income Trust(G)(8)
54,000
21,600
6,802
3,401
Booth & Co FFC Rush University Medical Center Endowment Account(G)(9)
71,000
28,400
8,943
4,472
Booth & Co FFC Rush University Medical Center Pension and Retirement(G)(10)
85,500
34,200
10,770
5,385
TOTAL
4,000,000
1,600,000
503,833
251,918
Page 6 of 12
Business of Buying and Selling Securities
Magnetar
Magnetar has informed the Company that it is not engaged in the
Show Raw Text
CORRESP
1
filename1.htm
Corresp
Vaughn W. Duff, Esq.
General Counsel x2126
Via EDGAR Filing
November 14, 2007
Mr. Larry Spirgel
Assistant Director, Division of Corporate Finance
U.S. Securities and Exchange Commission
100F Street, N.E.
Washington, DC 20549
Re:
Comment Letter, dated July 12, 2007:
Think Partnership Inc. (the “Company”)
Registration Statement on Form S-3
Amendment 2 Filed July 23, 2007
File No. 333-143299
Dear Mr. Spirgel:
This letter is the Company’s response to the telephone comments received from Ms. Krebs and Mr. Zitko and again to the above-referenced SEC comment letter, dated July 12, 2007. Each primary paragraph number below setting forth the Company’s response corresponds to the comment number in your letter. In particular, we note that several of your comments relate to two of the selling stockholders, Magnetar Capital Master Fund, Ltd (“Magnetar”) and the Brewer entities.
General
The Company would like to clarify that the Company is seeking to register only 4,016,901 previously unregistered shares (such shares being referred to as the “New Shares”) on this registration statement. The remaining 7,246,894 shares (such shares being referred to as the “Currently Registered Shares”) the Company is also seeking to include in this registration statement are currently registered on a registration statement on Form SB-2, File Number 333-121761, which was declared effective more than one year ago on July 24, 2006 and is still currently effective (the “SB-2”). The Currently Registered Shares are being included by the Company solely at its option and for its own convenience so that there will no longer be a need for the Company to update the SB-2 through periodic filings.
1.
Below is the specific information you requested in your comment No. 1.
Number of Issued and Outstanding Shares Held
Magnetar
Magnetar currently holds an aggregate of 5,425,078 shares of the Company’s issued and outstanding common stock, 9,139 of which were purchased in open market transactions.
Such 5,425,078 shares do not include any shares issuable upon exercise of the warrants described below because each of the warrants contain “blocker” provisions that prohibit Magnetar from exercising such warrants if following the exercise thereof Magnetar would beneficially own greater than 4.90% or 4.99%, as applicable, of the common stock of the Company.
Page 1 of 12
The Brewer Entities
The seven entities affiliated with Karl Brewer (the “Brewer entities”) hold an aggregate of 5,109,010 shares of the Company’s issued and outstanding common stock, 1,109,010 of which were purchased in open market transactions. The number of such shares held by each of the Brewer entities is detailed in the following table:
Selling Shareholder
SHARES OWNED (Issued and Outstanding)
Mac & Co(G)(4)
167,650
Calhoun & Co FFC City of Dearborn Policemen and Firemen Revised Retirement Systems(G)(5)
51,660
Calhoun & Co FFC City of Dearborn General Employees Retirement Systems(G)(6)
26,500
William Blair Small Cap Growth Fund(G)(7)
4,626,270
Booth & Co FFC Hartmarx Retirement Income Trust(G)(8)
60,790
Booth & Co FFC Rush University Medical Center Endowment Account(G)(9)
79,910
Booth & Co FFC Rush University Medical Center Pension and Retirement(G)(10)
96,230
TOTAL
5,109,010
Number of Shares that may be Issued Pursuant to Convertible Securities
Magnetar
Magnetar holds (i) two Conversion Warrants (as defined below), one of which is exercisable for 693,144 Warrant Shares (as defined below) at an exercise price of $3.05 per share and one of which is exercisable for 346,572 Warrant Shares at an exercise price of $4.00 per share and (ii) a warrant exercisable for 1,000,000 shares of common stock of the Company which was acquired in the Preferred Stock Sale (as defined below). As explained in footnote (a) of the prospectus for the instant registration statement, because the exercise price of warrants may be adjusted pursuant to customary anti-dilution protection provisions (which is not currently the case), the Company has or is registering the resale of at least 125% of the number of shares of common stock issuable upon exercise of such warrants (the “Adjustment Effect”). Thus, the amounts stated in this paragraph are less than the amounts stated in the prospectus due to the Adjustment Effect.
These warrants are not currently exercisable because they contain “blocker” provisions that prohibit Magnetar from exercising such warrants if following the exercise thereof Magnetar would beneficially own greater than 4.90% or 4.99%, as applicable, of the common stock of the Company.
Page 2 of 12
The Brewer Entities
The Brewer entities hold an aggregate number of shares that may be issued pursuant to convertible securities as follows: (i) two Conversion Warrants (as defined below), one of which is exercisable for 503,833 Warrant Shares (as defined below) at an exercise price of $3.05 per share and one of which is exercisable for 251,918 Warrant Shares at an exercise price of $4.00 per share and (ii) a warrant exercisable for 1,600,000 shares of common stock of the Company which was acquired in the Preferred Stock Sale (as defined below). The amounts stated in this paragraph are less than the amounts stated in the prospectus due to the Adjustment Effect. The number of such shares held by each of the Brewer entities is detailed in the following table:
Selling Shareholder
No. Shares Preferred Stock Sale Warrant
No. Shares of $3.05 Conversion Warrant
No. Shares $4.00 Conversion Warrant
Mac & Co(G)(4)
64,400
20,280
10,140
Calhoun & Co FFC City of Dearborn Policemen and Firemen Revised Retirement Systems(G)(5)
16,800
5,291
2,646
Calhoun & Co FFC City of Dearborn General Employees Retirement Systems(G)(6)
10,600
3,338
1,669
William Blair Small Cap Growth Fund(G)(7)
1,424,000
448,409
224,205
Booth & Co FFC Hartmarx Retirement Income Trust(G)(8)
21,600
6,802
3,401
Booth & Co FFC Rush University Medical Center Endowment Account(G)(9)
28,400
8,943
4,472
Booth & Co FFC Rush University Medical Center Pension and Retirement(G)(10)
34,200
10,770
5,385
TOTAL
1,600,000
503,833
251,918
Number of Shares Registered on Prior Registration Statements
Magnetar
3,750,000 shares of common stock of the Company were registered for sale by Magnetar on the Preferred Stock Sale S-3 (as defined below). The amounts stated in this paragraph include the Adjustment Effect.
4,200,000 shares of common stock of the Company were registered for sale by Magnetar on the SB-2.
The Company is seeking to register an aggregate of 5,499,645 shares of common stock of the Company for sale by Magnetar on the instant registration statement, which includes 3,435,000 shares previously registered on the currently effective SB-2 and 1,299,645 shares issuable from exercise of the Conversion Warrants, including the Adjustment Effect.
Page 3 of 12
The Brewer Entities
6,000,000 shares of common stock of the Company were registered for sale by the Brewer entities on the Preferred Stock Sale S-3 (as defined below). The amounts stated in this paragraph include the Adjustment Effect. The number of such shares registered for each of the Brewer entities is detailed in the following table:
Selling Shareholder
No. Shares Registered under Preferred Stock Sale
Mac & Co(G)(4)
241,500
Calhoun & Co FFC City of Dearborn Policemen and Firemen Revised Retirement Systems(G)(5)
63,000
Calhoun & Co FFC City of Dearborn General Employees Retirement Systems(G)(6)
39,750
William Blair Small Cap Growth Fund(G)(7)
5,340,000
Booth & Co FFC Hartmarx Retirement Income Trust(G)(8)
81,000
Booth & Co FFC Rush University Medical Center Endowment Account(G)(9)
106,500
Booth & Co FFC Rush University Medical Center Pension and Retirement(G)(10)
128,250
TOTAL
6,000,000
Number of Shares Registered on Prior Registration Statements that have been Sold
Magnetar
Magnetar sold an aggregate of 765,000 shares of common stock of the Company that were registered on the SB-2. These shares were only sold by Magnetar in January and February 2007 to decrease its ownership percentage in the Company so that Magnetar could convert all of its Preferred Stock (5,000 shares) into 2,500,000 shares of common stock of the Company as requested by the Company as described further below. If Magnetar had not sold these 765,000 shares, it would have been unable to so convert its Preferred Stock into common stock as so requested by the Company because the terms of the Preferred Stock contained a “blocker” that prohibited conversions that would result in a holder thereof beneficially owning 10% or more of the Company’s common stock. The conversion was aggressively solicited by, and substantially benefited, the Company as further described below.
Magnetar also sold an aggregate of 519,061 shares of common stock of the Company that were registered on the Preferred Stock Sale S-3 from May through July 2007.
The Brewer Entities
The Brewer entities continue to hold all shares of Think Partnership Inc. that have been purchased to date. Not only have the Brewer entities not sold any shares acquired from the Company, but they have collectively purchased in open market transactions an additional 1,109,010 shares which the continue to hold.
Page 4 of 12
Circumstances under which the Shares were Received
Preferred Stock Sale (April 5, 2006)
On April 5, 2006 the Company issued a total of 26,500 shares of Series A convertible preferred stock (the “Preferred Stock”) and accompanying warrants to purchase up to 5,300,000 shares of common stock (the “Preferred Stock Sale”). The preferred stock and warrants were issued in a private placement to 17 institutional investors for an aggregate cash purchase price of $26,500,000. There was no syndicate or manager for this private placement. Magnetar and each of the Brewer entities purchased Preferred Stock. Each investor individually decided whether to invest, although certain families of investors (including the Brewer entities) each had a common investment advisor with authority to make investment decisions. The shares of common stock to be issued upon conversion of the Preferred Stock and exercise of the warrants are registered on Form S-3 file number 333-134823 which was declared effective more than a year ago on August 1, 2006 (the “Preferred Stock Sale S-3”).
Non-Issuer Sale (July 3, 2006)
On July 3, 2006, the Roberti Jacobs Family Trust (the “Trust”) and T. Benjamin Jennings (“Jennings”) sold to certain private investors an aggregate of 6,359,726 shares of the Company’s common stock (the “Non-Issuer Sale”). Jennings and a member of the Jacobs family were former executives of the Company who resigned in May 2006. The Company had no involvement in the Trust’s or Jennings’ decision to exercise the warrants and sell the underlying shares or in negotiating or otherwise arranging or participating in such sale. Nevertheless, the Company believed that it was in the best interests of the Company for the Trust and Jennings to sell their Company shares, and the Company agreed to help facilitate such sale by agreeing to register the subsequent resale of such shares by the purchasers thereof. Magnetar individually decided to purchase shares in the Non-Issuer Sale. None of the Brewer entities participated in any way.
All of such shares sold by the Trust and Jennings are Currently Registered Shares that are registered on the currently effective SB-2.
Warrant Issuance to Induce Conversion of Preferred Stock (December 28, 2006)
The Company desired that the remaining holders of Preferred Stock convert all their shares of Preferred Stock so that the Company could eliminate (i) the entire $19.1 million of Preferred Stock from the Company’s balance sheet, (ii) an estimated $5.9 million in annual preferred dividend payments and accretion in 2007 and (iii) the looming prospect of mandatory cash redemption on the second anniversary of issuance. In an effort to create an incentive for the voluntary conversion of the Preferred Stock by the holders thereof, the Company offered, and agreed, to issue additional warrants (the “Conversion Warrants”) to the converting holders, as disclosed in the instant registration statement, which were exercisable into 3,750,020 shares in the aggregate (such shares being the “Warrant Shares”), including the Adjustment Effect. As discussed above, Magnetar and each of the Brewer entities received Conversion Warrants upon their respective conversion of their shares Preferred Stock. The Warrant Shares comprise substantially all of the New Shares being registered on the instant registration statement (approximately 93.4%).
Magnetar
Magnetar purchased 5,000 shares of Preferred Stock in the Preferred Stock Sale on April 5, 2006 and converted all of such shares of Preferred Stock into 2,500,000 shares of common stock as described above on February 28, 2007. In connection with the Preferred Stock Sale, the Company issued Magnetar a warrant to purchase 1,000,000 shares of common stock on April 5, 2006 as described above. No portion of such warrant has been exercised by Magnetar.
Page 5 of 12
Magnetar purchased an aggregate of 4,200,000 shares of common stock from the Trust and Jennings in the Non-Issuer Sale on July 3, 2006.
Two Conversion Warrants were issued to Magnetar on December 28, 2006: one of which is exercisable for 693,144 Warrant Shares at an exercise price of $3.05 per share and one of which is exercisable for 436,572 Warrant Shares at an exercise price of $4.00 per share.
The Brewer Entities
The Brewer entities collectively purchased 8,000 shares of Preferred Stock in the Preferred Stock Sale on April 5, 2006 and converted all of such shares of Preferred Stock into 4,000,000 shares of common stock as described above on December 29, 2006. In connection with the Preferred Stock Sale, the Company issued the Brewer entities collectively a warrant to purchase 1,600,000 shares of common stock on April 5, 2006 as described above. No portion of such warrant has been exercised by the Brewer entities.
The Brewer entities purchased no shares of common stock from the Trust and Jennings in the Non-Issuer Sale on July 3, 2006.
Two Conversion Warrants were collectively issued to the Brewer entities on December 28, 2006: one of which is exercisable for 503,833 Warrant Shares at an exercise price of $3.05 per share and one of which is exercisable for 251,918 Warrant Shares at an exercise price of $4.00 per share.
The number of such shares acquired by each of the Brewer entities is detailed in the following table:
Selling Shareholder
No. PIPE Shares Upon Conv. S-3 (Issued and Outstanding)
No. Shares Preferred Stock Sale Warrant
No. Shares of $3.05 Conversion Warrant
No. Shares $4.00 Conversion Warrant
Mac & Co(G)(4)
161,000
64,400
20,280
10,140
Calhoun & Co FFC City of Dearborn Policemen and Firemen Revised Retirement Systems(G)(5)
42,000
16,800
5,291
2,646
Calhoun & Co FFC City of Dearborn General Employees Retirement Systems(G)(6)
26,500
10,600
3,338
1,669
William Blair Small Cap Growth Fund(G)(7)
3,560,000
1,424,000
448,409
224,205
Booth & Co FFC Hartmarx Retirement Income Trust(G)(8)
54,000
21,600
6,802
3,401
Booth & Co FFC Rush University Medical Center Endowment Account(G)(9)
71,000
28,400
8,943
4,472
Booth & Co FFC Rush University Medical Center Pension and Retirement(G)(10)
85,500
34,200
10,770
5,385
TOTAL
4,000,000
1,600,000
503,833
251,918
Page 6 of 12
Business of Buying and Selling Securities
Magnetar
Magnetar has informed the Company that it is not engaged in the