Item 1.01 Entry into a Material Definitive Agreement
On May 19, 2022, the Company entered into the Voting Agreement with GP-HGM LLC
(the "Special Voting Holder"), providing that the Special Voting Holder will
vote all shares of Special Voting Stock on each of the Reverse Stock Split
Proposal (as herein defined) and the Preferred Stock Increase Proposal (as
herein defined). At the Annual Meeting, stockholders will be asked to, among
other proposals, (a) approve the adoption of an amendment to the Company's
certificate of incorporation (the "COI") to effect a reverse split of its
outstanding common stock at a ratio in the range of 1-for-2 to 1-for-20, to be
determined at the discretion of the Company's board of directors (the "Board of
Directors") and publicly disclosed prior to the effectiveness of such reverse
stock split, whereby each outstanding 2 to 20 shares would be reclassified and
combined into 1 share of our common stock, to enable the Company to comply with
the Nasdaq Stock Market's continued listing requirements (the Reverse Stock
Split Proposal) and (b) to approve an amendment to the Company's certificate of
incorporation to increase the number of authorized shares of preferred stock
from 20,000,000 shares to 40,000,000 shares (the "Preferred Stock Increase
Proposal").
Pursuant to the Voting Agreement, the Special Voting Holder has agreed to
purchase from the Company $1,000,000 shares of Special Voting Stock for an
aggregate purchase price of $100. The Special Voting Holder has further agreed
to vote for the Reverse Stock Split Proposal and the Preferred Stock Increase
Proposal in the same proportion as the votes cast on such proposals by the
holders of Common Stock and Tandem Preferred Stock (excluding abstentions and,
if applicable, broker non-votes). By way of example, if holders of 40% in voting
power of the outstanding shares of Common Stock and Tandem Preferred Stock
attend the meeting and, of that 40%, holders of 80% in voting power of the
shares of Common Stock and Tandem Preferred Stock present vote in favor of the
Reverse Stock Split Proposal, and holders of 20% in voting power of the shares
of Common Stock and Tandem Preferred Stock present vote against Reverse Stock
Split Proposal, then the Special Voting Holder will cause 80% of the voting
power of the outstanding shares of Special Voting Stock to be voted in favor of
Reverse Stock Split Proposal and 20% of the voting power of the outstanding
shares of Special Voting Stock to be voted against Reverse Stock Split Proposal.
By way of further example, if holders of 40% in voting power of the outstanding
shares of Common Stock and Tandem Preferred Stock attend the meeting and, of
that 40%, holders of 70% in voting power of the shares of Common Stock and
Tandem Preferred Stock present vote in favor of Preferred Stock Increase
Proposal, and holders of 30% in voting power of the shares of Common Stock and
Tandem Preferred Stock present vote against Preferred Stock Increase Proposal,
then the holder of the Special Voting Stock will cause 70% of the voting power
of the outstanding shares of Special Voting Stock to be voted in favor of
Preferred Stock Increase Proposal and 30% of the voting power of the outstanding
shares of Special Voting Stock to be voted against Preferred Stock Increase
Proposal.
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The Company has further agreed to redeem the shares of Special Voting Stock on
the first business day following the later of (a) the date on which the voting
on the Reverse Stock Split Proposal has concluded and the polls on the Reverse
Stock Split Proposal have closed and (b) the date on which the voting on the
Preferred Stock Increase Proposal has concluded and the polls on the Preferred
Stock Increase Proposal have closed for an aggregate price of $100.
The foregoing description of the Voting Agreement does not purport to be
complete and is qualified in its entirety by reference to the full text of the
Voting Agreement, a copy of which is filed as Exhibit 10.1 to this Current
Report on Form 8-K and is incorporated by reference.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Departure of CEO
As previously announced on the Company's current report on 8-K filed on
March 31, 2022 and modified on Amendment No. 1 to the Company's annual report on
form 10-K filed on May 2, 2022, Ronald Cogburn has stepped down from his
position as Chief Executive Officer of the Company, effective May 15, 2022.
Item 5.03 Amendments to the Articles of Incorporation or Bylaws; Change in
Fiscal Year
The information included under the headings "Introductory Note" and Item 1.01
Entry into a Material Definitive Agreement in this current report on Form 8-K
are incorporated herein by reference.
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Series A Preferred
On May 17, 2022, the Company decreased the number of Series A Perpetual
Convertible Preferred Stock ("Series A Preferred Stock") outstanding from
11,500,000 to 2,800,000 shares, which number exceeds the number of shares of
Preferred Stock issued and outstanding, in order to allow for a sufficient
number of shares of the Tandem Preferred Stock to be authorized.
By-Laws
Also on May 17, 2022, the Company adopted the Third Amended and Restated Bylaws
(the "Bylaws Amendment"). The Company's by-laws had originally been drafted at a
time when the Company had a controlling stockholder and two nomination
agreements. In connection with the recent exchange offers, the Company undertook
a comprehensive review of its by-laws, which led to an updating of its by-laws
through the Bylaws Amendment. The Bylaws Amendment among other things:
· removes references to the two nomination agreements, and related director
quorum requirements;
· provides that stockholders submitting director nominations or stockholder
proposals provide the Company with specified advance notice and related
information to enable the Company to evaluate such nominations or proposals;
· contains provisions designed to facilitate virtual stockholder meetings;
· increases the maximum size of the board of directors to 11 members;
· contains greater specificity regarding the duties of the Chairman and Vice
Chairman of the board;
· updated the indemnification provisions as they relate to derivative suits and
establishes a procedure for determining the entitlement to indemnification;
· addresses certain alleged ambiguities relating to the tabulation of votes cited
by the plaintiffs in a pending lawsuit;
· updates the notice provisions; and
· to reflect best practices that have developed since the adoption of the
original bylaws of the Company.
The foregoing descriptions do not purport to be complete and are qualified in
their entirety by reference to the full text of each of (1) the Certificate of
Decrease, a copy of which is filed as Exhibit 3.1 to this Current Report on
Form 8-K, (2) the Certificate of Designations for the Tandem Preferred Stock, a
copy of which is filed as Exhibit 3.2 to this Current Report on Form 8-K,
(3) the Certificate of Designations for the Special Voting Stock, a copy of
which is filed as Exhibit 3.3 to this Current Report on Form 8-K and (4) and the
Third Amended and Restated Bylaws, a copy of which is filed as Exhibit 3.4 to
this Current Report on Form 8-K each of which is incorporated by reference.
Item 8.01 Other Events
Close of Offer
On May 17, 2022, the Company consummated the Offer. Pursuant to the Offer,
42,591,440 shares of Common Stock were exchanged for 2,129,572 shares of
Series B Preferred Stock.
On May 17, 2022, the Company issued a press release announcing the closing of
the Offer. A copy of the press release is filed herewith as Exhibit 99.1.
2018 Stock Incentive Plan
The Company has also indicated its intent to have its stockholders re-approve
the amendment and restatement of its 2018 Stock Incentive Plan at the Annual
Meeting. The amendment and restatement of the 2018 Stock Incentive Plan was
approved by the stockholders at the 2021 annual meeting held December 31, 2021.
Subsequent to such approval, a lawsuit was filed against the Company alleging
that the Company did not properly count the broker non-votes on such matter, and
that as a result the 2018 Stock Incentive Plan in its amended and restated form
was not properly approved. Although the Company believes that it has meritorious
defenses to such suit, the Company believes that it is less expensive to ask our
stockholders to reapprove the amendment and restatement of the 2018 Stock
Incentive Plan at the Annual Meeting than to litigate the suit through to
vindication of the Company's position. As such, the Company expects to rescind
the delivery of shares subsequent to December 31, 2021 under the 2018 Stock
Incentive Plan.
In connection with a comprehensive update of the Company's Bylaws undertaken
following the consummation of its recent exchange offer to reflect, among other
things, the termination of the Director Nomination Agreements (as defined
below), the Company also amended the provision of the Bylaws cited by the
plaintiffs in the lawsuit as giving rise to their claim.
Upon the expected reapproval of the 2018 Stock Incentive Plan in its amended and
restated form, the Company intends to settle the grants for which the settlement
was rescinded in either shares of Common Stock or cash, as will be determined by
the Company's Compensation Committee in its sole discretion. If such newly
settled grants are settled for shares of Common Stock, the Company expects to
offer the recipients of such grants the opportunity to exchange such shares of
Common Stock for shares of the Company's Series B Preferred Stock and shares of
the Company's Tandem Preferred Stock in the same amount as such grantees would
have been permitted to exchange shares of Common Stock in the recently completed
exchange offer.
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Item 9.01 Financial Statements and Exhibits.
(d)
Exhibit No. Description
3.1 Certificate of Decrease of Series A Perpetual Convertible
Preferred Stock
3.2 Certificate of Designations, Preferences, Rights and Limitations
of Tandem Preferred Stock
3.3 Certificate of Designations, Preferences, Rights and Limitations
of Special Voting Preferred Stock
3.4 Third Amended and Restated Bylaws
10.1 Subscription, Voting and Redemption Agreement, dated as of
May 19, 2022, by and between Exela Technologies, Inc. and GP-HGM
LLC
99.1 Press Release dated May 17, 2022
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