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Delaware
(State
of incorporation)
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1-32736
(Commission
File No.)
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77-0602480
(IRS
Employer Identification No.)
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| Item 3.02. |
Unregistered
Sales of Equity
Securities.
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| Item 5.03. |
Amendments
to Articles of Incorporation or Bylaws; Changes in Fiscal
Year
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Ranking
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Shares
of our Series A preferred stock, with respect to dividend rights
and
rights upon our liquidation, winding up or dissolution, rank:
· Senior
to our common stock and any other class or series of our preferred
stock,
the terms of which do not expressly provide that such class or
series
ranks senior to or on a parity with the Series A preferred
stock;
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· On
a parity with any other class or series of our preferred stock,
the terms
of which expressly provide that such class or series ranks on a
parity
with the Series A preferred stock; and
· Junior
to all our existing and future debt obligations, and to each class
or
series of our preferred stock, the terms of which expressly provide
that
such class or series ranks senior to our Series A preferred
stock. |
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Dividends
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Holders
of our Series A preferred stock will receive cumulative dividends
of $200
per share, payable semi-annually in arrears, commencing June 15,
2007.
Dividends will be paid in cash on the basis of a 360-day year consisting
of twelve 30-day months. Dividends on the shares of our Series
A preferred
stock will accumulate and be cumulative from the date of original
issuance. Accumulated dividends on the shares of our Series A preferred
stock will not bear any interest.
If
we fail to pay, or set apart funds to pay, dividends on the shares
of our
Series A preferred stock for any semi-annual dividend period, or
if we
fail to cause a resale registration statement for the shares of
our common
stock underlying our Series A preferred stock and warrants within
180 days
of January 30, 2007, then holders of shares of our Series A preferred
stock will be entitled to receive, when, as and if declared by
our board
of directors, out of funds legally available therefore, dividends
at the
rate of 12% per annum for each subsequent semi-annual dividend
period
until we have paid or provided for the payment of all dividends
on the
shares of our Series A preferred stock for all dividend periods
up to and
including the dividend payment date on which the accumulated and
unpaid
dividends are paid in full, or until we have satisfied our registration
obligations, as applicable.
No
dividend or other distributions (other than a dividend payable
solely in
shares of a like or junior ranking) may be paid or set apart for
payment
upon any parity shares or junior shares, nor may any parity shares
or
junior shares be redeemed or acquired or any consideration by us
(except
by conversion into or exchange for shares of a like or junior ranking)
unless all accumulated and unpaid dividends have been paid or funds
have
been set apart on our Series A preferred stock and any parity
shares.
To
pay dividends, we must pay the dividends out of funds legally available
for payment.
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Liquidation
Preference
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$2,500
per share. In addition, upon any liquidation event, we will pay
any
accumulated and unpaid dividends.
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Conversion
Rights
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Each
share of our Series A preferred stock may be converted at any time,
at the
option of the holder, into 588.2353 shares of our common stock
(which is
equivalent to an initial conversion price of $4.25 per share of
Series A
preferred stock), plus cash in lieu of fractional shares. The conversion
rate is subject to adjustment upon the occurrence of certain events.
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Mandatory
Redemption
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We
are required to redeem our Series A preferred stock, to the extent
not
theretofore converted into shares of our common stock, on January
30, 2012
for cash at a redemption price per share of $2,500, plus all accumulated
but unpaid dividends thereon through the redemption date.
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Optional
Redemption
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At
any time following the date that is twelve months from the date
the
Securities and Exchange Commission declares our resale registration
statement covering our shares of common stock issuable upon conversion
or
exercise, as applicable, of our Series A preferred stock and warrants
effective, we may redeem all or any portion of our Series A preferred
stock at any time and from time to time if (i) the market price
of our
common stock exceeds $7.50 for at least 30 consecutive trading
days prior
to the conversion date; (ii) all our shares of common stock issuable
upon
conversion or exercise, as applicable of our Series A preferred
stock and
warrants are registered for resale pursuant to the Securities Act;
(iii)
no resale restrictions exist on such shares. Such registration
will take
the form of a continuously effective resale registration or such
other
arrangements as are reasonably satisfactory to the holders of the
Preferred.
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Adjustments
to Conversion Price and Exercise Price of Warrants
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The
conversion price of the Series A preferred stock and the exercise
price of
the warrants and the number of shares subject thereto shall be
subject to
adjustment in the event of stock splits, stock dividends, reverse
stock
splits, and similar events. Further, in the event that we should
issue
shares of common stock, warrants, options, convertible and/or exercisable
securities, at an effective price per share less than the conversion
price, then, subject to certain exceptions, the conversion price
and the
exercise price and the number of shares subject to the preferred
stock and
warrants shall be adjusted on a weighted average basis to reflect
the
dilution represented by the issuance of such shares of common stock
and
such lower effective price on a fully-diluted basis.
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Voting
Rights
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Holders
of Series A preferred stock shall be entitled to vote, on an as
converted
basis, on all matters as to which the holders of
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common stock are entitled to convert.
In
addition, so long as 40% of our Series A preferred stock
remains outstanding, the following actions, among others, shall
require
the approval of holders of a majority of our Series A preferred
stock,
voting separately as a class:
· any
liquidation, dissolution or winding up of our business;
· any
amendment, alteration or repeal of any provision of our certificate
of
incorporation or bylaws in a manner that adversely affects the
powers,
preferences and rights of the Series A preferred stock or that
is
otherwise material;
· the
creation, or authorization, or issuance of any additional class
or series
of our capital stock unless the same ranks junior to our Series
A
preferred stock;
· the
purchase or redemption or payment of any dividends or distribution
on any
shares of our capital stock other than (i) dividends or distributions
on
our Series A preferred stock, (ii) redemption of our currently
outstanding
publicly traded common stock purchase warrants, and (iii) dividends
or
other distributions payable on our junior securities solely in
the form of
additional junior securities;
· the
creation or incurrence of any indebtedness other than, among other
exceptions, (i) our credit line with The CIT Group/Commercial Services,
Inc.; (ii) capital lease obligations in excess of $15 million;
and (iii)
upon letters of credit issued in the ordinary course of our
business;
· subject
to certain exceptions, the creation or incurrence of any liens;
· our
entry into any material line of business outside of the telecom
sector;
· our
entry into any transaction or agreement with any of our executive
officers, directors or their respective affiliates except for those
(i) in
existence on January 30, 2007 or (ii) relating to employment and/or
consulting agreements to the extent that they have been approved
by a
majority of our board of directors (including the majority vote
of our
independent directors) and provide for consideration consisting
solely of
cash and/or securities junior to the Class A Preferred Stock;
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· any
increase in the aggregate number of shares of our capital stock
issuable
under all of our option, stock purchase or other equity-based plans
in
excess of 10% of our outstanding shares of common stock at the
time of the
proposed increase;
· capital
expenditures in excess of $1 million in the aggregate in any fiscal
year
if such excess was not reflected in our budget for such fiscal
year;
· subject
to certain exceptions, the acquisition of any securities, assets
or
business of any person; or
· the
taking of any action which will result in the failure of our common
stock
to be traded, listed or quoted on a national securities exchange
or
quotation system whose rules and regulations require that a majority
of
the board of directors of member corporations be comprised of individuals
who are “independent” as defined by such exchange or quotation system and
by the Sarbanes-Oxley Act of 2002. |
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Fundamental
Change
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If
a fundamental change occurs, a holder of Series A preferred stock
may
require us to purchase all or part of such holder’s shares of our Series A
preferred stock at a redemption price equal to 100% of the liquidation
preference of the shares of our Series A preferred stock to be
repurchased, plus accrued and unpaid dividends to but excluding
the
repurchase date, if any.
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| Item 8.01. |
Other
Events.
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| Item 9.01. |
Financial
Statements and Exhibits.
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Exhibit
No.
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Description
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3.1
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Certificate
of Designation of 8% Series A Cumulative Convertible Preferred
Stock
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4.1
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Form
of Common Stock Purchase Warrant
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10.1
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Registration
Rights Agreement dated as of January 30, 2007 by and between
the Company
and the several persons enumerated on Annex A thereto.
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99.1
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Press
release issued on January 31, 2007 pursuant to Rule
135c.
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| AMERICAN TELECOM SERVICES, INC. | ||
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| By: | /s/ Lawrence Burstein | |
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Name: Lawrence Burstein |
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| Title: Chairman | ||