Questions and Answers regarding the rights offering prospectus filed with the SEC on May 31, 2006.
Click here to view the rights offering prospectus filed with the SEC on May 31, 2006.
| Q. | What is the rights offering? |
| A. | The rights offering is a distribution, at no charge, to certain holders of our ordinary shares of transferable, to specified transferees, subscription rights. We are distributing one right for each 1,850 ordinary shares owned by a holder as of 5:00 p.m., New York City time, on June 5, 2006, the record date, for a total of 66,543 subscription rights. |
| Q. | Will all of ASAT Holdings’ ordinary shareholders be able to participate in the rights offering? |
| A. | No. The principal shareholder groups that participated in our private financing in July 2005, who collectively own approximately 81.85% of our outstanding ordinary shares, agreed in connection with the private financing that they will not receive any subscription rights. All of our remaining ordinary shareholders will receive the subscription rights. |
| Q. | What is a subscription right? |
| A. | Each full subscription right is a right to purchase one unit, with each full unit consisting of one share of our Series A Redeemable Convertible Preferred Shares, or our Series A Preferred Shares, and one warrant to purchase 50 of our ordinary shares within five years at an exercise price of $0.01 per ordinary share. We will not issue fractional units, or any cash in lieu of fractional units. If the number of ordinary shares you hold of record on the record date would result in your receipt of fractional subscription rights, the number of subscription rights you would receive will be rounded down to the nearest number of rights. |
| Q. | May I participate in the rights offering if I hold ADSs because I have deposited my ordinary shares with the depositary? |
| A. | Yes. You will still receive the subscription rights if you hold your ordinary shares in the form of ADSs. As each ADS represents five ordinary shares, you will effectively be able to purchase one unit for every 370 ADSs that you own. |
| Q. | If I own less than 1,850 ordinary shares or 370 ADSs will I be able to participate in the rights offering? |
| A. | No, you will not be able to participate in the rights offering. We are not distributing fractional units or cash in lieu of fractional units. As of December 13, 2005, we had 2,951 beneficial holders of our ADSs (excluding ASAT Holdings as we will not participate in the rights offering), 721 of which would not be able to participate in the rights offering as they owned less than 370 ADSs. As of January 31, 2006, we had 1 beneficial owner of our ordinary shares (excluding the principal shareholder groups that participated in the private financing), The Bank of New York. The Bank of New York is listed as the beneficial owner of ordinary shares deposited into our ADS program. |
| Q. | What is the purchase price for each unit? |
| A. | The purchase price per unit is $50.00. |
| Q. | How long will the rights offering last? |
| A. | You will be able to exercise your subscription rights only during a limited period. If you do not exercise your subscription rights before 5:00 p.m., New York City time, on July 12, 2006, your subscription rights will expire. We may, in our discretion, extend the rights offering until some later time. If we were to so extend, we do not expect we would extend the time for exercising the subscription rights beyond December 31, 2006. There is no maximum duration for this rights offering. |
| Q. | Why are you engaging in a rights offering? |
| A. | On July 31, 2005, we entered into agreements for a private financing of $30 million with JPMP Master Fund Manager, L.P. related funds (collectively, the “JPMP Funds”) and QPL International Holdings Limited (“QPL”), two of our principal shareholder groups, in the form of a $15 million preferred share financing and a $15 million purchase money loan facility. Olympus-ASAT II, L.L.C., or Olympus, became a party to the preferred share purchase agreement in October 2005. The preferred share financing provided for the issuance and sale of 300,000 Series A Preferred Shares for a total price of $15 million and the issuance of five-year warrants for a total of 20 million ordinary shares exercisable at a price of $0.01 per share, of which warrants to exercisable for a total of 5 million ordinary shares were issued as an arrangement fee. Throughout this prospectus, we refer to this preferred share financing as the “private financing” and may refer to the JPMP Funds, QPL and Olympus as the “private investors.” |
Our primary purpose for the rights offering is to allow the holders of our ordinary shares an opportunity to further invest in ASAT and restore a portion, although not all, of their proportionate interest in our capital stock at the same price per share of Series A Preferred Shares and the same exercise price per ordinary share with respect to the warrants that was established under the private financing with the JPMP Funds, QPL and Olympus. A secondary purpose for the rights offering is to raise funds. You will be able to restore only a portion of your proportionate interest through participating in the rights offering because the rights offering does not extend to the warrants to purchase an aggregate of 5,000,000 of our ordinary shares issued as an arrangement fee in the private financing or warrants to purchase an aggregate of 20,668,170 of our ordinary shares issued pursuant to the purchase money loan agreement. In addition, you will not be able to restore your proportionate interest with respect to the semiannual dividend on the outstanding Series A Preferred Shares, which we paid on March 15, 2006 by issuing an aggregate of 3,345,054 ordinary shares. As a result, our shareholders as a group would not be able to restore approximately 0.67% of their aggregate ownership interest.
| Q. | How were the subscription price for the units and the exercise price for the warrants comprising a part of each unit established? |
| A. | Because our intent was (and remains) to give holders of our ordinary shares the opportunity to invest in our company at the same price as our private investors, the terms of the units and the price at which the units are being offered in the rights offering are identical to the terms and offering price of the Series A Preferred Shares and the warrants sold in the private financing, except that our holders of ordinary shares will not receive any portion of the arrangement fees that were received by the private investors. We entered into a Securities Purchase Agreement with the private investors setting forth the terms of their purchase of Series A Preferred Shares and warrants to purchase ordinary shares at the end of July 2005, and amended and restated that agreement in October 2005. Our Board of Directors, with the assistance of our financial advisors, determined the price for the Series A Preferred Shares and the exercise price of the warrants that now comprise a part of each unit at the time we entered into the Securities Purchase Agreement for the private financing based on the information available to us at that time. In developing our financing plan, including the offering price of the Series A Preferred Shares and the warrants offered in the private financing to the private investors, our Board of Directors considered a number of factors, including the historic and then current market price of the ordinary shares, our business prospects, our recent and anticipated operating results, general conditions in the securities markets, our need for capital, alternatives available to us for raising capital, the amount of proceeds desired, the pricing of similar transactions, the liquidity of our ordinary shares and the level of risk to our investors. The transactions contemplated by the Securities Purchase Agreement have been unanimously approved by the disinterested directors of the Board and were approved by a majority vote of our shareholders (including interested shareholders) at an extraordinary general meeting of our shareholders held on November 17, 2005. |
| Q. | How does the number of shares and warrants I may purchase by exercising my subscription rights differ from the shares and warrants received by the private investors in the private financing? |
| A. | As described above, the terms of the units and the price at which the units are being offered in the rights offering are identical to the terms and offering price of the Series A Preferred Shares and warrants sold in the private financing, other than with respect to the arrangement fees. JPMP and QPL received additional warrants to purchase an aggregate of 5,000,000 ordinary shares in the private financing as arrangement fees which will not be reflected in the rights offering. Therefore, QPL received warrants to purchase approximately 33% more ordinary shares and JPMP received warrants to purchase approximately 45% more ordinary shares than a shareholder would by participating in this rights offering. The reason for the difference in percentages as between QPL and JPMP is that JPMP assigned its right to purchase 38,500 Series A Preferred Shares in the private financing to Olympus, but did not assign a proportionate interest in the arrangement fee. |
| Q. | How do I exercise my subscription rights? |
| A. | You may exercise your rights by properly completing and signing your subscription rights certificate. You must hold at least one ordinary share or ADS on the closing date of the rights offering. You must deliver your subscription rights certificate with full payment of the subscription price to the subscription agent on or prior to the expiration date. If you use the mail, we recommend that you use insured, registered mail, return receipt requested. If you cannot deliver your rights certificate to the subscription agent on time, you may follow the guaranteed delivery procedures described under “The Rights Offering—Guaranteed Delivery Procedures.” You may pay the subscription price in a number of different ways. See “The Rights Offering—Method of Payment.” In order for you to timely exercise your rights, the subscription agent must actually receive good funds in payment of the subscription price before the expiration date. An uncertified personal check may take five business days or more to clear. Accordingly, if you pay the subscription price by uncertified personal check, you should make payment sufficiently in advance of the expiration date to ensure that your check actually clears and the payment is received before the expiration date. |
| Q. | If I exercise my subscription rights, how do I exercise the warrants and convert the Series A Preferred Shares I received upon the exercise of my subscription rights? |
| A. | Warrants may be exercised by surrendering the warrant certificate, along with payment for the shares being purchased upon exercise, at the principal office of the warrant agent. You may convert your Series A Preferred Shares by surrendering such shares along with a notice of conversion to the transfer agent for the Series A Preferred Shares. |
| Q. | What should I do if I want to participate in the rights offering but my shares or ADSs are held in the name of my broker, custodian bank or other nominee? |
| A. | If you hold our ordinary shares or ADSs through a broker, custodian bank or other nominee, we will ask your broker, custodian bank or other nominee to notify you of the rights offering. If you wish to exercise your rights, you will need to have your broker, custodian bank or other nominee act for you. To indicate your decision, you should complete and return to your broker, custodian bank or other nominee the form entitled “Beneficial Owner Election Form.” You should receive this form from your broker, custodian bank or other nominee with the other rights offering materials. You should contact your broker, custodian bank or other nominee if you believe you are entitled to participate in the rights offering but you have not received this form. |
| Q. | What should I do if I want to participate in the rights offering but my shares have been deposited with The Bank of New York and exchanged for ADSs? |
| A. | If your shares have been deposited with The Bank of New York, as depositary, and exchanged for ADSs, we will ask the depositary to notify you of the rights offering. If you wish to exercise your rights, you will need to have the depositary act for you. To indicate your decision, you should complete and return to the depositary the form entitled “Beneficial Owner Election Form.” You should receive this form from the depositary with the other rights offering materials. You should contact the depositary if you believe you are entitled to participate in the rights offering but you have not received this form. |
| Q. | If I am a holder with a foreign address or a holder with an APO or FPO address, will I be able to exercise my subscription rights? |
| A. | Generally no. We will not mail rights certificates to you if you are a holder whose address is outside the United States. We are not doing so because your ability to exercise rights may be prohibited by the laws of the country in which you live. We are not distributing rights to any person in any jurisdiction where it is unlawful to do so, nor are we accepting any offers to purchase any units from any person in any jurisdiction in which it is unlawful to do so. Holders with addresses outside the United States who provide evidence satisfactory to us (in our sole discretion, and which may include an opinion of local counsel satisfactory to us) that distribution and exercise of the rights is lawful in that jurisdiction may participate in the rights offering. Provided that the evidence is satisfactory to us, the subscription agent will mail a rights certificate to such non-U.S. holder. In such case, however, all applicable deadlines will apply to such non-U.S. holder, and neither we nor the subscription agent will be responsible for any failure of a holder to have satisfied for any reason all requirements to exercise his or her rights on or prior to the expiration date of the rights offering. |
As of December 13, 2005, approximately 2,844,893 of our ADSs were held by holders with addresses outside the Unites States (excluding ASAT Holdings as we will not participate in the rights offering).
| Q. | Will I be charged a sales commission or a fee by ASAT Holdings if I exercise my subscription rights? |
| A. | No. We will not charge a brokerage commission or a fee to rights holders for exercising their subscription rights. However, if you exercise your rights through a broker, custodian bank or nominee, you will be responsible for any fees charged by your broker, custodian bank or nominee. If you sell your subscription rights, you will be responsible for any commissions, taxes or brokers fees arising from any such sale. Additionally, if you are a holder of ADSs and exercise your rights by acting through the depositary, you will be responsible for any fees charged by the depositary. The depositary for our ADSs currently charges $5.00 per 100 ADSs (or $0.05 per ADS) for deposit into the ADS program. For each unit purchased in the rights offering, assuming no adjustments in conversion or exercise price and without giving effect to any dividend payments, you would receive an aggregate of approximately 605 ordinary shares if you converted the Series A Preferred Share and exercised your warrant in full. Since an ADS represents 5 ordinary shares, you would be required to pay $6.05 to deposit these shares into the ADS program. |
| Q. | What is the Board of Directors’ recommendation regarding the rights offering? |
| A. | Our Board of Directors is not making any recommendation as to whether you should exercise or sell your subscription rights. You are urged to make your decision based on your own assessment of the rights offering and after considering all of the information in this prospectus, including the “Risk Factors” section of this prospectus. One member of our Board of Directors, who has waived his right to participate in the rights offering, may be deemed to have voting or investment power over approximately 42.6% of our outstanding ordinary shares. We are not aware of the beneficial ownership of any of our officers or the other members of our Board of Directors in excess of 1% of our outstanding ordinary shares and none of our officers or other members of our Board of Directors will be able to purchase units in the rights offering as they do not hold a sufficient number of ADSs or ordinary shares to participate. |
| Q. | Is exercising my subscription rights risky? |
| A. | Yes. The exercise of your rights involves risks. Exercising your subscription rights means buying our Series A Preferred Shares and warrants, and should be considered as carefully as you would consider any other equity investment. Among other things, you should carefully consider the risks described under the heading “Risk Factors” beginning on page 14 before deciding to exercise or sell your subscription rights. |
| Q. | May I transfer or sell my subscription rights if I do not want to purchase any units? |
| A. | Yes, to specified transferees. The subscription rights will be evidenced by transferable subscription rights certificates. The subscription rights may be transferred only to holders of our ordinary shares or ADSs on the record date and are transferable until the close of business on the last trading day preceding the expiration date of this rights offering. Holders are reminded that you must hold at least one ordinary share or ADS on the closing date of the rights offering to exercise your subscription rights. However, the subscription agent will facilitate subdivisions or transfers of the actual subscription rights certificates until only 5:00 p.m., New York City time, on July 7, 2006, three business days prior to the expiration date. In addition, we will not take any steps to facilitate trading and do not expect a market to develop in the trading of the subscription rights. Furthermore, we do not expect any transfers of subscription rights to be quoted on any inter-dealer quotation system or other national securities exchange. Finally, the JPMP Funds, QPL (and its affiliates who hold ordinary shares) and Olympus have agreed, pursuant to the Securities Purchase Agreement entered in connection with the private financing, that the rights shall not be transferable to any of those entities. As such, the parties to which you may transfer your rights is limited. Therefore, we cannot assure you that you will be able to sell any of your subscription rights. See “The Rights Offering—Methods for Transferring and Selling Subscription Rights.” |
| Q. | How may I sell my rights? |
| A. | You may sell your subscription rights by contacting your broker or the institution through which you hold your ordinary shares. If you are a holder of ADSs, you may sell your subscription rights by contacting the depositary and following their procedure for selling the subscription rights. You may sell your rights only to a holder of our ordinary shares or ADSs on the record date. Holders are reminded that you must hold at least one ordinary share or ADS on the closing date of the rights offering to exercise your subscription rights. |
| Q. | Am I required to subscribe in the rights offering? |
| A. | No. |
| Q. | What happens if I choose not to exercise my subscription rights? |
| A. | If you do not exercise your subscription rights, the rights offering will not affect the number of ordinary shares you now own. However, if you choose not to exercise your subscription rights and other shareholders do, the percentage of our voting stock that you own after the offering on a diluted basis will decrease, and your voting and other rights will be diluted to the extent that other shareholders exercising their rights in this offering or that participated in the private financing receive the Series A Preferred Shares and subsequently either convert their Series A Preferred Shares into ordinary shares or exercise their warrants comprising a part of the private financing or the units. Rights not exercised prior to the expiration of the rights offering will expire. |
| Q. | How many Series A Preferred Shares and warrants will be outstanding after the rights offering? |
| A. | Assuming that the rights offering is fully subscribed, 366,543 Series A Preferred Shares and warrants to purchase 72,632,270 ordinary shares (equivalent to 14,526,454 ADSs) will be outstanding immediately after the rights offering, including the Series A Preferred Shares and warrants issued in connection with the private financing and the purchase money loan facility and currently outstanding warrants. In the event that all of these Series A Preferred Shares are converted into ordinary shares and all of the warrants issued in connection with the private financing, the purchase money loan facility and the rights offering are exercised, there would be an additional 247,630,320 ordinary shares (equivalent to 49,526,064 ADSs) outstanding after such conversions and exercises. The number is subject to any increases that may occur after the date of this prospectus as a result of adjustments to the conversion or exercise price and the issuance of additional Series A Preferred Shares or ordinary shares in payment of dividends on the Series A Preferred Shares and excludes the ordinary shares paid as a dividend on the outstanding Series A Preferred Shares on March 15, 2006. See “Dilution” for a description of the dilutive effects of the rights offering. |
| Q. | What happens if the rights offering is not fully subscribed? |
| A. | Any rights not exercised before 5:00 p.m., New York City time, on July 12, 2006, will expire, unless, in our discretion, we extend the rights offering until some later time. We will not further distribute unexercised rights. We will sell units to those holders who have exercised their rights. |
| We may consummate this offering even if we do not receive subscriptions for any specific number of units. We are not obligated, prior to the completion of the rights offering, to inform you how many units have been subscribed for, and we do not expect to announce publicly the results of the rights offering until after its completion. |
| Q. | After I exercise my rights, can I change my mind and cancel my purchase? |
| A. | Generally, no. Once you send in your rights certificate and payment you cannot revoke the exercise of your rights, even if you later learn information about us that you consider to be unfavorable. You should not exercise your subscription rights unless you are certain that you wish to purchase units at a price of $50.00 per unit. You will be permitted to revoke the exercise of your subscription rights in the limited circumstance where we have made a significant change (other than the extension of the expiration date) to the terms of the rights offering, such as a change in the purchase price of a unit or the composition of a unit. See “The Rights Offering—No Revocation.” |
| Q. | What are the U.S. federal income tax consequences of exercising my subscription rights as a holder of ordinary shares? |
| A. | You will generally not recognize gain or loss upon exercising your subscription rights. Your tax basis in the Series A Preferred Shares and warrants received upon exercise of your subscription rights will generally equal the total purchase price that you pay upon exercise, which must be allocated between the Series A Preferred Shares and warrants based on their fair market values. Tax matters are very complicated, and you could be subject to adverse tax consequences as a result of holding or disposing of our Series A Preferred Shares and warrants. Accordingly, you are strongly urged to consult your own tax advisors regarding the tax consequences to you of exercising your subscription rights and owning and disposing of our Series A Preferred Shares and warrants. For a more complete description of the material federal income tax consequences relating to the purchase, ownership and disposition of the Series A Preferred Shares and warrants you receive upon the exercise of your subscription rights, you should review the information under the caption “Tax Considerations” beginning on page 73. |
| Q: | What are the Series A Preferred Shares? How do they differ from the ordinary shares? |
| A: | Our Series A Preferred Shares are an equity security of ASAT Holdings that are entitled to various rights, preferences, and privileges that are senior to those of our ordinary shares. These senior rights include a liquidation preference and anti-dilution protection in the event of certain equity issuances at prices less than the conversion price at which the Series A Preferred Shares were issued. The effective issue price of each Series A Preferred Share is $50.00. Each Series A Preferred Share is convertible at the option of the holder into ordinary shares at a conversion price equal to $0.09 per ordinary share (equivalent to $0.45 per ADS), or 555.556 ordinary shares per Series A Preferred Share, subject to customary adjustments for shares splits, dividends, re-combinations and similar transactions. The Series A Preferred Shares are also subject to a potential reset of the conversion price on October 31, 2006 to 80% of the average trading price of the ADSs during the preceding three months, subject to a floor of $0.065 per ordinary share ($0.325 per ADS). The Series A Preferred Shares accrue dividends at the rate of 13% per annum, payable semi-annually in arrears. Such dividends will be payable at our option, in cash, subject to certain limitations, or in additional Series A Preferred Shares or ordinary shares. |
The transferability of the Series A Preferred Shares is limited by our Restated Articles of Association which provide that no holder of Series A Preferred Shares may assign or transfer any Series A Preferred Shares or any rights, interests or obligations thereunder without the prior written approval of a majority of the Series A Preferred Shares then outstanding, subject to certain exceptions. See “Risk Factors—Risks Related to the Rights Offering and Our Securities—Your ability to sell Series A Preferred Shares purchased in the Rights Offering is severely limited by our Restated Articles of Association.”
| For a more complete description of the rights, preferences, and privileges of the Series A Preferred Shares, you should review the information under the caption “Description of Securities to be Registered—Capital Stock—Series A Preferred Shares,” beginning on page 68. |
| Q. | How will the issuance of Series A Preferred Shares affect my voting interests as an ordinary shareholder? |
| A. | Although the Series A Preferred Shares have no voting rights except as required by applicable law, the issuance of Series A Preferred Shares will reduce the aggregate voting interests of ordinary shareholders relative to their voting interests prior to the issuance if such shares are converted into ordinary shares. As a result, the voting interests represented by ordinary shares outstanding prior to the private financing will be reduced if all of the previously outstanding Series A Preferred Shares were converted into ordinary shares and the warrants issued in connection therewith were exercised. Further dilution in this percentage voting interest will result from the sale of shares of Series A Preferred Shares in this offering if those shares are converted into ordinary shares, from the payment of dividends on the Series A Preferred Shares in additional Series A Preferred Shares or ordinary shares, from the warrants issued in this offering if exercised for ordinary shares and from the warrants issued or issuable under the purchase money loan agreement. In the event we were required to raise additional capital in a financing transaction at a ordinary share equivalent price less than $0.09, the holders of Series A Preferred Shares would be entitled to anti-dilution protections that could potentially further reduce the relative voting interests of ordinary shareholders by decreasing the conversion price of the Series A Preferred Shares (and, correspondingly, increasing the conversion rate). |
| Q. | Will the issuance of the Series A Preferred Shares affect my ordinary shares in any other ways? |
| A. | In connection with major corporate transactions involving ASAT Holdings, the terms of the Series A Preferred Shares could result in an ordinary shareholder’s receiving less value for his or her shares than a holder of Series A Preferred Shares representing the same number of ordinary shares on an as converted basis. In particular, in connection with any liquidation, dissolution or winding up of ASAT Holdings, holders of Series A Preferred Shares will be entitled to receive, before any proceeds may be distributed to holders of ordinary shares, an amount equal to 100% of the original purchase price of the Series A Preferred Shares, plus all accrued and unpaid dividends. |
| After payment of this senior liquidation preference, any remaining assets that are available for distribution to shareholders will be distributed pro rata among holders of Series A Preferred Shares and ordinary shares, with holders of Series A Preferred Shares receiving an additional amount in excess of their liquidation preference based on the number of ordinary shares into which the Series A Preferred Shares may then be converted. Acquisitions of ASAT Holdings by other companies through mergers, consolidations, or purchases of all or substantially all of our assets would be treated as a liquidation for purposes of these provisions. |
| Q. | What are the important terms of the warrants? |
| A. | Each warrant gives the holder thereof the right to purchase 50 ordinary shares, subject to adjustment, at an exercise price of $0.01 per ordinary share (equivalent to $0.05 per ADS) within five years of the date of its issuance. |
| Q. | When will I receive my new Series A Preferred Shares and warrants? |
| A. | If you purchase units through this rights offering, you will receive your Series A Preferred Shares and warrants comprising the units as soon as practicable after the expiration of the rights offering. Subject to state securities laws and regulations, we have the discretion to delay distribution of any shares you may elect to purchase by exercise of your subscription privilege in order to comply with state securities laws. |
| Q. | In what form will the Series A Preferred Shares and warrants be issued to me? |
| A. | Both the Series A Preferred Shares and warrants will initially be issued in the form in which you hold your ordinary shares or ADSs. In other words, if you hold your ordinary shares, including ADSs, in global form, you will receive your Series A Preferred Shares and warrants in global form. If you hold your ordinary shares in physical form, you will receive physical certificates for the Series A Preferred Shares and warrants. |
| Q. | Will the new Series A Preferred Shares or warrants initially be listed on an exchange? |
| A. | No. The shares of Series A Preferred Shares and warrants will not be listed on any securities exchange. Additionally, the ordinary shares into which the Series A Preferred Shares may be converted and for which the warrants may be exercised are not listed on any securities exchange. Shares of our ADSs are tradable on the Nasdaq Capital Market under the symbol “ASTT.” On May 30, 2006, the last reported sales price of our ADSs was $0.79 per ADS. |
| Q. | Are there any conditions to the rights offering? |
| A. | We may terminate this rights offering, in whole or in part, if at any time before completion of this rights offering there is any judgment, order, decree, injunction, statute, law or regulation entered, enacted, amended or held to be applicable to this rights offering that in the sole judgment of our Board of Directors would or might make this rights offering or its completion, whether in whole or in part, illegal or otherwise restrict or prohibit completion of this rights offering. We may waive this and choose to proceed with this rights offering even if these events occur. If we terminate this rights offering, in whole or in part, all affected subscription rights will expire without value and all subscription payments received by the subscription agent will be returned promptly, without interest or deduction. |
| Q. | Can ASAT cancel this rights offering? |
| A. | Yes. We may cancel this rights offering, in whole or in part, in our sole discretion at any time prior to the time this rights offering expires for any reason. If we cancel this rights offering, any money received from subscribing shareholders will be refunded promptly, without interest. While we may cancel this rights offering, there is an affirmative covenant in the Securities Purchase Agreement related to the private financing that we will undertake this rights offering. If we decided to cancel this rights offering, we would be in violation of that covenant unless we received the consent or waiver of the purchasers under the Securities Purchase Agreement. |
| Q. | If the rights offering is not completed, will my subscription payment be refunded to me? |
| A. | Yes. The subscription agent will hold all funds it receives in escrow until completion of the rights offering. There is no minimum requirement to complete the rights offering. If the rights offering is not completed, the subscription agent will return promptly, without interest, all subscription payments. |
| Q. | What should I do if I have other questions? |
| A. | If you have questions or need assistance, please contact U.S. Bank National Association, the subscription agent, at (651) 495-3512. For a more complete description of the rights offering, see “The Rights Offering,” beginning on page 55. |
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