News Column

CROSSROADS SYSTEMS INC FILES (8-K) Disclosing Entry into a Material Definitive Agreement, Material Modification to Rights of Security Holders, Amendments to Articles of Inc. or Bylaws; Change in Fiscal Year, Other Events, Financial Statements and Exhibits

May 23, 2014

Item 1.01. Entry into a Material Definitive Agreement.

On May 23, 2014, the Board of Directors (the "Board") of Crossroads Systems, Inc. (the "Company" or "Crossroads") authorized and declared a dividend distribution of one right (a "Right") for each outstanding share of the Company's Common Stock, par value $0.001 per share (the "Common Stock"), and 5.0% Series F Convertible Preferred Stock, par value $0.001 per share (the "Series F Preferred Stock"), to stockholders of record as of the close of business on June 4, 2014 (the "Record Date"). Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series G Participating Preferred Stock, par value $0.001 per share (the "Series G Preferred Stock"), of the Company at an exercise price of $14.00 per one one-thousandth of a Series G Preferred Stock, subject to adjustment (the "Exercise Price"). The complete terms of the Rights are set forth in a Tax Benefit Preservation Plan (the "Rights Plan"), dated as of May 23, 2014, between the Company and American Stock Transfer & Trust Company, LLC, as rights agent.

By adopting the Rights Plan, the Board is helping to preserve the value of certain deferred tax benefits, including those generated by net operating losses (collectively, the "Tax Benefits"). The Company's ability to use these Tax Benefits would be substantially limited if it were to experience an "ownership change" as defined under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). In general, an ownership change would occur if there is a greater than 50-percentage point change in ownership of securities by stockholders owning (or deemed to own under Section 382 of the Code) five percent or more of a corporation's securities over a rolling three-year period. The Rights Plan reduces the likelihood that changes in the Company's investor base have the unintended effect of limiting the Company's use of its Tax Benefits. The Board believes it is in the best interest of the Company and its stockholders that the Company provide for the protection of the Tax Benefits by adopting the Plan.

The Rights Plan is intended to act as a deterrent to any person acquiring shares of the Company's securities equal to or exceeding the Trigger Amount (as defined below) without the approval of the Board. This would protect the Tax Benefits because changes in ownership by a person owning less than 4.99% of the Company's stock are not included in the calculation of "ownership change" for purposes of Section 382 of the Code. The Board has established procedures to consider requests to exempt certain acquisitions of the Company's securities from the Rights Plan if the Board determines that doing so would not limit or impair the availability of the Tax Benefits or is otherwise in the best interests of the Company.

The Rights Plan specifying the terms of the Rights (as defined below) and the text of the press release announcing the declaration of the Rights are incorporated herein by reference as exhibits to this current report. The following summary provides only a general description of the Rights Plan and is qualified in its entirety by reference to such exhibits.

The following is a summary of the terms of the Rights Plan. The summary does not purport to be complete and is qualified in its entirety by reference to the Rights Plan, a copy of which is attached as Exhibit 4.1 and incorporated herein by reference.

Distribution and Transfer of Rights; Rights Certificates

The Board has declared a dividend of one Right for each outstanding share of Common Stock and Series F Preferred Stock. Prior to the Distribution Date referred to below:

· the Rights will be evidenced by and trade with the certificates for the Common

Stock and Series F Preferred Stock (or, with respect to any uncertificated Common Stock or Series F Preferred Stock registered in book entry form, by notation in book entry), and no separate rights certificates will be distributed;



· new Common Stock and Series F Preferred Stock certificates issued after the

Record Date will contain a legend incorporating the Benefit Plan by reference (for uncertificated Common Stock or Series F Preferred Stock registered in book entry form, this legend will be contained in a notation in book entry); and



· the surrender for transfer of any certificates for Common Stock or Series F

Preferred Stock (or the surrender for transfer of any uncertificated Common Stock or Series F Preferred Stock registered in book entry form) will also constitute the transfer of the Rights associated with such shares of stock.



Rights will accompany any new shares of Common Stock or Series F Preferred Stock that are issued after the Record Date.

Distribution Date



Subject to certain exceptions specified in the Benefit Plan, the Rights will separate from the Common Stock and Series F Preferred Stock and become exercisable following (i) the 10th business day (or such later date as may be determined by the Board) after the public announcement that an Acquiring Person has acquired beneficial ownership of 4.99% or more of the Common Stock (including ownership of Series F Preferred Stock as beneficial ownership of Common Stock) or (ii) the 10th business day (or such later date as may be determined by the Board) after a person or group announces a tender or exchange offer that would result in ownership by a person or group of 4.99% or more of the Common Stock. For the purposes of calculating beneficial ownership of Common Stock under the Benefit Plan, each outstanding share of Series F Preferred Stock is deemed to represent the ownership of the number of shares of Common Stock issuable upon conversion of such share Series F Preferred Stock (which, for the . . .

Item 3.03 Material Modification of Rights of Security Holders.



The information included in Item 1.01 and Item 5.03 of this Current Report on Form 8-K is incorporated by reference into this Item 3.03.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

In connection with the adoption of the Rights Plan, on May 23, 2014, the Company filed a Certificate of Designation of Rights, Preferences and Privileges of Series G Participating Preferred Stock (the "Certificate of Designation") with the Secretary of State of the State of Delaware. The Certificate of Designation sets forth the rights, powers and preferences of the Series G Preferred Stock.

The summary of the rights, powers and preferences of the Series G Preferred Stock set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 5.03. A copy of the Certificate of Designation is attached as Exhibit 3.1 and is incorporated herein by reference.

Item 8.01. Other Events.



On May 23, 2014, the Company issued a press release announcing the adoption of the Rights Plan and the declaration of the dividend of the Rights. A copy of the press release is attached as Exhibit 99.1 and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits. Exhibit No. Description 3.1 Certificate of Designation of Rights, Preferences and Privileges of Series G Participating Preferred Stock. 4.1 Tax Benefit Preservation Plan, dated as of May 23, 2014, by and between Crossroads Systems, Inc. and American Stock Transfer & Trust Company, LLC, as rights agent. 99.1 Press Release of Crossroads Systems, Inc., dated May 23, 2014.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters