Page 13 of 17 SEC Filing
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.
Proposed 1:200 Reverse Stock Split followed by SEC Deregistration.
This filing is being made because the Board of Directors on January 18, 2016 approved a 1-for-200 reverse stock split of the outstanding shares of its Class A Common Stock. As part of the proposed transaction, authorized shares of Class B Common Stock, which are unissued, likewise would be subject to and adjusted for a 1-for-200 reverse stock split as well.
If the transaction is approved by the Company’s stockholders and implemented, the Company expects to have fewer than 300 stockholders of record of its outstanding common stock, in which event the Company intends to deregister its shares and cease to be a reporting company under the Securities and Exchange Act of 1934.
The reporting persons submitting this filing include the current directors and the Company’s current Chief Executive Officer/Chairman of the Board as well as its current Senior Vice President/Chief Financial Officer. Considered together they currently own approximately 56.6% of the Company’s outstanding Class A Common Stock, although it is noted that Mr. Evans does not own any such shares. In their capacities as directors and/or officers, these reporting persons have indicated they support the proposed transaction and, to the extent they own or control shares of Class A Common Stock, they intend to support the proposed transaction and to vote in favor of the proposed amendment to the Company’s Articles of Incorporation when the amendment is presented to a vote of the Company’s stockholders. To the extent they thus may be viewed or considered a group acting to effectuate transactions that would lead to the ultimate deregistration of the Company and its Class A Common Stock, these reporting persons are making this filing.
Presently Exercisable Warrants Owned by Mr. Reynolds
As noted in response to Item 5(a) above, Mr. Reynolds also owns presently exercisable warrants to purchase shares of common stock equal to 30% of the then issued and outstanding common stock of the Company on a fully diluted, post-exercise basis. Based on the 11,299,528 shares of Company common stock currently issued and outstanding, exercise in full of the warrants would result in issuance of an additional 4,842,654 shares. Although the Warrants are for Class B Common Stock (nonvoting shares), Subsection 7(c) of Article 7 of the Company’s Articles of Incorporation provides as follows:
“(c) Any share of Class B common shares that is transferred to a holder who is not subject to the ownership limitations of the Bank Holding Company Act of 1956, as amended, and the regulations promulgated thereunder, shall automatically, upon tender to the corporation, be redeemed and converted by the corporation into a share of Class A common shares. “
Subsection 7(d) of Article 7 of the Company’s Articles of Incorporation in turn further provides, in relevant part, that “[a]ny conversion of . . . Class B common shares pursuant to . . . hereof shall be made for no additional consideration If Mr. Reynolds were to exercise such warrants, at this time, he would be able to convert Class B shares to Class A Common Stock for no additional consideration under the above provisions of Article 7 of the Company’s Articles of Incorporation. The relevant beneficial ownership table set forth in response to Item 5(a) above reflects the percentage of Class A Commons Stock owned by Mr. Reynolds includes common stock attributable to these warrants assuming the warrants were exercised and all shares were converted into Class A shares. As set forth in the footnotes to the relevant ownership table set forth in response to Item 5(a) above, excluding the effect of the warrants, Mr. Reynolds beneficially owns 53.7% of the Company’s currently outstanding common stock (only Class A shares are outstanding at this time).
Mr. Reynolds and Harrah and Reynolds have pledged 3,771,500 of their Class A shares (constituting 62.2% of all outstanding Class A shares beneficially owned by Mr. Reynolds) as collateral to secure loans made to Mr. Reynolds or Harrah and Reynolds in the ordinary course of business by several commercial banks.
Any disposition of such pledged shares upon a default by Mr. Reynolds or Harrah and Reynolds under such loans could result in a change of control of the Company.
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