Filed Pursuant to Rule 424(b)(3)
Registration File No. 333-130244
SPACEDEV STARSYS RESEARCH
JOINT PROXY STATEMENT/PROSPECTUS SUPPLEMENT NO. 1
(To joint proxy statement/prospectus
dated December 29, 2005)
12,357,143 SHARES
SPACEDEV, INC.
COMMON STOCK, PAR VALUE $0.001 PER SHARE
This joint proxy statement/prospectus supplement no. 1, which we refer to
as this supplement, updates and supplements our joint proxy statement/prospectus
dated December 29, 2005 which forms part of our Registration Statement on Form
S-4 (Registration File No. 333-130244). The joint proxy statement/prospectus
relates to the special meetings of the shareholders of SpaceDev, Inc. and
Starsys Research Corporation and the proposed merger of Starsys with and into a
wholly-owned subsidiary of SpaceDev, which we refer to as the merger, including
the issuance of shares of SpaceDev common stock to Starsys shareholders pursuant
to the related agreement and plan of merger and reorganization. This supplement
is being sent to shareholders of SpaceDev and Starsys to advise them of the
financing that SpaceDev recently consummated and to update the description of
appraisal rights under California law.
You should read this supplement in conjunction with the joint proxy
statement/prospectus identified above. This supplement is qualified by
reference to the joint proxy statement/prospectus, except to the extent that the
information in this supplement updates or supersedes the information contained
in the joint proxy statement/prospectus.
The proposed merger involves risks. WE ENCOURAGE YOU TO READ THE ENTIRE
JOINT PROXY STATEMENT/PROSPECTUS AND THIS SUPPLEMENT CAREFULLY AND WE ESPECIALLY
ENCOURAGE YOU TO READ THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 13
OF THE JOINT PROXY STATEMENT/PROSPECTUS AND THE SUPPLEMENTAL SECTION ENTITLED
"SUPPLEMENTAL RISK FACTORS" BEGINNING ON PAGE 2 OF THIS SUPPLEMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SPACEDEV COMMON STOCK TO BE ISSUED
PURSUANT TO THE MERGER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE JOINT
PROXY STATEMENT/PROSPECTUS OR THIS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Boards of Directors of both SpaceDev and Starsys enthusiastically
support this reorganization, and recommend that you vote FOR the merger and the
other proposals.
This joint proxy statement/prospectus supplement no. 1 is dated January 23,
2006.
PAGE 1
SUPPLEMENTAL RISK FACTORS
The merger involves a high degree of risk. In addition to the risks
referenced or described in the joint proxy statement/prospectus dated December
29, 2005 and in SpaceDev's reports filed with the Securities and Exchange
Commission, you should carefully consider the risks described below relating to
the merger. If any of these risks actually materialize, the business, financial
condition or results of operations of SpaceDev and/or Starsys may be seriously
harmed. In such case, the market price of SpaceDev common stock may decline,
and you may lose all or part of your investment.
RISKS RELATED TO THE COMBINED COMPANY FOLLOWING THE MERGER
EACH OF SPACEDEV AND STARSYS HAVE EXPERIENCED LOSSES FROM OPERATIONS IN PRIOR
PERIODS AND HAVE BEEN REQUIRED TO SEEK ADDITIONAL FINANCING TO SUPPORT THEIR
BUSINESSES.
In prior years, both SpaceDev and Starsys have experienced operating losses
and, in some periods, revenues from operations have not been sufficient to fund
their respective operations. On a pro forma basis, the combined company would
have had a net loss from operations of $4,962,858 for the year ended December
31, 2004 and $955,631 for the nine months ended September 30, 2005, assuming the
merger had occurred on January 1, 2004. See "Unaudited Pro Forma Consolidated
Financial Statements" beginning on page 89 of the joint proxy statement/
prospectus. The success of the combined company's business depends upon our
ability to generate revenue from existing contracts, to execute programs
cost-effectively, to attract and complete successfully additional government and
commercial contracts, and additional financing. In the past, both SpaceDev and
Starsys have relied upon cash from financing activities to fund part of the cash
requirements of their respective businesses. If we are in need of further
financing, we may be unable to obtain such financing or contracts as needed or
on terms favorable or acceptable to us. The likelihood of our success must be
considered in light of the expenses, difficulties and delays frequently
encountered in connection with developing businesses, those historically
encountered by us, the competitive environment in which we operate and the
restrictions under which SpaceDev currently operations. In particular,
SpaceDev's Series D-1 Preferred Stock prohibits SpaceDev or its subsidiaries
from incurring indebtedness, including under SpaceDev's revolving credit
facility with Laurus Master Fund Ltd., except for some limited exceptions, and
places material restrictions on SpaceDev's ability to raise cash in an equity
financing, without the consent of the holders of the Series D-1 Preferred Stock.
Debt financing, if available, would increase our interest expense, reduce our
net operating results, and could include covenants that are more restrictive
than those in our current financings, including limitations on the payment of
dividends and on the incurrence of additional debt. The issuance of additional
equity could be dilutive to SpaceDev's existing stockholders.
SPACEDEV COMMON SHAREHOLDERS, INCLUDING STARSYS SHAREHOLDERS WHO RECEIVE
SPACEDEV COMMON STOCK IN THE MERGER, WILL EXPERIENCE DILUTION IF OUR PREFERRED
STOCK IS CONVERTED OR OUR OUTSTANDING WARRANTS AND OPTIONS ARE EXERCISED.
As of January 13, 2006, following the financing described under the heading
"Series D Preferred Stock Financing" below, SpaceDev is obligated to issue
7,983,994 shares of SpaceDev common stock if all of SpaceDev's outstanding
warrants are exercised and outstanding shares of preferred stock converted. In
addition, as of January 13, 2006, SpaceDev has outstanding stock options to
purchase an aggregate of 10,337,266 shares of SpaceDev common stock. The total
number of shares issuable upon the exercise of currently vested warrants,
options and preferred stock (18,321,260 shares) represents approximately 74% of
SpaceDev's issued and outstanding shares of common stock as of January 13, 2006.
In addition, SpaceDev has agreed in the merger agreement to issue up to
5,357,143 shares at the closing of the merger as payment of Starsys transaction
expenses and to Starsys shareholders, up to 7,000,000 shares as performance
consideration and up to 1,853,571 shares as options under SpaceDev's equity
incentive plan to post-merger executives, managers, employees and consultants of
Starsys. In addition, in connection with the financing referred to above,
SpaceDev issued rights to purchase 2,000 shares of convertible preferred stock
and common stock warrants which, if purchased for an aggregate purchase price of
$2,000,000, would be exercisable and convertible into up to 1,792,181 shares of
SpaceDev common stock.
SPACEDEV HAS NOT PAID DIVIDENDS ON ITS COMMON STOCK IN THE PAST AND DOES NOT
ANTICIPATE PAYING DIVIDENDS ON ITS COMMON STOCK IN THE FORESEEABLE FUTURE.
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SpaceDev has not paid common stock dividends since its inception and does
not anticipate paying dividends in the foreseeable future. SpaceDev's current
business plan provides for the reinvestment of earnings in an effort to complete
development of our technologies and products, with the goal of increasing sales
and long-term profitability and value. In addition, Chapter 5 of the California
General Corporation Law, SpaceDev's revolving credit facility with Laurus Master
Fund Ltd. and the terms of SpaceDev's outstanding preferred stock currently
restrict or entirely prohibit the ability of SpaceDev to pay dividends or other
distributions, or to repurchase, shares of its common stock. Any other
financing arrangement that SpaceDev may enter into in the future may
additionally restrict or prohibit paying dividends or distributions on, or
repurchasing, shares of its common stock. In addition, SpaceDev currently has
outstanding shares of preferred stock having an aggregate liquidation preference
of approximately $7.63 million, which shares would receive preferential payment
ahead of any dividends or distributions on any shares of SpaceDev common stock
upon the liquidation or dissolution of SpaceDev.
SPACEDEV MAY BE UNABLE TO COMPLY WITH RESTRICTIONS IMPOSED BY ITS SENIOR D
PREFERRED STOCK, INCLUDING FINANCING RESTRICTIONS, WHICH COULD RESULT IN A
DEFAULT UNDER THEIR TERMS.
SpaceDev's Series D-1 Preferred Stock financing facility imposes a number
of restrictions on SpaceDev for so long as any shares of Series D Preferred
Stock are outstanding, including financing restrictions. The Series D Preferred
Stock contains covenants that limit the ability of SpaceDev or its subsidiaries:
to incur indebtedness, including under the Laurus Master Fund revolving credit
facility, except for indebtedness related to project financing and synergistic
acquisitions; to issue preferred stock which ranks pari passu with the Series
D-1 Preferred Stock, except for related series of Series D Preferred Stock
contemplated by the financing; to issue any variable-priced securities; or to
issue any securities convertible, exercisable or exchangeable for SpaceDev
common stock at a price per share or rate which may change over time. The
Series D Preferred Stock also grants preemptive rights to the investors in the
Series D Preferred Stock financing to participate in future financings until the
first anniversary of the closing date of the Series D Preferred Stock financing,
and prohibits SpaceDev from issuing any shares of its common stock for a period
of at least 6 months after the Series D Preferred Stock financing, except under
specified conditions intended to ensure the terms are no less favorable to us
than the terms of this financing. The Series D Preferred Stock also prohibits
SpaceDev from creating or suffering to exist any lien on SpaceDev's property or
the property of any of its subsidiaries, including Starsys after the merger,
other than for specified permitted liens. A failure to comply with any of the
foregoing or other covenants could result in a triggering event under the
preferred stock, which could require SpaceDev to redeem the preferred stock at
130% or more of their original purchase price.
RISKS RELATED TO THE MERGER
A SUBSTANTIAL NUMBER OF SPACEDEV SHAREHOLDERS MAY EXERCISE THEIR APPRAISAL
RIGHTS UNDER CALIFORNIA LAW.
The shares of SpaceDev common stock will not be listed on a national
securities exchange or the NASDAQ National Market System at or prior to the
merger. SpaceDev shareholders will therefore have appraisal rights with regard
to shares of common stock not voted in favor of the merger and merger agreement
under the California General Corporation Law. Under the General Corporation
Law, a shareholder who does not vote shares in favor of the merger and complies
with the requirements of Chapter 13 of the General Corporation Law may require
SpaceDev to purchase those dissenting shares at their fair market value as of
the day before the first announcement of the terms of the merger. SpaceDev
anticipates that fair market value will be $1.49 per share. Chapter 13 requires
that SpaceDev or its transfer agent receive a shareholder demand for payment
within 30 days of the mailing by SpaceDev of notice of the approval of the
merger to the shareholder, and requires SpaceDev to mail the notice to potential
dissenting shareholders within 10 days of the approval.
Under Chapter 5 of the California Corporations Code, however, SpaceDev may
pay for dissenting shares only to the extent its assets (excluding goodwill,
capitalized R&D expenses and deferred charges) exceed the sum of its liabilities
(excluding deferred taxes and other deferred credits) plus the aggregate
liquidation preferences of its outstanding shares of preferred stock. To the
extent funds are not lawfully available to pay dissenting shares, the right to
payment will be treated as a subordinated claim against SpaceDev. The
subordinated claim will earn interest at the legal rate on judgments, currently
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10% per annum. SpaceDev would not be able to pay this claim, or the accrued
interest, until it meets the financial test in Chapter 5 of the General
Corporation Law, described above.
In addition, if appraisal rights are exercised with respect to more than
1.5% of the outstanding shares of SpaceDev's common stock, then either SpaceDev
or Starsys may elect not to consummate the merger.
FAILURE TO COMPLETE THE MERGER COULD ADVERSELY AFFECT THE FUTURE BUSINESS AND
OPERATIONS OF SPACEDEV AND STARSYS AS WELL AS THE MARKET PRICE OF SPACEDEV
COMMON STOCK.
The merger is subject to the satisfaction of a number of closing
conditions, including the approval of the merger by both SpaceDev and Starsys
shareholders, and may not be successfully completed. In the event that the
merger is not completed, SpaceDev may be subject to a number of risks,
including:
- The price of SpaceDev's common stock may decline to the extent that the
current market price of SpaceDev's common stock reflects a market
assumption that the merger will be completed.
- SpaceDev could suffer the loss of customers, revenues and employees due to
uncertainties resulting from an uncompleted merger.
- SpaceDev's costs related to the merger, such as legal and accounting fees,
must be paid even if the merger is not completed, and these costs would
reduce reported earnings or increase reported loss, for the period when it
was determined that the merger would not be consummated.
- If the merger is not completed by March 31, 2006, each of the investors in
the SpaceDev Series D Preferred Stock financing, described under the
caption "Series D Preferred Stock Financing" below, will have the right to
require SpaceDev to redeem its shares of Series D-1 Preferred Stock, as
described under the caption "Series D Certificates of Designation" below.
If the merger is not completed, Starsys may be subject to a number of risks
including:
- Vectra Bank Colorado may foreclose on Starsys' credit facility, which could
force Starsys into bankruptcy and could result in Vectra owning all of the
assets of Starsys.
- Starsys could suffer the loss of customers, revenues and employees due to
uncertainties resulting from the uncompleted merger.
- Starsys could have difficulty attracting new customers or maintaining
current customers because of its difficult financial situation.
- Starsys's costs related to the merger, such as legal and accounting fees,
must be paid even if the merger is not completed.
SERIES D PREFERRED STOCK FINANCING
On January 12, 2006, SpaceDev entered into a Securities Purchase Agreement,
which we refer to as the purchase agreement, with a limited number of
institutional accredited investors, whom we refer to as the investors. On
January 13, 2006, SpaceDev issued and sold to these investors 5,150 shares of
its Series D-1 Amortizing Convertible Perpetual Preferred Stock, par value
$0.0001 per share, which we refer to as Series D-1 Preferred Stock, under the
purchase agreement for an aggregate purchase price of $5,150,000, or $1,000 per
share. SpaceDev also issued various warrants to these investors under the
purchase agreement, as described below. SpaceDev paid cash fees and expenses of
$119,209 to a finder for the introduction of potential investors in this
financing, and paid $60,000 to the lead investor's counsel for legal expenses
incurred in the transaction.
Use of Proceeds. If the merger contemplated by the joint proxy
statement/prospectus is consummated, the proceeds of this financing will be used
to repay Starsys indebtedness, to pay transaction expenses incurred by Starsys
and by SpaceDev in connection with the merger and to pay the cash consideration
to the Starsys shareholders. If the merger is not completed by March 31, 2006,
each of the investors will have the right to require SpaceDev to redeem its
shares of Series D-1 Preferred Stock, as described under the caption "Series D
Certificates of Designation" below, upon notice and surrender of its preferred
stock warrants. To the extent investors do not exercise this right, the
proceeds of this financing will be used by SpaceDev for working capital and
possibly other strategic acquisitions.
PAGE 4
Series D Preferred Stock. The purchase agreement contemplates the
authorization and issuance by SpaceDev of numerous series of preferred stock,
all of which are substantially similar to the Series D-1 Preferred Stock. We
refer to each series individually as Series D-X Preferred Stock, where X
represents a sequential number, and generically as Series D Preferred Stock.
The relative rights, preferences, limitations and other terms of the series of
Series D Preferred Stock are described below under the caption "Series D
Certificates of Designation" below.
Registration Rights Agreement. Pursuant to a registration rights agreement
among SpaceDev and the investors dated January 12, 2006, SpaceDev agreed to
prepare and file a registration statement covering the resale of the shares of
common stock issuable upon the conversion or redemption of, or as dividends paid
on, the various series of Series D Preferred Stock, as well as the shares
issuable upon the exercise of the common stock warrants. SpaceDev agreed to
file this resale registration statement within 30 days of the closing of the
financing. If, among other things, (1) SpaceDev fails to file the resale
registration statement by that date, or (2) the resale registration statement is
not declared effective by the SEC within 120 days of the closing of the
financing, SpaceDev will be obligated to pay liquidated damages to the investors
of 1% of the aggregate purchase price paid by the investors under the purchase
agreement for the first 30-day period of noncompliance and 2% of the aggregate
purchase price paid by the investors under the purchase agreement for each
subsequent 30-day period of noncompliance.
Additional Investment Option. Under the purchase agreement, from the date
of the effectiveness of the initial registration statement filed pursuant to the
registration rights agreement, which we refer to as the effective date, until
the one-year anniversary of that date, if (1) on any trading day during such
period the volume weighted average price of SpaceDev common stock for each of
the 20 trading days immediately prior to such date exceeds $1.63 and (2) the
average daily trading volume of SpaceDev common stock exceeds $100,000 on each
of those days, then SpaceDev has the option, subject to a number of additional
conditions, to sell to the investors "units" for an aggregate purchase price of
up to $2,000,000 (or a lesser amount to the extent the preferred stock warrants
issued at the initial closing of the financing, which are described below, have
been exercised to purchase these units). Each "unit" consists of one share of
Series D Preferred Stock and a common stock warrant, which entitles the holder
to purchase up to an aggregate of 440,829 shares of SpaceDev common stock at an
exercise price of $1.51 and otherwise has the same terms as the warrants
described in the following paragraph. We refer to the date on which SpaceDev
gives notice to the investors of its exercise of this option as the call date.
Common Stock Warrants. Certain warrants SpaceDev issued to the investors
at the closing entitle the investors to purchase up to an aggregate of 1,135,138
shares of SpaceDev common stock at an exercise price of $1.51 per share. The
warrants are exercisable for five years following the date of grant. The
warrants feature a net exercise provision, which enables the holder to choose to
exercise the warrant without paying cash by surrendering shares subject to the
warrant with a market value equal to the exercise price. However, this right is
available only if a registration statement or prospectus covering the shares
subject to the warrant is not available at any time after one year from the date
of grant. The warrants also have anti-dilution provisions reducing the warrant
exercise price if SpaceDev issues equity securities (other than in specified
exempt transactions) at an effective price below the warrant exercise price to
such lower exercise price. We refer to these warrants as the common stock
warrants.
Preferred Stock Warrants. SpaceDev also issued certain other warrants to
the investors at the closing, which we refer to as the preferred stock warrants.
These warrants entitle the holder to purchase an aggregate number of 2,000
"units", which are identical to the "units" described above, at an exercise
price of $1,000 per unit. The preferred stock warrants are exercisable from the
effective date until the one-year anniversary of that date. If any units
subject to the preferred stock warrants remain unsold after (1) their expiration
date and (2) the exercise of the additional investment option described in the
preceding paragraph, if applicable, and any holder of a preferred stock warrant
issued in the financing has exercised the warrant in full, then the preferred
stock warrant grants that holder the right to purchase a proportionate share of
the unsold units.
Other Provisions. The purchase agreement contains a number of
representations and warranties by SpaceDev in favor of the investors as well as
a number of covenants by SpaceDev, which are generally customary or typical for
financings of this nature. The covenants include:
- an agreement by SpaceDev to indemnify the investors under specified
circumstances;
PAGE 5
- a grant of preemptive rights to the investors to participate in future
SpaceDev financings until the first anniversary of the closing date of the
financing;
- an agreement not to issue any shares of SpaceDev common stock or securities
or other rights to acquire shares of common stock until 6 months after the
effective date (exclusive of shares being issued in the merger), except
under specified conditions intended to ensure the terms are no less
favorable to us than the terms of this financing;
- an agreement by SpaceDev not to effect any transaction involving the
issuance of securities convertible, exercisable or exchangeable for
SpaceDev common stock at a price per share or rate which may change over
time, which we refer to as a variable-rate transaction, so long as any
shares of Series D Preferred Stock are outstanding; and
- a provision which gives effect to any terms of the Series D Preferred Stock
which are determined to be unenforceable.
Prior Relationships with Investors. Laurus Master Fund, Ltd., which we
refer to as Laurus, is one of the investors participating in the financing. On
August 25, 2004, SpaceDev issued and sold to Laurus 250,000 shares of its Series
C Convertible Cumulative Preferred Stock, par value $0.001, which we refer to as
the Series C Preferred Stock, and a warrant to purchase up to 487,000 shares of
common stock, as described in the Form 8-K filed with the SEC on August 30,
2004. In addition, on October 31, 2005, SpaceDev issued and sold to Laurus
2,032,520 shares of its common stock and a warrant to purchase an additional
450,000 shares of its common stock, as described in the Form 8-K filed by
SpaceDev with the SEC on November 3, 2005. In addition, on June 3, 2003,
SpaceDev entered into a secured revolving credit facility with Laurus and issued
warrants to Laurus to purchase up to an aggregate of 200,000 shares of its
common stock, as described in the Form 8-K filed by SpaceDev with the SEC on
July 18, 2003. In June 2004, SpaceDev issued warrants to acquire 50,000 shares
of its common stock to Laurus in connection with the revolving credit facility.
These warrants were exercised in April 2005 at an exercise price of $1.06 per
share. In August 2004, SpaceDev issued warrants to acquire an additional 50,000
shares of common stock to Laurus at an exercise price per share equal to $1.93
per share in connection with the revolving credit facility. There is currently
no debt outstanding under this credit facility, and the purchase agreement
prohibits SpaceDev from drawing down on the facility. The revolving credit
facility with Laurus expires on June 3, 2006.
In connection with this financing, Laurus consented to and waived certain
preemptive and other rights under the SpaceDev Series C Preferred Stock, the
aforementioned agreements and certain related agreements in respect of the
authorization and issuance of one or more series of Series D Preferred Stock and
the other transactions described in this supplement, and certain other
transactions. SpaceDev paid Laurus Capital Management, L.L.C., the manager of
Laurus, $87,000 in connection with Laurus's delivery of the consent and $1,000
to Laurus's counsel for their related fees.
A complete copy of the certificates of designation for the first two series
of Series D Preferred Stock, the Securities Purchase Agreement, the Registration
Rights Agreement, the form of Preferred Stock Warrant and the form of Common
Stock Warrant are filed as exhibits to the current report on Form 8-K filed by
SpaceDev with the SEC on January 13, 2006.
This supplement is neither an offer to sell nor a solicitation of an offer
to buy shares of Series D Preferred Stock, common stock warrants, preferred
stock warrants or common stock which may be issued upon exercise of the common
stock warrants, as dividends on the Series D Preferred Stock or upon the
conversion or redemption of the Series D Preferred Stock. The above disclosures
are being made pursuant to and in accordance with Rule 135 under the Securities
Act.
SPACEDEV SERIES D CERTIFICATES OF DESIGNATION
On January 11, 2006, SpaceDev filed with the Colorado Secretary of State
(1) a Certificate to Set Forth Designations, Voting Powers, Preferences,
Limitations, Restrictions and Relative Rights of the Series D-1 Amortizing
Convertible Perpetual Preferred Stock, $0.001 Par Value per Share, which we
refer to as the Series D-1 Certificate of Designations, and (2) a Certificate to
Set Forth Designations, Voting Powers, Preferences, Limitations, Restrictions
and Relative Rights of the Series D-2 Amortizing Convertible Perpetual Preferred
Stock, $0.001 Par Value per Share, which we refer to as the Series D-2
Certificate of Designations. Under the purchase agreement described under the
caption "Series D Preferred Stock Financing" above, SpaceDev may be obligated to
PAGE 6
file additional certificates of designation which will be substantially similar
to the Series D-2 Certificate of Designations, except as to the issue date and
number of authorized shares in the series. We refer to all of the foregoing
certificates of designations as the Series D Certificates of Designations.
The following is a summary of the relative rights, preferences and
limitations of the SpaceDev Series D Preferred Stock. All series are
substantially the same in all respects except for the issue date and the number
of authorized shares in the series; in addition, the Series D-1 Preferred Stock,
but no other series of Series D Preferred Stock, includes an explicit reference
to the amendment of the SpaceDev Series C Preferred Stock, and the original
issue date for all series of Series D Preferred Stock is based on the original
issue date of the Series D-1 Preferred Stock.
Dividend Rights. Holders of the Series D Preferred are entitled to receive
cumulative preferential dividends at the annual rate per share (as a percentage
of the stated value per share, which is initially $1,000), which we refer to as
the dividend rate, equal to LIBOR (as determined for each calendar quarter) for
the applicable dividend period plus 4.0% on a quarterly basis. On the 6 month
anniversary of the issue date of any series of Series D Preferred Stock, the
dividend rate will be increased to 15% per annum per share with respect to any
portion of outstanding shares of the Series D Preferred Stock not redeemed
pursuant to SpaceDev's monthly redemption option (described in the paragraph
"Redemption Rights" below); and commencing at the beginning of the 37th month of
the issue date of the series of Series D Preferred Stock, the dividend rate will
be increased to the greater of LIBOR plus 10% per annum and 15% per annum.
These dividends may be paid in cash or, at SpaceDev's option, if the equity
conditions described below have been satisfied, in shares of SpaceDev common
stock, with each share being valued at approximately 89% of its fair market
value.
Conversion Rights. A holder of a share of the Series D Preferred Stock may
convert the share at any time into a number of shares of SpaceDev common stock
determined by dividing the current stated value of the share (initially $1,000)
by the conversion price (initially $1.48). SpaceDev also has the option,
subject to certain requirements, of forcing a conversion of the shares of the
Series D Preferred Stock, at the same conversion rate, if, after 24 months from
the issue date of the Series D-1 Preferred Stock, the volume weighted average
price for each trading day in any 20 consecutive trading day period exceeds the
then conversion price by 250%. If SpaceDev fails to deliver share certificates
for converted shares in a timely manner, the holder may cover a short sale of
those shares in the market and SpaceDev will be obligated to pay the holder the
difference between the cover price and the prior sale price of those shares. In
addition, SpaceDev has the right to force a conversion of any series of Series D
Preferred Stock anytime after the two-year anniversary of the issue date of that
series if all of the equity conditions have been satisfied and the
volume-weighted average price of SpaceDev common stock for each of 20
consecutive trading days exceeds 2.5 times the current conversion price
(initially $1.48). The foregoing rights of conversion are subject to a
limitation that no holder of Series D Preferred Stock is, for purposes of the
federal securities laws, deemed to beneficially own more than 4.99% of the
outstanding shares of SpaceDev common stock or, if the holder waives this limit
with 61 days notice, more than 9.99% of the outstanding shares of SpaceDev
common stock.
Voting Rights. The Series D Preferred have no general voting rights, but
the holders of a majority of the outstanding Series D Preferred must vote in
favor of or consent to certain corporate actions, including:
- changing the relative rights, preferences or limitations of the applicable
series of Series D Preferred Stock;
- authorizing or issuing any securities that are pari passu or senior to the
applicable series of Series D Preferred Stock, other than other series of
Series D Preferred Stock permitted by the financing documents;
- amending the SpaceDev articles of incorporation in a manner which adversely
affects the rights of any holder of shares of Series D Preferred Stock or
amending the SpaceDev bylaws in a manner which materially and adversely
affects any rights of any holder of shares of Series D Preferred Stock;
- increasing of the authorized number of shares of the applicable series of
Series D Preferred Stock;
- incurring or guaranteeing any indebtedness by SpaceDev or any of its
subsidiaries, other than for specified permitted indebtedness;
PAGE 7
- creating or suffering to exist any lien on SpaceDev's property or the
property of any of its subsidiaries, other than for specified permitted
liens;
- designating any class or series of capital stock having any rights or
preferences senior or pari passu with the Series D Preferred Stock, other
than additional series of Series D Preferred Stock;
- redeeming, repurchasing or acquiring any shares of SpaceDev's common stock
or equivalent securities or junior securities;
- issuing any variable-priced securities or entering into any variable-rate
transaction; or
- paying dividends or other distributions on SpaceDev's shares of junior
securities or common stock, other than ordinary dividends on pari passu
securities if no dividends or other payments are past due on any series of
Series D Preferred Stock.
Liquidation Preferences. Upon any liquidation, dissolution or winding up
of SpaceDev, the holders of the Series D Preferred Stock are entitled to receive
from the assets available for distribution to shareholders, for each share of
the Series D Preferred Stock, an amount equal to the current stated value per
share (initially $1,000), plus any accrued and unpaid dividends thereon and any
other fees or liquidated damages owing thereon, before any distribution or
payment may be made to any other holders of SpaceDev capital stock, other than
other pari passu shares (including the Series C Preferred Stock). If the assets
available for distribution to shareholders are insufficient to pay the
liquidation preferences of all shares of Series D Preferred Stock and other pari
passu shares, then each holder of shares of Series D Preferred Stock and/or pari
passu shares will receive a percentage of the assets available for distribution
equal to (1) the full amount that would otherwise be payable to that holder upon
liquidation, dissolution or winding-up of our company, divided by (2) the full
amount that would be otherwise be payable to all holders of any series of Series
D Preferred Stock or any pari passu stock upon liquidation, dissolution or
winding-up of SpaceDev.
Redemption Rights. SpaceDev has the option of redeeming shares of Series D
Preferred Stock, in whole or in part, for cash upon 20 trading days notice if
the equity conditions described below (other than the volume and share price
condition) have been satisfied and SpaceDev is not participating in a change in
control transaction. The redemption price equals the current stated value of
the shares, multiplied by 115%, if prior to the 9 month anniversary of the issue
date of the shares, or 110%, if thereafter but prior to the 24 month anniversary
of that issue date, plus accrued and unpaid dividends and other amounts due on
the shares. On and after the 24 month anniversary of the issue date, the
redemption price is equal to 100% of the current stated value of the shares,
plus accrued and unpaid dividends and other amounts due on the shares. SpaceDev
may also redeem all the shares of Series D Preferred Stock for cash equal to the
stated value of such shares (plus all accrued and unpaid dividends and other
amounts due on such shares) if SpaceDev is required to reclassify all of the
value of the applicable series of Series D Preferred Stock as a liability on its
balance sheet. If SpaceDev sends a redemption notice, a holder of shares of
Series D Preferred Stock may elect to convert those shares pursuant to its
conversion rights described above before the redemption becomes effective. If a
change of control transaction occurs within 6 months of a redemption that occurs
within 24 months following the issue date, the holder of the redeemed shares
will be entitled to receive any additional compensation the holder would have
received had those shares been redeemed due to the change in control
transaction, as described below.
In addition, on each monthly anniversary of the issue date of any series of
Series D Preferred Stock, following the 6 month anniversary of that issue date,
SpaceDev may elect to redeem in part each share of that series of Series D
Preferred Stock, in an amount equal to the quotient of 1/54 of the aggregate
stated value of the shares of that series on such date, which we refer to in
each case as the monthly optional redemption amount. SpaceDev may pay this
amount in cash or, subject to satisfaction of the equity conditions, with a
number of shares of SpaceDev common stock equal to 1.12 times the monthly
optional redemption amount, divided by the volume weighted average price of
SpaceDev common stock for the 10 trading days immediately preceding the monthly
redemption date. Such a partial redemption will decrease the stated value of
each share of the applicable series of Series D Preferred Stock by an amount per
share equal to the monthly optional redemption amount divided by the number of
then outstanding shares of that series. If SpaceDev does not redeem a part of
any series of Series D Preferred Stock which SpaceDev has the right to redeem,
the dividend rate on that portion will increase to not less than 15%, as
described above.
SpaceDev is also required to redeem the shares of Series D Preferred Stock
upon the occurrence of a triggering event other than a change in control
transaction at a price equal to the sum of greater of (x) 130% and (y) the
volume weighted average price of its common stock on the trading date preceding
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the triggering event divided by the conversion price, multiplied by the stated
value of the shares, plus all accrued but unpaid dividends and other amounts due
on the shares. In the event of a change in control transaction, the redemption
price equals 130% of the stated value of the shares. In the event the
triggering event is the failure of the Starsys merger to occur by March 31,
2006, the holder requiring the redemption of its shares of Series D Preferred
Stock must surrender its preferred stock warrants.
Conversion Price Adjustments. The conversion price of the shares of Series
D Preferred Stock will be appropriately adjusted in the event of stock
dividends, stock splits, reverse stock splits or reclassifications, or specified
pro rata asset distributions, affecting SpaceDev common stock. The stock into
which the shares of Series D Preferred Stock can be converted and the conversion
price will also be adjusted upon the occurrence of a fundamental transaction (a
merger or consolidation of SpaceDev, the sale of all or substantially all
SpaceDev assets, a successful tender or exchange offer affecting SpaceDev common
stock, or a reclassification of SpaceDev common stock).
Equity Conditions. SpaceDev's right to take certain actions under the
Series D Preferred Stock, including its option to redeem shares of Series D
Preferred Stock, to force the conversion of a series of Series D Preferred
Stock, to make optional monthly redemptions of shares of Series D Preferred
Stock in shares of its common stock in lieu of cash or to pay dividends on
shares of Series D Preferred Stock in shares of its common stock in lieu of
cash, depend on the following conditions being satisfied, which we refer to as
the equity conditions:
- SpaceDev has complied with specified obligations to holders of shares of
Series D Preferred Stock, including honoring all conversions and paying all
amounts owed to holders;
- An effective registration statement which the holders may use to resell
shares of SpaceDev common stock acquired pursuant to the financing
documents is available to the holders;
- The SpaceDev common stock is trading on a public trading market (including
the OTC Bulletin Board) and the shares of SpaceDev common stock to be
issued pursuant to the financing documents are listed for trading on that
market;
- No triggering event (as described below) exists or is imminent;
- The issuance of shares to the holder would not violate the beneficial
ownership limitations described above;
- For a period of 20 trading days prior to the date of determination, the
daily average dollar volume for shares of SpaceDev common stock on the
trading market exceeds $100,000 per trading day and the volume weighted
average price of SpaceDev common stock for each of those trading days is at
least $1.50 per share (subject to adjustment); and
- No fundamental transaction or change in control transaction is pending or
proposed.
Triggering Events. For purposes of the Series D Certificates of
Designations, a triggering event is defined as the occurrence of any of the
following events:
- The initial registration statement required by the registration rights
agreement does not become effective by June 12, 2006 or, after the issuance
of shares of a new series of Series D Preferred Stock, a registration
statement required by the registration rights agreement to cover the shares
of common stock issuable on account of that series does not become
effective within 120 days of the issue date of those shares;
- Any registration statement required to be effective under the registration
rights agreement is unavailable for more than 45 days during any 12-month
period, or a holder may not resell its securities under the registration
statement for 15 consecutive days or for more than 45 days during any
12-month period, in either case subject to a 20-day increase for delays
caused by an SEC review of our registration statement or periodic reports;
- SpaceDev does not comply with its obligations promptly to achieve
effectiveness of the initial registration statement under the registration
rights agreement;
- SpaceDev breaches various obligations due to holders of Series D Preferred
Stock, including: failing to deliver share certificates upon conversion on
time; failing to pay specified amounts owed on time; failing to reserve
sufficient shares of its common stock to issue upon the conversion of
shares of Series D Preferred Stock; or redeeming junior securities;
- the occurrence of a change in control transaction affecting SpaceDev,
including the acquisition by a group of 33% of the voting securities of
SpaceDev;
PAGE 9
- the occurrence of various insolvency or bankruptcy events affecting
SpaceDev or any of its significant subsidiaries;
- the failure of SpaceDev common stock to be traded on a trading market for
more than 5 trading days (whether or not consecutive); and
- the failure of the merger to be consummated by March 31, 2006.
The Series D-1 Certificate of Designations and Series D-2 Certificate of
Designations have been filed as exhibits to the current report on Form 8-K filed
by SpaceDev with the SEC on January 13, 2006.
DISSENTERS' RIGHTS
California General Corporation Law. Due to a change in the initial listing
requirements at the American Stock Exchange, which became effective after the
date of the joint proxy statement/prospectus, shares of SpaceDev common stock
will not be listed on the American Stock Exchange or another national securities
exchange or the NASDAQ National Market at the time of the merger. Shares of
SpaceDev common stock will continue to be traded on the OTC Bulletin Board under
the symbol "SPDV.OB". As a result, the rights of SpaceDev shareholders to
exercise appraisal rights, and the procedures to exercise these rights, are as
described below.
The following summary of appraisal rights under the California General
Corporation Law is not intended to set forth definitively all of the law and
procedures relating to perfection of dissenters rights under the General
Corporation Law. SpaceDev shareholders are referred to the text of the
applicable sections of such law, set forth in Annex C to the joint proxy
statement/prospectus. In view of the complexity of these provisions of
California law, SpaceDev shareholders who are considering exercising their
appraisal rights should consult a legal advisor.
Under Chapter 13 of the General Corporation Law, a SpaceDev shareholder who
desires to exercise his or her appraisal rights with respect to some or all of
his or her shares and obtain the payment of cash for those shares must take the
following four steps in order to perfect the right to obtain an appraisal and
the payment of cash. First, the shareholder must not vote the shares in favor
of the merger. Second, SpaceDev or its transfer agent must receive the
shareholder's demand for the payment of cash for the shares within 30 days of
the date SpaceDev mails a notice of approval of the merger to the shareholder,
as described below. Third, the shareholder must submit to SpaceDev or its
transfer agent the certificates representing the shares, properly stamped or
endorsed, within 30 days of the date of the mailing date for the notice of
approval. Shares which were not voted in favor of the merger and for which a
timely demand and share certificate submission have been made become "dissenting
shares", unless they lose their status as dissenting shares, as described below.
Fourth, if the shareholder and SpaceDev are unable to reach an agreement on
whether shares are dissenting shares and/or on the price to be paid for the
dissenting shares, the shareholder must file an action in a proper superior
court in California within six months of the mailing date for the notice of
approval to have the court determine the fair market value.
If the merger is approved at the special meeting, SpaceDev must mail a
notice of the approval to each of its shareholders eligible to exercise
appraisal rights under Chapter 13 of the General Corporation Law within 10 days
after the approval. The notice must include a copy of specified provisions of
Chapter 13 of the General Corporation Law, a brief description of the procedure
to be followed if a shareholder desires to exercise appraisal rights under
Chapter 13, and a statement of the price SpaceDev has determined to represent
the fair market value of dissenting shares. The fair market value is to be
determined as of the day before the first announcement of the terms of the
merger, excluding any appreciation or depreciation in consequence of the
proposed merger. SpaceDev anticipates this price to be $1.49 per share, which
was the closing price of SpaceDev common stock on October 25, 2005, the day
before SpaceDev filed a periodic report on Form 8-K with the SEC which described
the terms of the proposed merger. Under Chapter 13, the statement of price
constitutes an offer by SpaceDev to purchase any dissenting shares at the price
stated.
SpaceDev shareholders who have not voted their shares in favor of the
merger and merger agreement may exercise their appraisal rights by delivering a
written demand for the purchase of those shares for their fair market value, and
submitting the share certificates evidencing those shares, properly stamped or
endorsed, to SpaceDev or its transfer agent. The demand and share certificates
must be received by SpaceDev or its transfer agent within 30 days of the mailing
PAGE 10
of the notice of approval of the merger. The demand must state the number and
class of the dissenting shares and must contain a statement of what the
shareholder claims to be the fair market value of the dissenting shares as of
the day before the announcement of the merger, even if the shareholder agrees
with SpaceDev's determination of the fair market value of the shares as set
forth in SpaceDev's notice of approval. The demand must be made by the
shareholder of record to be effective. Accordingly, in the event a shareholder
holds shares of SpaceDev common stock in street name, the shareholder must
ensure that the demand and share certificate submission are made on his or her
behalf by the record holder of the shares. Under Chapter 13, the statement of
fair market value will constitute an offer by the shareholder to sell the shares
to SpaceDev at that price. A dissenting shareholder may not withdraw the demand
for purchase of dissenting shares without the consent of SpaceDev.
If SpaceDev and a shareholder exercising appraisal rights agree that the
shares are dissenting shares and agree upon the price of the shares, the
shareholder is entitled to receive the agreed price with interest at the legal
rate on judgments, currently 10% per annum, from the date of agreement. Payment
is to be made out of legally available funds (as described below) within 30 days
after the date of the agreement or within 30 days after any statutory or
contractual conditions to the merger are satisfied, whichever occurs later.
If SpaceDev denies that the shares are dissenting shares, or if SpaceDev
and the SpaceDev shareholder fail to agree upon the fair market value of the
shares, then the shareholder, within six months after the date on which notice
of the approval of the merger was mailed to the shareholder, may file a
complaint or intervene in a pending action in a proper superior court in
California, seeking a judicial determination of whether the shares are
dissenting shares and/or the fair market value of the shares. If the
shareholder does not file a complaint or intervene in a pending action within
the six month period, the shares will lose their status as dissenting shares and
the shareholder will lose his or her appraisal rights with respect to those
shares. The court may enter judgment against SpaceDev for payment of the fair
market value of dissenting shares, together with interest thereon at the legal
rate on judgments from the date of judgment, subject to delivery of the share
certificates evidencing the dissenting shares properly stamped or endorsed to
SpaceDev. The costs of the proceedings may be apportioned as the court
considers equitable, but if the price determined by the court exceeds the price
offered by SpaceDev, SpaceDev must pay the costs, and if the price determined by
the court exceeds the price offered by SpaceDev by more than 25%, the court may
in its discretion order SpaceDev to pay the shareholder's attorneys' and expert
fees and interest at the legal rate on judgments from the date the shares became
dissenting shares.
Payment of the price for dissenting shares is subject to funds being
legally available under Chapter 5 of the General Corporation Law. If sufficient
funds are not legally available, a shareholder's claim for the purchase of
dissenting shares would become a subordinated claim earning interest at the
legal rate for judgments, payable when permitted by Chapter 5. Under Chapter 5,
the amount of funds lawfully available to purchase dissenting shares is limited
to the excess of the assets of SpaceDev (excluding goodwill, capitalized R&D
expenses and deferred charges) over the sum of the liabilities of SpaceDev
(excluding deferred taxes, deferred income and other deferred credits) plus the
aggregate liquidation preferences of the outstanding shares of SpaceDev's
preferred stock. SpaceDev does not anticipate that funds would be legally
available to pay for dissenting shares after the consummation of the merger,
and, accordingly, any proper demand for the purchase of dissenting shares would
become a subordinated claim and no assurances can be provided when such a claim
could be lawfully paid to the dissenting shareholder.
Dissenting shares would lost their status as dissenting shares under any of
the following circumstances:
- The merger is abandoned;
- The shares are transferred prior to submission of the share certificates
properly stamped or endorsed to SpaceDev or its transfer agent;
- SpaceDev and the shareholder disagree as to the status of the shares as
dissenting shares or as to their fair market value, and neither files a
complaint with a proper court in California as described above within six
months of the date on which SpaceDev mailed notice of the approval of the
merger to the shareholder; or
- The shareholder, with the consent of SpaceDev, withdraws the demand for
SpaceDev to purchase of the dissenting shares.
PAGE 11
WHERE YOU CAN FIND MORE INFORMATION
SpaceDev has filed with the SEC a Form S-4 registration statement under the
Securities Act of 1933 with respect to the common stock offered by the joint
proxy statement/prospectus. The joint proxy statement/prospectus and this
supplement, which together constitute part of the registration statement, do not
contain all of the information set forth in the registration statement and its
exhibits and schedules, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. For further information regarding
SpaceDev's common stock and SpaceDev, please review the registration statement,
including exhibits, schedules and reports filed as a part of the registration
statement. Statements in the joint proxy statement/prospectus and this
supplement about the contents of any contract or other document filed as an
exhibit to the registration statement or the current report on Form 8-K filed by
SpaceDev with the SEC on January 13, 2006 set forth the material terms of
contracts or other documents but are not necessarily complete. The registration
statement and current report on Form 8-K, including the exhibits and schedules,
may be inspected without charge at the principal office of the public reference
facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549.
Copies of this material can also be obtained at prescribed rates by writing to
the Public Reference Section of the SEC at its principal office at 100 F Street,
N.E., Washington, D.C. 20549. You may obtain information on the operation of
the public reference facilities by calling the SEC at 1-800-SEC-0330. The SEC
maintains a Web site (http://www.sec.gov/) that contains reports, proxy
statements and other information regarding registrants that file electronically
with the SEC, including SpaceDev. Additional information about SpaceDev can be
obtained from its Internet website at http://www.spacedev.com/. The content of
this website does not constitute part of the joint proxy statement/prospectus or
this supplement.
If you have any questions about the merger, the non merger-related
proposals of SpaceDev or the meetings of SpaceDev and Starsys, including the
procedures for voting your shares, or if you need additional copies of the joint
proxy statement/prospectus, this supplement or the proxies or (in the case of
Starsys shareholders only) transmittal letters enclosed with the joint proxy
statement/prospectus, please contact:
FOR SPACEDEV SHAREHOLDERS:
SpaceDev, Inc.
13855 Stowe Drive
Poway, CA 92064
Attention: Investor Relations
(858) 375-2026
FOR STARSYS SHAREHOLDERS:
Starsys Research Corporation
4909 Nautilus Court North
Boulder, Colorado 80301
Attention: Chief Executive Officer
(303) 583-1400
Additional copies of the joint proxy statement/prospectus and this
supplement may also be obtained from Exchange Agent at the following office:
Continental Stock Transfer and Trust Company
17 Battery Place
New York, NY 10004
Attention: Reorganization Department
(212) 509-4000
Any questions may also be directed to Investor Relations at SpaceDev, Inc.
at (858) 375-2026.
PAGE 12