EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
AEROBIC POWER SYSTEMS, INC.
ARTICLE I
The name of the corporation is "Aerobic Power Systems, Inc." and it
shall have the purpose of engaging in any lawful business.
ARTICLE II
The corporation shall have the authority to issue up to 200,000 shares
of stock which shall be designated as "common stock."
ARTICLE III
The street address and county of the initial registered office of the
corporation is Sutherland, Asbill & Brennan, 3100 First Atlanta Tower, 2
Peachtree Street, N.W., Atlanta, Georgia 30383-3001, Fulton County, Georgia,
and the name of its initial registered agent at such address is Mark D.
Kaufman.
ARTICLE IV
The name and address of the sole incorporator is:
Mark D. Kaufman
Sutherland, Asbill & Brennan
3100 First Atlanta Tower
2 Peachtree Street, N.W.
Atlanta, Georgia 30383-3001
ARTICLE V
The mailing address of the initial principal office of the corporation
is:
12651 Elmwood Avenue
Cleveland, Ohio 44111
Attention: Jon A. Lindseth
ARTICLE VI
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages
for breach of duty of care or other duty as a director, except: (a) for any
appropriation, in violation of his or her duties, of any business opportunity of
the corporation, (b) for acts or omissions which involve intentional misconduct
or a knowing violation of law, (c) for any type of liability set forth in
section 14-2-832 of the Georgia Business Corporation Code (the "GBCC"), or (d)
for any transaction from which the director derived an improper personal
benefit. If the GBCC is hereafter amended to further eliminate or limit the
personal liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the GBCC, as so amended.
Any repeal or modification of the foregoing paragraph by the
shareholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE VII
Any action required or permitted by the GBCC to be taken at a meeting
of the shareholders of the corporation may be taken without a meeting if a
written consent setting forth the action so taken shall be signed by the
persons who would be entitled to vote at a meeting shares having voting power
to cast not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shareholders entitled
to vote were present and voted.
ARTICLE VIII
In discharging the duties of their respective positions and in
determining what is believed to be in the best interests of the corporation,
the Board of Directors, committees of the Board of Directors and individual
directors, in addition to considering the effects of any action on the
corporation or its shareholders, may consider the interests of the employees,
customers, suppliers and creditors of the corporation and its subsidiaries, the
communities in which offices or other establishments of the corporation and its
subsidiaries are located, and all other factors such directors consider
pertinent; provided, however, that this Article VIII shall be deemed solely to
grant discretionary authority to the directors and shall not be deemed to
provide any constituency any right to be considered.
-2-
ARTICLE IX
The shareholders of the corporation shall not have a preemptive right
to acquire the corporation's unissued or treasury shares or any other shares or
securities of the corporation.
IN WITNESS WHEREOF, the undersigned incorporator has executed these
articles of incorporation.
/s/ Mark D. Kaufman
----------------------------------
Mark D. Kaufman
-3-
ARTICLES OF AMENDMENT
OF
AEROBIC POWER SYSTEMS, INC.
I.
The name of the corporation, which was incorporated under the Georgia
Business Corporation Code, is Aerobic Power Systems, Inc.
II.
The amendment adopted is to add Article X, as set forth below, to the
Articles of Incorporation:
"Article X
Approval of the following matters shall require the affirmative
vote of the holders of at least two-thirds of the outstanding shares of all
capital stock of the corporation entitled to vote generally in the election
of directors, considered for purposes of this Article X as one class:
1. any merger of the corporation with any other
corporation except for any merger as to which a vote of the
shareholders of this corporation is not otherwise required pursuant to
the GBCC as now or hereafter in effect;
2. any acquisition of all of the outstanding shares of one
or more classes or series of the corporation by another corporation
through a share exchange;
3. any sale, lease, exchange or other disposition of all
or substantially all of the property of the corporation except as to
which a vote of the shareholders of this corporation is not otherwise
required pursuant to the GBCC as now or hereafter in effect;
4. any dissolution of the corporation; or
5. any amendment or repeal of this Article X."
and such amendment was adopted on August 31, 1990.
[SEAL]
CERTIFICATE
THIS DOCUMENT RECEIVED AND FILED IN THE OFFICE OF THE SECRETARY OF STATE
BY: J. Slate
DATE: 9-24-90
TRANSACTION#: 90268022
8923805
III.
No shares of the corporation having been issued, the amendment was
adopted by the incorporator without shareholder action, which action was not
required, pursuant to s.14-2-1005 of the Georgia Business Corporation Code.
DULY EXECUTED and delivered, under seal, by the incorporator on August
31, 1990.
/s/ Mark D. Kaufman
----------------------------------
Mark D. Kaufman, as the
incorporator
-2-
ARTICLES OF MERGER
OF
AEROBICS POWER SYSTEMS, INC., AN OHIO CORPORATION
WITH AND INTO
AEROBIC POWER SYSTEMS, INC., A GEORGIA CORPORATION
Aerobic Power Systems, Inc., a Georgia corporation (the "Surviving
Corporation") hereby executes the following Articles of Merger with respect to
the merger (the "Merger") of Aerobic Power Systems, Inc., an Ohio corporation
(the "Merging Corporation"), with and into the Surviving Corporation:
I.
The Agreement and Plan of Merger is attached hereto as Exhibit A and
by reference made a part of these Articles of Merger (the "Plan").
II.
The Plan and the Merger have each been duly approved by the
shareholders of the Merging Corporation and the shareholders of the Surviving
Corporation.
III.
The Merger shall be effective upon delivery of these Articles of
Merger to the Secretary of State of Georgia.
DULY EXECUTED and delivered, under seal, by duly authorized officers
of the Surviving Corporation on January 15, 1991.
THE SURVIVING CORPORATION:
AEROBIC POWER SYSTEMS, INC.
(Corporate Seal)
By: /s/ David W. Dorheim
-------------------------------
David W. Dorheim
President
Attest:
/s/ Mark D. Kaufman
----------------------------
Mark D. Kaufman
Secretary
Exhibit A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into this 6th day
of November, 1990, by and between Aerobic Power Systems, Inc., a Georgia
corporation (hereinafter called the "Georgia Company" or the "Surviving
Corporation") and Aerobic Power Systems, Inc., an Ohio corporation (hereinafter
called the "Merging Corporation"), said entities being hereinafter referred to
sometimes jointly as the "Constituent Entities."
WITNESSETH:
WHEREAS, the Georgia Company by its Articles of Incorporation has an
authorized capital stock consisting of two hundred thousand (200,000) shares of
common stock, one hundred (100) shares of which are now issued and outstanding
and are owned by Jon A. Lindseth; and
WHEREAS, as of the date hereof, the Merging Corporation has an
authorized capital stock consisting of two hundred thousand (200,000) shares of
common stock without par value, of which forty-one thousand two hundred and
fifty (41,250) are issued and outstanding and are owned by the persons listed,
and in the amounts set forth opposite their names, on Schedule I attached
hereto; and
WHEREAS, the Boards of Directors of the Georgia Company and the Merging
Corporation, by written consent in accordance with section 14-2-821 of the
Georgia Business Corporation Code and section 1701.54 of the Ohio General
Corporation Law, respectively, for the sole purpose of causing the Surviving
Corporation to be a Georgia corporation, have approved and adopted this
Agreement and Plan of Merger, and have recommended this Agreement and Plan of
Merger to the shareholders of the respective Constituent Entities, and have
declared it advisable and in the best interests of the Constituent Entities and
their shareholders that the Merging Corporation merge with and into the Georgia
Company, which shall be the surviving corporation, in the manner and upon the
terms and conditions hereinafter set forth and with the effect provided by and
pursuant to the applicable provisions of the corporation laws of the States of
Georgia and Ohio, which laws permit the merger herein contemplated; and
WHEREAS, the shareholders of the Georgia Company and the Merging
Corporation have approved and adopted this Agreement and Plan of Merger by
written consent in accordance with section 14-2-704 of the Georgia Business
Corporation Code and section 1701.54 of the Ohio General Corporation Law,
respectively.
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and provision hereinafter contained, the Merging Corporation and the Georgia
Company hereby agree as follows:
ARTICLE I
1. The Merger. At the Effective Time of the Merger (as
hereinafter defined) the Georgia Company and the Merging Corporation shall be
merged (the "Merger") into a single corporation in accordance with the laws of
the States of Georgia and Ohio, by the Merging Corporation merging into the
Georgia Company. The Georgia Company shall be the Surviving Corporation and
shall exist under the name "Aerobic Power Systems, Inc.," as hereinafter
provided. The principal office of the Surviving Corporation shall be located at
120 Interstate North Parkway East, Atlanta, Georgia 30339.
2. Effective Time of the Merger. The Merger shall be effective
upon delivery of the articles of merger for the Merger to the Secretary of
State of Georgia and the Certificate of Merger to the appropriate official in
Ohio (the "Effective Time of the Merger").
ARTICLE II
Effect of the Merger. At and after the Effective Time of the Merger,
in accordance with the laws of the States of Georgia and Ohio:
1. Corporate Existence. The Constituent Entities shall be a
single corporation which shall be the Georgia Company as the Surviving
Corporation and the separate existence of the Merging Corporation shall cease
except to the extent provided by the laws of the State of Ohio in the case of a
corporation after its merger into another corporation.
2. Rights, Privileges, Etc. The Surviving Corporation shall
possess all the rights, privileges, powers, immunities and franchises of a
public as well as a private nature of each of the Constituent Entities, and all
property, real, personal and mixed, including all patents, trademarks,
trademark registrations and applications for registration of patents and
trademarks, and all debts due on whatever account, including subscriptions for
shares, and all other choses in action, and all and every other interest of, or
belonging to, or due to, each of the Constituent Entities, shall be taken and
deemed to be transferred to and vested in the Surviving Corporation without
further act or deed;
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and the title to all real estate, or any interest therein, vested in either of
the Constituent Entities shall not revert nor be in any way impaired by reason
of the Merger.
3. Liabilities, Obligations, Etc. The Surviving Corporation shall
be responsible and liable for all liabilities and obligations of each of the
Constituent Entities, and shall be subject to all of the duties and liabilities
of a corporation organized under the Georgia Business Corporation Code; and any
claim existing or action or proceeding pending by or against either of the
Constituent Entities may be prosecuted to judgment as if the Merger had not
taken place, or the Surviving Corporation may be substituted in its place, and
neither the rights of creditors nor any liens upon the property of either of the
Constituent Entities shall be impaired by the Merger.
4. Corporate Acts. All acts, contracts, approvals and
authorizations of the Merging Corporation, its shareholders, Board of Directors,
committees elected or appointed by the Board of Directors, officers and agents,
which were valid and effective immediately prior to the Effective Time of the
Merger shall be taken for all purposes as the acts, contracts, approvals and
authorizations of the Surviving Corporation and shall be as effective and
binding thereon as they were with respect to the Merging Corporation.
5. Articles of Incorporation. The Articles of Incorporation of the
Georgia Company as in effect at the Effective Time of the Merger shall be the
Articles of Incorporation of the Surviving Corporation, until further amended in
the manner provided by law.
6. Bylaws. The Bylaws of the Georgia Company shall be and
constitute the Bylaws of the Surviving Corporation, until the same shall
thereafter be altered, amended, or repealed in accordance with applicable law.
7. Directors and Officers. The directors and officers of the
Merging Corporation immediately prior to the Effective Time of the Merger shall
be and constitute the directors and officers of the Surviving Corporation and
shall hold office until their successors shall have been elected or appointed as
provided in the Bylaws of the Surviving Corporation.
ARTICLE III
Manner and Basis of Converting Shares. The manner and basis of
converting shares of stock of the Constituent Entities shall be as follows:
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1. Merging Corporation Common Stock. At the Effective Time of
the Merger, each issued and outstanding share of the common stock without par
value of the Merging Corporation ("Merging Corporation Common Stock") shall
thereupon, without any action on the part of the holder thereof, be converted
into one share of the Common Stock of the Surviving Corporation ("Surviving
Corporation Common Stock"). Any shares of Merging Corporation Common Stock held
as treasury stock by the Merging Corporation shall be cancelled and retired,
and no consideration shall be issued or given in exchange therefor.
2. Deemed Surviving Corporation Shareholders. At the Effective
Time of the Merger, each shareholder of the Merging Corporation shall
thereupon be deemed to be a shareholder of the Surviving Corporation to the
extent of the number of shares of Surviving Corporation Common Stock to which
he or she is entitled pursuant to this Agreement and Plan of Merger, whether or
not certificates for Merging Corporation Common Stock are surrendered as herein
provided.
3. Merging Corporation Share Certificates. At or following the
Effective Time of the Merger, each holder of a certificate or certificates
theretofore representing Merging Corporation Common Stock shall surrender the
same, along with a duly endorsed stock transfer power, to the Surviving
Corporation. At or following the Effective Time of the Merger, upon surrender of
his or her certificates representing Merging Corporation Common Stock, the
Surviving Corporation shall deliver to each holder of Merging Corporation Common
Stock a Surviving Corporation share certificate in the name of such holder,
representing the shares of Surviving Corporation Common Stock into which his or
her respective shares of Merging Corporation Common Stock shall have been
converted as herein provided. Until surrendered as provided herein, each
certificate representing shares of Merging Corporation Common Stock shall be
deemed for all corporate purposes (including without limitation the payment of
any dividends) to evidence ownership of the number of shares of Surviving
Corporation Common Stock which the holder of such certificate has become
entitled to receive pursuant to this Agreement and Plan of Merger.
4. Stock of the Georgia Company. Each share of stock of the
Georgia Company outstanding immediately prior to the Effective Time of the
Merger shall be cancelled.
5. Stock Options and Rights. All options and other rights for
the purchase or other acquisition of Merging Corporation Common Stock which are
outstanding immediately prior to the Effective Time of the Merger shall
continue without impairment or
-4-
alteration following the Effective Time of the Merger as outstanding options or
other rights for the purchase or other acquisition of shares of Surviving
Corporation Common Stock. Any options and other rights for the purchase or other
acquisition of stock of the Georgia Company which are outstanding immediately
prior to the Effective Time of the Merger shall be cancelled.
ARTICLE IV
Further Assurances. If at any time the Surviving Corporation shall
determine that any further assignments or assurances or any other actions are
necessary or desirable to vest in the Surviving Corporation the title to any
property rights of the Merging Corporation or to better document the Merger or
the transactions contemplated by this Agreement and Plan of Merger, the proper
officers and directors of the Merging Corporation or the Surviving Corporation
shall execute and make all such proper assignments and assurances and take all
such actions as are necessary or proper so to do.
ARTICLE V
Shareholder Approval; Effectiveness. This Agreement and Plan of Merger
shall be submitted to the shareholders of each of the Constituent Entities as
provided by law and shall take effect upon the approval thereof by the
shareholders of Merging Corporation and the Georgia Company in accordance with
the laws of the States of Georgia and Ohio.
ARTICLE VI
Termination and Abandonment; Modification. Anything herein or
elsewhere to the contrary notwithstanding, this Agreement and Plan of Merger may
be terminated and the Merger abandoned by the Merging Corporation by appropriate
resolution of its Board of Directors, in its sole discretion, at any time prior
to the Effective Time of the Merger, notwithstanding approval of this Agreement
and Plan of Merger by the shareholders of both the Constituent Entities. In the
event of such termination and abandonment pursuant to the foregoing provisions
of this Article VI, this Agreement and Plan of Merger shall become void and
shall have no effect, without any liability on the part of either of the
Constituent Entities or the shareholders, directors or officers thereof.
-5-
ARTICLE VII
1. Counterparts. This Agreement and Plan of Merger may be
executed by each party upon a separate copy, and in such case one counterpart
of this Agreement and Plan of Merger shall consist of enough of such copies to
reflect the signature of all of the parties to this Agreement and Plan of
Merger. This Agreement and Plan of Merger may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement and Plan of Merger or its terms to
produce or account for more than one of such counterparts.
2. No Third Party Beneficiaries. Except as otherwise expressly
provided in this Agreement and Plan or Merger, nothing herein is intended nor
shall be construed to confer upon or give any person, firm, association, trust,
corporation or other entity, other than the Merging Corporation and the Georgia
Company and their respective shareholders, any rights or remedies under or by
reason of this Agreement and Plan of Merger.
3. Integration. This Agreement and Plan of Merger constitutes
the entire agreement between the Constituent Entities and supersedes all prior
agreements and undertakings, oral and written, between the Constituent Entities
with respect thereto.
4. Consent to Suit and Service of Process. In accordance with
section 1701.79(B)(6) of the Ohio General Corporation Law, the Surviving
Corporation hereby consents to be sued and served with process in the State of
Ohio and hereby irrevocably appoints the Secretary of State of the State of
Ohio as its agent to accept service of process in any proceeding in the State
of Ohio to enforce against the Surviving Corporation any obligation of the
Merging Corporation, or to enforce the rights of a dissenting shareholder of
the Merging Corporation.
5. Qualification to Transact Business in Ohio as a Foreign
Corporation. In accordance with section 1701.79(B)(7) of the Ohio General
Corporation law, the surviving corporation hereby states its intention to be
licensed to transact business in the State of Ohio and hereby appoints the
Secretary of State of the State of Ohio as its designated agent with respect to
service of any process, notice or demand.
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IN WITNESS WHEREOF, the parties to this Agreement and Plan of Merger,
pursuant to the approval and authority duly given by written consents of their
Boards of Directors and shareholders, have caused this Agreement and Plan of
Merger to be executed by duly authorized officers of each party hereto.
THE MERGING CORPORATION:
AEROBIC POWER SYSTEMS, INC.,
an Ohio corporation
By: /s/ David W. Dorheim 11/6/90
------------------------------
David W. Dorheim, President
Attest:
/s/ Mark D. Kaufman
- ------------------------------
Mark D. Kaufman, Secretary
THE SURVIVING CORPORATION:
AEROBIC POWER SYSTEMS, INC.,
a Georgia corporation
By: /s/ David W. Dorheim 11/6/90
(Corporate Seal) ------------------------------
David W. Dorheim, President
Attest:
/s/ Mark D. Kaufman
- ------------------------------
Mark D. Kaufman, Secretary
-7-
SCHEDULE I
Number of
Shareholder Common Shares
- ----------- -------------
R. Dennis Bentz 1,000
Charity Cheiky 8,080
Mike Cheiky 2,000
David W. Dorheim 1,000
Mark G. Ewald 250
Sally Gries 387
Robert Gries 594
Frank Harris 1,000
Robert Nimocks 200
Christopher Pedicini 250
Mark J. Schimpf 250
Leonard Skeggs 3,437
Charles L. Smythe, Jr. 442
Corinne F. Smythe 500
Ruthana Dreisbach Trust 1,366
Madeline N. Porter Trust 2,800
Battery Partners 2,694
The Kindt-Collins Company 15,000
-8-
CERTIFICATE
OF
REQUEST FOR PUBLICATION
The undersigned does hereby certify:
1. That he is the duly elected and acting Secretary of Aerobic
Power Systems, Inc., a Georgia corporation (the "Corporation") and that he is
authorized to execute and deliver this certificate on behalf of the Corporation:
2. That a request for publication of notice of intent to file
Articles of Merger pursuant to which Aerobic Power Systems, Inc., an Ohio
corporation will merge with and into the Corporation, together with payment for
such publication, has been mailed or delivered as required by and in accordance
with Georgia Business Corporation Code s. 14-2-1105.1(b).
DULY EXECUTED and delivered by the undersigned on January 15, 1991.
/s/ Mark D. Kaufman
---------------------
Name: Mark D. Kaufman
Title: Secretary
Sworn to and subscribed before
me on January 15, 1991.
/s/ Mary E. Arnold
- ------------------
Notary Public
My Commission Expires: October 2, 1994
(Notary Seal)
ARTICLES OF AMENDMENT
OF
AEROBIC POWER SYSTEMS, INC.
I.
The name of the corporation, which was organized under the Georgia
Business Corporation ("G.B.C.C."), is "Aerobic Power Systems, Inc."
II.
The amendment adopted is to amend Article I of the Articles of
Incorporation of the corporation to change the name of the corporation to "AER
Energy Resources, Inc.", so that, as amended, said Article I shall read as
follows:
"I.
The name of the corporation is AER Energy Resources, Inc. and it shall
have the purpose of engaging in any lawful business."
III.
The date of the adoption of the amendment by the Board of Directors
was January 17, 1991.
IV.
The amendment was adopted by the Board of Directors without
shareholder action, which was not required according to the provisions of
G.B.C.C. s.14-2-1002.
DULY EXECUTED and delivered, under seal, by the undersigned on
February 4, 1991.
AEROBIC POWER SYSTEMS, INC.
By: /s/ Mark D. Kaufman
---------------------------------
Mark D. Kaufman,
Secretary
ARTICLES OF AMENDMENT
OF
AER ENERGY RESOURCES, INC.
I.
The name of the corporation, which was organized under the Georgia
Business Corporation Code, is "AER Energy Resources, Inc."
II.
The amendment adopted is to amend Article II of the Articles of
Incorporation by deleting Article II in its entirety and substituting in lieu
thereof the following:
Article II
The corporation shall have the authority to issue up to 300,000
shares of stock which shall be designated as "common stock."
III.
The date of the adoption of the amendment was April 15, 1992.
IV.
The amendment was duly approved by the shareholders of AER Energy
Resources, Inc. in accordance with the provisions of Georgia Business
Corporation Code Section 14-2-1003.
IN WITNESS WHEREOF, AER Energy Resources, Inc. has executed these
Articles of Amendment.
AER ENERGY RESOURCES, INC.
By: /s/ David W. Dorheim
---------------------------------------
David W. Dorheim, President
ARTICLES OF AMENDMENT
OF
AER ENERGY RESOURCES, INC.
I.
The name of the corporation, which was organized under the Georgia
Business Corporation Code, is "AER Energy Resources, Inc."
II.
The amendments adopted amend Article II of the articles of
incorporation of the corporation so that, as amended, Article II is as follows:
"ARTICLE II
2.1 Capital Structure. The corporation has the
authority, acting by its Board of Directors, to issue not
more than one hundred ten million (110,000,000) shares,
divided into classes as follows:
(a) one hundred million (100,000,000) shares
shall be common shares having no par value ("Common
Shares"); and
(b) ten million (10,000,000) shares shall be
preferred shares having no par value ("Preferred
Shares").
The preferences, limitations and relative rights of the Common Shares
and of the Preferred Shares are set forth below and are otherwise
subject to applicable law.
2.2 Treasury Shares. Any shares of the corporation
reacquired by the corporation shall become treasury shares.
2.3 Common Shares. The Common Shares (a) shall be one and
the same class and (b) subject to the rights of the Preferred Shares,
shall (i) have unlimited voting rights (with each share having one vote
on each matter submitted to shareholders for a vote), (ii) have equal
rights of participation in dividends and other distributions, and (iii)
be entitled to receive the net assets of the corporation ratably upon
dissolution.
2.4 Preferred Shares--Authorization of Board of
Directors to Determine. The Board of Directors is hereby
authorized, subject to the provisions of this Article II and applicable
law, to adopt and file from time to time articles of amendment to the
articles of incorporation setting forth:
(a) its determination of the
preferences, limitations and relative rights (i) of the
Preferred Shares before the issuance of any Preferred Shares
if they are not to be issued in series or (ii) if Preferred
Shares are to be issued in series, of one or more series of
Preferred Shares before the issuance of any Preferred Shares
of that series; and
(b) if Preferred Shares are to be
issued in series, its determination of (i) the number of
Preferred Shares within that series and (ii) before the
issuance of any Preferred Shares of that series, the
distinguishing designation of that series.
The Board of Directors may, unless the terms of the Preferred Shares
issued pursuant to this section 2.4 provide otherwise, increase or
decrease the number of Preferred Shares in a series (but not below the
number of Preferred Shares in that series then issued) by adopting and
filing articles of amendment to the articles of incorporation in
accordance with applicable law. Without limiting the foregoing, the
Board of Directors is hereby expressly authorized to determine in such
articles of amendment providing for the issuance of the Preferred
Shares, or of a series of the Preferred Shares, the preferences,
limitations and relative rights of the Preferred Shares, or of such
series of the Preferred Shares, in the following respects:
(1) the rate of dividends, the
times of payment and the date from which, and the basis on
which, dividends shall be accumulated, if dividends are to be
cumulative;
(2) whether or not the
Preferred Shares, or such series of the Preferred Shares, have
voting rights, and the extent of such voting rights, if any;
(3) whether the Preferred
Shares, or such series of the Preferred Shares, can be
redeemed and, if so, the redemption price and terms and
conditions of redemption;
(4) the terms and conditions,
if any, on which the Preferred Shares, or such series of the
Preferred Shares, may be converted into Common Shares or any
other securities;
2
(5) the amount payable upon the
Preferred Shares, or such series of the Preferred Shares, in
the event of voluntary and involuntary dissolution,
liquidation or winding up of the affairs of the corporation;
(6) purchase, retirement or
sinking fund provisions, if any, for the redemption of the
Preferred Shares or such series of the Preferred Shares; and
(7) any other preferences,
limitations and relative rights of the Preferred Shares or of
such series of the Preferred Shares.
All shares of a series of Preferred Shares determined by the Board of
Directors must have preferences, limitations and relative rights
identical with those of other Preferred Shares of the same series and,
except to the extent otherwise provided in the description of a series
of Preferred Shares, with those of other series of Preferred Shares.
Different series of the Preferred Shares shall not be construed to
constitute different voting groups for the purpose of voting by groups,
except when such voting by groups is expressly required by applicable
law or when the terms of the Preferred Shares issued pursuant to this
section 2.4 provide otherwise.
2.5 No Preemptive Rights. No holders of shares of the
corporation of any class or series shall be entitled as a matter of
right to any preemptive right to subscribe for or purchase any shares
of any class or series, whether now or hereafter authorized, any
options or rights to purchase any such shares, or any bonds, debentures
or other securities of the corporation, whether or not convertible into
or carrying an option to purchase any such shares.
III.
The amendments adopted further amend the articles of incorporation of
the corporation by deleting in their entirety Article IX (providing for no
preemptive rights because this is contained in amended Article II) and Article X
(providing for a 2/3 vote of shareholders for mergers, share exchanges, sales of
all or substantially all the assets of the corporation for which a shareholder
vote is required, dissolution of the corporation or amendment or repeal of
Article X).
IV.
The date of the adoption of the amendments was May 12, 1993.
3
V.
The amendments were duly approved by the shareholders in accordance
with the provisions of O.C.G.A.ss.14-2-1003.
DULY EXECUTED and delivered by the undersigned on May 12, 1993.
AER ENERGY RESOURCES, INC.
By: /s/ DAVID W. DORHEIM
---------------------------------
David W. Dorheim
President
* * * * *
4
ARTICLES OF AMENDMENT
OF
AER ENERGY RESOURCES, INC.
I.
The name of the corporation, which was organized under the Georgia
Business Corporation Code, is "AER Energy Resources, Inc."
II.
The amendment adopted amends Article VII of the articles of
incorporation of the corporation so that, as amended, Article VII shall read as
follows:
"ARTICLE VII
Any action required or permitted by the GBCC to be
taken at a meeting of the shareholders of the corporation may be taken
without a meeting if a written consent setting forth the action so
taken shall be signed by all the shareholders entitled to vote on the
action."
III.
The date of the adoption of the amendment was June, 14, 1993.
IV.
The amendment was duly approved by the shareholders in
accordance with the provisions of O.C.G.A.ss.14-2-1003.
DULY EXECUTED and delivered by the undersigned on June 15,
1993.
AER ENERGY RESOURCES, INC.
By: /s/ David W. Dorheim
-------------------------------
David W. Dorheim
President
* * * * *
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
AER ENERGY RESOURCES, INC.
In accordance with Sections 14-2-602 and 14-2-1006 of the Georgia
Business Corporation Code (the "Code"), AER Energy Resources, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of the
Code, DOES HEREBY CERTIFY:
1. The name of the Corporation is AER Energy Resources, Inc.
2. The following resolution setting forth an amendment to the
Corporation's Articles of Incorporation has been duly adopted
by the Corporation's Board of Directors:
RESOLVED, THAT ARTICLE II OF THE CORPORATION'S
ARTICLES OF INCORPORATION IS HEREBY AMENDED BY ADDING THE
FOLLOWING PROVISIONS TO THE END OF SECTION 2.4: "THE
CORPORATION IS AUTHORIZED TO ISSUE 425,000 SHARES OF SERIES A
CONVERTIBLE PREFERRED STOCK, NO PAR VALUE (THE "SERIES A
PREFERRED STOCK"). THE SERIES A PREFERRED STOCK SHALL HAVE THE
TERMS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS SET FORTH
ON EXHIBIT A HERETO."
3. The "Exhibit A" referenced in the foregoing resolution is
included in these Articles of Amendment and is the same
"Exhibit A" as is attached hereto.
4. The foregoing resolution containing the amendment was duly
adopted on September 21, 2000, by the Corporation's Board of
Directors in accordance with the provisions of Sections
14-2-602 and 14-2-1002 of the Code. This amendment was adopted
by the Corporation's Board of Directors without shareholder
action and such shareholder action was not required.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be signed by the undersigned duly authorized officer, this 27th day
of September, 2000.
AER ENERGY RESOURCES, INC.
By: /s/ J. T. MOORE
----------------------------------------------
J.T. Moore
Vice President and Chief Financial Officer
EXHIBIT A
TERMS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF
SERIES A CONVERTIBLE PREFERRED STOCK OF
AER ENERGY RESOURCES, INC.
The following terms shall have the meanings specified:
"Articles of Incorporation" shall mean the Articles of Incorporation of
the Corporation, as amended.
"Base Price" shall mean $0.738.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Bylaws" shall mean the bylaws of the Corporation, as amended.
"Common Stock" shall mean the common stock, no par value per share, of
the Corporation.
"Conversion Notice" shall have the meaning provided in Section (d)(5)
hereof.
"Conversion Price" shall equal $0.851; provided, however, that if 115%
of the average closing bid price of the Common Stock as reported on the OTC-BB
for the 20 consecutive trading days ending on the first anniversary of the
Original Issue Date (such 20-day average price being referred to in this
definition as the "Adjusted Price") is less than the Conversion Price, then the
Conversion Price shall equal the greater of (1) 115% of the Adjusted Price and
(2) $0.554; provided, further, that the Conversion Price shall also be subject
to the adjustments provided in Section (d)(6) hereof.
"Conversion Rate" shall equal such number of shares of Common Stock
equal to (1) the then applicable Liquidation Value, divided by (2) the then
applicable Conversion Price.
"Conversion Rights" shall have the meaning provided in Section (d)
hereof.
"Conversion Shares" shall mean the shares of Common Stock into which
each share of Series A Preferred Stock is convertible pursuant to Section (d)
hereof.
"Corporation" shall mean AER Energy Resources, Inc., a Georgia
corporation.
"Extraordinary Transaction" shall mean any of the following events:
(1) the consummation of a merger, share exchange, acquisition of
stock or other similar transaction, as a result of which the Corporation shall
not continue to exist
or shall continue to exist only as a subsidiary of another entity (other than a
parent or subsidiary of the Corporation);
(2) the consummation of a sale of all or substantially all the
assets of the Corporation to a person or entity (other than a parent or
subsidiary of the Corporation); or
(3) the public announcement of a tender offer (other than by a
parent or subsidiary of the Corporation) for all of the outstanding shares of
Common Stock.
"Georgia Code" shall mean the Georgia Business Corporation Code,
O.C.G.A.ss.14-2-101 et seq., as amended.
"Liquidation" shall have the meaning provided in Section (b) hereof.
"Liquidation Value," with respect to a share of Series A Preferred
Stock, shall equal the Stated Value of such share plus all accrued but unpaid
dividends with respect to such share.
"Original Issue Date" shall mean September 27, 2000.
"OTC-BB" shall mean the Over-the-Counter Bulletin Board automated
quotation system operated by The Nasdaq Stock Market, Inc., or any successor
quotation system.
"Redemption Notice" shall have the meaning provided in Section (e)(1)
hereof.
"Redemption Price" shall have the meaning provided in Section (e)(1)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Preferred Stock" shall mean the 425,000 shares of Series A
Convertible Preferred Stock, no par value, hereby established.
"Stated Value" per share of the Series A Preferred Stock shall mean the
per share issue price for any share of Series A Preferred Stock, as adjusted
pursuant to Section (d)(6) hereof after the Original Issue Date. The initial
Stated Value per share of Series A Preferred Stock is $10.00.
The terms, preferences, limitations and relative rights of the Series A
Preferred Stock are as follows:
(a) Dividend Rights. The following dividend rights shall apply to
the Series A Preferred Stock:
(1) The holders of outstanding shares of Series A
Preferred Stock shall be entitled to receive cash dividends when, as
and if declared by the Board of Directors out of any funds legally
available therefor at the rate of 6.75% of the
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Liquidation Value per annum, or $0.675 per share of Series A Preferred
Stock based upon the initial Stated Value per share.
(2) Dividends shall accrue on each share of Series A
Preferred Stock from the Original Issue Date, and shall accrue from day
to day, whether or not earned or declared and whether or not there
shall be funds legally available for the payment of such dividends.
Such dividends shall be cumulative so that, if such dividends in
respect of any previous or current quarterly dividend period, at the
rate specified above, shall not have been paid or declared and a sum
sufficient for the payment thereof set apart, the deficiency shall
first be fully paid before any dividend or other distribution shall be
paid on or declared and set apart for the Common Stock or any other
stock ranking junior to the Series A Preferred Stock. Any accumulation
of dividends on the Series A Preferred Stock shall not bear interest.
(3) No cash dividend shall be paid or declared on Common
Stock or any or any other stock ranking junior to the Series A
Preferred Stock as to dividend preference unless (A) full accrued and
unpaid dividends on the Series A Preferred Stock for all past dividend
periods and the then current dividend period shall have been paid or
declared and a sum sufficient for the payment above set apart and (B)
the Corporation shall also pay each holder of the Series A Preferred
Stock the amount of such cash dividend per share of Common Stock,
multiplied by the number of shares of Common Stock that such holder
would have received if, immediately prior to the declaration date of
such dividend, all shares of Series A Preferred Stock owned by such
holder were converted into Common Stock pursuant to Section (d) hereof.
(4) Each dividend shall be paid to the holders of record
of the Series A Preferred Stock as they shall appear on the stock
register of the Corporation on such record date, not exceeding 45 days
nor less than 10 days preceding a dividend payment date, as shall be
fixed by the Board of Directors or a duly authorized committee thereof.
(b) Liquidation Rights. Subject to the rights of any class of
stock of the Corporation with liquidation preferences senior to the Series A
Preferred Stock, in the event of the liquidation, dissolution or winding up for
any reason, including, without limitation, bankruptcy, of the Corporation or any
of the Corporation's subsidiaries, the assets of which constitute all or
substantially all the assets of the business of the Corporation and its
subsidiaries taken as a whole (each such event being referred to as a
"Liquidation"), the holders of the outstanding shares of Series A Preferred
Stock shall be entitled to receive in exchange for and in redemption of each
share of their Series A Preferred Stock, and on a parity with the holders of any
capital stock ranking pari passu to the Series A Preferred Stock, from any
funds, proceeds or assets legally available for distribution to shareholders, an
amount equal to the greater of (1) the Liquidation Value as of the date that the
Liquidation is approved by the shareholders of the Corporation, or, if no such
approval is required, the Board of Directors, or (2) the aggregate amount of
such funds, proceeds or assets, multiplied by a fraction:
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(x) the numerator of which is the number of Conversion
Shares to which the holder of such share of Series A Preferred Stock
would be entitled to receive by virtue of converting such share; and
(y) the denominator of which is the aggregate of the
number of Conversion Shares, shares of Common Stock outstanding, and
all other shares of outstanding capital stock of any series the holders
of which are entitled to participate in the proceeds of a Liquidation.
All the preferential amounts to be paid to the holders of Series A
Preferred Stock under this Section (b) shall be paid or set apart for payment
before the payment or setting apart for payment of any amount for, or the
distribution of any funds, proceeds or assets of the Corporation to, the holders
of shares of Common Stock or any class or series of stock of the Corporation
ranking junior to the Series A Preferred Stock in connection with a Liquidation
as to which this Section (b) applies. If the funds, proceeds and assets to be
distributed to the holders of Series A Preferred Stock are insufficient to
permit the payment to such holders of the full amounts payable to such holders,
the funds, proceeds and assets legally available for distribution shall be
distributed ratably among the holders of Series A Preferred Stock in proportion
to the full amount each such holder is otherwise entitled to receive.
(c) Voting Rights. Except as provided herein or by the Code, the
Series A Preferred Stock shall not have any voting rights.
(d) Conversion. The holders of Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(1) Conversion Rate.
(A) For purposes of this Section (d), each share
of Series A Preferred Stock shall be convertible, at the times
and under the conditions described in this Section (d), at the
rate of one share of Series A Preferred Stock to the number of
shares of Common Stock that equals the Conversion Rate. Such
conversion shall be deemed to have been made immediately prior
to the close of business on the date of the surrender of the
shares of Series A Preferred Stock to be converted in
accordance with the procedures described in Section (d)(5)
hereof.
(B) No fractional shares of Common Stock shall
be issued upon conversion of Series A Preferred Stock, and any
shares of Series A Preferred Stock surrendered for conversion
that would otherwise result in a fractional share of Common
Stock shall be redeemed in cash at the then effective
Conversion Price per share, payable as promptly as possible
when funds are legally available therefor.
(2) Conversion at Option of Holders. Subject to Section
(d)(5) hereof, each share of Series A Preferred Stock shall be
convertible, at the option of the
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holder thereof, at any time after issuance, in whole or in part, at the
office of the Corporation or any transfer agent for the Series A
Preferred Stock, into Common Stock at the then effective Conversion
Rate
(3) Conversion at Option of Company.
(A) Beginning on the date that is three years
after the Original Issue Date, and if all the conditions of
Section (d)(3)(B) are satisfied, the Corporation may require
that each holder of Series A Preferred Stock convert such
holder's shares of Series A Preferred Stock into Common Stock
in accordance with Section (d) hereof.
(B) All of the following conditions must be met
in order for the Corporation to exercise the conversion rights
set forth in Section (d)(3)(A) hereof:
(i) the average closing bid price of a
share of the Common Stock (as reported on the OTC-BB)
for any 20 trading days out of the 30 trading days
immediately preceding such exercise shall be greater
than or equal to 250% of the Conversion Price as of
the date of such exercise;
(ii) a registration statement filed
under the Securities Act covering the resale of
shares of Common Stock that may be received upon the
conversion of all shares of the Series A Preferred
Stock (the "Resale Registration Statement") is
effective and has been continuously effective for at
least three months;
(iii) from the effective date of the
Resale Registration Statement until the date of such
exercise, the Common Stock has been continuously
listed or quoted on a national securities exchange,
on any tier of The Nasdaq Stock Market, Inc. or on an
automated inter-dealer quotation system (including
the OTC-BB), and the Corporation has not received any
written notice stating that such exchange, market or
system has delisted or is seeking to delist the
Common Stock from such exchange, market or system;
and
(iv) for a three-month period ending on
the Conversion Date with respect to such exercise,
there has not been a public announcement of an
Extraordinary Transaction that is pending on or has
been consummated before the Conversion Date.
(4) Conversion Upon Extraordinary Transaction. At any
time after the date that an Extraordinary Transaction has been
announced and is then pending, any holder of Series A Preferred Stock
may convert all of its shares of Series A Preferred Stock into a number
of shares of Common Stock calculated by dividing (A) the greater of (i)
the then applicable Liquidation Value and (ii) the
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Stated Value, plus the dividends that would have accrued on the Series
A Preferred Stock in the event that no dividends were declared and paid
by the Corporation for a period of three years from the Original Issue
Date, by (B) the then applicable Conversion Price.
(5) Mechanics of Conversion. Before any holder of Series
A Preferred Stock shall be entitled to receive certificates
representing the shares of Common Stock into which shares of Series A
Preferred Stock are converted in accordance with Sections (d)(2),
(d)(3), (d)(4) or (e)(2) hereof, such holder shall surrender the
certificate or certificates for such shares of Series A Preferred
Stock, duly endorsed, with signatures guaranteed, at the office of the
Corporation or of any transfer agent for the Series A Preferred Stock,
and shall give written notice to the Corporation at such office of the
name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued, if different from
the name shown on the books and records of the Corporation (the
"Conversion Notice"). The Conversion Notice shall also contain such
representations as may reasonably be required by the Corporation to the
effect that the shares to be received upon conversion are not being
acquired and will not be transferred in any way that might violate the
then applicable securities laws. The Corporation shall, as soon as
practicable thereafter and in no event later than 10 days after the
delivery of said certificates and Conversion Notice, issue and deliver
at such office to such holder of Series A Preferred Stock, or to the
nominee or nominees of such holder as provided in the Conversion
Notice, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid. The
conversion shall be effective at the time the Corporation accepts the
Conversion Notice as being proper in form and substance. The person or
persons entitled to receive the shares of Common Stock issuable upon a
conversion pursuant to Sections (d)(2), (d)(3), (d)(4) or (e)(2) hereof
shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of the effective date of conversion
pursuant to this Section (d). All certificates issued upon the exercise
or occurrence of the conversion shall contain a legend governing
restrictions upon such shares imposed by law (if any) or agreement of
the holder or his or its predecessors, successors or permitted assigns.
(6) Conversion Price Adjustments. The Stated Value (and
therefore, the Liquidation Value, the Conversion Price, the
corresponding Conversion Rate and the $0.851 and $0.554 figures set
forth in the definition of Conversion Price) shall be subject to
adjustment from time to time as follows:
(A) Common Stock Issued at Less Than the Current
Conversion Price. If the Corporation shall issue any Common
Stock other than Excluded Securities (as hereinafter defined)
without consideration or for a consideration per share less
than the then current Conversion Price, the Conversion Price
in effect immediately prior to each such issuance shall
immediately (except as provided below) be reduced by
multiplying the Conversion Price by a fraction of which the
numerator shall be an amount
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equal to the sum of (x) the number of shares of Common Stock
outstanding immediately prior to such issuance multiplied by
the current Conversion Price plus (y) the consideration, if
any, received by the Corporation upon such issuance and the
denominator shall be the total number of shares of Common
Stock outstanding immediately after such issuance multiplied
by the current Conversion Price.
For the purposes of any adjustment of the Conversion Price
pursuant to Section (d)(6)(A) hereof, the following provisions
shall be applicable:
(i) Cash. In the case of the issuance
of Common Stock for cash, the amount of the
consideration received by the Corporation shall be
deemed to be the amount of the cash proceeds received
by the Corporation for such Common Stock before
deducting therefrom any discounts, commissions, taxes
or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in
connection with the issuance and sale thereof.
(ii) Consideration Other Than Cash. In
the case of the issuance of Common Stock (otherwise
than upon the conversion of shares of capital stock
or other securities of the Corporation) for a
consideration in whole or in part other than cash,
including securities acquired in exchange therefor
(other than securities by their terms so
exchangeable), the consideration other than cash
shall be deemed to be the fair value thereof as
determined by the Board of Directors, irrespective of
any accounting treatment, whose determination shall
be conclusive.
(iii) Options and Convertible Securities.
Except with respect to any securities that are
Excluded Securities, in the case of the issuance of
(1) options, warrants or other rights to purchase or
acquire Common Stock (whether or not at the time
exercisable), (2) securities by their terms
convertible into or exchangeable for Common Stock
(whether or not at the time so convertible or
exchangeable) or (3) options, warrants or rights to
purchase such convertible or exchangeable securities
(whether or not at the time exercisable):
(a) the aggregate maximum
number of shares of Common Stock deliverable
upon exercise of such options, warrants or
other rights to purchase or acquire Common
Stock shall be deemed to have been issued at
the time such options, warrants or rights
were issued and for a consideration equal to
the consideration (determined in the manner
provided in Sections (d)(6)(A)(i) and (ii)
hereof, if
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any, received by the Corporation upon the
issuance of such options, warrants or rights
plus the minimum purchase price provided in
such options, warrants or rights for the
Common Stock covered thereby;
(b) the aggregate maximum
number of shares of Common Stock deliverable
upon conversion of or in exchange for any
such convertible or exchangeable securities,
or upon the exercise of options, warrants or
other rights to purchase or acquire such
convertible or exchangeable securities and
the subsequent conversion or exchange
thereof, shall be deemed to have been issued
at the time such securities were issued or
such options, warrants or rights were issued
and for a consideration equal to the
consideration, if any, received by the
Corporation for any such securities and
related options, warrants or rights
(excluding any cash received on account of
accrued interest or accrued dividends), plus
the additional consideration (determined in
the manner provided in Sections (d)(6)(A)(i)
and (ii) hereof), if any, to be received by
the Corporation upon the conversion or
exchange of such securities, or upon the
exercise of any related options, warrants or
rights to purchase or acquire such
convertible or exchangeable securities and
the subsequent conversion or exchange
thereof;
(c) on any change in the
number of shares of Common Stock deliverable
upon exercise of any such options, warrants
or rights or conversion or exchange of such
convertible or exchangeable securities or
any change in the consideration to be
received by the Corporation upon such
exercise, conversion or exchange, including,
but not limited to, a change resulting from
the anti-dilution provisions thereof, the
Conversion Price as then in effect shall
forthwith be readjusted to such Conversion
Price as would have been obtained had an
adjustment been made upon the issuance of
such options, warrants or rights not
exercised prior to such change, or of such
convertible or exchangeable securities not
converted or exchanged prior to such change,
upon the basis of such change;
(d) on the expiration or
cancellation of any such options, warrants
or rights, or the termination of the right
to convert or exchange such convertible or
exchangeable securities, if the Conversion
Price shall have been adjusted upon the
issuance thereof, the Conversion Price shall
A-8
forthwith be readjusted to such Conversion
Price as would have been obtained had an
adjustment been made upon the issuance of
such options, warrants, rights or such
convertible or exchangeable securities on
the basis of the issuance of only the number
of shares of Common Stock actually issued
upon the exercise of such options, warrants
or rights, or upon the conversion or
exchange of such convertible or exchangeable
securities; and
(e) if the Conversion Price
shall have been adjusted upon the issuance
of any such options, warrants, rights or
convertible or exchangeable securities, no
further adjustment of the Conversion Price
shall be made for the actual issuance of
Common Stock upon the exercise, conversion
or exchange thereof.
(B) Excluded Securities. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this
Section (d) as a result of the issuance or deemed issuance of
any of the foregoing (collectively, the "Excluded
Securities"):
(i) any shares of Common Stock upon the
conversion of shares of Series A Preferred Stock;
(ii) securities of the Corporation
offered to the public pursuant to an effective
registration statement under the Securities Act;
(iii) any securities of the Corporation
(including any shares of Common Stock that may be
issuable pursuant to the conversion or exercise of
any options, warrants or rights of the Corporation)
pursuant to any commercial agreement if the issuance
of such securities is approved by the Board of
Directors;
(iv) any shares of Common Stock as a
result of the adjustments to the Conversion Price and
the Conversion Rate under this Section (d);
(v) any options, warrants or rights of
the Corporation, and any shares of Common Stock
issued at any time following the Original Issue Date
(including any shares of Common Stock that may be
issuable pursuant to the conversion or exercise of
any options, warrants or rights of the Corporation),
in each case granted under any employee stock option
or incentive plan in which employees or directors of
the Corporation may participate;
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(vi) any shares of Common Stock issued
in a transaction to which Section (d)(6)(C) or (D)
applies; or
(vii) any shares of Common Stock issued
pursuant to the exchange, conversion or exercise of
options, warrants or other rights of the Corporation
that have previously been incorporated into
computations hereunder on the date when such options,
warrants or other rights of the Corporation were
issued.
(C) Stock Dividends, Subdivisions,
Reclassifications or Combinations. If the Corporation shall
(i) declare a dividend or make a distribution on its Common
Stock in shares of its Common Stock, (ii) subdivide or
reclassify the outstanding shares of Common Stock into a
greater number of shares, or (iii) combine or reclassify the
outstanding Common Stock into a smaller number of shares, the
Conversion Price in effect at the time of the record date for
such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any shares of
Series A Preferred Stock surrendered for conversion after such
date shall be entitled to receive the number of shares of
Common Stock which he would have owned or been entitled to
receive had such Series A Preferred Stock been converted
immediately prior to such date. Successive adjustments in the
Conversion Price shall be made whenever any event specified
above shall occur.
(D) Other Distributions. In case the Corporation
shall fix a record date for making of a distribution to all
holders of shares of its Common Stock of (i) shares of any
class other than its Common Stock, (ii) evidences of
indebtedness of the Corporation, (iii) assets (excluding cash
dividends or distributions, or dividends or distributions
referred to in Section (d)(6)(C) hereof), or (iv) rights or
warrants (excluding those referred to in Section (d)(6)(A)
hereof), in each such case the Conversion Price in effect
immediately prior thereto shall be reduced immediately
thereafter to the price determined by dividing (1) an amount
equal to the difference resulting from (x) the number of
shares of Common Stock outstanding on such record date
multiplied by the Conversion Price per share on such record
date, less (y) the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive)
of said shares or evidences of indebtedness or assets or
rights or warrants to be so distributed, by (2) the number of
shares of Common Stock outstanding on such record date. Such
adjustment shall be made successively whenever such a record
date is fixed. In the event that such distribution is not so
made, the Conversion Price then in effect shall be readjusted,
effective as of the date when the Board of Directors
determines not to distribute such shares, evidences of
indebtedness, assets, rights or warrants, as the case may be,
to the Conversion Price which would then be in effect if such
record date had not been fixed.
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(7) De Minimis Adjustments. No adjustment to the
Conversion Price (and, therefore, the Conversion Rate) shall be made
if such adjustment would result in a change in the Conversion Price of
less than $0.01, but any lesser adjustment shall be carried forward
and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustments so carried
forward, shall amount to $0.01 or more.
(8) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose
of effecting the conversion of the shares of the Series A Preferred
Stock such number of shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares
of the Series A Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall be insufficient to
effect the conversion of all then outstanding shares of the Series A
Preferred Stock, the Corporation shall take such corporate action as
may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(9) Notices of Record Date. In the event of any taking
by the Corporation of a record of the holders of any series or class
of securities other than Series A Preferred Stock (A) for the purpose
of determining the holders thereof who are entitled to receive any
dividend or other distribution or (B) with respect to an
Extraordinary Transaction (other than a tender offer) or any other
action described in Section (d)(6)(C) or (D) hereof, the Corporation
shall mail to each holder of Series A Preferred Stock, at least 10
days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such
dividend, distribution or action, and the amount and character of
such dividend, distribution or action; provided, however, that the
failure to give such notice shall not impair the validity of such
dividend, distribution, Extraordinary Transaction or other action.
(e) Redemption.
(1) Optional Redemption. The Series A Preferred Stock is
redeemable by the Corporation, in whole or in part, at any time or from
time to time after issuance of the Series A Preferred Stock at the
option of the Corporation, on at least 20 but not more than 90 days'
written notice (the "Redemption Notice"). With respect to any such
redemption, each share of Series A Preferred Stock will be redeemable
at a price equal to the greater of (A) the then applicable Liquidation
Value and (B) the Stated Value, plus the dividends that would have
accrued on the Series A Preferred Stock in the event that no dividends
were declared and paid by the Corporation for a period of three years
from the Original Issue Date (the "Redemption Price"). The Redemption
Price is payable in cash. Any holder of Series A Preferred Stock may,
in lieu of receiving cash pursuant to this Section (e), exercise such
holder's conversion rights pursuant to Section
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(d)(2) hereof by giving the Corporation a Conversion Notice no later
than 10 days after the Corporation delivers the Redemption Notice.
(2) Mandatory Redemption. On the fifth anniversary of the
Original Issue Date, the Company must, at its option (A) redeem each
share of Preferred Stock for a cash payment equal to the then
applicable Liquidation Value or (B) convert each share of Series A
Preferred Stock into a number of shares of Common Stock equal to the
then Conversion Rate in accordance with the applicable provisions of
Section (d).
(f) Protective Provisions. In addition to any other rights
provided by law, so long as any shares of Series A Preferred Stock are then
outstanding, except where the vote or written consent of the holders of a
greater number of shares is required by law or by another provision of the
Articles of Incorporation, without first obtaining the affirmative vote or
written consent of the holders of 66"% of the total number of shares of Series A
Preferred Stock outstanding, voting together as a single class, the Corporation
shall not:
(1) amend or repeal any provision of, or add any
provision to, the Articles of Incorporation or the Bylaws, if such
action would materially and adversely alter the preferences, rights,
privileges or powers of, or restrictions provided for the benefit of,
holders of Series A Preferred Stock; or
(2) issue any shares of capital stock with preferences,
limitations and relative rights that would be superior to or pari passu
with the Series A Preferred Stock.
(g) Notices. Any notice required by the provisions hereof to be
given to the holders of shares of Series A Preferred Stock shall be deemed given
(i) on the date of delivery, if such notice is hand-delivered to such holder or
(ii) on the third business day following (and not including) the date on which
such notice is either sent via express courier or deposited in the United States
Mail, first-class, postage prepaid, and addressed to each holder of record at
his address appearing on the books of the Corporation. Notice by any other means
shall not be deemed effective until actually received.
(h) Determination of Market Price. In each case where these
Articles of Amendment refer to the OTC-BB to calculate the market price of the
Common Stock and at such time the Common Stock is not quoted on the OTC-BB, the
following provisions shall apply:
(1) If the Common Stock is listed on a national
securities exchange, the average closing bid price shall be calculated
according to the closing price of the Common Stock as reported by such
exchange.
(2) If the Common Stock is not listed on a national
securities exchange but is quoted on any tier of The Nasdaq Stock
Market, Inc. ("Nasdaq"), or any
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successor thereto, the average closing bid price shall be calculated
according to the closing bid price of the Common Stock as reported by
such tier of Nasdaq.
(3) If the Common Stock is not listed on a national
securities exchange or quoted on a tier of Nasdaq, the average closing
bid price shall be calculated according to the closing price of the
Common Stock as reported by the "Pink Sheets" published by The National
Quotation Bureau, Inc., or any successor thereto, or as reported by any
other electronic or non-electronic quotation system that publishes or
reports daily quotations of the Common Stock.
(4) If none of the foregoing apply, the average closing
bid price shall be as determined in good faith by a resolution of the
Board of Directors.
* * *
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ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
AER ENERGY RESOURCES, INC.
In accordance with Sections 14-2-602 and 14-2-1006 of the Georgia
Business Corporation Code (the "Code"), AER Energy Resources, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of the
Code, DOES HEREBY CERTIFY:
1. The name of the Corporation is AER Energy Resources, Inc.
2. The following resolution setting forth an amendment to the
Corporation's Articles of Incorporation has been duly adopted
by the Corporation's Board of Directors:
RESOLVED, THAT ARTICLE II OF THE CORPORATION'S
ARTICLES OF INCORPORATION IS HEREBY AMENDED BY ADDING THE
FOLLOWING PROVISIONS TO THE END OF SECTION 2.4: "THE
CORPORATION IS AUTHORIZED TO ISSUE 250,000 SHARES OF SERIES B
CONVERTIBLE PREFERRED STOCK, NO PAR VALUE (THE "SERIES B
PREFERRED STOCK"). THE SERIES B PREFERRED STOCK SHALL HAVE THE
TERMS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS SET FORTH
ON EXHIBIT A HERETO."
3. The "Exhibit A" referenced in the foregoing resolution is
included in these Articles of Amendment and is the same
"Exhibit A" as is attached hereto.
4. The foregoing resolution containing the amendment was duly
adopted on February 26, 2001, by the Corporation's Board of
Directors in accordance with the provisions of Sections
14-2-602 and 14-2-1002 of the Code. This amendment was adopted
by the Corporation's Board of Directors without shareholder
action and such shareholder action was not required.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be signed by the undersigned duly authorized officer, this 27th day
of February, 2001.
AER ENERGY RESOURCES, INC.
By: /s/ J. T. MOORE
----------------------------------------------
J.T. Moore
Vice President and Chief Financial Officer
EXHIBIT A
TERMS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF
SERIES B CONVERTIBLE PREFERRED STOCK OF
AER ENERGY RESOURCES, INC.
The following terms shall have the meanings specified:
"Articles of Incorporation" shall mean the Articles of Incorporation of
the Corporation, as amended.
"Base Price" shall mean $0.448.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Bylaws" shall mean the bylaws of the Corporation, as amended.
"Common Stock" shall mean the common stock, no par value per share, of
the Corporation.
"Conversion Notice" shall have the meaning provided in Section (d)(5)
hereof.
"Conversion Price" shall equal $0.515; provided, however, that if 115%
of the average closing bid price of the Common Stock as reported on the OTC-BB
for the 20 consecutive trading days ending on the first anniversary of the
Original Issue Date (such 20-day average price being referred to in this
definition as the "Adjusted Price") is less than the Conversion Price, then the
Conversion Price shall equal the greater of (1) 115% of the Adjusted Price and
(2) $0.336; provided, further, that the Conversion Price shall also be subject
to the adjustments provided in Section (d)(6) hereof.
"Conversion Rate" shall equal such number of shares of Common Stock
equal to (1) the then applicable Liquidation Value, divided by (2) the then
applicable Conversion Price.
"Conversion Rights" shall have the meaning provided in Section (d)
hereof.
"Conversion Shares" shall mean the shares of Common Stock into which
each share of Series B Preferred Stock is convertible pursuant to Section (d)
hereof.
"Corporation" shall mean AER Energy Resources, Inc., a Georgia
corporation.
"Extraordinary Transaction" shall mean any of the following events:
(1) the consummation of a merger, share exchange, acquisition of
stock or other similar transaction, as a result of which the Corporation shall
not continue to exist
or shall continue to exist only as a subsidiary of another entity (other than a
parent or subsidiary of the Corporation);
(2) the consummation of a sale of all or substantially all the
assets of the Corporation to a person or entity (other than a parent or
subsidiary of the Corporation); or
(3) the public announcement of a tender offer (other than by a
parent or subsidiary of the Corporation) for all of the outstanding shares of
Common Stock.
"Georgia Code" shall mean the Georgia Business Corporation Code,
O.C.G.A.ss.14-2-101 et seq., as amended.
"Liquidation" shall have the meaning provided in Section (b) hereof.
"Liquidation Value," with respect to a share of Series B Preferred
Stock, shall equal the Stated Value of such share plus all accrued but unpaid
dividends with respect to such share.
"Original Issue Date" shall mean February 27, 2001.
"OTC-BB" shall mean the Over-the-Counter Bulletin Board automated
quotation system operated by The Nasdaq Stock Market, Inc., or any successor
quotation system.
"Redemption Notice" shall have the meaning provided in Section (e)(1)
hereof.
"Redemption Price" shall have the meaning provided in Section (e)(1)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Preferred Stock" shall mean the 425,000 shares of Series A
Convertible Preferred Stock, no par value, established by the Corporation on
September 27, 2000.
"Series B Preferred Stock" shall mean the 250,000 shares of Series B
Convertible Stock, no par value, hereby established.
"Stated Value" per share of the Series B Preferred Stock shall mean the
per share issue price for any share of Series B Preferred Stock, as adjusted
pursuant to Section (d)(6) hereof after the Original Issue Date. The initial
Stated Value per share of Series B Preferred Stock is $10.00.
The terms, preferences, limitations and relative rights of the Series B
Preferred Stock are as follows:
(a) Dividend Rights. The following dividend rights shall apply to
the Series B Preferred Stock:
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(1) The holders of outstanding shares of Series B
Preferred Stock shall be entitled to receive cash dividends when, as
and if declared by the Board of Directors out of any funds legally
available therefor at the rate of 6.75% of the Liquidation Value per
annum, or $0.675 per share of Series B Preferred Stock based upon the
initial Stated Value per share.
(2) Dividends shall accrue on each share of Series B
Preferred Stock from the Original Issue Date, and shall accrue from day
to day, whether or not earned or declared and whether or not there
shall be funds legally available for the payment of such dividends.
Such dividends shall be cumulative so that, if such dividends in
respect of any previous or current quarterly dividend period, at the
rate specified above, shall not have been paid or declared and a sum
sufficient for the payment thereof set apart, the deficiency shall
first be fully paid before any dividend or other distribution shall be
paid on or declared and set apart for the Common Stock or any other
stock ranking junior to the Series B Preferred Stock. Any accumulation
of dividends on the Series B Preferred Stock shall not bear interest.
(3) No cash dividend shall be paid or declared on Common
Stock or any other stock ranking junior to the Series B Preferred Stock
as to dividend preference unless (A) full accrued and unpaid dividends
on the Series B Preferred Stock for all past dividend periods and the
then current dividend period shall have been paid or declared and a sum
sufficient for the payment above set apart and (B) the Corporation
shall also pay each holder of the Series B Preferred Stock the amount
of such cash dividend per share of Common Stock, multiplied by the
number of shares of Common Stock that such holder would have received
if, immediately prior to the declaration date of such dividend, all
shares of Series B Preferred Stock owned by such holder were converted
into Common Stock pursuant to Section (d) hereof.
(4) Each dividend shall be paid to the holders of record
of the Series B Preferred Stock as they shall appear on the stock
register of the Corporation on such record date, not exceeding 45 days
nor less than 10 days preceding a dividend payment date, as shall be
fixed by the Board of Directors or a duly authorized committee thereof.
(5) The Series B Preferred Stock shall rank as to payment
of dividends on a parity with the Series A Preferred Stock.
(b) Liquidation Rights.
(1) Subject to the rights of any class of stock of the
Corporation with liquidation preferences senior to the Series B
Preferred Stock, in the event of the liquidation, dissolution or
winding up for any reason, including, without limitation, bankruptcy,
of the Corporation or any of the Corporation's subsidiaries, the assets
of which constitute all or substantially all the assets of the business
of the Corporation and its subsidiaries taken as a whole (each such
event
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being referred to as a "Liquidation"), the holders of the outstanding
shares of Series B Preferred Stock shall be entitled to receive in
exchange for and in redemption of each share of their Series B
Preferred Stock, and on a parity with the holders of any capital stock
ranking pari passu to the Series B Preferred Stock, from any funds,
proceeds or assets legally available for distribution to shareholders,
an amount equal to the greater of (1) the Liquidation Value as of the
date that the Liquidation is approved by the shareholders of the
Corporation, or, if no such approval is required, the Board of
Directors, or (2) the aggregate amount of such funds, proceeds or
assets, multiplied by a fraction:
(x) the numerator of which is the number of
Conversion Shares to which the holder of such share of Series
B Preferred Stock would be entitled to receive by virtue of
converting such share; and
(y) the denominator of which is the aggregate of
the number of Conversion Shares, shares of Common Stock
outstanding, and all other shares of outstanding capital stock
of any series the holders of which are entitled to participate
in the proceeds of a Liquidation.
(2) All the preferential amounts to be paid to the
holders of Series B Preferred Stock under this Section (b) shall be
paid or set apart for payment before the payment or setting apart for
payment of any amount for, or the distribution of any funds, proceeds
or assets of the Corporation to, the holders of shares of Common Stock
or any class or series of stock of the Corporation ranking junior to
the Series B Preferred Stock in connection with a Liquidation as to
which this Section (b) applies. If the funds, proceeds and assets to be
distributed to the holders of Series B Preferred Stock are insufficient
to permit the payment to such holders of the full amounts payable to
such holders, the funds, proceeds and assets legally available for
distribution shall be distributed ratably among the holders of Series B
Preferred Stock in proportion to the full amount each such holder is
otherwise entitled to receive.
(3) The Series B Preferred Stock shall rank as to
payments upon Liquidation on a parity with the Series A Preferred
Stock.
(c) Voting Rights. Except as provided herein or by the Code, the
Series B Preferred Stock shall not have any voting rights.
(d) Conversion. The holders of Series B Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(1) Conversion Rate.
(A) For purposes of this Section (d), each share
of Series B Preferred Stock shall be convertible, at the times and
under the conditions described in this Section (d), at the rate of one
share of Series B Preferred Stock to the number of shares of Common
Stock that equals the
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Conversion Rate. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of the surrender
of the shares of Series B Preferred Stock to be converted in accordance
with the procedures described in Section (d)(5) hereof.
(B) No fractional shares of Common Stock shall
be issued upon conversion of Series B Preferred Stock, and any shares
of Series B Preferred Stock surrendered for conversion that would
otherwise result in a fractional share of Common Stock shall be
redeemed in cash at the then effective Conversion Price per share,
payable as promptly as possible when funds are legally available
therefor.
(2) Conversion at Option of Holders. Subject to Section (d)(5)
hereof, each share of Series B Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after issuance, in whole or in part,
at the office of the Corporation or any transfer agent for the Series B
Preferred Stock, into Common Stock at the then effective Conversion Rate
(3) Conversion at Option of Company.
(A) Beginning on the date that is three years after the
Original Issue Date, and if all the conditions of Section (d)(3)(B) are
satisfied, the Corporation may require that each holder of Series B
Preferred Stock convert such holder's shares of Series B Preferred
Stock into Common Stock in accordance with Section (d) hereof.
(B) All of the following conditions must be met in order
for the Corporation to exercise the conversion rights set forth in
Section (d)(3)(A) hereof:
(i) the average closing bid price of a share of
the Common Stock (as reported on the OTC-BB) for any 20
trading days out of the 30 trading days immediately preceding
such exercise shall be greater than or equal to 250% of the
Conversion Price as of the date of such exercise;
(ii) a registration statement filed under the
Securities Act covering the resale of shares of Common Stock
that may be received upon the conversion of all shares of the
Series B Preferred Stock (the "Resale Registration Statement")
is effective and has been continuously effective for at least
three months;
(iii) from the effective date of the Resale
Registration Statement until the date of such exercise, the
Common Stock has been continuously listed or quoted on a
national securities exchange, on any tier of The Nasdaq Stock
Market, Inc. or on an automated inter-dealer quotation system
(including the OTC-BB),
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and the Corporation has not received any written notice
stating that such exchange, market or system has delisted or
is seeking to delist the Common Stock from such exchange,
market or system; and
(iv) for a three-month period ending on the
Conversion Date with respect to such exercise, there has not
been a public announcement of an Extraordinary Transaction
that is pending on or has been consummated before the
Conversion Date.
(4) Conversion Upon Extraordinary Transaction. At any time after
the date that an Extraordinary Transaction has been announced and is then
pending, any holder of Series B Preferred Stock may convert all of its shares of
Series B Preferred Stock into a number of shares of Common Stock calculated by
dividing (A) the greater of (i) the then applicable Liquidation Value and (ii)
the Stated Value, plus the dividends that would have accrued on the Series B
Preferred Stock in the event that no dividends were declared and paid by the
Corporation for a period of three years from the Original Issue Date, by (B) the
then applicable Conversion Price.
(5) Mechanics of Conversion. Before any holder of Series B
Preferred Stock shall be entitled to receive certificates representing the
shares of Common Stock into which shares of Series B Preferred Stock are
converted in accordance with Sections (d)(2), (d)(3), (d)(4) or (e)(2) hereof,
such holder shall surrender the certificate or certificates for such shares of
Series B Preferred Stock, duly endorsed, with signatures guaranteed, at the
office of the Corporation or of any transfer agent for the Series B Preferred
Stock, and shall give written notice to the Corporation at such office of the
name or names in which such holder wishes the certificate or certificates for
shares of Common Stock to be issued, if different from the name shown on the
books and records of the Corporation (the "Conversion Notice"). The Conversion
Notice shall also contain such representations as may reasonably be required by
the Corporation to the effect that the shares to be received upon conversion are
not being acquired and will not be transferred in any way that might violate the
then applicable securities laws. The Corporation shall, as soon as practicable
thereafter and in no event later than 10 days after the delivery of said
certificates and Conversion Notice, issue and deliver at such office to such
holder of Series B Preferred Stock, or to the nominee or nominees of such holder
as provided in the Conversion Notice, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. The conversion shall be effective at the time the Corporation accepts
the Conversion Notice as being proper in form and substance. The person or
persons entitled to receive the shares of Common Stock issuable upon a
conversion pursuant to Sections (d)(2), (d)(3), (d)(4) or (e)(2) hereof shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of the effective date of conversion pursuant to this Section
(d). All certificates issued upon the exercise or occurrence of the conversion
shall contain a legend governing restrictions upon such shares
A-6
imposed by law (if any) or agreement of the holder or his or its predecessors,
successors or permitted assigns.
(6) Conversion Price Adjustments. The Stated Value (and therefore,
the Liquidation Value, the Conversion Price, the corresponding Conversion Rate
and the $0.515 and $0.336 figures set forth in the definition of Conversion
Price) shall be subject to adjustment from time to time as follows:
(A) Common Stock Issued at Less Than the Current
Conversion Price. If the Corporation shall issue any Common Stock other
than Excluded Securities (as hereinafter defined) without consideration
or for a consideration per share less than the then current Conversion
Price, the Conversion Price in effect immediately prior to each such
issuance shall immediately (except as provided below) be reduced by
multiplying the Conversion Price by a fraction of which the numerator
shall be an amount equal to the sum of (x) the number of shares of
Common Stock outstanding immediately prior to such issuance multiplied
by the current Conversion Price plus (y) the consideration, if any,
received by the Corporation upon such issuance and the denominator
shall be the total number of shares of Common Stock outstanding
immediately after such issuance multiplied by the current Conversion
Price.
For the purposes of any adjustment of the Conversion Price pursuant to
Section (d)(6)(A) hereof, the following provisions shall be applicable:
(i) Cash. In the case of the issuance of Common
Stock for cash, the amount of the consideration received by
the Corporation shall be deemed to be the amount of the cash
proceeds received by the Corporation for such Common Stock
before deducting therefrom any discounts, commissions, taxes
or other expenses allowed, paid or incurred by the Corporation
for any underwriting or otherwise in connection with the
issuance and sale thereof.
(ii) Consideration Other Than Cash. In the case
of the issuance of Common Stock (otherwise than upon the
conversion of shares of capital stock or other securities of
the Corporation) for a consideration in whole or in part other
than cash, including securities acquired in exchange therefor
(other than securities by their terms so exchangeable), the
consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board of Directors,
irrespective of any accounting treatment, whose determination
shall be conclusive.
(iii) Options and Convertible Securities. Except
with respect to any securities that are Excluded Securities,
in the case of
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the issuance of (1) options, warrants or other rights to
purchase or acquire Common Stock (whether or not at the time
exercisable), (2) securities by their terms convertible into
or exchangeable for Common Stock (whether or not at the time
so convertible or exchangeable) or (3) options, warrants or
rights to purchase such convertible or exchangeable securities
(whether or not at the time exercisable):
(a) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of
such options, warrants or other rights to purchase or
acquire Common Stock shall be deemed to have been
issued at the time such options, warrants or rights
were issued and for a consideration equal to the
consideration (determined in the manner provided in
Sections (d)(6)(A)(i) and (ii) hereof, if any,
received by the Corporation upon the issuance of such
options, warrants or rights plus the minimum purchase
price provided in such options, warrants or rights
for the Common Stock covered thereby;
(b) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of
or in exchange for any such convertible or
exchangeable securities, or upon the exercise of
options, warrants or other rights to purchase or
acquire such convertible or exchangeable securities
and the subsequent conversion or exchange thereof,
shall be deemed to have been issued at the time such
securities were issued or such options, warrants or
rights were issued and for a consideration equal to
the consideration, if any, received by the
Corporation for any such securities and related
options, warrants or rights (excluding any cash
received on account of accrued interest or accrued
dividends), plus the additional consideration
(determined in the manner provided in Sections
(d)(6)(A)(i) and (ii) hereof), if any, to be received
by the Corporation upon the conversion or exchange of
such securities, or upon the exercise of any related
options, warrants or rights to purchase or acquire
such convertible or exchangeable securities and the
subsequent conversion or exchange thereof;
(c) on any change in the number of
shares of Common Stock deliverable upon exercise of
any such options, warrants or rights or conversion or
exchange of such convertible or exchangeable
securities or any change in the consideration to be
received by the Corporation upon
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such exercise, conversion or exchange, including, but
not limited to, a change resulting from the
anti-dilution provisions thereof, the Conversion
Price as then in effect shall forthwith be readjusted
to such Conversion Price as would have been obtained
had an adjustment been made upon the issuance of such
options, warrants or rights not exercised prior to
such change, or of such convertible or exchangeable
securities not converted or exchanged prior to such
change, upon the basis of such change;
(d) on the expiration or cancellation
of any such options, warrants or rights, or the
termination of the right to convert or exchange such
convertible or exchangeable securities, if the
Conversion Price shall have been adjusted upon the
issuance thereof, the Conversion Price shall
forthwith be readjusted to such Conversion Price as
would have been obtained had an adjustment been made
upon the issuance of such options, warrants, rights
or such convertible or exchangeable securities on the
basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of
such options, warrants or rights, or upon the
conversion or exchange of such convertible or
exchangeable securities; and
(e) if the Conversion Price shall have
been adjusted upon the issuance of any such options,
warrants, rights or convertible or exchangeable
securities, no further adjustment of the Conversion
Price shall be made for the actual issuance of Common
Stock upon the exercise, conversion or exchange
thereof.
(B) Excluded Securities. Notwithstanding the foregoing,
no adjustment shall be made pursuant to this Section (d) as a result of
the issuance or deemed issuance of any of the foregoing (collectively,
the "Excluded Securities"):
(i) any shares of Common Stock upon the
conversion of shares of Series A Preferred Stock or Series B
Preferred Stock;
(ii) securities of the Corporation offered to the
public pursuant to an effective registration statement under
the Securities Act;
(iii) any securities of the Corporation (including
any shares of Common Stock that may be issuable pursuant to
the conversion or exercise of any options, warrants or rights
of the
A-9
Corporation) pursuant to any commercial agreement if the
issuance of such securities is approved by the Board of
Directors;
(iv) any shares of Common Stock as a result of
the adjustments to the Conversion Price and the Conversion
Rate under this Section (d) or the similar provisions of the
Series A Preferred Stock;
(v) any options, warrants or rights of the
Corporation, and any shares of Common Stock issued at any time
following the Original Issue Date (including any shares of
Common Stock that may be issuable pursuant to the conversion
or exercise of any options, warrants or rights of the
Corporation), in each case granted under any employee stock
option or incentive plan in which employees or directors of
the Corporation may participate;
(vi) any shares of Common Stock issued in a
transaction to which Section (d)(6)(C) or (D) applies; or
(vii) any shares of Common Stock issued pursuant
to the exchange, conversion or exercise of options, warrants
or other rights of the Corporation that have previously been
incorporated into computations hereunder on the date when such
options, warrants or other rights of the Corporation were
issued.
(C) Stock Dividends, Subdivisions, Reclassifications or
Combinations. If the Corporation shall (i) declare a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (ii)
subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares, or (iii) combine or reclassify the
outstanding Common Stock into a smaller number of shares, the
Conversion Price in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so
that the holder of any shares of Series B Preferred Stock surrendered
for conversion after such date shall be entitled to receive the number
of shares of Common Stock which he would have owned or been entitled to
receive had such Series B Preferred Stock been converted immediately
prior to such date. Successive adjustments in the Conversion Price
shall be made whenever any event specified above shall occur.
(D) Other Distributions. In case the Corporation shall
fix a record date for making of a distribution to all holders of shares
of its Common Stock of (i) shares of any class other than its Common
Stock, (ii) evidences of indebtedness of the Corporation, (iii) assets
(excluding cash dividends or distributions, or dividends or
distributions referred to in Section (d)(6)(C) hereof), or (iv) rights
or warrants (excluding those
A-10
referred to in Section (d)(6)(A) hereof), in each such case the
Conversion Price in effect immediately prior thereto shall be reduced
immediately thereafter to the price determined by dividing (1) an
amount equal to the difference resulting from (x) the number of shares
of Common Stock outstanding on such record date multiplied by the
Conversion Price per share on such record date, less (y) the fair
market value (as determined by the Board of Directors, whose
determination shall be conclusive) of said shares or evidences of
indebtedness or assets or rights or warrants to be so distributed, by
(2) the number of shares of Common Stock outstanding on such record
date. Such adjustment shall be made successively whenever such a record
date is fixed. In the event that such distribution is not so made, the
Conversion Price then in effect shall be readjusted, effective as of
the date when the Board of Directors determines not to distribute such
shares, evidences of indebtedness, assets, rights or warrants, as the
case may be, to the Conversion Price which would then be in effect if
such record date had not been fixed.
(7) De Minimis Adjustments. No adjustment to the Conversion Price
(and, therefore, the Conversion Rate) shall be made if such adjustment would
result in a change in the Conversion Price of less than $0.01, but any lesser
adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to $0.01 or more.
(8) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series B Preferred Stock such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall be insufficient
to effect the conversion of all then outstanding shares of the Series B
Preferred Stock, the Corporation shall take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(9) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any series or class of securities
other than Series B Preferred Stock (A) for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution
or (B) with respect to an Extraordinary Transaction (other than a tender offer)
or any other action described in Section (d)(6)(C) or (D) hereof, the
Corporation shall mail to each holder of Series B Preferred Stock, at least 10
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
action, and the amount and character of such dividend, distribution or action;
provided, however, that the failure to give
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such notice shall not impair the validity of such dividend,
distribution, Extraordinary Transaction or other action.
(e) Redemption.
(1) Optional Redemption. The Series B Preferred Stock is
redeemable by the Corporation, in whole or in part, at any time or from
time to time after issuance of the Series B Preferred Stock at the
option of the Corporation, on at least 20 but not more than 90 days'
written notice (the "Redemption Notice"). With respect to any such
redemption, each share of Series B Preferred Stock will be redeemable
at a price equal to the greater of (A) the then applicable Liquidation
Value and (B) the Stated Value, plus the dividends that would have
accrued on the Series B Preferred Stock in the event that no dividends
were declared and paid by the Corporation for a period of three years
from the Original Issue Date (the "Redemption Price"). The Redemption
Price is payable in cash. Any holder of Series B Preferred Stock may,
in lieu of receiving cash pursuant to this Section (e), exercise such
holder's conversion rights pursuant to Section (d)(2) hereof by giving
the Corporation a Conversion Notice no later than 10 days after the
Corporation delivers the Redemption Notice.
(2) Mandatory Redemption. On the fifth anniversary of the
Original Issue Date, the Company must, at its option (A) redeem each
share of Preferred Stock for a cash payment equal to the then
applicable Liquidation Value or (B) convert each share of Series B
Preferred Stock into a number of shares of Common Stock equal to the
then Conversion Rate in accordance with the applicable provisions of
Section (d).
(f) Protective Provisions. In addition to any other rights
provided by law, so long as any shares of Series B Preferred Stock are then
outstanding, except where the vote or written consent of the holders of a
greater number of shares is required by law or by another provision of the
Articles of Incorporation, without first obtaining the affirmative vote or
written consent of the holders of 66"% of the total number of shares of Series B
Preferred Stock outstanding, voting together as a single class, the Corporation
shall not:
(1) amend or repeal any provision of, or add any
provision to, the Articles of Incorporation or the Bylaws, if such
action would materially and adversely alter the preferences, rights,
privileges or powers of, or restrictions provided for the benefit of,
holders of Series B Preferred Stock; or
(2) issue any shares of capital stock with preferences,
limitations and relative rights that would be superior to or pari passu
with the Series B Preferred Stock.
(g) Notices. Any notice required by the provisions hereof to be
given to the holders of shares of Series B Preferred Stock shall be deemed given
(i) on the date of delivery, if such notice is hand-delivered to such holder or
(ii) on the third business day
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following (and not including) the date on which such notice is either sent via
express courier or deposited in the United States Mail, first-class, postage
prepaid, and addressed to each holder of record at his address appearing on the
books of the Corporation. Notice by any other means shall not be deemed
effective until actually received.
(h) Determination of Market Price. In each case where these
Articles of Amendment refer to the OTC-BB to calculate the market price of the
Common Stock and at such time the Common Stock is not quoted on the OTC-BB, the
following provisions shall apply:
(1) If the Common Stock is listed on a national
securities exchange, the average closing bid price shall be calculated
according to the closing price of the Common Stock as reported by such
exchange.
(2) If the Common Stock is not listed on a national
securities exchange but is quoted on any tier of The Nasdaq Stock
Market, Inc. ("Nasdaq"), or any successor thereto, the average closing
bid price shall be calculated according to the closing bid price of the
Common Stock as reported by such tier of Nasdaq.
(3) If the Common Stock is not listed on a national
securities exchange or quoted on a tier of Nasdaq, the average closing
bid price shall be calculated according to the closing price of the
Common Stock as reported by the "Pink Sheets" published by The National
Quotation Bureau, Inc., or any successor thereto, or as reported by any
other electronic or non-electronic quotation system that publishes or
reports daily quotations of the Common Stock.
(4) If none of the foregoing apply, the average closing
bid price shall be as determined in good faith by a resolution of the
Board of Directors.
* * *
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ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
AER ENERGY RESOURCES, INC.
In accordance with Sections 14-2-602 and 14-2-1006 of the Georgia
Business Corporation Code (the "Code"), AER Energy Resources, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of the
Code, DOES HEREBY CERTIFY:
1. The name of the Corporation is AER Energy Resources, Inc.
2. The following resolution setting forth an amendment to the
Corporation's Articles of Incorporation has been duly adopted
by the Corporation's Board of Directors:
RESOLVED, THAT ARTICLE II OF THE CORPORATION'S
ARTICLES OF INCORPORATION IS HEREBY AMENDED BY ADDING THE
FOLLOWING PROVISIONS TO THE END OF SECTION 2.4: "THE
CORPORATION IS AUTHORIZED TO ISSUE 500,000 SHARES OF SERIES C
CONVERTIBLE PREFERRED STOCK, NO PAR VALUE (THE "SERIES C
PREFERRED STOCK"). THE SERIES C PREFERRED STOCK SHALL HAVE THE
TERMS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS SET FORTH
ON EXHIBIT A HERETO."
3. The "Exhibit A" referenced in the foregoing resolution is
included in these Articles of Amendment and is the same
"Exhibit A" as is attached hereto.
4. The foregoing resolution containing the amendment was duly
adopted on June 8, 2001, by the Corporation's Board of
Directors in accordance with the provisions of Sections
14-2-602 and 14-2-1002 of the Code. This amendment was adopted
by the Corporation's Board of Directors without shareholder
action and such shareholder action was not required.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be signed by the undersigned duly authorized officer, this 1st day
of June, 2001.
AER ENERGY RESOURCES, INC.
By: /s/ J. T. Moore
-------------------------------------
J.T. Moore
Vice President and Chief Financial
Officer
EXHIBIT A
TERMS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF
SERIES C CONVERTIBLE PREFERRED STOCK OF
AER ENERGY RESOURCES, INC.
The following terms shall have the meanings specified:
"Articles of Incorporation" shall mean the Articles of Incorporation of
the Corporation, as amended.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Bylaws" shall mean the bylaws of the Corporation, as amended.
"Common Stock" shall mean the common stock, no par value per share, of
the Corporation.
"Conversion Notice" shall have the meaning provided in Section (d)(5)
hereof.
"Conversion Price" shall equal $0.407; provided, however, that if 115%
of the average closing bid price of the Common Stock as reported on the OTC-BB
for the 20 consecutive trading days ending on June 1, 2002 (such 20-day average
price being referred to in this definition as the "Adjusted Price") is less than
the Conversion Price, then the Conversion Price shall equal the greater of (1)
115% of the Adjusted Price and (2) $0.266; provided, further, that the
Conversion Price shall also be subject to the adjustments provided in Section
(d)(6) hereof.
"Conversion Rate" shall equal such number of shares of Common Stock
equal to (1) the then applicable Liquidation Value, divided by (2) the then
applicable Conversion Price.
"Conversion Rights" shall have the meaning provided in Section (d)
hereof.
"Conversion Shares" shall mean the shares of Common Stock into which
each share of Series C Preferred Stock is convertible pursuant to Section (d)
hereof.
"Corporation" shall mean AER Energy Resources, Inc., a Georgia
corporation.
"Extraordinary Transaction" shall mean any of the following events:
(1) the consummation of a merger, share exchange, acquisition of
stock or other similar transaction, as a result of which the Corporation shall
not continue to exist or shall continue to exist only as a subsidiary of another
entity (other than a parent or subsidiary of the Corporation);
(2) the consummation of a sale of all or substantially all the
assets of the Corporation to a person or entity (other than a parent or
subsidiary of the Corporation); or
(3) the public announcement of a tender offer (other than by a
parent or subsidiary of the Corporation) for all of the outstanding shares of
Common Stock.
"Georgia Code" shall mean the Georgia Business Corporation Code,
O.C.G.A. ss. 14-2-101 et seq., as amended.
"Liquidation" shall have the meaning provided in Section (b) hereof.
"Liquidation Value," with respect to a share of Series C Preferred
Stock, shall equal the Stated Value of such share plus all accrued but unpaid
dividends with respect to such share.
"Original Issue Date" shall mean, with respect to a share of Series C
Preferred Stock, the date that such share was purchased from the Corporation.
"OTC-BB" shall mean the Over-the-Counter Bulletin Board automated
quotation system operated by The Nasdaq Stock Market, Inc. ("Nasdaq"), or any
successor quotation system.
"Redemption Notice" shall have the meaning provided in Section (e)(1)
hereof.
"Redemption Price" shall have the meaning provided in Section (e)(1)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Preferred Stock" shall mean the 425,000 shares of Series A
Convertible Preferred Stock, no par value, established by the Corporation on
September 27, 2000.
"Series B Preferred Stock" shall mean the 250,000 shares of Series B
Convertible Preferred Stock, no par value, established by the Corporation on
February 28, 2001.
"Series C Preferred Stock" shall mean the 500,000 shares of Series C
Convertible Preferred Stock, no par value, hereby established.
"Stated Value" per share of the Series C Preferred Stock shall mean the
per share issue price for any share of Series C Preferred Stock, as adjusted
pursuant to Section (d)(6) hereof after June 1, 2001. The initial Stated Value
per share of Series C Preferred Stock is $10.00.
The terms, preferences, limitations and relative rights of the Series C
Preferred Stock are as follows:
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(a) Dividend Rights. The following dividend rights shall apply to
the Series C Preferred Stock:
(1) The holders of outstanding shares of Series C
Preferred Stock shall be entitled to receive cash dividends when, as
and if declared by the Board of Directors out of any funds legally
available therefor at the rate of 6.75% of the Liquidation Value per
annum, or $0.675 per share of Series C Preferred Stock based upon the
initial Stated Value per share.
(2) Dividends shall accrue on each share of Series C
Preferred Stock from the Original Issue Date, and shall accrue from day
to day, whether or not earned or declared and whether or not there
shall be funds legally available for the payment of such dividends.
Such dividends shall be cumulative so that, if such dividends in
respect of any previous or current quarterly dividend period, at the
rate specified above, shall not have been paid or declared and a sum
sufficient for the payment thereof set apart, the deficiency shall
first be fully paid before any dividend or other distribution shall be
paid on or declared and set apart for the Common Stock or any other
stock ranking junior to the Series C Preferred Stock. Any accumulation
of dividends on the Series C Preferred Stock shall not bear interest.
(3) No cash dividend shall be paid or declared on Common
Stock or any other stock ranking junior to the Series C Preferred Stock
as to dividend preference unless (A) full accrued and unpaid dividends
on the Series C Preferred Stock for all past dividend periods and the
then current dividend period shall have been paid or declared and a sum
sufficient for the payment above set apart and (B) the Corporation
shall also pay each holder of the Series C Preferred Stock the amount
of such cash dividend per share of Common Stock, multiplied by the
number of shares of Common Stock that such holder would have received
if, immediately prior to the declaration date of such dividend, all
shares of Series C Preferred Stock owned by such holder were converted
into Common Stock pursuant to Section (d) hereof.
(4) Each dividend shall be paid to the holders of record
of the Series C Preferred Stock as they shall appear on the stock
register of the Corporation on such record date, not exceeding 45 days
nor less than 10 days preceding a dividend payment date, as shall be
fixed by the Board of Directors or a duly authorized committee thereof.
(5) The Series C Preferred Stock shall rank as to payment
of dividends on a parity with the Series A and Series B Preferred
Stock.
(b) Liquidation Rights.
(1) Subject to the rights of any class of stock of the
Corporation with liquidation preferences senior to the Series C
Preferred Stock, in the event of the liquidation, dissolution or
winding up for any reason, including, without
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limitation, bankruptcy, of the Corporation or any of the Corporation's
subsidiaries, the assets of which constitute all or substantially all
the assets of the business of the Corporation and its subsidiaries
taken as a whole (each such event being referred to as a
"Liquidation"), the holders of the outstanding shares of Series C
Preferred Stock shall be entitled to receive in exchange for and in
redemption of each share of their Series C Preferred Stock, and on a
parity with the holders of any capital stock ranking pari passu to the
Series C Preferred Stock, from any funds, proceeds or assets legally
available for distribution to shareholders, an amount equal to the
greater of (1) the Liquidation Value as of the date that the
Liquidation is approved by the shareholders of the Corporation, or, if
no such approval is required, the Board of Directors, or (2) the
aggregate amount of such funds, proceeds or assets, multiplied by a
fraction:
(x) the numerator of which is the number of
Conversion Shares to which the holder of such share of Series
C Preferred Stock would be entitled to receive by virtue of
converting such share; and
(y) the denominator of which is the aggregate of
the number of Conversion Shares, shares of Common Stock
outstanding, and all other shares of outstanding capital stock
of any series the holders of which are entitled to participate
in the proceeds of a Liquidation.
(2) All the preferential amounts to be paid to the
holders of Series C Preferred Stock under this Section (b) shall be
paid or set apart for payment before the payment or setting apart for
payment of any amount for, or the distribution of any funds, proceeds
or assets of the Corporation to, the holders of shares of Common Stock
or any class or series of stock of the Corporation ranking junior to
the Series C Preferred Stock in connection with a Liquidation as to
which this Section (b) applies. If the funds, proceeds and assets to be
distributed to the holders of Series C Preferred Stock are insufficient
to permit the payment to such holders of the full amounts payable to
such holders, the funds, proceeds and assets legally available for
distribution shall be distributed ratably among the holders of Series C
Preferred Stock in proportion to the full amount each such holder is
otherwise entitled to receive.
(3) The Series C Preferred Stock shall rank as to
payments upon Liquidation on a parity with the Series A and Series B
Preferred Stock.
(c) Voting Rights. Except as provided herein or by the Code, the
Series C Preferred Stock shall not have any voting rights.
(d) Conversion. The holders of Series C Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(1) Conversion Rate.
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(A) For purposes of this Section (d), each share of
Series C Preferred Stock shall be convertible, at the times and under
the conditions described in this Section (d), at the rate of one share
of Series C Preferred Stock to the number of shares of Common Stock
that equals the Conversion Rate. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date
of the surrender of the shares of Series C Preferred Stock to be
converted in accordance with the procedures described in Section (d)(5)
hereof.
(B) No fractional shares of Common Stock shall be issued
upon conversion of Series C Preferred Stock, and any shares of Series C
Preferred Stock surrendered for conversion that would otherwise result
in a fractional share of Common Stock shall be redeemed in cash at the
then effective Conversion Price per share, payable as promptly as
possible when funds are legally available therefor.
(2) Conversion at Option of Holders. Subject to Section (d)(5)
hereof, each share of Series C Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after issuance, in whole or in part,
at the office of the Corporation or any transfer agent for the Series C
Preferred Stock, into Common Stock at the then effective Conversion Rate.
(3) Conversion at Option of Company.
(A) Beginning on June 1, 2004, and if all the conditions
of Section (d)(3)(B) are satisfied, the Corporation may require that
each holder of Series C Preferred Stock convert such holder's shares of
Series C Preferred Stock into Common Stock in accordance with Section
(d) hereof.
(B) All of the following conditions must be met in order
for the Corporation to exercise the conversion rights set forth in
Section (d)(3)(A) hereof:
(i) the average closing bid price of a share of the
Common Stock (as reported on the OTC-BB) for any 20 trading
days out of the 30 trading days immediately preceding such
exercise shall be greater than or equal to 250% of the
Conversion Price as of the date of such exercise;
(ii) a registration statement filed under the
Securities Act covering the resale of shares of Common Stock
that may be received upon the conversion of all shares of the
Series C Preferred Stock (the "Resale Registration Statement")
is effective and has been continuously effective for at least
three months;
A-5
(iii) from the effective date of the Resale
Registration Statement until the date of such exercise, the
Common Stock has been continuously listed or quoted on a
national securities exchange, on any tier of The Nasdaq Stock
Market, Inc. or on an automated inter-dealer quotation system
(including the OTC-BB), and the Corporation has not received
any written notice stating that such exchange, market or
system has delisted or is seeking to delist the Common Stock
from such exchange, market or system; and
(iv) for a three-month period ending on the
Conversion Date with respect to such exercise, there has not
been a public announcement of an Extraordinary Transaction
that is pending on or has been consummated before the
Conversion Date.
(4) Conversion Upon Extraordinary Transaction. At any time after
the date that an Extraordinary Transaction has been announced and is then
pending, any holder of Series C Preferred Stock may convert all of its shares of
Series C Preferred Stock into a number of shares of Common Stock calculated by
dividing (A) the greater of (i) the then applicable Liquidation Value and (ii)
the Stated Value, plus the dividends that would have accrued on the Series C
Preferred Stock in the event that no dividends were declared and paid by the
Corporation for a period of three years from the Original Issue Date, by (B) the
then applicable Conversion Price.
(5) Mechanics of Conversion. Before any holder of Series C
Preferred Stock shall be entitled to receive certificates representing the
shares of Common Stock into which shares of Series C Preferred Stock are
converted in accordance with Sections (d)(2), (d)(3), (d)(4) or (e)(2) hereof,
such holder shall surrender the certificate or certificates for such shares of
Series C Preferred Stock, duly endorsed, with signatures guaranteed, at the
office of the Corporation or of any transfer agent for the Series C Preferred
Stock, and shall give written notice to the Corporation at such office of the
name or names in which such holder wishes the certificate or certificates for
shares of Common Stock to be issued, if different from the name shown on the
books and records of the Corporation (the "Conversion Notice"). The Conversion
Notice shall also contain such representations as may reasonably be required by
the Corporation to the effect that the shares to be received upon conversion are
not being acquired and will not be transferred in any way that might violate the
then applicable securities laws. The Corporation shall, as soon as practicable
thereafter and in no event later than 10 days after the delivery of said
certificates and Conversion Notice, issue and deliver at such office to such
holder of Series C Preferred Stock, or to the nominee or nominees of such holder
as provided in the Conversion Notice, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. The conversion shall be effective at the time the Corporation accepts
the Conversion Notice as being proper in form and substance. The person or
persons entitled to receive the shares of Common Stock issuable upon a
conversion pursuant to Sections (d)(2), (d)(3), (d)(4) or (e)(2)
A-6
hereof shall be treated for all purposes as the record holder or holders of such
shares of Common Stock as of the effective date of conversion pursuant to this
Section (d). All certificates issued upon the exercise or occurrence of the
conversion shall contain a legend governing restrictions upon such shares
imposed by law (if any) or agreement of the holder or his or its predecessors,
successors or permitted assigns.
(6) Conversion Price Adjustments. The Stated Value (and therefore,
the Liquidation Value, the Conversion Price, the corresponding Conversion Rate
and the $0.407 and $0.266 figures set forth in the definition of Conversion
Price) shall be subject to adjustment from time to time as follows:
(A) Common Stock Issued at Less Than the Current
Conversion Price. If the Corporation shall issue any Common Stock other
than Excluded Securities (as hereinafter defined) without consideration
or for a consideration per share less than the then current Conversion
Price, the Conversion Price in effect immediately prior to each such
issuance shall immediately (except as provided below) be reduced by
multiplying the Conversion Price by a fraction of which the numerator
shall be an amount equal to the sum of (x) the number of shares of
Common Stock outstanding immediately prior to such issuance multiplied
by the current Conversion Price plus (y) the consideration, if any,
received by the Corporation upon such issuance and the denominator
shall be the total number of shares of Common Stock outstanding
immediately after such issuance multiplied by the current Conversion
Price.
For the purposes of any adjustment of the Conversion Price pursuant to
Section (d)(6)(A) hereof, the following provisions shall be applicable:
(i) Cash. In the case of the issuance of Common
Stock for cash, the amount of the consideration received by
the Corporation shall be deemed to be the amount of the cash
proceeds received by the Corporation for such Common Stock
before deducting therefrom any discounts, commissions, taxes
or other expenses allowed, paid or incurred by the Corporation
for any underwriting or otherwise in connection with the
issuance and sale thereof.
(ii) Consideration Other Than Cash. In the case
of the issuance of Common Stock (otherwise than upon the
conversion of shares of capital stock or other securities of
the Corporation) for a consideration in whole or in part other
than cash, including securities acquired in exchange therefor
(other than securities by their terms so exchangeable), the
consideration other than cash shall be deemed to be the fair
value thereof as determined by the
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Board of Directors, irrespective of any accounting treatment,
whose determination shall be conclusive.
(iii) Options and Convertible Securities. Except
with respect to any securities that are Excluded Securities,
in the case of the issuance of (1) options, warrants or other
rights to purchase or acquire Common Stock (whether or not at
the time exercisable), (2) securities by their terms
convertible into or exchangeable for Common Stock (whether or
not at the time so convertible or exchangeable) or (3)
options, warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time
exercisable):
(a) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of
such options, warrants or other rights to purchase or
acquire Common Stock shall be deemed to have been
issued at the time such options, warrants or rights
were issued and for a consideration equal to the
consideration (determined in the manner provided in
Sections (d)(6)(A)(i) and (ii) hereof, if any,
received by the Corporation upon the issuance of such
options, warrants or rights plus the minimum purchase
price provided in such options, warrants or rights
for the Common Stock covered thereby;
(b) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of
or in exchange for any such convertible or
exchangeable securities, or upon the exercise of
options, warrants or other rights to purchase or
acquire such convertible or exchangeable securities
and the subsequent conversion or exchange thereof,
shall be deemed to have been issued at the time such
securities were issued or such options, warrants or
rights were issued and for a consideration equal to
the consideration, if any, received by the
Corporation for any such securities and related
options, warrants or rights (excluding any cash
received on account of accrued interest or accrued
dividends), plus the additional consideration
(determined in the manner provided in Sections
(d)(6)(A)(i) and (ii) hereof), if any, to be received
by the Corporation upon the conversion or exchange of
such securities, or upon the exercise of any related
options, warrants or rights to purchase or acquire
such convertible or exchangeable securities and the
subsequent conversion or exchange thereof;
A-8
(c) on any change in the number of
shares of Common Stock deliverable upon exercise of
any such options, warrants or rights or conversion or
exchange of such convertible or exchangeable
securities or any change in the consideration to be
received by the Corporation upon such exercise,
conversion or exchange, including, but not limited
to, a change resulting from the anti-dilution
provisions thereof, the Conversion Price as then in
effect shall forthwith be readjusted to such
Conversion Price as would have been obtained had an
adjustment been made upon the issuance of such
options, warrants or rights not exercised prior to
such change, or of such convertible or exchangeable
securities not converted or exchanged prior to such
change, upon the basis of such change;
(d) on the expiration or cancellation
of any such options, warrants or rights, or the
termination of the right to convert or exchange such
convertible or exchangeable securities, if the
Conversion Price shall have been adjusted upon the
issuance thereof, the Conversion Price shall
forthwith be readjusted to such Conversion Price as
would have been obtained had an adjustment been made
upon the issuance of such options, warrants, rights
or such convertible or exchangeable securities on the
basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of
such options, warrants or rights, or upon the
conversion or exchange of such convertible or
exchangeable securities; and
(e) if the Conversion Price shall have
been adjusted upon the issuance of any such options,
warrants, rights or convertible or exchangeable
securities, no further adjustment of the Conversion
Price shall be made for the actual issuance of Common
Stock upon the exercise, conversion or exchange
thereof.
(B) Excluded Securities. Notwithstanding the foregoing,
no adjustment shall be made pursuant to this Section (d) as a result of
the issuance or deemed issuance of any of the foregoing (collectively,
the "Excluded Securities"):
(i) any shares of Common Stock upon the
conversion of shares of Series A, Series B or Series C
Preferred Stock;
A-9
(ii) securities of the Corporation offered to the
public pursuant to an effective registration statement under
the Securities Act;
(iii) any securities of the Corporation (including
any shares of Common Stock that may be issuable pursuant to
the conversion or exercise of any options, warrants or rights
of the Corporation) pursuant to any commercial agreement if
the issuance of such securities is approved by the Board of
Directors;
(iv) any shares of Common Stock as a result of
the adjustments to the Conversion Price and the Conversion
Rate under this Section (d) or the similar provisions of the
Series A and Series B Preferred Stock;
(v) any options, warrants or rights of the
Corporation, and any shares of Common Stock issued at any time
following the Original Issue Date (including any shares of
Common Stock that may be issuable pursuant to the conversion
or exercise of any options, warrants or rights of the
Corporation), in each case granted under any employee stock
option or incentive plan in which employees or directors of
the Corporation may participate;
(vi) any shares of Common Stock issued in a
transaction to which Section (d)(6)(C) or (D) applies; or
(vii) any shares of Common Stock issued pursuant
to the exchange, conversion or exercise of options, warrants
or other rights of the Corporation that have previously been
incorporated into computations hereunder on the date when such
options, warrants or other rights of the Corporation were
issued.
(C) Stock Dividends, Subdivisions, Reclassifications or
Combinations. If the Corporation shall (i) declare a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (ii)
subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares, or (iii) combine or reclassify the
outstanding Common Stock into a smaller number of shares, the
Conversion Price in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so
that the holder of any shares of Series C Preferred Stock surrendered
for conversion after such date shall be entitled to receive the number
of shares of Common Stock which he would have owned or been entitled to
receive had such Series C Preferred Stock been converted immediately
prior to such date. Successive adjustments in the Conversion Price
shall be made whenever any event specified above shall occur.
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(D) Other Distributions. In case the Corporation shall
fix a record date for making of a distribution to all holders of shares
of its Common Stock of (i) shares of any class other than its Common
Stock, (ii) evidences of indebtedness of the Corporation, (iii) assets
(excluding cash dividends or distributions, or dividends or
distributions referred to in Section (d)(6)(C) hereof), or (iv) rights
or warrants (excluding those referred to in Section (d)(6)(A) hereof),
in each such case the Conversion Price in effect immediately prior
thereto shall be reduced immediately thereafter to the price determined
by dividing (1) an amount equal to the difference resulting from (x)
the number of shares of Common Stock outstanding on such record date
multiplied by the Conversion Price per share on such record date, less
(y) the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive) of said shares or evidences of
indebtedness or assets or rights or warrants to be so distributed, by
(2) the number of shares of Common Stock outstanding on such record
date. Such adjustment shall be made successively whenever such a record
date is fixed. In the event that such distribution is not so made, the
Conversion Price then in effect shall be readjusted, effective as of
the date when the Board of Directors determines not to distribute such
shares, evidences of indebtedness, assets, rights or warrants, as the
case may be, to the Conversion Price which would then be in effect if
such record date had not been fixed.
(7) De Minimis Adjustments. No adjustment to the Conversion Price
(and, therefore, the Conversion Rate) shall be made if such adjustment would
result in a change in the Conversion Price of less than $0.01, but any lesser
adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to $0.01 or more.
(8) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series C Preferred Stock such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series C Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall be insufficient
to effect the conversion of all then outstanding shares of the Series C
Preferred Stock, the Corporation shall take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(9) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any series or class of securities
other than Series C Preferred Stock (A) for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution
or (B) with respect to an Extraordinary Transaction (other than a tender offer)
or any other
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action described in Section (d)(6)(C) or (D) hereof, the Corporation
shall mail to each holder of Series C Preferred Stock, at least 10 days
prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution or action, and the amount and character of such dividend,
distribution or action; provided, however, that the failure to give
such notice shall not impair the validity of such dividend,
distribution, Extraordinary Transaction or other action.
(e) Redemption.
(1) Optional Redemption. The Series C Preferred Stock is
redeemable by the Corporation, in whole or in part, at any time or from
time to time after issuance of the Series C Preferred Stock at the
option of the Corporation, on at least 20 but not more than 90 days'
written notice (the "Redemption Notice"). With respect to any such
redemption, each share of Series C Preferred Stock will be redeemable
at a price equal to the greater of (A) the then applicable Liquidation
Value and (B) the Stated Value, plus the dividends that would have
accrued on the Series C Preferred Stock in the event that no dividends
were declared and paid by the Corporation for a period of three years
from June 1, 2001 (the "Redemption Price"). The Redemption Price is
payable in cash. Any holder of Series C Preferred Stock may, in lieu of
receiving cash pursuant to this Section (e), exercise such holder's
conversion rights pursuant to Section (d)(2) hereof by giving the
Corporation a Conversion Notice no later than 10 days after the
Corporation delivers the Redemption Notice.
(2) Mandatory Redemption. On June 1, 2006, the Company
must, at its option (A) redeem each share of Preferred Stock for a cash
payment equal to the then applicable Liquidation Value or (B) convert
each share of Series C Preferred Stock into a number of shares of
Common Stock equal to the then Conversion Rate in accordance with the
applicable provisions of Section (d).
(f) Protective Provisions. In addition to any other rights
provided by law, so long as any shares of Series C Preferred Stock are then
outstanding, except where the vote or written consent of the holders of a
greater number of shares is required by law or by another provision of the
Articles of Incorporation, without first obtaining the affirmative vote or
written consent of the holders of 66 2/3% of the total number of shares of
Series C Preferred Stock outstanding, voting together as a single class, the
Corporation shall not:
(1) amend or repeal any provision of, or add any
provision to, the Articles of Incorporation or the Bylaws, if such
action would materially and adversely alter the preferences, rights,
privileges or powers of, or restrictions provided for the benefit of,
holders of Series C Preferred Stock; or
(2) issue any shares of capital stock with preferences,
limitations and relative rights that would be superior to or pari passu
with the Series C Preferred Stock.
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(g) Notices. Any notice required by the provisions hereof to be
given to the holders of shares of Series C Preferred Stock shall be deemed given
(i) on the date of delivery, if such notice is hand-delivered to such holder or
(ii) on the third business day following (and not including) the date on which
such notice is either sent via express courier or deposited in the United States
Mail, first-class, postage prepaid, and addressed to each holder of record at
his address appearing on the books of the Corporation. Notice by any other means
shall not be deemed effective until actually received.
(h) Determination of Market Price. In each case where these
Articles of Amendment refer to the OTC-BB to calculate the market price of the
Common Stock and at such time the Common Stock is not quoted on the OTC-BB, the
following provisions shall apply:
(1) If the Common Stock is listed on a national
securities exchange, the average closing bid price shall be calculated
according to the closing price of the Common Stock as reported by such
exchange.
(2) If the Common Stock is not listed on a national
securities exchange but is quoted on any tier of Nasdaq, or any
successor thereto, the average closing bid price shall be calculated
according to the closing bid price of the Common Stock as reported by
such tier of Nasdaq.
(3) If the Common Stock is not listed on a national
securities exchange or quoted on a tier of Nasdaq, the average closing
bid price shall be calculated according to the closing price of the
Common Stock as reported by the "Pink Sheets" published by The National
Quotation Bureau, Inc., or any successor thereto, or as reported by any
other electronic or non-electronic quotation system that publishes or
reports daily quotations of the Common Stock.
(4) If none of the foregoing apply, the average closing
bid price shall be as determined in good faith by a resolution of the
Board of Directors.
* * *
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ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
AER ENERGY RESOURCES, INC.
In accordance with Sections 14-2-602 and 14-2-1006 of the Georgia
Business Corporation Code (the "Code"), AER Energy Resources, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of the
Code, DOES HEREBY CERTIFY:
1. The name of the Corporation is AER Energy Resources, Inc.
2. The following resolution setting forth an amendment to the
Corporation's Articles of Incorporation has been duly adopted
by the Corporation's Board of Directors:
RESOLVED, that Article II of the Corporation's
Articles of Incorporation is hereby amended by adding the
following provisions to the end of Section 2.4: "The
Corporation is authorized to issue 400,000 shares of Series D
Convertible Preferred Stock, no par value (the "Series D
Preferred Stock"). The Series D Preferred Stock shall have
the terms, preferences, limitations and relative rights set
forth on Exhibit A hereto."
3. The "Exhibit A" referenced in the foregoing resolution is
included in these Articles of Amendment and is the same
"Exhibit A" as is attached hereto.
4. The foregoing resolution containing the amendment was duly
adopted on January 28, 2002, by the Corporation's Board of
Directors in accordance with the provisions of Sections
14-2-602 and 14-2-1002 of the Code. This amendment was
adopted by the Corporation's Board of Directors without
shareholder action and such shareholder action was not
required, except that this amendment was duly approved by the
holders of Series A, B and C Preferred Stock pursuant to the
requirements of the Corporation's Articles of Incorporation.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be signed by the undersigned duly authorized officer, this 31st day
of January, 2002.
AER ENERGY RESOURCES, INC.
By: /s/ J.T. Moore
----------------------------------------
J.T. Moore
Vice President and Chief Financial
Officer
EXHIBIT A
TERMS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF
SERIES D CONVERTIBLE PREFERRED STOCK OF
AER ENERGY RESOURCES, INC.
The following terms shall have the meanings specified:
"Articles of Incorporation" shall mean the Articles of Incorporation
of the Corporation, as amended.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Bylaws" shall mean the bylaws of the Corporation, as amended.
"Common Stock" shall mean the common stock, no par value per share, of
the Corporation.
"Conversion Notice" shall have the meaning provided in Section (d)(5)
hereof.
"Conversion Price" shall equal $0.3059; provided, however, that if
115% of the average closing bid price of the Common Stock as reported on the
OTC-BB for the 20 consecutive trading days ending on January 30, 2003 (such
20-day average price being referred to in this definition as the "Adjusted
Price") is less than the Conversion Price, then the Conversion Price shall
equal the greater of (1) 115% of the Adjusted Price and (2) $0.1995; provided,
further, that the Conversion Price shall also be subject to the adjustments
provided in Section (d)(6) hereof.
"Conversion Rate" shall equal such number of shares of Common Stock
equal to (1) the then applicable Liquidation Value, divided by (2) the then
applicable Conversion Price.
"Conversion Rights" shall have the meaning provided in Section (d)
hereof.
"Conversion Shares" shall mean the shares of Common Stock into which
each share of Series D Preferred Stock is convertible pursuant to Section (d)
hereof.
"Corporation" shall mean AER Energy Resources, Inc., a Georgia
corporation.
"Extraordinary Transaction" shall mean any of the following events:
(1) the consummation of a merger, share exchange, acquisition of
stock or other similar transaction, as a result of which the Corporation shall
not continue to exist or shall continue to exist only as a subsidiary of
another entity (other than a parent or subsidiary of the Corporation);
(2) the consummation of a sale of all or substantially all the
assets of the Corporation to a person or entity (other than a parent or
subsidiary of the Corporation); or
(3) the public announcement of a tender offer (other than by a
parent or subsidiary of the Corporation) for all of the outstanding shares of
Common Stock.
"Georgia Code" shall mean the Georgia Business Corporation Code,
O.C.G.A. ss. 14-2-101 et seq., as amended.
"Liquidation" shall have the meaning provided in Section (b) hereof.
"Liquidation Value," with respect to a share of Series D Preferred
Stock, shall equal the Stated Value of such share plus all accrued but unpaid
dividends with respect to such share.
"Original Issue Date" shall mean, with respect to a share of Series D
Preferred Stock, the date that such share was purchased from the Corporation.
"OTC-BB" shall mean the Over-the-Counter Bulletin Board automated
quotation system operated by The Nasdaq Stock Market, Inc. ("Nasdaq"), or any
successor quotation system.
"Redemption Notice" shall have the meaning provided in Section (e)(1)
hereof.
"Redemption Price" shall have the meaning provided in Section (e)(1)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Preferred Stock" shall mean the 425,000 shares of Series A
Convertible Preferred Stock, no par value, established by the Corporation on
September 27, 2000.
"Series B Preferred Stock" shall mean the 250,000 shares of Series B
Convertible Preferred Stock, no par value, established by the Corporation on
February 28, 2001.
"Series C Preferred Stock" shall mean the 500,000 shares of Series C
Convertible Preferred Stock, no par value, established by the Corporation on
June 12, 2001.
"Series D Preferred Stock" shall mean the 400,000 shares of Series D
Convertible Preferred Stock, no par value, hereby established.
"Stated Value" per share of the Series D Preferred Stock shall mean
the per share issue price for any share of Series D Preferred Stock, as
adjusted pursuant to Section (d)(6) hereof after January 31, 2002. The initial
Stated Value per share of Series D Preferred Stock is $10.00.
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The terms, preferences, limitations and relative rights of the Series
D Preferred Stock are as follows:
(a) Dividend Rights. The following dividend rights shall apply to
the Series D Preferred Stock:
(1) The holders of outstanding shares of Series D
Preferred Stock shall be entitled to receive cash dividends when, as
and if declared by the Board of Directors out of any funds legally
available therefor at the rate of 6.75% of the Liquidation Value per
annum, or $0.675 per share of Series D Preferred Stock based upon the
initial Stated Value per share.
(2) Dividends shall accrue on each share of Series D
Preferred Stock from the Original Issue Date, and shall accrue from
day to day, whether or not earned or declared and whether or not there
shall be funds legally available for the payment of such dividends.
Such dividends shall be cumulative so that, if such dividends in
respect of any previous or current quarterly dividend period, at the
rate specified above, shall not have been paid or declared and a sum
sufficient for the payment thereof set apart, the deficiency shall
first be fully paid before any dividend or other distribution shall be
paid on or declared and set apart for the Common Stock or any other
stock ranking junior to the Series D Preferred Stock. Any accumulation
of dividends on the Series D Preferred Stock shall not bear interest.
(3) No cash dividend shall be paid or declared on Common
Stock or any other stock ranking junior to the Series D Preferred
Stock as to dividend preference unless (A) full accrued and unpaid
dividends on the Series D Preferred Stock for all past dividend
periods and the then current dividend period shall have been paid or
declared and a sum sufficient for the payment above set apart and (B)
the Corporation shall also pay each holder of the Series D Preferred
Stock the amount of such cash dividend per share of Common Stock,
multiplied by the number of shares of Common Stock that such holder
would have received if, immediately prior to the declaration date of
such dividend, all shares of Series D Preferred Stock owned by such
holder were converted into Common Stock pursuant to Section (d)
hereof.
(4) Each dividend shall be paid to the holders of record
of the Series D Preferred Stock as they shall appear on the stock
register of the Corporation on such record date, not exceeding 45 days
nor less than 10 days preceding a dividend payment date, as shall be
fixed by the Board of Directors or a duly authorized committee
thereof.
(5) The Series D Preferred Stock shall rank as to
payment of dividends on a parity with the Series A, Series B and
Series C Preferred Stock.
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(b) Liquidation Rights.
(1) Subject to the rights of any class of stock of the
Corporation with liquidation preferences senior to the Series D
Preferred Stock, in the event of the liquidation, dissolution or
winding up for any reason, including, without limitation, bankruptcy,
of the Corporation or any of the Corporation's subsidiaries, the
assets of which constitute all or substantially all the assets of the
business of the Corporation and its subsidiaries taken as a whole
(each such event being referred to as a "Liquidation"), the holders of
the outstanding shares of Series D Preferred Stock shall be entitled
to receive in exchange for and in redemption of each share of their
Series D Preferred Stock, and on a parity with the holders of any
capital stock ranking pari passu to the Series D Preferred Stock, from
any funds, proceeds or assets legally available for distribution to
shareholders, an amount equal to the greater of (1) the Liquidation
Value as of the date that the Liquidation is approved by the
shareholders of the Corporation, or, if no such approval is required,
the Board of Directors, or (2) the aggregate amount of such funds,
proceeds or assets, multiplied by a fraction:
(x) the numerator of which is the number of
Conversion Shares to which the holder of such share of Series
D Preferred Stock would be entitled to receive by virtue of
converting such share; and
(y) the denominator of which is the aggregate
of the number of Conversion Shares, shares of Common Stock
outstanding, and all other shares of outstanding capital
stock of any series the holders of which are entitled to
participate in the proceeds of a Liquidation.
(2) All the preferential amounts to be paid to the
holders of Series D Preferred Stock under this Section (b) shall be
paid or set apart for payment before the payment or setting apart for
payment of any amount for, or the distribution of any funds, proceeds
or assets of the Corporation to, the holders of shares of Common Stock
or any class or series of stock of the Corporation ranking junior to
the Series D Preferred Stock in connection with a Liquidation as to
which this Section (b) applies. If the funds, proceeds and assets to
be distributed to the holders of Series D Preferred Stock are
insufficient to permit the payment to such holders of the full amounts
payable to such holders, the funds, proceeds and assets legally
available for distribution shall be distributed ratably among the
holders of Series D Preferred Stock in proportion to the full amount
each such holder is otherwise entitled to receive.
(3) The Series D Preferred Stock shall rank as to
payments upon Liquidation on a parity with the Series A, Series B and
Series C Preferred Stock.
(c) Voting Rights. Except as provided herein or by the Code, the
Series D Preferred Stock shall not have any voting rights.
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(d) Conversion. The holders of Series D Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(1) Conversion Rate.
(A) For purposes of this Section (d), each
share of Series D Preferred Stock shall be convertible, at
the times and under the conditions described in this Section
(d), at the rate of one share of Series D Preferred Stock to
the number of shares of Common Stock that equals the
Conversion Rate. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date
of the surrender of the shares of Series D Preferred Stock to
be converted in accordance with the procedures described in
Section (d)(5) hereof.
(B) No fractional shares of Common Stock shall
be issued upon conversion of Series D Preferred Stock, and
any shares of Series D Preferred Stock surrendered for
conversion that would otherwise result in a fractional share
of Common Stock shall be redeemed in cash at the then
effective Conversion Price per share, payable as promptly as
possible when funds are legally available therefor.
(2) Conversion at Option of Holders. Subject to Section
(d)(5) hereof, each share of Series D Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after
issuance, in whole or in part, at the office of the Corporation or any
transfer agent for the Series D Preferred Stock, into Common Stock at
the then effective Conversion Rate.
(3) Conversion at Option of Company.
(A) Beginning on January 31, 2005, and if all
the conditions of Section (d)(3)(B) are satisfied, the
Corporation may require that each holder of Series D
Preferred Stock convert such holder's shares of Series D
Preferred Stock into Common Stock in accordance with Section
(d) hereof.
(B) All of the following conditions must be met
in order for the Corporation to exercise the conversion
rights set forth in Section (d)(3)(A) hereof:
(i) the average closing bid price of a
share of the Common Stock (as reported on the
OTC-BB) for any 20 trading days out of the 30
trading days immediately preceding such exercise
shall be greater than or equal to 250% of the
Conversion Price as of the date of such exercise;
(ii) a registration statement filed
under the Securities Act covering the resale of
shares of Common Stock that may be
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received upon the conversion of all shares of the
Series D Preferred Stock (the "Resale Registration
Statement") is effective and has been continuously
effective for at least three months;
(iii) from the effective date of the
Resale Registration Statement until the date of such
exercise, the Common Stock has been continuously
listed or quoted on a national securities exchange,
on any tier of The Nasdaq Stock Market, Inc. or on
an automated inter-dealer quotation system
(including the OTC-BB), and the Corporation has not
received any written notice stating that such
exchange, market or system has delisted or is
seeking to delist the Common Stock from such
exchange, market or system; and
(iv) for a three-month period ending on
the Conversion Date with respect to such exercise,
there has not been a public announcement of an
Extraordinary Transaction that is pending on or has
been consummated before the Conversion Date.
(4) Conversion Upon Extraordinary Transaction. At any
time after the date that an Extraordinary Transaction has been
announced and is then pending, any holder of Series D Preferred Stock
may convert all of its shares of Series D Preferred Stock into a
number of shares of Common Stock calculated by dividing (A) the
greater of (i) the then applicable Liquidation Value and (ii) the
Stated Value, plus the dividends that would have accrued on the Series
D Preferred Stock in the event that no dividends were declared and
paid by the Corporation for a period of three years from the Original
Issue Date, by (B) the then applicable Conversion Price.
(5) Mechanics of Conversion. Before any holder of Series
D Preferred Stock shall be entitled to receive certificates
representing the shares of Common Stock into which shares of Series D
Preferred Stock are converted in accordance with Sections (d)(2),
(d)(3), (d)(4) or (e)(2) hereof, such holder shall surrender the
certificate or certificates for such shares of Series D Preferred
Stock, duly endorsed, with signatures guaranteed, at the office of the
Corporation or of any transfer agent for the Series D Preferred Stock,
and shall give written notice to the Corporation at such office of the
name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued, if different
from the name shown on the books and records of the Corporation (the
"Conversion Notice"). The Conversion Notice shall also contain such
representations as may reasonably be required by the Corporation to
the effect that the shares to be received upon conversion are not
being acquired and will not be transferred in any way that might
violate the then applicable securities laws. The Corporation shall, as
soon as practicable thereafter and in no event later than 10 days
after the delivery of said certificates and Conversion Notice, issue
and deliver at such office to such holder of Series D Preferred Stock,
or to the nominee or nominees of such holder as provided in the
Conversion Notice, a certificate or certificates for the number of
shares of Common Stock to which
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such holder shall be entitled as aforesaid. The conversion shall be
effective at the time the Corporation accepts the Conversion Notice as
being proper in form and substance. The person or persons entitled to
receive the shares of Common Stock issuable upon a conversion pursuant
to Sections (d)(2), (d)(3), (d)(4) or (e)(2) hereof shall be treated
for all purposes as the record holder or holders of such shares of
Common Stock as of the effective date of conversion pursuant to this
Section (d). All certificates issued upon the exercise or occurrence
of the conversion shall contain a legend governing restrictions upon
such shares imposed by law (if any) or agreement of the holder or his
or its predecessors, successors or permitted assigns.
(6) Conversion Price Adjustments. The Stated Value (and
therefore, the Liquidation Value, the Conversion Price, the
corresponding Conversion Rate and the figures set forth in the
definition of Conversion Price) shall be subject to adjustment from
time to time as follows:
(A) Common Stock Issued at Less Than the
Current Conversion Price. If the Corporation shall issue any
Common Stock other than Excluded Securities (as hereinafter
defined) without consideration or for a consideration per
share less than the then current Conversion Price, the
Conversion Price in effect immediately prior to each such
issuance shall immediately (except as provided below) be
reduced by multiplying the Conversion Price by a fraction of
which the numerator shall be an amount equal to the sum of
(x) the number of shares of Common Stock outstanding
immediately prior to such issuance multiplied by the current
Conversion Price plus (y) the consideration, if any, received
by the Corporation upon such issuance and the denominator
shall be the total number of shares of Common Stock
outstanding immediately after such issuance multiplied by the
current Conversion Price.
For the purposes of any adjustment of the Conversion Price
pursuant to Section (d)(6)(A) hereof, the following
provisions shall be applicable:
(i) Cash. In the case of the issuance
of Common Stock for cash, the amount of the
consideration received by the Corporation shall be
deemed to be the amount of the cash proceeds
received by the Corporation for such Common Stock
before deducting therefrom any discounts,
commissions, taxes or other expenses allowed, paid
or incurred by the Corporation for any underwriting
or otherwise in connection with the issuance and
sale thereof.
(ii) Consideration Other Than Cash. In
the case of the issuance of Common Stock (otherwise
than upon the conversion of shares of capital stock
or other securities of the Corporation) for a
consideration in whole or in part other than cash,
including
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securities acquired in exchange therefor (other than
securities by their terms so exchangeable), the
consideration other than cash shall be deemed to be
the fair value thereof as determined by the Board of
Directors, irrespective of any accounting treatment,
whose determination shall be conclusive.
(iii) Options and Convertible
Securities. Except with respect to any securities
that are Excluded Securities, in the case of the
issuance of (1) options, warrants or other rights to
purchase or acquire Common Stock (whether or not at
the time exercisable), (2) securities by their terms
convertible into or exchangeable for Common Stock
(whether or not at the time so convertible or
exchangeable) or (3) options, warrants or rights to
purchase such convertible or exchangeable securities
(whether or not at the time exercisable):
(a) the aggregate maximum
number of shares of Common Stock
deliverable upon exercise of such options,
warrants or other rights to purchase or
acquire Common Stock shall be deemed to
have been issued at the time such options,
warrants or rights were issued and for a
consideration equal to the consideration
(determined in the manner provided in
Sections (d)(6)(A)(i) and (ii) hereof, if
any, received by the Corporation upon the
issuance of such options, warrants or
rights plus the minimum purchase price
provided in such options, warrants or
rights for the Common Stock covered
thereby;
(b) the aggregate maximum
number of shares of Common Stock
deliverable upon conversion of or in
exchange for any such convertible or
exchangeable securities, or upon the
exercise of options, warrants or other
rights to purchase or acquire such
convertible or exchangeable securities and
the subsequent conversion or exchange
thereof, shall be deemed to have been
issued at the time such securities were
issued or such options, warrants or rights
were issued and for a consideration equal
to the consideration, if any, received by
the Corporation for any such securities and
related options, warrants or rights
(excluding any cash received on account of
accrued interest or accrued dividends),
plus the additional consideration
(determined in the manner provided in
Sections (d)(6)(A)(i) and (ii) hereof), if
any, to be received by the Corporation upon
the conversion or exchange of such
securities, or upon the exercise of any
related options, warrants or rights to
purchase or acquire such convertible or
exchangeable
A-8
securities and the subsequent conversion or
exchange thereof;
(c) on any change in the
number of shares of Common Stock
deliverable upon exercise of any such
options, warrants or rights or conversion
or exchange of such convertible or
exchangeable securities or any change in
the consideration to be received by the
Corporation upon such exercise, conversion
or exchange, including, but not limited to,
a change resulting from the anti-dilution
provisions thereof, the Conversion Price as
then in effect shall forthwith be
readjusted to such Conversion Price as
would have been obtained had an adjustment
been made upon the issuance of such
options, warrants or rights not exercised
prior to such change, or of such
convertible or exchangeable securities not
converted or exchanged prior to such
change, upon the basis of such change;
(d) on the expiration or
cancellation of any such options, warrants
or rights, or the termination of the right
to convert or exchange such convertible or
exchangeable securities, if the Conversion
Price shall have been adjusted upon the
issuance thereof, the Conversion Price
shall forthwith be readjusted to such
Conversion Price as would have been
obtained had an adjustment been made upon
the issuance of such options, warrants,
rights or such convertible or exchangeable
securities on the basis of the issuance of
only the number of shares of Common Stock
actually issued upon the exercise of such
options, warrants or rights, or upon the
conversion or exchange of such convertible
or exchangeable securities; and
(e) if the Conversion Price
shall have been adjusted upon the issuance
of any such options, warrants, rights or
convertible or exchangeable securities, no
further adjustment of the Conversion Price
shall be made for the actual issuance of
Common Stock upon the exercise, conversion
or exchange thereof.
(B) Excluded Securities. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this
Section (d) as a result of the issuance or deemed issuance of
any of the foregoing (collectively, the "Excluded
Securities"):
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(i) any shares of Common Stock upon
the conversion of shares of Series A, Series B,
Series C or Series D Preferred Stock;
(ii) securities of the Corporation
offered to the public pursuant to an effective
registration statement under the Securities Act;
(iii) any securities of the Corporation
(including any shares of Common Stock that may be
issuable pursuant to the conversion or exercise of
any options, warrants or rights of the Corporation)
pursuant to any commercial agreement if the issuance
of such securities is approved by the Board of
Directors;
(iv) any shares of Common Stock as a
result of the adjustments to the Conversion Price
and the Conversion Rate under this Section (d) or
the similar provisions of the Series A, Series B and
Series C Preferred Stock;
(v) any options, warrants or rights of
the Corporation, and any shares of Common Stock
issued at any time following the Original Issue Date
(including any shares of Common Stock that may be
issuable pursuant to the conversion or exercise of
any options, warrants or rights of the Corporation),
in each case granted under any employee stock option
or incentive plan in which employees or directors of
the Corporation may participate;
(vi) any shares of Common Stock issued
in a transaction to which Section (d)(6)(C) or (D)
applies; or
(vii) any shares of Common Stock issued
pursuant to the exchange, conversion or exercise of
options, warrants or other rights of the Corporation
that have previously been incorporated into
computations hereunder on the date when such
options, warrants or other rights of the Corporation
were issued.
(C) Stock Dividends, Subdivisions,
Reclassifications or Combinations. If the Corporation shall
(i) declare a dividend or make a distribution on its Common
Stock in shares of its Common Stock, (ii) subdivide or
reclassify the outstanding shares of Common Stock into a
greater number of shares, or (iii) combine or reclassify the
outstanding Common Stock into a smaller number of shares, the
Conversion Price in effect at the time of the record date for
such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any shares of
Series D Preferred Stock surrendered for conversion after
such date shall be entitled to receive the number of shares
of Common Stock which he would have
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owned or been entitled to receive had such Series D Preferred
Stock been converted immediately prior to such date.
Successive adjustments in the Conversion Price shall be made
whenever any event specified above shall occur.
(D) Other Distributions. In case the
Corporation shall fix a record date for making of a
distribution to all holders of shares of its Common Stock of
(i) shares of any class other than its Common Stock, (ii)
evidences of indebtedness of the Corporation, (iii) assets
(excluding cash dividends or distributions, or dividends or
distributions referred to in Section (d)(6)(C) hereof), or
(iv) rights or warrants (excluding those referred to in
Section (d)(6)(A) hereof), in each such case the Conversion
Price in effect immediately prior thereto shall be reduced
immediately thereafter to the price determined by dividing
(1) an amount equal to the difference resulting from (x) the
number of shares of Common Stock outstanding on such record
date multiplied by the Conversion Price per share on such
record date, less (y) the fair market value (as determined by
the Board of Directors, whose determination shall be
conclusive) of said shares or evidences of indebtedness or
assets or rights or warrants to be so distributed, by (2) the
number of shares of Common Stock outstanding on such record
date. Such adjustment shall be made successively whenever
such a record date is fixed. In the event that such
distribution is not so made, the Conversion Price then in
effect shall be readjusted, effective as of the date when the
Board of Directors determines not to distribute such shares,
evidences of indebtedness, assets, rights or warrants, as the
case may be, to the Conversion Price which would then be in
effect if such record date had not been fixed.
(7) De Minimis Adjustments. No adjustment to the
Conversion Price (and, therefore, the Conversion Rate) shall be made
if such adjustment would result in a change in the Conversion Price of
less than $0.01, but any lesser adjustment shall be carried forward
and shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustments so carried forward,
shall amount to $0.01 or more.
(8) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose
of effecting the conversion of the shares of the Series D Preferred
Stock such number of shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of
the Series D Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall be insufficient
to effect the conversion of all then outstanding shares of the Series
D Preferred Stock, the Corporation shall take such corporate action as
may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
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(9) Notices of Record Date. In the event of any taking
by the Corporation of a record of the holders of any series or class
of securities other than Series D Preferred Stock (A) for the purpose
of determining the holders thereof who are entitled to receive any
dividend or other distribution or (B) with respect to an Extraordinary
Transaction (other than a tender offer) or any other action described
in Section (d)(6)(C) or (D) hereof, the Corporation shall mail to each
holder of Series D Preferred Stock, at least 10 days prior to the date
specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution
or action, and the amount and character of such dividend, distribution
or action; provided, however, that the failure to give such notice
shall not impair the validity of such dividend, distribution,
Extraordinary Transaction or other action.
(e) Redemption.
(1) Optional Redemption. The Series D Preferred Stock is
redeemable by the Corporation, in whole or in part, at any time or
from time to time after issuance of the Series D Preferred Stock at
the option of the Corporation, on at least 20 but not more than 90
days' written notice (the "Redemption Notice"). With respect to any
such redemption, each share of Series D Preferred Stock will be
redeemable at a price equal to the greater of (A) the then applicable
Liquidation Value and (B) the Stated Value, plus the dividends that
would have accrued on the Series D Preferred Stock in the event that
no dividends were declared and paid by the Corporation for a period of
three years from January 31, 2002 (the "Redemption Price"). The
Redemption Price is payable in cash. Any holder of Series D Preferred
Stock may, in lieu of receiving cash pursuant to this Section (e),
exercise such holder's conversion rights pursuant to Section (d)(2)
hereof by giving the Corporation a Conversion Notice no later than 10
days after the Corporation delivers the Redemption Notice.
(2) Mandatory Redemption. On January 31, 2007, the
Company must, at its option (A) redeem each share of Preferred Stock
for a cash payment equal to the then applicable Liquidation Value or
(B) convert each share of Series D Preferred Stock into a number of
shares of Common Stock equal to the then Conversion Rate in accordance
with the applicable provisions of Section (d).
(f) Protective Provisions. In addition to any other rights
provided by law, so long as any shares of Series D Preferred Stock are then
outstanding, except where the vote or written consent of the holders of a
greater number of shares is required by law or by another provision of the
Articles of Incorporation, without first obtaining the affirmative vote or
written consent of the holders of 66 2/3% of the total number of shares of
Series D Preferred Stock outstanding, voting together as a single class, the
Corporation shall not:
(1) amend or repeal any provision of, or add any
provision to, the Articles of Incorporation or the Bylaws, if such
action would materially and
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adversely alter the preferences, rights, privileges or powers of, or
restrictions provided for the benefit of, holders of Series D
Preferred Stock; or
(2) issue any shares of capital stock with preferences,
limitations and relative rights that would be superior to or pari
passu with the Series D Preferred Stock.
(g) Notices. Any notice required by the provisions hereof to be
given to the holders of shares of Series D Preferred Stock shall be deemed
given (i) on the date of delivery, if such notice is hand-delivered to such
holder or (ii) on the third business day following (and not including) the date
on which such notice is either sent via express courier or deposited in the
United States Mail, first-class, postage prepaid, and addressed to each holder
of record at his address appearing on the books of the Corporation. Notice by
any other means shall not be deemed effective until actually received.
(h) Determination of Market Price. In each case where these
Articles of Amendment refer to the OTC-BB to calculate the market price of the
Common Stock and at such time the Common Stock is not quoted on the OTC-BB, the
following provisions shall apply:
(1) If the Common Stock is listed on a national
securities exchange, the average closing bid price shall be calculated
according to the closing price of the Common Stock as reported by such
exchange.
(2) If the Common Stock is not listed on a national
securities exchange but is quoted on any tier of Nasdaq, or any
successor thereto, the average closing bid price shall be calculated
according to the closing bid price of the Common Stock as reported by
such tier of Nasdaq.
(3) If the Common Stock is not listed on a national
securities exchange or quoted on a tier of Nasdaq, the average closing
bid price shall be calculated according to the closing price of the
Common Stock as reported by the "Pink Sheets" published by The
National Quotation Bureau, Inc., or any successor thereto, or as
reported by any other electronic or non-electronic quotation system
that publishes or reports daily quotations of the Common Stock.
(4) If none of the foregoing apply, the average closing
bid price shall be as determined in good faith by a resolution of the
Board of Directors.
* * *
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ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
AER ENERGY RESOURCES, INC.
In accordance with Sections 14-2-602 and 14-2-1006 of the Georgia
Business Corporation Code (the "Code"), AER Energy Resources, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of the
Code, DOES HEREBY CERTIFY:
1. The name of the Corporation is AER Energy Resources, Inc.
2. The following resolution setting forth an amendment to the
Corporation's Articles of Incorporation has been duly adopted
by the Corporation's Board of Directors:
RESOLVED, that Article II of the Corporation's
Articles of Incorporation is hereby amended by adding the
following provisions to the end of Section 2.4: "The
Corporation is authorized to issue 200,000 shares of Series E
Convertible Preferred Stock, no par value (the "Series E
Preferred Stock"). The Series E Preferred Stock shall have
the terms, preferences, limitations and relative rights set
forth on EXHIBIT A hereto."
3. The "EXHIBIT A" referenced in the foregoing resolution is
included in these Articles of Amendment and is the same
"EXHIBIT A" as is attached hereto.
4. The foregoing resolution containing the amendment was duly
adopted on April 18, 2002 by the Corporation's Board of
Directors in accordance with the provisions of Sections
14-2-602 and 14-2-1002 of the Code. This amendment was
adopted by the Corporation's Board of Directors without
shareholder action and such shareholder action was not
required, except that this amendment was duly approved by the
holders of Series A, B, C and D Preferred Stock pursuant to
the requirements of the Corporation's Articles of
Incorporation.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be signed by the undersigned duly authorized officer, this 18th
day of April, 2002.
AER ENERGY RESOURCES, INC.
By: /s/ J.T. Moore
------------------------------------------
J.T. Moore
Vice President and Chief Financial Officer
EXHIBIT A
TERMS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF
SERIES E CONVERTIBLE PREFERRED STOCK OF
AER ENERGY RESOURCES, INC.
The following terms shall have the meanings specified:
"Articles of Incorporation" shall mean the Articles of Incorporation
of the Corporation, as amended.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Bylaws" shall mean the bylaws of the Corporation, as amended.
"Common Stock" shall mean the common stock, no par value per share, of
the Corporation.
"Conversion Notice" shall have the meaning provided in Section (d)(5)
hereof.
"Conversion Price" shall equal $0.207; PROVIDED, HOWEVER, that if 115%
of the average closing bid price of the Common Stock as reported on the OTC-BB
for the 20 consecutive trading days ending on April 22, 2003 (such 20-day
average price being referred to in this definition as the "Adjusted Price") is
less than the Conversion Price, then the Conversion Price shall equal the
greater of (1) 115% of the Adjusted Price and (2) $0.135 PROVIDED, FURTHER,
that the Conversion Price shall also be subject to the adjustments provided in
Section (d)(6) hereof.
"Conversion Rate" shall equal such number of shares of Common Stock
equal to (1) the then applicable Liquidation Value, divided by (2) the then
applicable Conversion Price.
"Conversion Rights" shall have the meaning provided in Section (d)
hereof.
"Conversion Shares" shall mean the shares of Common Stock into which
each share of Series E Preferred Stock is convertible pursuant to Section (d)
hereof.
"Corporation" shall mean AER Energy Resources, Inc., a Georgia
corporation.
"Extraordinary Transaction" shall mean any of the following events:
(1) the consummation of a merger, share exchange, acquisition of
stock or other similar transaction, as a result of which the Corporation shall
not continue to exist or shall continue to exist only as a subsidiary of
another entity (other than a parent or subsidiary of the Corporation);
(2) the consummation of a sale of all or substantially all the
assets of the Corporation to a person or entity (other than a parent or
subsidiary of the Corporation); or
(3) the public announcement of a tender offer (other than by a
parent or subsidiary of the Corporation) for all of the outstanding shares of
Common Stock.
"Georgia Code" shall mean the Georgia Business Corporation Code,
O.C.G.A. ss.14-2-101 et seq., as amended.
"Liquidation" shall have the meaning provided in Section (b) hereof.
"Liquidation Value," with respect to a share of Series E Preferred
Stock, shall equal the Stated Value of such share plus all accrued but unpaid
dividends with respect to such share.
"Original Issue Date" shall mean, with respect to a share of Series E
Preferred Stock, the date that such share was purchased from the Corporation.
"OTC-BB" shall mean the Over-the-Counter Bulletin Board automated
quotation system operated by The Nasdaq Stock Market, Inc. ("Nasdaq"), or any
successor quotation system.
"Redemption Notice" shall have the meaning provided in Section (e)(1)
hereof.
"Redemption Price" shall have the meaning provided in Section (e)(1)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Preferred Stock" shall mean the 425,000 shares of Series A
Convertible Preferred Stock, no par value, established by the Corporation on
September 27, 2000.
"Series B Preferred Stock" shall mean the 250,000 shares of Series B
Convertible Preferred Stock, no par value, established by the Corporation on
February 28, 2001.
"Series C Preferred Stock" shall mean the 500,000 shares of Series C
Convertible Preferred Stock, no par value, established by the Corporation on
June 12, 2001.
"Series D Preferred Stock" shall mean the 400,000 shares of Series D
Convertible Preferred Stock, no par value, established by the Corporation on
February 1, 2002.
"Series E Preferred Stock" shall mean the 200,000 shares of Series E
Convertible Preferred Stock, no par value, hereby established.
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"Stated Value" per share of the Series E Preferred Stock shall mean
the per share issue price for any share of Series E Preferred Stock, as
adjusted pursuant to Section (d)(6) hereof after the Original Issue Date. The
initial Stated Value per share of Series E Preferred Stock is $10.00.
The terms, preferences, limitations and relative rights of the Series
E Preferred Stock are as follows:
(a) DIVIDEND RIGHTS. The following dividend rights shall apply to
the Series E Preferred Stock:
(1) The holders of outstanding shares of Series E
Preferred Stock shall be entitled to receive cash dividends when, as
and if declared by the Board of Directors out of any funds legally
available therefor at the rate of 6.75% of the Liquidation Value per
annum, or $0.675 per share of Series E Preferred Stock based upon the
initial Stated Value per share.
(2) Dividends shall accrue on each share of Series E
Preferred Stock from the Original Issue Date, and shall accrue from
day to day, whether or not earned or declared and whether or not there
shall be funds legally available for the payment of such dividends.
Such dividends shall be cumulative so that, if such dividends in
respect of any previous or current quarterly dividend period, at the
rate specified above, shall not have been paid or declared and a sum
sufficient for the payment thereof set apart, the deficiency shall
first be fully paid before any dividend or other distribution shall be
paid on or declared and set apart for the Common Stock or any other
stock ranking junior to the Series E Preferred Stock. Any accumulation
of dividends on the Series E Preferred Stock shall not bear interest.
(3) No cash dividend shall be paid or declared on Common
Stock or any other stock ranking junior to the Series E Preferred
Stock as to dividend preference unless (A) full accrued and unpaid
dividends on the Series E Preferred Stock for all past dividend
periods and the then current dividend period shall have been paid or
declared and a sum sufficient for the payment above set apart and (B)
the Corporation shall also pay each holder of the Series E Preferred
Stock the amount of such cash dividend per share of Common Stock,
multiplied by the number of shares of Common Stock that such holder
would have received if, immediately prior to the declaration date of
such dividend, all shares of Series E Preferred Stock owned by such
holder were converted into Common Stock pursuant to Section (d)
hereof.
(4) Each dividend shall be paid to the holders of record
of the Series E Preferred Stock as they shall appear on the stock
register of the Corporation on such record date, not exceeding 45 days
nor less than 10 days preceding a dividend payment date, as shall be
fixed by the Board of Directors or a duly authorized committee
thereof.
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(5) The Series E Preferred Stock shall rank as to
payment of dividends on a parity with the Series A, Series B, Series C
and Series D Preferred Stock.
(b) LIQUIDATION RIGHTS.
(1) Subject to the rights of any class of stock of the
Corporation with liquidation preferences senior to the Series E
Preferred Stock, in the event of the liquidation, dissolution or
winding up for any reason, including, without limitation, bankruptcy,
of the Corporation or any of the Corporation's subsidiaries, the
assets of which constitute all or substantially all the assets of the
business of the Corporation and its subsidiaries taken as a whole
(each such event being referred to as a "Liquidation"), the holders of
the outstanding shares of Series E Preferred Stock shall be entitled
to receive in exchange for and in redemption of each share of their
Series E Preferred Stock, and on a parity with the holders of any
capital stock ranking pari passu to the Series E Preferred Stock, from
any funds, proceeds or assets legally available for distribution to
shareholders, an amount equal to the greater of (1) the Liquidation
Value as of the date that the Liquidation is approved by the
shareholders of the Corporation, or, if no such approval is required,
the Board of Directors, or (2) the aggregate amount of such funds,
proceeds or assets, multiplied by a fraction:
(x) the numerator of which is the number of
Conversion Shares to which the holder of such share of Series
E Preferred Stock would be entitled to receive by virtue of
converting such share; and
(y) the denominator of which is the aggregate
of the number of Conversion Shares, shares of Common Stock
outstanding, and all other shares of outstanding capital
stock of any series the holders of which are entitled to
participate in the proceeds of a Liquidation.
(2) All the preferential amounts to be paid to the
holders of Series E Preferred Stock under this Section (b) shall be
paid or set apart for payment before the payment or setting apart for
payment of any amount for, or the distribution of any funds, proceeds
or assets of the Corporation to, the holders of shares of Common Stock
or any class or series of stock of the Corporation ranking junior to
the Series E Preferred Stock in connection with a Liquidation as to
which this Section (b) applies. If the funds, proceeds and assets to
be distributed to the holders of Series E Preferred Stock are
insufficient to permit the payment to such holders of the full amounts
payable to such holders, the funds, proceeds and assets legally
available for distribution shall be distributed ratably among the
holders of Series E Preferred Stock in proportion to the full amount
each such holder is otherwise entitled to receive.
(3) The Series E Preferred Stock shall rank as to
payments upon Liquidation on a parity with the Series A, Series B,
Series C and Series D Preferred Stock.
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(c) VOTING RIGHTS. Except as provided herein or by the Code, the
Series E Preferred Stock shall not have any voting rights.
(d) CONVERSION. The holders of Series E Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(1) Conversion Rate.
(A) For purposes of this Section (d), each
share of Series E Preferred Stock shall be convertible, at
the times and under the conditions described in this Section
(d), at the rate of one share of Series E Preferred Stock to
the number of shares of Common Stock that equals the
Conversion Rate. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date
of the surrender of the shares of Series E Preferred Stock to
be converted in accordance with the procedures described in
Section (d)(5) hereof.
(B) No fractional shares of Common Stock shall
be issued upon conversion of Series E Preferred Stock, and
any shares of Series E Preferred Stock surrendered for
conversion that would otherwise result in a fractional share
of Common Stock shall be redeemed in cash at the then
effective Conversion Price per share, payable as promptly as
possible when funds are legally available therefor.
(2) Conversion at Option of Holders. Subject to Section
(d)(5) hereof, each share of Series E Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after
issuance, in whole or in part, at the office of the Corporation or any
transfer agent for the Series E Preferred Stock, into Common Stock at
the then effective Conversion Rate.
(3) Conversion at Option of Company.
(A) Beginning on April 22, 2005, and if all the
conditions of Section (d)(3)(B) are satisfied, the
Corporation may require that each holder of Series E
Preferred Stock convert such holder's shares of Series E
Preferred Stock into Common Stock in accordance with Section
(d) hereof.
(B) All of the following conditions must be met
in order for the Corporation to exercise the conversion
rights set forth in Section (d)(3)(A) hereof:
(i) the average closing bid price of a
share of the Common Stock (as reported on the
OTC-BB) for any 20 trading days out of the 30
trading days immediately preceding such exercise
shall be greater than or equal to 250% of the
Conversion Price as of the date of such exercise;
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(ii) a registration statement filed
under the Securities Act covering the resale of
shares of Common Stock that may be received upon the
conversion of all shares of the Series E Preferred
Stock (the "Resale Registration Statement") is
effective and has been continuously effective for at
least three months;
(iii) from the effective date of the
Resale Registration Statement until the date of such
exercise, the Common Stock has been continuously
listed or quoted on a national securities exchange,
on any tier of The Nasdaq Stock Market, Inc. or on
an automated inter-dealer quotation system
(including the OTC-BB), and the Corporation has not
received any written notice stating that such
exchange, market or system has delisted or is
seeking to delist the Common Stock from such
exchange, market or system; and
(iv) for a three-month period ending on
the Conversion Date with respect to such exercise,
there has not been a public announcement of an
Extraordinary Transaction that is pending on or has
been consummated before the Conversion Date.
(4) Conversion Upon Extraordinary Transaction. At any
time after the date that an Extraordinary Transaction has been
announced and is then pending, any holder of Series E Preferred Stock
may convert all of its shares of Series E Preferred Stock into a
number of shares of Common Stock calculated by dividing (A) the
greater of (i) the then applicable Liquidation Value and (ii) the
Stated Value, plus the dividends that would have accrued on the Series
E Preferred Stock in the event that no dividends were declared and
paid by the Corporation for a period of three years from the Original
Issue Date, by (B) the then applicable Conversion Price.
(5) Mechanics of Conversion. Before any holder of Series
E Preferred Stock shall be entitled to receive certificates
representing the shares of Common Stock into which shares of Series E
Preferred Stock are converted in accordance with Sections (d)(2),
(d)(3), (d)(4) or (e)(2) hereof, such holder shall surrender the
certificate or certificates for such shares of Series E Preferred
Stock, duly endorsed, with signatures guaranteed, at the office of the
Corporation or of any transfer agent for the Series E Preferred Stock,
and shall give written notice to the Corporation at such office of the
name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued, if different
from the name shown on the books and records of the Corporation (the
"Conversion Notice"). The Conversion Notice shall also contain such
representations as may reasonably be required by the Corporation to
the effect that the shares to be received upon conversion are not
being acquired and will not be transferred in any way that might
violate the then applicable securities laws. The Corporation shall, as
soon as practicable thereafter and in no event later than 10 days
after the delivery of said certificates and Conversion Notice, issue
and deliver at such office to such holder of Series E Preferred Stock,
or to the nominee
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or nominees of such holder as provided in the Conversion Notice, a
certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. The conversion
shall be effective at the time the Corporation accepts the Conversion
Notice as being proper in form and substance. The person or persons
entitled to receive the shares of Common Stock issuable upon a
conversion pursuant to Sections (d)(2), (d)(3), (d)(4) or (e)(2)
hereof shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of the effective date of
conversion pursuant to this Section (d). All certificates issued upon
the exercise or occurrence of the conversion shall contain a legend
governing restrictions upon such shares imposed by law (if any) or
agreement of the holder or his or its predecessors, successors or
permitted assigns.
(6) Conversion Price Adjustments. The Stated Value (and
therefore, the Liquidation Value, the Conversion Price, the
corresponding Conversion Rate and the figures set forth in the
definition of Conversion Price) shall be subject to adjustment from
time to time as follows:
(A) Common Stock Issued at Less Than the
Current Conversion Price. If the Corporation shall issue any
Common Stock other than Excluded Securities (as hereinafter
defined) without consideration or for a consideration per
share less than the then current Conversion Price, the
Conversion Price in effect immediately prior to each such
issuance shall immediately (except as provided below) be
reduced by multiplying the Conversion Price by a fraction of
which the numerator shall be an amount equal to the sum of
(x) the number of shares of Common Stock outstanding
immediately prior to such issuance multiplied by the current
Conversion Price plus (y) the consideration, if any, received
by the Corporation upon such issuance and the denominator
shall be the total number of shares of Common Stock
outstanding immediately after such issuance multiplied by the
current Conversion Price.
For the purposes of any adjustment of the Conversion Price
pursuant to Section (d)(6)(A) hereof, the following
provisions shall be applicable:
(i) Cash. In the case of the issuance
of Common Stock for cash, the amount of the
consideration received by the Corporation shall be
deemed to be the amount of the cash proceeds
received by the Corporation for such Common Stock
before deducting therefrom any discounts,
commissions, taxes or other expenses allowed, paid
or incurred by the Corporation for any underwriting
or otherwise in connection with the issuance and
sale thereof.
(ii) Consideration Other Than Cash. In
the case of the issuance of Common Stock (otherwise
than upon the conversion of
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shares of capital stock or other securities of the
Corporation) for a consideration in whole or in part
other than cash, including securities acquired in
exchange therefor (other than securities by their
terms so exchangeable), the consideration other than
cash shall be deemed to be the fair value thereof as
determined by the Board of Directors, irrespective
of any accounting treatment, whose determination
shall be conclusive.
(iii) Options and Convertible
Securities. Except with respect to any securities
that are Excluded Securities, in the case of the
issuance of (1) options, warrants or other rights to
purchase or acquire Common Stock (whether or not at
the time exercisable), (2) securities by their terms
convertible into or exchangeable for Common Stock
(whether or not at the time so convertible or
exchangeable) or (3) options, warrants or rights to
purchase such convertible or exchangeable securities
(whether or not at the time exercisable):
(a) the aggregate maximum
number of shares of Common Stock
deliverable upon exercise of such options,
warrants or other rights to purchase or
acquire Common Stock shall be deemed to
have been issued at the time such options,
warrants or rights were issued and for a
consideration equal to the consideration
(determined in the manner provided in
Sections (d)(6)(A)(i) and (ii) hereof, if
any, received by the Corporation upon the
issuance of such options, warrants or
rights plus the minimum purchase price
provided in such options, warrants or
rights for the Common Stock covered
thereby;
(b) the aggregate maximum
number of shares of Common Stock
deliverable upon conversion of or in
exchange for any such convertible or
exchangeable securities, or upon the
exercise of options, warrants or other
rights to purchase or acquire such
convertible or exchangeable securities and
the subsequent conversion or exchange
thereof, shall be deemed to have been
issued at the time such securities were
issued or such options, warrants or rights
were issued and for a consideration equal
to the consideration, if any, received by
the Corporation for any such securities and
related options, warrants or rights
(excluding any cash received on account of
accrued interest or accrued dividends),
plus the additional consideration
(determined in the manner provided in
Sections (d)(6)(A)(i) and (ii) hereof), if
any, to be received by the Corporation upon
the conversion or exchange of such
securities, or upon the exercise of any
related options, warrants or rights to
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purchase or acquire such convertible or
exchangeable securities and the subsequent
conversion or exchange thereof;
(c) on any change in the
number of shares of Common Stock
deliverable upon exercise of any such
options, warrants or rights or conversion
or exchange of such convertible or
exchangeable securities or any change in
the consideration to be received by the
Corporation upon such exercise, conversion
or exchange, including, but not limited to,
a change resulting from the anti-dilution
provisions thereof, the Conversion Price as
then in effect shall forthwith be
readjusted to such Conversion Price as
would have been obtained had an adjustment
been made upon the issuance of such
options, warrants or rights not exercised
prior to such change, or of such
convertible or exchangeable securities not
converted or exchanged prior to such
change, upon the basis of such change;
(d) on the expiration or
cancellation of any such options, warrants
or rights, or the termination of the right
to convert or exchange such convertible or
exchangeable securities, if the Conversion
Price shall have been adjusted upon the
issuance thereof, the Conversion Price
shall forthwith be readjusted to such
Conversion Price as would have been
obtained had an adjustment been made upon
the issuance of such options, warrants,
rights or such convertible or exchangeable
securities on the basis of the issuance of
only the number of shares of Common Stock
actually issued upon the exercise of such
options, warrants or rights, or upon the
conversion or exchange of such convertible
or exchangeable securities; and
(e) if the Conversion Price
shall have been adjusted upon the issuance
of any such options, warrants, rights or
convertible or exchangeable securities, no
further adjustment of the Conversion Price
shall be made for the actual issuance of
Common Stock upon the exercise, conversion
or exchange thereof.
(B) Excluded Securities. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this
Section (d) as a result of the issuance or deemed issuance of
any of the foregoing (collectively, the "Excluded
Securities"):
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(i) any shares of Common Stock upon
the conversion of shares of Series A, Series B,
Series C, Series D or Series E Preferred Stock;
(ii) securities of the Corporation
offered to the public pursuant to an effective
registration statement under the Securities Act;
(iii) any securities of the Corporation
(including any shares of Common Stock that may be
issuable pursuant to the conversion or exercise of
any options, warrants or rights of the Corporation)
pursuant to any commercial agreement if the issuance
of such securities is approved by the Board of
Directors;
(iv) any shares of Common Stock as a
result of the adjustments to the Conversion Price
and the Conversion Rate under this Section (d) or
the similar provisions of the Series A, Series B,
Series C or Series D Preferred Stock;
(v) any options, warrants or rights of
the Corporation, and any shares of Common Stock
issued at any time following the Original Issue Date
(including any shares of Common Stock that may be
issuable pursuant to the conversion or exercise of
any options, warrants or rights of the Corporation),
in each case granted under any employee stock option
or incentive plan in which employees or directors of
the Corporation may participate;
(vi) any shares of Common Stock issued
in a transaction to which Section (d)(6)(C) or (D)
applies; or
(vii) any shares of Common Stock issued
pursuant to the exchange, conversion or exercise of
options, warrants or other rights of the Corporation
that have previously been incorporated into
computations hereunder on the date when such
options, warrants or other rights of the Corporation
were issued.
(C) Stock Dividends, Subdivisions,
Reclassifications or Combinations. If the Corporation shall
(i) declare a dividend or make a distribution on its Common
Stock in shares of its Common Stock, (ii) subdivide or
reclassify the outstanding shares of Common Stock into a
greater number of shares, or (iii) combine or reclassify the
outstanding Common Stock into a smaller number of shares, the
Conversion Price in effect at the time of the record date for
such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any shares of
Series E Preferred Stock surrendered for conversion after
such date shall be entitled to receive the number of shares
of Common Stock which he would have
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owned or been entitled to receive had such Series E Preferred
Stock been converted immediately prior to such date.
Successive adjustments in the Conversion Price shall be made
whenever any event specified above shall occur.
(D) Other Distributions. In case the
Corporation shall fix a record date for making of a
distribution to all holders of shares of its Common Stock of
(i) shares of any class other than its Common Stock, (ii)
evidences of indebtedness of the Corporation, (iii) assets
(excluding cash dividends or distributions, or dividends or
distributions referred to in Section (d)(6)(C) hereof), or
(iv) rights or warrants (excluding those referred to in
Section (d)(6)(A) hereof), in each such case the Conversion
Price in effect immediately prior thereto shall be reduced
immediately thereafter to the price determined by dividing
(1) an amount equal to the difference resulting from (x) the
number of shares of Common Stock outstanding on such record
date multiplied by the Conversion Price per share on such
record date, less (y) the fair market value (as determined by
the Board of Directors, whose determination shall be
conclusive) of said shares or evidences of indebtedness or
assets or rights or warrants to be so distributed, by (2) the
number of shares of Common Stock outstanding on such record
date. Such adjustment shall be made successively whenever
such a record date is fixed. In the event that such
distribution is not so made, the Conversion Price then in
effect shall be readjusted, effective as of the date when the
Board of Directors determines not to distribute such shares,
evidences of indebtedness, assets, rights or warrants, as the
case may be, to the Conversion Price which would then be in
effect if such record date had not been fixed.
(7) De Minimis Adjustments. No adjustment to the
Conversion Price (and, therefore, the Conversion Rate) shall be made
if such adjustment would result in a change in the Conversion Price of
less than $0.01, but any lesser adjustment shall be carried forward
and shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustments so carried forward,
shall amount to $0.01 or more.
(8) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose
of effecting the conversion of the shares of the Series E Preferred
Stock such number of shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of
the Series E Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall be insufficient
to effect the conversion of all then outstanding shares of the Series
E Preferred Stock, the Corporation shall take such corporate action as
may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
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(9) Notices of Record Date. In the event of any taking
by the Corporation of a record of the holders of any series or class
of securities other than Series E Preferred Stock (A) for the purpose
of determining the holders thereof who are entitled to receive any
dividend or other distribution or (B) with respect to an Extraordinary
Transaction (other than a tender offer) or any other action described
in Section (d)(6)(C) or (D) hereof, the Corporation shall mail to each
holder of Series E Preferred Stock, at least 10 days prior to the date
specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution
or action, and the amount and character of such dividend, distribution
or action; provided, however, that the failure to give such notice
shall not impair the validity of such dividend, distribution,
Extraordinary Transaction or other action.
(e) REDEMPTION.
(1) Optional Redemption. The Series E Preferred Stock is
redeemable by the Corporation, in whole or in part, at any time or
from time to time after issuance of the Series E Preferred Stock at
the option of the Corporation, on at least 20 but not more than 90
days' written notice (the "Redemption Notice"). With respect to any
such redemption, each share of Series E Preferred Stock will be
redeemable at a price equal to the greater of (A) the then applicable
Liquidation Value and (B) the Stated Value, plus the dividends that
would have accrued on the Series E Preferred Stock in the event that
no dividends were declared and paid by the Corporation for a period of
three years from April 22, 2002 (the "Redemption Price"). The
Redemption Price is payable in cash. Any holder of Series E Preferred
Stock may, in lieu of receiving cash pursuant to this Section (e),
exercise such holder's conversion rights pursuant to Section (d)(2)
hereof by giving the Corporation a Conversion Notice no later than 10
days after the Corporation delivers the Redemption Notice.
(2) Mandatory Redemption. On April 22, 2007, the Company
must, at its option (A) redeem each share of Preferred Stock for a
cash payment equal to the then applicable Liquidation Value or (B)
convert each share of Series E Preferred Stock into a number of shares
of Common Stock equal to the then Conversion Rate in accordance with
the applicable provisions of Section (d).
(f) PROTECTIVE PROVISIONS. In addition to any other rights
provided by law, so long as any shares of Series E Preferred Stock are then
outstanding, except where the vote or written consent of the holders of a
greater number of shares is required by law or by another provision of the
Articles of Incorporation, without first obtaining the affirmative vote or
written consent of the holders of 66 2/3% of the total number of shares of
Series E Preferred Stock outstanding, voting together as a single class, the
Corporation shall not:
(1) amend or repeal any provision of, or add any
provision to, the Articles of Incorporation or the Bylaws, if such
action would materially and
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adversely alter the preferences, rights, privileges or powers of, or
restrictions provided for the benefit of, holders of Series E
Preferred Stock; or
(2) issue any shares of capital stock with preferences,
limitations and relative rights that would be superior to or pari
passu with the Series E Preferred Stock.
(g) NOTICES. Any notice required by the provisions hereof to be
given to the holders of shares of Series E Preferred Stock shall be deemed
given (i) on the date of delivery, if such notice is hand-delivered to such
holder or (ii) on the third business day following (and not including) the date
on which such notice is either sent via express courier or deposited in the
United States Mail, first-class, postage prepaid, and addressed to each holder
of record at his address appearing on the books of the Corporation. Notice by
any other means shall not be deemed effective until actually received.
(h) DETERMINATION OF MARKET PRICE. In each case where these
Articles of Amendment refer to the OTC-BB to calculate the market price of the
Common Stock and at such time the Common Stock is not quoted on the OTC-BB, the
following provisions shall apply:
(1) If the Common Stock is listed on a national
securities exchange, the average closing bid price shall be calculated
according to the closing price of the Common Stock as reported by such
exchange.
(2) If the Common Stock is not listed on a national
securities exchange but is quoted on any tier of Nasdaq, or any
successor thereto, the average closing bid price shall be calculated
according to the closing bid price of the Common Stock as reported by
such tier of Nasdaq.
(3) If the Common Stock is not listed on a national
securities exchange or quoted on a tier of Nasdaq, the average closing
bid price shall be calculated according to the closing price of the
Common Stock as reported by the "Pink Sheets" published by The
National Quotation Bureau, Inc., or any successor thereto, or as
reported by any other electronic or non-electronic quotation system
that publishes or reports daily quotations of the Common Stock.
(4) If none of the foregoing apply, the average closing
bid price shall be as determined in good faith by a resolution of the
Board of Directors.
* * *
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