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EXHIBIT 4.8
STATEMENT PURSUANT TO SECTION 10-602 OF THE ARIZONA REVISED STATUTES
OF THE DESIGNATIONS, PREFERENCES, RIGHTS AND PRIVILEGES OF THE
$7,500,000 SERIES A CONVERTIBLE PREFERRED STOCK
PAR VALUE $.05 PER SHARE OF
SIMULA, INC.
Simula, Inc., a corporation organized and existing under the laws of
the state of Arizona (the "Company"), does hereby submit this Statement pursuant
to Section 10-602 of the Arizona Revised Statutes as follows:
1. The name of this corporation is: Simula, Inc.
2. The resolution (the "Resolution") determining the terms of the
Series A Convertible Preferred Stock, par value $.05 per share, of the Company
is attached as Exhibit A hereto and is incorporated by reference herein.
3. The Resolution was duly adopted by unanimous consent of the Board
of Directors of the Company on March 16, 1999.
4. The Resolution was duly adopted by the Board of Directors of the
Company and has not been amended, modified, rescinded or superseded and remains
in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Statement to be
executed, delivered and filed this 16 day of March, 1999.
/s/ Donald W. Townsend
__________________________________
Donald W. Townsend, President
/s/ Bradley P. Forst
__________________________________
Bradley P. Forst, Secretary
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Exhibit A
RESOLUTION OF THE BOARD OF DIRECTORS OF SIMULA, INC.
PURSUANT TO SECTION 10-602 OF THE ARIZONA REVISED STATUTES
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Company in accordance with the provisions of its Articles of
Incorporation, a new series of preferred stock, par value $.05 per share, to be
titled the "SERIES A CONVERTIBLE PREFERRED STOCK" of the Company is hereby
created and designated. The number of shares of Series A Preferred Shares (as
defined in Section 1 below) shall be 7,500 shares. The voting powers,
preferences and relative, participating, optional and other special rights of
the Series A Preferred Shares, and the qualifications, limitations and
restrictions thereof, are as follows:
(1) Designation. The series of preferred stock established hereby
shall be designated the "Series A Convertible Preferred Stock" (and shall
be referred to herein as the "SERIES A PREFERRED SHARES") and the
authorized number of Series A Preferred Shares shall be 7,500. The stated
value per share shall be $1,000 (the "STATED VALUE").
(2) Conversion of Series A Preferred Shares. A holder of Series A
Preferred Shares (collectively, the "HOLDERS" and each a "HOLDER") shall
have the right, at such holder's option, to convert the Series A Preferred
Shares into shares of the Company's common stock, par value $.01 per share
(the "COMMON STOCK"), on the following terms and conditions:
(a) Conversion Right. Subject to the provisions of Section
2(f) below, each Series A Preferred Share shall be convertible at the
option of the Holder thereof, at any time or from time to time on or after
the initial date of issuance of the Series A Preferred Shares which shall
be the date of the Securities Purchase Agreement (the "SECURITIES PURCHASE
AGREEMENT"), among the Company and the initial Investors named therein
(such date, "INITIAL ISSUANCE DATE") into fully paid, validly issued and
nonassessable shares (rounded to the nearest whole share in accordance
with Section 2(g) below) of Common Stock, at the Conversion Rate (as
defined below), provided, however, that (i) no Holder shall be entitled to
convert any Series A Preferred Shares in excess of the Conversion Limit
(except pursuant to Section 2(f)) or (ii) with respect to the Holders in
the aggregate, the Common Share Limit (as defined in Section 2(b)(vii)
below), unless the Company (A) has obtained approval of the issuance of
the Common Stock upon conversion of the Series A Preferred Shares by a
majority of the total votes eligible to be cast on such proposal, in
person or by proxy, by the holders of the then outstanding shares of
Common Stock, (B) shall have otherwise obtained permission to allow such
issuances from the New York Stock Exchange ("NYSE") or (C) is no longer
governed by a rule promulgated by a stock exchange, NASDAQ or other
applicable body prohibiting the issuance of the Common Stock upon
conversion of the Series A Preferred Shares in excess of 19.99% of the
number of shares of Common Stock outstanding on the Initial Issuance Date
and in the case of (i) and (ii) above, except as provided in this
Statement. In addition, in no event shall any Holder be entitled to
convert Series A Preferred Shares in excess of that number of Series A
Preferred Shares which, upon
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giving effect to such conversion, would cause the aggregate number of
shares of Common Stock beneficially owned by the Holder and its affiliates
to exceed 4.99% of the outstanding shares of the Common Stock following
such conversion, provided, however, that a Holder may elect to waive this
restriction upon not less than sixty-one (61) days prior written notice to
the Company. For purposes of this paragraph "beneficial ownership" shall
be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended.
(b) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of each of the Series A Preferred Shares pursuant
to Sections (2)(a) and 2(f) shall be determined in accordance with the
following formula (the "CONVERSION RATE"):
Stated Value + all accrued and unpaid dividends
------------------------------------------------
Conversion Price
For purposes of this Statement, the following terms shall have the
following meanings:
(i) "ADDITIONAL SHARES OF COMMON STOCK" shall mean, all
shares (including treasury shares) of Common Stock issued or sold or
deemed to be issued by the Company after the Initial Issuance Date,
whether or not subsequently reacquired or retired by the Company other
than (A) shares of Common Stock issued upon conversion of the Series A
Preferred Shares and (B) Approved Stock Plan Shares;
(ii) "ANNIVERSARY DATE" means the calendar date of the
Initial Issuance Date of each calendar year;
(iii) "ANNIVERSARY MARKET PRICE" means the average of
the Closing Bid Prices of the Common Stock on the 20 consecutive trading
days immediately preceding the applicable Anniversary Date;
(iv) "APPROVED STOCK PLAN SHARES" means any Options (as
defined below) issued to an employee, officer, director, consultant or
other service provider of the Company pursuant to any contract, plan or
agreement which has been approved by the Board of Directors of the Company
(collectively, the "APPROVED STOCK PLANS") for which the price per share
of the Common Stock issuable upon the exercise of such Options (a) is
equal or in excess of the last sale price of the Common Stock on the date
of such issuance (the "SALES PRICE") or (b) is greater than 85% of the
Sales Price, but less than the Sales Price (the "BELOW FAIR MARKET VALUE
OPTIONS"); provided, however, that the aggregate amount of such Below Fair
Market Value Options issued in total by the Company under the Approved
Stock Plans cannot exceed 0.5% of the number of shares of Common Stock
issued and outstanding as of such issuance date.
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(v) "AVERAGE MARKET PRICE" means the average of the
Closing Bid Prices of the Common Stock on the ten consecutive trading days
immediately preceding the applicable date;
(vi) "CLOSING BID PRICES" means, for any security as of
any date, the last closing bid price on the New York Stock Exchange
Composite Transactions Tape as reported by Bloomberg, L.P. ("BLOOMBERG"),
or, if the NYSE is not the principal securities exchange for such
security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or if the foregoing do not apply, the
last closing bid price of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg,
or, if no closing bid price is reported for such security by Bloomberg,
or, if no last closing trade price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such
security as reported in the "pink sheets" by the National Quotation
Bureau, Inc.;
(vii) "COMMON SHARE LIMIT" means 1,982,681;
(viii) "COMPANY CONVERSION EVENT LIMIT" means with
respect to Section 2(f), (A) 10% of the number of Series A Preferred
Shares issued to the Holders on the Initial Issuance Date for the period
beginning on the Initial Issuance Date and ending on March 31, 1999 and
(B) for each calendar month thereafter, an additional 10% of the number of
Series A Preferred Shares issued to the Holders on the Initial Issuance
Date; provided, however, that in no event shall the Company in any one
calendar month be required to convert more than 30% of the number of
Series A Preferred Shares issued to the Holders on the Initial Issuance
Date.
(ix) "CONVERSION LIMIT" means with respect to any
Holder, (A) 10% of the number of Series A Preferred Shares issued to such
Holder on the Initial Issuance Date for the period beginning on the
Initial Issuance Date and ending on March 31, 1999 and (B) for each
calendar month thereafter, an additional 10% of the number of Series A
Preferred Shares issued to such Holder on the Initial Issuance Date;
provided, however, that in no event shall the Company in any one calendar
month be required to convert more than 30% of the number of Series A
Preferred Shares issued to such Holder on the Initial Issuance Date.
(x) "CONVERSION PRICE" means as of any Conversion Date
(as defined below) or other date of determination, the lesser of (A) the
Fixed Conversion Price and (B) the Variable Conversion Price;
(xi) "FIXED CONVERSION PRICE" means with respect to any
Conversion Date (A) for the period from the Initial Issuance Date and
ending on the day immediately preceding the first Anniversary Date
thereof, $8.60; provided, that if (I) on or prior to July 31, 1999 the
Company fails to consummate the sale, in a single transaction, of all of
the capital stock or all or substantially all of the assets of Coach and
Car Equipment Corporation ("CCEC"), an Arizona corporation and
wholly-owned subsidiary of the Company, for an aggregate cash
consideration of at least $7.5 million
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and (II) for the period from January 1, 1999 through July 31, 1999, net
income (after deduction of all expenses, taxes and interest) of CCEC, as
determined in accordance with generally accepted accounting principles, is
equal to or less than zero, then the Fixed Conversion Price from August 1,
1999 and ending on the day immediately preceding the first Anniversary
Date, shall equal the lesser of (x) $8.60 and (y) 130% of the average
Closing Bid Prices of the Common Stock on the 20 consecutive trading days
immediately preceding August 1, 1999; and (B) for each successive annual
period thereafter, beginning on an Anniversary Date and ending on the day
immediately preceding the next Anniversary Date, the lesser of (x) the
Fixed Conversion Price then in effect and (y) 130% of the applicable
Anniversary Market Price;
(xii) "VARIABLE CONVERSION PRICE" means 101% of the
average of the Closing Bid Prices for any 15 trading days during a period
of the 30 consecutive trading days ending one day prior to the applicable
Conversion Date.
(c) Effect of Failure to Obtain and Maintain Effectiveness of
Registration Statement. (i) If the registration statement (the
"REGISTRATION STATEMENT") covering the resale of the shares of Common
Stock issuable upon conversion of the Series A Preferred Shares and
required to be filed by the Company pursuant to the Registration Rights
Agreement between the Company and the initial Holders of the Series A
Preferred Shares (the "REGISTRATION RIGHTS AGREEMENT") is not declared
effective by the United States Securities and Exchange Commission or any
successor entity thereto (the "SEC") on or before the 120th calendar day
following the Initial Issuance Date (the "SCHEDULED EFFECTIVE DATE"), then
for each consecutive thirty (30) day period following the Scheduled
Effective Date, each Holder of Series A Preferred Shares shall, until such
time as the Registration Statement is declared effective by the SEC (all
such payments to be made in cash and nonrefundable on the first day of
each thirty (30) day period), be entitled to an amount equal to the
product of (A) one percent, multiplied by (B) the Stated Value plus all
accrued and unpaid dividends thereon, multiplied by (C) the number of
Series A Preferred Shares held by such Holder.
(ii) If the Registration Statement shall not have been
declared effective by the 140th day following the Scheduled Effective
Date, the Company shall be required, at the option of the Holders, to
redeem the Series A Preferred Shares in accordance with Section 3(a) and
in connection therewith the Company shall pay the Holders who so elect, a
price per Series A Preferred Share equal to the Triggering Event
Redemption Price (as defined in Section 3(a)(ii)).
(d) Adjustment to Fixed Conversion Price, the Common Share
Limit, the Conversion Limit, the Company Conversion Event Limit and the
Closing Bid Prices -- Dilution and Other Events. In order to prevent
dilution of the rights granted under this Statement, the Fixed Conversion
Price, the Common Share Limit, the Conversion Limit, the Company
Conversion Event Limit and the Closing Bid Prices for any days during any
measuring period prior to any of the events set forth below (the
"ADJUSTING CLOSING BID PRICES") will be subject to adjustment from time to
time as provided in this Section 2(d). Any such adjustments to the Fixed
Conversion Price, the Conversion Limit, the Company
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Conversion Event Limit and the Adjusting Closing Bid Prices will be
applicable to Series A Preferred Shares not yet converted or redeemed.
(i) Dividends and Distributions. If the Company shall
declare or pay to the holders of the Common Stock a dividend or other
distribution payable in shares of Common Stock or any other security
convertible into or exchangeable for shares of Common Stock, each Holder
shall be entitled to receive the number of shares of Common Stock or other
securities convertible into or exchangeable for shares of Common Stock, as
applicable, which such Holder would have owned or been entitled to receive
after the declaration and payment of such dividend or other distribution
as if the Series A Preferred Shares then held by such Holder had been
converted at the Conversion Price in effect immediately prior to the
record date for the determination of stockholders entitled to receive such
dividend or other distribution.
(ii) Stock Splits and Combinations. If the Company shall
subdivide (by means of any stock split, stock dividend, recapitalization
or otherwise) the outstanding shares of Common Stock into a greater number
of shares of Common Stock, or combine (by means of any combination,
reverse stock split or otherwise) the outstanding shares of Common Stock
into a lesser number of shares, or issue by reclassification of shares of
Common Stock any shares of the Company, the Fixed Conversion Price, the
Common Share Limit, the Conversion Limit, the Company Conversion Event
Limit and the Adjusting Closing Bid Prices, each in effect immediately
prior thereto shall be adjusted so that each Holder shall receive the
number of shares of Common Stock which such Holder would have owned or
been entitled to receive after the happening of any and each of the events
described above if such Holder had converted the Series A Preferred Shares
held by such Holder immediately prior to the happening of each such event
on the day upon which such subdivision or combination, as the case may be,
becomes effective.
(iii) Organic Changes. Any recapitalization,
reorganization, reclassification, consolidation, merger, sale of all or
substantially all of the Company's assets (in one or a series of related
transactions) to another Person (as defined below) or other transaction
which is effected in such a way that holders of Common Stock are entitled
to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is
referred to herein as an "ORGANIC CHANGE". In case the Company shall
effect an Organic Change, then the Holder shall be given a written notice
from the Company informing such Holder of the terms of such Organic Change
and of the record date thereof for any distribution pursuant thereto, at
least ten (10) days in advance of such record date, and, if such record
date shall precede the Mandatory Redemption Date, each Holder shall have
the right thereafter to receive, upon conversion of the Series A Preferred
Shares, the number of shares of stock or other securities, property or
assets of the Company, or of its successor or transferee or any affiliate
thereof, or cash receivable upon or as a result of such Organic Change
that would have been received by a holder of the number of shares of
Common Stock equal to the number of shares each Holder would have received
had such Holder converted its Series A Preferred Shares prior to such
event at the Conversion Price in effect
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immediately prior to such event. In any such case, the Company will make
appropriate provision (in form and substance reasonably satisfactory to
the Holders of a majority of the Series A Preferred Shares then
outstanding) to insure that the provisions of this Section 2(d)(iii) will
thereafter be applicable to the Series A Preferred Shares (including, in
the case of any such Organic Change in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of
the Conversion Price to the value for the Common Stock reflected by the
terms of such Organic Change, if the value so reflected is less than the
Conversion Price in effect immediately prior to such Organic Change). The
Company will not effect any such Organic Change unless prior to the
consummation thereof the successor entity (if other than the Company)
resulting from such Organic Change assumes, by written instrument (in form
and substance satisfactory to the Holders of a majority of the Series A
Preferred Shares then outstanding), the obligation to deliver to each
Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to acquire or
receive. The provisions of this subparagraph (iii) shall similarly apply
to successive Organic Changes. "PERSON" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust,
an unincorporated organization and a government or any department or
agency thereof.
(iv) Adjustment upon Issuance of Options and Convertible
Securities. If the Company in any manner grants any rights or options to
subscribe for or to purchase one or more classes of its Common Stock or
any stock or other securities convertible into or exchangeable for Common
Stock (such rights or options being herein called "OPTIONS" and such
convertible or exchangeable stock or securities being herein called
"CONVERTIBLE SECURITIES") (other than Approved Stock Plan Shares) and the
price per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible Securities
(the "NEW OPTION ISSUANCE PRICE") is less than the Average Market Price
immediately prior to such time, then, from and after the time of such
issue or sale, the Fixed Conversion Price shall be reduced, if necessary,
so that it shall not exceed the New Option Issuance Price. For purposes of
this Section 2(d)(iv), the New Option Issuance Price shall mean the amount
determined by dividing (A) the total amount, if any, received or
receivable by the Company as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, plus in the
case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum number of shares
of Common Stock issuable upon exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Conversion
Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon the exercise of such Options or upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(v) Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options, the additional consideration,
if any, payable
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upon the issue, conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for any class of Common Stock change at any time, the Fixed
Conversion Price at the time of such change shall be readjusted, effective
on and after the date of such change, to the Fixed Conversion Price which
would have been in effect on the date of such change had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold; provided
that no adjustment shall be made if such adjustment would result in an
increase of the Fixed Conversion Price then in effect.
(vi) Issuance of Additional Shares of Common Stock. In
case the Company at any time or from time to time after the date hereof
shall issue or sell Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
2(d)(ii), (iv) or (v)), without consideration or for a consideration per
share less than the Average Market Price in effect immediately prior to
such issue or sale, then, and in each such case, the Fixed Conversion
Price shall be reduced, to a price determined by multiplying such Fixed
Conversion Price by a fraction
(A) the numerator of which shall be the sum of (i)
the number of shares of Common Stock outstanding immediately prior to such
issue or sale and (ii) the number of shares of Common Stock which the
aggregate consideration received by the Company for the total number of
such Additional Shares of Common Stock so issued or sold would purchase at
the Average Market Price, and
(B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such issue
or sale, provided that, for the purposes of this Section 2(d)(vi),
immediately after any Additional Shares of Common Stock are deemed to have
been issued pursuant to Section 2(d)(ii), (iv) or (v), such Additional
Shares of Common Stock shall be deemed to be outstanding, and (y) treasury
shares of Common Stock shall not be deemed to be outstanding.
(vii) Other Dilutive Events. In case any event shall
occur as to which the provisions of this Section 2(d) are not strictly
applicable or if strictly applicable would not fairly protect the
conversion rights of the Holder in accordance with the essential intent
and principles of this Section 2(d), then, in each such case, the Board of
Directors of the Company shall make an adjustment in the application of
such provisions, in accordance with such essential intent and principles,
so as to preserve, without dilution, the conversion rights represented by
this Note.
(viii) No Dilution or Impairment. The Company shall not,
by amendment of its certificate of incorporation or through any Organic
Change or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Statement, but will
at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the Holders against dilution or other
impairment. Without limiting the generality of the foregoing, the Company
(A) shall take all such action as may be
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necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock, free from all
taxes, liens, security interests, encumbrances, preemptive rights and
charges on the conversion of the Series A Preferred Shares, (B) shall not
take any action which results in any adjustment of the Fixed Conversion
Price or the Adjusting Closing Bid Prices if the total number of shares of
Common Stock issuable after the action upon the conversion of the Series A
Preferred Shares would exceed the total number of shares of Common Stock
then authorized by the Company's articles of incorporation and available
for the purpose of issue upon such exercise, (C) shall not permit the par
value of any shares of stock receivable upon the conversion of the Series
A Preferred Shares to exceed the amount payable therefor upon such
exercise, and (D) shall not issue any capital stock of any class which, as
to the Holders, is preferred as to dividends or as to the distribution of
assets upon voluntary or involuntary dissolution, liquidation or
winding-up, unless the rights of the holders thereof shall be limited to a
fixed sum or percentage of par value or a sum determined by reference to a
formula based on a published index of interest rates, an interest rate
publicly announced by a financial institution or a similar indicator of
interest rates in respect of participation in dividends and to a fixed sum
or percentage of par value in any such distribution of assets.
(ix) Notices.
(A) Immediately upon any adjustment pursuant
hereto, the Company will give immediate written notice thereof to each
Holder, setting forth in reasonable detail and certifying the calculation
of such adjustment.
(B) The Company will give written notice to
each Holder at least twenty (20) days prior to the date on which the
Company closes its books or takes a record (I) with respect to any
dividend or distribution upon the Common Stock, or (II) for determining
rights to vote with respect to any Organic Change, dissolution or
liquidation; provided, that in no event shall such notice be provided to
such Holder prior to such information being made known to the public.
(C) The Company will also give written notice
to each Holder at least twenty (20) days prior to the date on which any
Organic Change, dissolution or liquidation will take place.
(x) Successive Adjustments. Successive adjustments in
the Fixed Conversion Price, the Common Share Limit, the Conversion Limit,
the Company Conversion Event Limit and the Adjusting Closing Bid Prices
shall be made whenever any event specified above shall occur. All
calculations under this Section 2(d) shall be made to the nearest cent or
to the nearest one-hundredth of a share, as the case may be. No adjustment
in the Adjusting Closing Bid Prices shall be made if the amount of such
adjustment would be less than $0.01, but any such amount shall be carried
forward and an adjustment with respect thereto shall be made at the time
of, and together with, any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, shall in the
aggregate equal $0.01 or more.
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(e) Mechanics of Conversion. Subject to the Company's
inability to fully satisfy its obligations under a Conversion Notice (as
defined below) as provided for in Section 5 below:
(i) Holder's Delivery Requirements. To convert Series A
Preferred Shares into full shares of Common Stock on any date (the
"CONVERSION DATE"), the Holder thereof shall (A) deliver by courier or
transmit by facsimile, for receipt on or prior to 11:59 p.m., Central Time
on such date, a copy of a fully executed notice of conversion in the form
attached hereto as Exhibit I (the "CONVERSION NOTICE"), to the Company or
its designated transfer agent (the "TRANSFER AGENT"), and (B) surrender to
a common carrier for delivery to the Company or the Transfer Agent as soon
as practicable following such date, the original certificates representing
the Series A Preferred Shares being converted (or an indemnification
undertaking with respect to such shares in the case of their loss, theft
or destruction pursuant to the provisions set forth in Section 12 hereof)
(the "PREFERRED STOCK CERTIFICATES") and the originally executed
Conversion Notice.
(ii) Company's Response. Upon receipt by the Company of
a copy of a Conversion Notice, the Company shall immediately send, via
facsimile, a confirmation of receipt of such Conversion Notice to such
Holder. Upon receipt by the Company or the Transfer Agent of the Preferred
Stock Certificates to be converted pursuant to a Conversion Notice (or an
indemnification undertaking with respect to such shares in the case of
their loss, theft or destruction pursuant to the provisions set forth in
Section 12 hereof), together with the originally executed Conversion
Notice, the Company or the Transfer Agent (as applicable) shall, on the
next business day following the date of such receipt (A) issue and
surrender to a common carrier for overnight delivery to the address as
specified in the Conversion Notice, a certificate, registered in the name
of the Holder or its designee, for the number of shares of Common Stock to
which the Holder shall be entitled, (B) credit such aggregate number of
shares of Common Stock to which the Holder shall be entitled to the
Holder's or its designee's balance account with The Depository Trust
Company, or (C) if the Holder requests, issue shares in electronic format
(e.g. via DWAC).
(iii) Dispute Resolution. In the case of a dispute as to
the determination of the Conversion Price, the Company shall promptly
issue to the Holder the number of shares of Common Stock that is not
disputed pursuant to the provision in this Section 2(e) and shall submit
the disputed determinations or arithmetic calculations to the Holder via
facsimile within one (1) business day of receipt of such Holder's
Conversion Notice. If such Holder and the Company are unable to agree upon
the determination of the Conversion Price within one (1) business day of
such disputed determination or arithmetic calculation being submitted to
the Holder, then the Company shall within one (1) business day submit via
facsimile the disputed determination of the Conversion Price to an
independent, reputable accounting firm of national standing acceptable to
the Company and such Holder of Series A Preferred Shares. The Company
shall cause such accounting firm to perform the determinations or
calculations and notify the Company and the Holder of the results no later
than forty-eight (48) hours from the
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time it receives the disputed determinations or calculations. Such
accounting firm's determination, shall be binding upon all parties absent
manifest error. If as a result of such determination by the accounting
firm the Company is required to issue additional shares of Common Stock to
a Holder, the Company or the Transfer Agent, as applicable, shall on the
next business day following the date such determination is made, issue
such shares of Common Stock in accordance with the options set forth in
the last sentence of Section 2(e)(ii) above. The reasonable fees and
expenses of the accounting firm shall be borne by the party whose
calculations is furthest from the accounting firm's determination.
(iv) Record Holder. The Person or Persons entitled to
receive the shares of Common Stock issuable upon a conversion of Series A
Preferred Shares shall be treated for all purposes as the record Holder or
Holders of such shares of Common Stock on the Conversion Date.
(v) Company's Failure to Timely Convert. If the Company
shall fail (other than as a result of the situations described in Section
4(a) with respect to which the Holder has elected, and the Company has
satisfied its obligations under, one of the options set forth in
subparagraphs (i) through (v) of Section 4(a)) to issue to a Holder on a
timely basis as described in this Section 2(e), a certificate for the
number of shares of Common Stock to which such Holder is entitled upon
such Holder's conversion of Series A Preferred Shares, the Company shall
pay damages to such Holder equal to the greater of (A) actual damages
incurred by such Holder as a result of such Holder's needing to "buy in"
shares of Common Stock to satisfy its securities delivery requirements
("BUY IN ACTUAL DAMAGES") and (B) if the Company fails to deliver such
certificates within five days after the last possible date which the
Company could have issued such Common Stock to such Holder without
violating this Section 2(e), on each date such conversion is not timely
effected in an amount equal to 1% of the product of (A) the number of
shares of Common Stock not issued to the Holder on a timely basis and to
which such Holder is entitled and (B) the Closing Bid Price of the Common
Stock on the last possible date which the Company could have issued such
Common Stock to such Holder without violating this Section 2(e).
(f) Conversion at the Option of the Company. On any Company
Conversion Event Date (as defined below), the Holders shall be required to
convert on a pro rata basis such number of Series A Preferred Shares as
required by the Company pursuant to a written notice delivered to the
holders via facsimile provided, that such notice is delivered within one
(1) business day following a Company Conversion Event Date. Any such
conversion shall be made in accordance with this Section 2 as if the
Holders of such Series A Preferred Shares had given a Conversion Notice on
the Company Conversion Event Date, and the Conversion Date had been fixed
as of the Company Conversion Event Date for all purposes of this Section
2. Any conversion pursuant to this Section 2(f) shall be subject to the
Common Share Limit and the Company Conversion Event Limit, in each case as
adjusted as provided herein, but shall not be subject to or otherwise
counted towards the Conversion Limit. The Holders of Series A Preferred
Shares shall thereupon and within two (2) business days thereafter
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surrender the Preferred Stock Certificates to be converted (or an
indemnification undertaking with respect to such shares in the case of
their loss, theft or destruction pursuant to the provisions set forth in
Section 12 hereof), duly endorsed for cancellation, to the Company or the
Transfer Agent. No person shall thereafter have any rights in respect of
the Series A Preferred Shares so converted, except the right to receive
shares of Common Stock on conversion thereof as provided in this Section
2. "COMPANY CONVERSION EVENT DATE" means any date on which the average of
the Closing Bid Prices of the Common Stock for the twenty (20) consecutive
trading days immediately preceding such date exceeds the Fixed Conversion
Price multiplied by 150%.
(g) Fractional Shares. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. All shares of
Common Stock (including fractions thereof) issuable upon conversion of
more than one Series A Preferred Share by a Holder shall be aggregated for
purposes of determining whether the conversion would result in the
issuance of a fraction of a share of Common Stock. If, after the
aforementioned aggregation, the issuance would result in the issuance of a
fraction of a share of Common Stock, the Company shall round such fraction
of a share of Common Stock up or down to the nearest whole share.
(h) Taxes. The Company shall pay any and all taxes which may
be imposed upon it with respect to the issuance and delivery of Common
Stock upon the conversion of the Series A Preferred Shares.
(3) Redemption.
(a) Voluntary Redemption.
(i) Major Transaction. In addition to all other rights
of the Holders of Series A Preferred Shares contained in this Statement
(including, without limitation, the provisions of Section 2), after a
Major Transaction (as defined in Section 3(b) below), each Holder shall
have the right in accordance with Section 3(e), at such Holder's option,
to require the Company to redeem all or a portion of such Holder's Series
A Preferred Shares at a price per Series A Preferred Share equal to the
product of (A) the Stated Value plus all accrued and unpaid dividends
thereon, multiplied by (B) 105% ("MAJOR TRANSACTION REDEMPTION PRICE").
The provisions of this Section 3(a)(i) shall not be deemed to restrict the
ability of a Holder to convert Series A Preferred Shares pursuant to the
provisions of Section 2 at any time and from time to time before the
consummation of a Major Transaction.
(ii) Triggering Event. In addition to all other rights
of the Holders of Series A Preferred Shares contained in this Statement
(including, without limitation, the provisions of Section 2), after a
Triggering Event (as defined in Section 3(c) below), each Holder of Series
A Preferred Shares shall have the right in accordance with Section 3(e),
at such Holder's option, to require the Company to redeem all or a portion
of such Holder's Series A Preferred Shares at a price per Series A
Preferred Share equal to the greater of (x) product of (A) the aggregate
number of shares of Common Stock for which such Holder would be entitled
to receive if the Series A Preferred Shares
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that it holds would be converted as of the date immediately preceding such
Triggering Event on which the exchange or market on which the Common Stock
is traded is open, multiplied by (B) the greater of (x) the Average Market
Price of the Common Stock on such date and (y) the product of (A) the
Stated Value plus all accrued and unpaid dividends thereon, multiplied by
(B) 130% (the "TRIGGERING EVENT REDEMPTION PRICE"). The provisions of this
Section 3(a)(ii) shall not be deemed to restrict the ability of a Holder
to convert the Series A Preferred Shares pursuant to the provisions of
Section 2 at any time and from time to time before such Holder receives
the Triggering Event Redemption Price.
(b) "Major Transaction". A "MAJOR TRANSACTION" means the
occurrence at such time of any of the following events:
(i) the consolidation or merger of the Company with or
into another Person (other than pursuant to a migratory merger effected
solely for the purpose of changing the jurisdiction of incorporation of
the Company or pursuant to a merger after which the Holders of the
Company's outstanding capital stock immediately prior to the merger own a
number of shares of the resulting company's outstanding capital stock
sufficient to elect a majority of the resulting company's board of
directors;
(ii) the sale, transfer, lease, disposal or abandonment
of (whether in one transaction or in a series of transactions) of all or
substantially all of the Company's assets (other than a sale or transfer
to an entity controlling, controlled by or under common control with the
Company); or
(iii) a purchase, tender or exchange offer for more than
50% of the outstanding shares of Common Stock or other voting securities
of the Company is made and accepted by the holders thereof.
(c) "Triggering Event". A "TRIGGERING EVENT" shall be deemed
to have occurred at such time as any of the following events:
(i) notice from the Company that Common Stock issued or
issuable upon conversion of the Series A Preferred Shares cannot be sold
under the Registration Statement covering such Common Stock (the
"SUSPENSION PERIOD"), for any period of ten consecutive trading days or
any twenty non-consecutive trading days during any period of 180
consecutive days that is (A) after the date the Registration Statement has
been declared effective by the SEC and (B) prior to the time that the
Conversion Stock issuable upon conversion of the Series A Preferred Shares
may be sold without limitation in accordance with Rule 144(k) under the
Securities Act of 1933, as amended (the "1933 ACT"); provided, that any
demand for redemption under this Section 3(c)(i) must be made by a Holder
of Series A Preferred Shares within 30 days after receipt of notice from
the Company of the termination of the Suspension Period; provided,
further, that if the aggregate number of days in all Suspension Periods
(the "SUSPENSION DAYS") is equal to or greater than thirty (30) days, then
the Mandatory Redemption Date may, at the option of the Holder, be
extended by the aggregate number of Suspension Days;
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(ii) the failure of the Common Stock or the Conversion
Shares to be listed on the American Stock Exchange (the "AMEX"), the NYSE
or the Nasdaq National Market System for a period of 10 days during any
period of 12 months (the "DELISTING PERIOD"); provided, however, that any
demand for redemption under this Section 3(c)(ii) must be made by a Holder
within 30 days after receipt of the Notice of Redemption Event (as defined
in Section 3(e)); or
(iii) the Company's notice to any Holder of Series A
Preferred Shares, including by way of public announcement, at any time, of
its intention not to comply with proper requests for conversion of any
Series A Preferred Shares into shares of Common Stock, including due to
any of the reasons set forth in Section 4(a) below, except in any case in
which the basis for such intention by the Company is a bona fide dispute
as to the right of such Holder to such conversion.
(d) Mandatory Redemption. If any of the Series A Preferred
Shares remain outstanding on May 1, 2004 (the "MANDATORY REDEMPTION DATE")
(subject to extension as provided in Section 3(c)(i) above), then the
Company shall be required to redeem all of such Series A Preferred Shares
at a price per Series A Preferred Shares equal to the Triggering Event
Redemption Price (the "MANDATORY REDEMPTION PRICE" and together with the
Major Transaction Redemption Price, and the Triggering Event Redemption
Price, each a "REDEMPTION PRICE").
(e) Mechanics of Redemption. (i) Upon Major Transaction. No
sooner than fifteen (15) days nor later than ten (10) days prior to the
consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Company shall deliver written
notice thereof via facsimile and overnight courier to each Holder (each a
"NOTICE OF MAJOR TRANSACTION"). At anytime after receipt of a Notice of
Major Transaction, any Holder of the Series A Preferred Shares then
outstanding may require the Company to redeem all or any portion of its
Series A Preferred Shares by delivering written notice thereof via
facsimile or overnight courier (each a "NOTICE OF VOLUNTARY REDEMPTION
UPON MAJOR TRANSACTION") to the Company, which Notice of Voluntary
Redemption Upon Major Transaction shall indicate (A) the number of Series
A Preferred Shares that such Holder is requesting redemption for and (B)
the Major Transaction Redemption Price as calculated pursuant to Section
3(a)(i) above.
(ii) Upon Triggering Event. Within one day after the
occurrence of a Triggering Event, the Company shall deliver written notice
thereof via facsimile and overnight courier to each Holder (each a "NOTICE
OF TRIGGERING EVENT"). At anytime after receipt of a Notice of Triggering
Event, but only for so long as the facts giving rise to the Triggering
Event continue to exist, any Holder may require the Company to redeem all
or any portion of its Series A Preferred Shares by delivering written
notice thereof via facsimile or overnight courier (each a "NOTICE OF
VOLUNTARY REDEMPTION UPON TRIGGERING EVENT") to the Company, which Notice
of Voluntary Redemption Upon Triggering Event shall indicate (A) the
number of Series A Preferred
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Shares that such Holder is requesting redemption for and (B) the
Triggering Event Redemption Price as calculated pursuant to Section
3(a)(ii) above.
(iii) Upon Mandatory Redemption Date. Within two
business days after receipt of the Mandatory Redemption Price in cash, the
Holders shall surrender all Preferred Stock Certificates, duly endorsed
for cancellation, to the Company or the Transfer Agent. No Person shall
thereafter have any rights in respect of Series A Preferred Shares, except
the right to receive the Mandatory Redemption Price.
(f) Payment of Redemption Price Upon Voluntary Redemption.
Upon the Company's receipt of a Notice of Voluntary Redemption Upon Major
Transaction or Notice of Voluntary Redemption Upon Triggering Event from
any Holder, the Company shall immediately notify such Holder by facsimile
of the mechanics of the delivery of each Holder's Preferred Stock
Certificate and, if applicable, the Company's receipt of such requisite
notice necessary to effect a redemption and such Holder of Series A
Preferred Shares shall thereafter promptly send such Holder's Preferred
Stock Certificates to be redeemed to the Company or its Transfer Agent (or
an indemnification undertaking with respect to such shares in the case of
their loss, the theft or destruction pursuant to the provisions set forth
in Section 12 hereof). The Company shall deliver the applicable Redemption
Price to such Holder within ten (10) days after the Company's receipt of
the requisite notice required to affect a redemption; provided, that a
Holder's Preferred Stock Certificates shall have been so delivered to the
Company or its Transfer Agent (or an indemnification undertaking with
respect to such shares in the case of their loss, the theft or destruction
pursuant to the provisions set forth in Section 12 hereof); provided
further that if the Company is unable to redeem all of the Series A
Preferred Shares, the Company shall redeem an amount from each Holder of
Series A Preferred Shares equal to such Holder's pro rata amount (based on
the number of Series A Preferred Shares held by such Holder relative to
the number of Series A Preferred Shares outstanding) of all Series A
Preferred Shares being redeemed. If the Company shall fail to redeem all
of the Series A Preferred Shares submitted for redemption (other than
pursuant to a dispute as to the arithmetic calculation of the applicable
Redemption Price), in addition to any remedy such Holder of Series A
Preferred Shares may have under this Statement and the Securities Purchase
Agreement, the applicable Redemption Price payable in respect of such
unredeemed Series A Preferred Shares shall bear interest at the rate of
1.25% per month (prorated for partial months) until paid in full. Until
the Company pays such unpaid Redemption Price in full to each Holder,
Holders of the Series A Preferred Shares then outstanding, including
shares of Series A Preferred Shares submitted for redemption pursuant to
this Section 3 and for which the applicable Redemption Price has not been
paid, shall have the option (the "VOID REDEMPTION OPTION") to, in lieu of
redemption, require the Company to promptly return to each Holder all of
the Series A Preferred Shares that were submitted for redemption by such
Holder under this Section 3 and for which the applicable Redemption Price
has not been paid, by sending written notice thereof to the Company via
facsimile or by courier (the "VOID REDEMPTION NOTICE"). Upon the Company's
receipt of such Void Redemption Notice and prior to payment of the full
applicable Redemption Price to each Holder, (i) the Notice of Voluntary
Redemption Upon Major Transaction or Notice of Voluntary Redemption Upon
Triggering Event, as
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applicable, shall be null and void with respect to those Series A
Preferred Shares submitted for redemption and for which the applicable
Redemption Price has not been paid, and (ii) the Company shall immediately
return any Series A Preferred Shares submitted to the Company by each such
Holder for redemption under this Section 3(f) and for which the applicable
Redemption Price has not been paid. Notwithstanding the foregoing, in the
event of a dispute as to the determination of the arithmetic calculation
of the applicable Redemption Price, such dispute shall be resolved
pursuant to the provisions set forth in Section 2(e)(iii) above. Payments
provided for in this Section 3 in connection with a Redemption Upon a
Major Transaction shall have priority to payments to other stockholders in
connection with a Major Transaction.
(g) Redemption Upon Reaching Common Share Limit. In addition
to all other rights of the Holder contained herein (including, without
limitation, the provisions of Section 2), after the Common Share Limit has
been reached (unless it is no longer applicable as contemplated by Section
2(a)), the Company shall redeem all of the Series A Preferred Shares then
outstanding, and pay each Holder in cash an amount per Series A Preferred
Share equal to the greater of (i) 130% of the Stated Value plus accrued
and unpaid dividends to the date of such redemption and (ii) the product
of (A) the aggregate number of shares of Common Stock for which such
Holder would be entitled to receive if the Series A Preferred Shares that
it holds would be converted as of the date that the Common Share Limit was
reached and (B) the Average Market Price ("COMMON SHARE LIMIT REDEMPTION
PRICE"). The provisions of this Section 3(g) shall not be deemed to
restrict the ability of the Holder to convert Series A Preferred Shares
pursuant to the provisions of Section 2 at any time and from time to time
before the Common Share Limit is reached or if the Common Share Limit is
no longer applicable.
(4) Inability to Fully Convert.
(a) Holder's Option if Company Cannot Fully Convert. If, upon
the Company's receipt of a Conversion Notice, the Company cannot issue
shares of Common Stock registered for resale under the Registration
Statement for any reason, including, without limitation, because the
Company (x) does not have a sufficient number of shares of Common Stock
authorized and available, (y) is otherwise prohibited by applicable law or
by the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the
Company or its securities, including without limitation the NYSE, from
issuing all of the Common Stock which is to be issued to a Holder pursuant
to a Conversion Notice or (z) fails to have a sufficient number of shares
of Common Stock registered for resale under the Registration Statement,
then the Company shall issue as many shares of Common Stock as it is able
to issue in accordance with such Holder's Conversion Notice and pursuant
to Section 2(e) above and, with respect to the unconverted Series A
Preferred Shares, the Holder, solely at such Holder's option, can elect to
(unless the Company issues and delivers the Common Stock underlying the
unconverted Series A Preferred Shares prior to the Holder's election
hereunder, in which case such Holder shall only be entitled to receive Buy
In Actual Damages under Section 2(e)(v)):
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(i) require the Company to redeem from such Holder those
Series A Preferred Shares for which the Company is unable to issue Common
Stock in accordance with such Holder's Conversion Notice ("DEFAULT
REDEMPTION") at a price per Series A Preferred Share equal to the
Triggering Event Redemption Price as of such Conversion Date;
(ii) if the Company's inability to fully convert Series
A Preferred Shares is pursuant to Section 4(a)(i)(z) above, require the
Company to issue restricted shares of Common Stock in accordance with such
Holder's Conversion Notice pursuant to Section 2(e) above;
(iii) void its Conversion Notice and retain or have
retained, as the case may be, the nonconverted Series A Preferred Shares
that were to be converted pursuant to such Holder's Conversion Notice; or
(iv) if the Company's inability to fully convert Series
A Preferred Shares is pursuant to the rules and regulations described in
Section 4(a)(i)(y) above, require the Company to issue shares of Common
Stock in accordance with such Holder's Conversion Notice and pursuant to
Section 2(e) above at a Conversion Price equal to the Average Market Price
of the Common Stock on the date preceding such Holder's Notice in Response
to Inability to Convert (as defined below).
(b) Mechanics of Fulfilling Holder's Election. The Company
shall immediately send via facsimile to a Holder of Series A Preferred
Shares, upon receipt of a facsimile copy of a Conversion Notice from such
Holder which cannot be fully satisfied as described in Section 4(a) above,
a notice of the Company's inability to fully satisfy such Holder's
Conversion Notice (the "INABILITY TO FULLY CONVERT NOTICE"). Such
Inability to Fully Convert Notice shall indicate (i) the reason why the
Company is unable to fully satisfy such Holder's Conversion Notice, (ii)
the number of Series A Preferred Shares which cannot be converted and
(iii) the Default Redemption Price. Such Holder must within five (5)
business days of receipt of such Inability to Fully Convert Notice deliver
written notice via facsimile to the Company ("NOTICE IN RESPONSE TO
INABILITY TO CONVERT") of its election pursuant to Section 4(a) above.
(c) Payment of Default Redemption Price. If such Holder shall
elect to have its shares redeemed pursuant to Section 4(a)(i) above, the
Company shall pay the Default Redemption Price in cash to such Holder
within ten (10) days of the Company's receipt of the Holder's Notice in
Response to Inability to Convert. If the Company shall fail to pay the
Default Redemption Price to such Holder on a timely basis as described in
this Section 4(c) (other than pursuant to a dispute as to the
determination of the arithmetic calculation of the Default Redemption
Price), in addition to any remedy such Holder of Series A Preferred Shares
may have under this Statement and the Securities Purchase Agreement, such
unpaid amount shall bear interest at the rate of 1.25% per month (prorated
for partial months) until paid in full. Until the full Default Redemption
Price is paid in full to such Holder, such Holder may void the Default
Redemption with respect to those Series A Preferred Shares for which the
full Default Redemption Price has not been
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paid and receive back such Series A Preferred Shares. Notwithstanding the
foregoing, if the Company fails to pay the Default Redemption Price within
such ten (10) day time period due to a dispute as to the determination of
the arithmetic calculation of the Default Redemption Price, such dispute
shall be resolved pursuant to Section 2(e)(iii) above.
(d) Pro-rata Conversion and Redemption. In the event the
Company receives a Conversion Notice from more than one Holder on the same
day and the Company can convert and redeem some, but not all, of the
Series A Preferred Shares pursuant to this Section 4, the Company shall
convert and redeem from each Holder electing to have Series A Preferred
Shares converted and redeemed at such time an amount equal to such
Holder's pro rata amount (based on the number of Series A Preferred Shares
held by such Holder relative to the number of Series A Preferred Shares
outstanding) of all Series A Preferred Shares being converted and redeemed
at such time.
(5) Reissuance of Certificates. In the event of a conversion or
redemption pursuant to this Statement of less than all of the Series A
Preferred Shares represented by a particular Preferred Stock Certificate,
the Company shall promptly cause to be issued and delivered to the Holder
of such Series A Preferred Shares a preferred stock certificate
representing the remaining Series A Preferred Shares which have not been
so converted or redeemed.
(6) Reservation of Shares. The Company shall, so long as any of the
Series A Preferred Shares are outstanding, reserve and keep available out
of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Series A Preferred Shares, such number of
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all of the Series A Preferred Shares then outstanding;
provided, that the number of shares of Common Stock so reserved shall at
no time be less than 200% of the aggregate number of shares of Common
Stock for which (a) the Series A Preferred Shares are at any time
convertible and (b) the dividends on the Series A Preferred Shares
pursuant to Section 7 hereof are payable; provided, further, that such
shares of Common Stock so reserved shall be allocated for issuance upon
conversion of Series A Preferred Shares pro rata among the Holders of
Series A Preferred Shares based on the number of Series A Preferred Shares
held by such Holder relative to the total number of authorized Series A
Preferred Shares.
(7) Dividends. The Holders of the outstanding Series A Preferred
Shares shall be entitled to receive cumulative dividends at the rate of 6%
per annum of the Stated Value per Series A Preferred Share. Such dividends
shall be payable quarterly in arrears on the last day of March, June,
September and December of each year, commencing on June 30, 1999 (each of
such dates being a "DIVIDEND PAYMENT DATE"). Such dividend shall accrue on
each Series A Preferred Share from the Initial Issuance Date (with
appropriate proration for any partial dividend period) and shall accrue
from day-to-day, whether or not earned or declared. Dividend payments made
with respect to Series A Preferred Shares may be made, subject to the
terms hereof, in cash or, at the option and in the sole discretion of the
Board of Directors of the Company, in full or in part, by issuing validly
issued, fully paid and nonassessable shares of Common Stock; provided that
the
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shares of Common Stock so issued are covered by an effective Registration
Statement or may otherwise be sold without limitation in accordance with
Rule 144(k) under the 1933 Act. The number of shares of Common Stock to be
so issued shall be equal to the quotient of (a) the amount of the dividend
to be paid on such Dividend Payment Date which is not being paid in cash,
divided by (b) 90% times the Average Market Price. If the Board of
Directors shall elect to pay any part of a dividend by such issuance of
Common Stock, the Company shall provide notice (the "COMMON STOCK ELECTION
NOTICE") to such effect to the Holders of the Series A Preferred Shares by
no later than thirty (30) days prior to the applicable Dividend Payment
Date. If the Company shall not provide a Common Stock Election Notice, the
applicable dividend shall be paid in cash. The issuance of such Common
Stock (plus the amount of cash dividend, if any, paid together therewith)
shall constitute full payment of such dividend. In no event shall an
election by the Board of Directors to pay dividends, in full or in part,
in cash on any Dividend Payment Dates preclude the Board of Directors from
electing any other available alternative in respect of all or any portion
of any subsequent dividend.
(8) Liquidation, Dissolution, Winding-Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the Holders of the Series A Preferred Shares shall be entitled to
receive in cash out of the assets of the Company, whether from capital or
from earnings available for distribution to its stockholders (the
"PREFERRED FUNDS"), before any amount shall be paid to the holders of any
of the capital stock of the Company of any class junior in rank to the
Series A Preferred Shares in respect of the preferences as to the
distributions and payments on the liquidation, dissolution and winding up
of the Company, an amount per Series A Preferred Share equal to the
product of (x) 110% and (y) the sum of (i) the Stated Value and (ii) all
accrued and unpaid dividends thereon (such sum being referred to as the
"LIQUIDATION VALUE"); provided, that if the Preferred Funds are
insufficient to pay the full amount due to the holders of Series A
Preferred Shares and holders of shares of other classes or series of
preferred stock of the Company that are of equal rank with the Series A
Preferred Shares as to payments of Preferred Funds (the "PARI PASSU
SHARES"), then each holder of Series A Preferred Shares and Pari Passu
Shares shall receive a percentage of the Preferred Funds equal to the full
amount of Preferred Funds payable to such holder as a liquidation
preference, in accordance with their respective Statement, as a percentage
of the full amount of Preferred Funds payable to all holders of Series A
Preferred Shares and Pari Passu Shares. The purchase or redemption by the
Company of stock of any class, in any manner permitted by law, shall not,
for the purposes hereof, be regarded as a liquidation, dissolution or
winding up of the Company. Neither the consolidation or merger of the
Company with or into any other Person, nor the sale or transfer by the
Company of less than substantially all of its assets, shall, for the
purposes hereof, be deemed to be a liquidation, dissolution or winding up
of the Company.
(9) Preferred Rank. All shares of Common Stock of the Company shall
be of junior rank to all Series A Preferred Shares in respect to the
preferences as to distributions and payments upon the liquidation,
dissolution and winding up of the Company. All other shares of preferred
stock shall not be of senior rank to all Series A Preferred Shares in
respect to the preferences as to distributions and payments upon the
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liquidation, dissolution and winding up of the Company. As long as the
Series A Preferred Shares initially issued remain outstanding, then
without the prior express written consent of the holders of not less than
two-thirds (2/3) of the then outstanding Series A Preferred Shares, the
Company shall not hereafter authorize or issue additional or other capital
stock that is of senior rank or rank pari passu to the Series A Preferred
Shares in respect of the preferences as to distributions and payments upon
the liquidation, dissolution and winding up of the Company. Without the
prior express written consent of the holders of not less than two-thirds
(2/3) of the then outstanding Series A Preferred Shares, the Company shall
not hereafter authorize or make any amendment to the Company's Articles of
Incorporation or bylaws, or file any resolution of the board of directors
of the Company with the Arizona Secretary of State containing any
provisions, which would adversely affect or otherwise impair the rights or
relative priority of the holders of the Series A Preferred Shares relative
to the holders of the Common Stock or the holders of any other class of
capital stock. In the event of the merger or consolidation of the Company
with or into another corporation, the Series A Preferred Shares shall
maintain their relative powers, designations and preferences provided for
herein and no merger shall result inconsistent therewith.
(10) Restriction on Redemption and Cash Dividends with respect to
Other Capital Stock. Until all of the Series A Preferred Shares have been
converted or redeemed as provided herein, the Company shall not, directly
or indirectly, declare or pay any cash dividend or distribution on its
Common Stock without the prior express written consent of the holders of
not less than two-thirds (2/3) of the then outstanding Series A Preferred
Shares.
(11) Voting Rights and Related Matters.
(a) The Holders of the outstanding Series A Preferred Shares
shall have no voting rights, except as required by law, including, but not
limited to, the laws of the State of Arizona, and as expressly provided in
this Statement.
(b) The affirmative vote at a meeting duly called for such
purpose or the written consent without a meeting, of the holders of not
less than two-thirds (2/3) of the then outstanding Series A Preferred
Shares, shall be required for any change to this Statement or the
Company's Articles of Incorporation which would amend, alter, change or
repeal any of the powers, designations, preferences and rights of the
Series A Preferred Shares.
(12) Lost or Stolen Certificates. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Series A
Preferred Shares, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the holder to the Company and, in the case
of mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date; provided, however, the Company
shall not be obligated to re-issue
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Preferred Stock Certificates if the holder contemporaneously requests the
Company to convert such Series A Preferred Shares into Common Stock.
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IN WITNESS WHEREOF, the Company has caused this Statement to be
signed, as of the 24 day of March, 1999.
SIMULA, INC.
By: /s/ Donald W. Townsend
_________________________________
Name: Donald W. Townsend
Its: President
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EXHIBIT I
SIMULA, INC.
CONVERSION NOTICE
Reference is made to the Statement Pursuant to Section 10-602 of the Arizona
Revised Statutes of Simula, Inc. (the "CERTIFICATE OF DESIGNATIONS"). In
accordance with and pursuant to the Certificate of Designations, the undersigned
hereby elects to convert the number of shares of Series A Convertible Preferred
Stock, par value $.05 per share (the "SERIES A PREFERRED SHARES"), of Simula,
Inc., an Arizona corporation (the "COMPANY"), indicated below into shares of
Common Stock, par value $.01 per share (the "COMMON STOCK"), of the Company, by
tendering the stock certificate(s) representing the share(s) of Series A
Preferred Shares specified below as of the date specified below.
Date of Conversion:
---------------------------------------
Number of Series A
Preferred Shares to be converted:
---------------------------------------
Stock certificate no(s). of Series A
Preferred Shares to be converted:
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Please confirm the following information:
Conversion Price:
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Number of shares of Common Stock
to be issued:
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Please issue and deliver the Common Stock and, if applicable, any check drawn on
an account of the Company into which the Series A Preferred Shares are being
converted in the following name and to the following address:
Issue to:
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Facsimile Number:
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Authorization:
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By:
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Title:
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Dated:
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