VOLU-SOL, INC.
5095 West 2100 South
Salt Lake City, Utah 84120
(801) 974-9474
NOTICE OF WRITTEN CONSENT
DUE BY JUNE 12, 2000
To the Series A Preferred Shareholders:
Attached hereto is a Proxy Statement which solicits the written consent
of the holders of the Series A 10% Convertible Preferred Stock ("Series A
Preferred") of Volu-Sol, Inc., a Utah corporation (the "Company"), to authorize
and approve the amendment and modification (the "Amendment") of the Designation
of Rights and Preferences of the Series A Preferred as described in detail in
the attached Proxy Statement.
Attached to the Proxy Statement as Appendix A is the Shareholder
Consent Resolution (the "Consent Resolution"), which provides for authorization
and approval of the Amendment. The procedure for indicating authorization and
approval of the Amendment is described in detail in the attached Proxy
Statement.
Pursuant to Section 16-10a-704 of the Utah Revised Business
Corporations Act, once the Company receives the written consents from holders of
a majority of the Company's issued and outstanding Series A Preferred as of May
20, 2000 (the "Record Date"), the Company will deliver such written consents to
its registered office in Utah, and the Amendment shall be deemed to have been
approved by the Company's Series A Preferred shareholders. No meeting will be
held to vote on this corporate action.
You are requested to fill out, date, sign and return the enclosed
Shareholder Consent Resolution Signature Page (the "Signature Page"), which is
solicited by the Board of Directors of the Company as described in the
accompanying Proxy Statement.
Your consent is important. Please sign and date the enclosed Signature
Page and return it promptly in the enclosed return envelope. The return envelope
requires no postage if mailed in the United States. If mailed elsewhere, foreign
postage must be affixed. Your consent as evidenced by your signing and returning
the Signature Page is irrevocable once the Company receives it.
By Order of the Board of Directors,
/s/ Wilford W. Kirton, III
Wilford W. Kirton, President and Chairman
Salt Lake City, Utah
May 31, 2000
VOLU-SOL, INC.
5095 West 2100 South
Salt Lake City, Utah 84120
(801) 974-9474
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
SHARHOLDER ACTION BY WRITTEN CONSENT
1
This Proxy Statement has been prepared by the Board of Directors of
Volu-Sol, Inc., a Utah corporation ("Volu-Sol" or the "Company") and is
furnished in connection with the solicitation by the Board of Directors of the
written consent of the Series A Preferred Shareholders of the Company to
authorize and approve the amendment of the Articles of Incorporation of the
Company to change the rights and preferences of the Series A Preferred as
described in more detail in this Proxy Statement (the "Amendment").
The Company intends to distribute this Proxy Statement and the
accompanying materials to the Series A Preferred Shareholders on or about May
31, 2000. The reasons for the Amendment are described in the Proxy Statement.
Attached to this Proxy Statement as Appendix A is the Series A Preferred
Shareholder Consent Resolution ("Consent Resolution"), which provides for the
authorization and approval of the Amendment and the requisite amendment to the
Company's Articles of Incorporation to effect the Amendment. The procedure for
indicating your approval of the Amendment is described in this Proxy Statement.
General Information
Voting Rights
The matter being submitted for Series A Preferred shareholder approval
is to be acted upon by written consent, without a meeting, rather than by a vote
held at a meeting. The holders of the Company's issued and outstanding Series A
Preferred are entitled to consent in writing to the Amendment. The execution of
the Signature Page by the holders of a majority of the issued and outstanding
shares of the Company's Series A Preferred stock is required to authorize the
Amendment. No dissenters' rights or rights of appraisal are applicable or
available in connection with this action.
Only holders of record of shares of the Company's Series A Preferred
stock at the close of business May 20, 2000 (the "Record Date") are entitled to
execute the Consent Resolution. At the close of business on the Record Date
there were 15,133 shares of Series A Preferred stock issued and outstanding held
by approximately 40 shareholders of record. In deciding the action described in
this Proxy Statement, a holder of Series A Preferred stock on the Record Date
will be entitled to provide one consent for each share of Series A Preferred
stock then registered in such holder's name. The holders of the Series A
Preferred stock as of the Record Date are referred to in this Proxy Statement as
the "Series A Preferred Shareholders."
Solicitation of Written Consents
Under Utah law and under the Company's bylaws, any action that may be
taken at any meeting of the shareholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or to take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. The matter being considered by the Series A Preferred
Shareholders is being submitted for action by written consent rather than by
votes cast at a meeting. The attached Consent Resolution will be effective on
the date that the Company receives signed Signature Pages representing the
consent of the holders of a majority of the Company's issued and outstanding
Series A Preferred stock as of the Record Date.
Series A Preferred Shareholders are requested to indicate approval of
and consent to the adoption of the Amendment by filling out, signing and dating
the enclosed Signature Page. Execution of the Signature Page will constitute
your approval, as a Series A Preferred Shareholder, of the Amendment. Series A
Preferred Shareholders who do not approve and consent to the Amendment by
execution of the Signature Page will be bound by the Consent Resolution if
sufficient written consents are received by the Company on or before June 12,
2000, the date selected by the Company to effect the change (the "Effective
Date").
The Board of Directors requests that each Series A Preferred
Shareholder complete, execute, date and return the Signature Page to the Company
at the address indicated therein. An addressed envelope is enclosed for your
convenience. The Signature Page should be returned as soon as possible for
receipt by the Company no later than June 12, 2000.
2
The Company will pay the entire cost of the preparation and mailing of
this Proxy Statement and all other costs of this solicitation. Certain of the
Company's directors, officers, or employees may also solicit written consents by
mail, telephone, telegraph, or personal interview but no additional compensation
will be paid to them by the Company for doing so.
Written Consents Revocable until June 12, 2000
Any Signature Page executed and delivered by a Series A Preferred
Shareholder shall be deemed by the Company to constitute that Series A Preferred
Shareholder's approval of and written consent to the adoption of the Consent
Resolution. Once the Company (or its agent) receives the executed Signature
Page, that consent may not be revoked unless written notice of revocation is
received by the Company before the close of business on June 12, 2000.
This Proxy Statement and the enclosed Proxy are being furnished to Series A
Preferred Shareholders on or about May 12, 2000.
The Proposal
Summary of the Proposal
The Board of Directors of the Company has unanimously adopted, subject
to Series A Preferred Shareholder approval, an amendment to the Company's
Articles of Incorporation, which will modify the Designation of Rights and
Preferences of the Series A Preferred. The form of the Amendment is included in
the Consent Resolution attached as Appendix "A" to this Proxy Statement. The
Series A Preferred Shareholders are asked to approve this Amendment to the
Articles of Incorporation. The Board of Directors believes that it is in the
Company's best interest to adopt these changes to permit further financing to be
made on terms more favorable to the Series A Preferred Shareholders and the new
investors.
The changes to the rights and preferences of the Series A Preferred:
(1) change the conversion factor to $1.00 per share from the previous factor
calculated as the "lesser of market value less 20% or $6.25 per share" as
adjusted for the recently implemented 1-for-5 reverse split of the Company's
common stock; and (2) delete references to dates or contingencies which are no
longer relevant with the passage of time since the original adoption and
designation of the Series A Preferred.
If the Amendment is adopted, the conversion feature of the Series A
Preferred will be fixed and no longer variable. If the trading price of the
Company's common stock were less than $1.20 per share, the change in the
conversion feature would result in fewer shares of common stock being issued
upon conversion of the Series A Preferred. However, if the fair market value of
the Company's common stock exceeds $1.20 per share, the number of shares of
common stock issuable upon conversion of the Series A Preferred will be
increased under the proposed Amendment. At the present time there is no market
for the Company's common stock and the Company cannot predict when such a market
will or might develop, if ever.
Changes to the Designation of Rights and Preferences
The proposed changes to the Designation of Rights and Preferences are
as follows:
1. Paragraph 3 (a) is amended to delete reference to the
liquidation preference payable prior to January 1, 1998. This
change reflects the fact that more than 2 years have passed
since January 1, 1998 and there is no longer a need for this
provision.
2. Paragraph 4 is amended to update the reference to the amended
articles of incorporation from August 31, 1997 to June 12,
2000, the date the Company expects to file the Amendment.
3
3. Paragraph 5(a) is amended to fix the conversion Factor at
$1.00.
4. Paragraph 9 is revised to delete reference to a lesser
redemption price for redemptions occurring prior to January 1,
1998 as such references are now irrelevant.
Principal Effects of the Proposed Amendment
The Designation of Rights and Preferences of the Series A Preferred
permits the amendment of the Designation upon a vote of the holders of a
majority of the outstanding shares of Series A Preferred. Although the Series A
Preferred Shareholders are entitled to vote against the Amendment, they have no
right under Utah law or under the Company's Articles of Incorporation, as
amended or the Company's Bylaws to dissent from the adoption of the Amendment.
Except for certain special circumstances that are not applicable to the
action proposed by the Board of Directors of the Company, an amendment to a
corporation's Articles of Incorporation under Utah law requires the approval of
a majority of the issued and outstanding voting shares of the corporation.
Generally such action is taken by a vote conducted at an annual or special
meeting of the shareholders of the corporation. Section 16-10a-706 of the Utah
Revised Business Corporations Act (the "Utah Law") provides that "any action
which may be taken at any annual or special meeting of shareholders may be taken
without a meeting and without prior notice, if one or more consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take the action at a meeting at which all shares entitled to
vote thereon were present and voted." In addition, the Utah Law provides that
any action taken in this manner has the same effect as action taken at a meeting
of shareholders.
The action proposed by the Board of Directors as described in this
Proxy Statement affects the Series A Preferred Shareholders and, under the terms
of the Designation of Rights and Preferences of the Series A Preferred, no
modification of those rights and preferences may be made without the consent of
the holders of a majority of the issued and outstanding shares of Series A
Preferred. Consequently, the consent of a majority of the outstanding shares of
the Company's Series A Preferred stock is required to approve the proposed
Amendment.
If the Amendment is approved, the changes to the Rights and Preferences
of the Series A Preferred described above will go into effect without further
action by the Series A Preferred Shareholders or the Company. The Amendment will
govern the rights of the Series A Preferred Shareholders following the Effective
Date.
THE BOARD OF DIRECTORS HAS APPROVED THE PROPOSAL TO AMEND THE COMPANY'S ARTICLES
OF INCORPORATION AND RECOMMENDS THAT SERIES A PREFERRED SHAREHOLDERS VOTE FOR
APPROVAL OF THE PROPOSED AMENDMENT.
The enclosed Shareholder Consent Resolution is furnished for you to
indicate your consent with respect to the Amendment described in this Proxy
Statement. If you wish to consent in accordance with the Board's recommendation,
please fill out, sign, date and return the Signature Page in the enclosed
envelope, which requires no postage if mailed in the United States. A prompt
return of the Signature Page will be appreciated.
By Order of the Board of Directors
Wilford W. Kirton, III
Chairman and Chief Executive Officer
4
APPENDIX A
CONSENT RESOLUTION
OF THE SERIES A PREFERRED SHAREHOLDERS
OF
VOLU-SOL, INC.
A Utah Corporation
(Amendment)
Pursuant to Section 16-10a-704 of the Utah Revised Business
Corporations Act, the undersigned, being the holders of __________ shares of the
issued and outstanding Series A Preferred stock of Volu-Sol, Inc. (the
"Company"), a Utah corporation, hereby consent to and approve the following
corporate action as if it had been taken at a meeting of the shareholders of the
Company:
RESOLVED, that the Designation of the Rights and Preferences of the
Series A 10% Convertible Preferred Stock be and the same are hereby amended in
their entirety by adoption of the Amended and Restated Designation of Rights and
Preferences of Series A 10% Convertible Preferred Stock in the form attached to
this Consent Resolution, by this reference incorporated in and made a part of
this Resolution.
FURTHER RESOLVED, that the officers of the Company are authorized to
take all additional actions and to execute, deliver and cause to be filed, such
instruments and documents as may be required by the Utah Revised Business
Corporations Act to effect this Amendment.
Once signed by the holders of at least a majority of the outstanding
shares of Series A Preferred stock of the Company, these resolutions shall be
delivered to the Company at its principal office in Salt Lake City, Utah. These
resolutions are to be included in the Company's corporate records and, as of the
Effective Date, shall have the same force and effect as an action taken at a
meeting of the shareholders of the Company.
5
VOLU-SOL, INC.
AMENDED AND RESTATED
DESIGNATION OF RIGHTS AND PREFERENCES
OF
SERIES A 10% CONVERTIBLE NON-VOTING PREFERRED STOCK
Pursuant to the authority vested in the Board of Directors of Volu-Sol,
Inc., a Utah corporation (the "Company"), in its Articles of Incorporation and
as permitted by Section 602 of the Utah Revised Business Corporation Act, as
amended (the "Utah Act"), the Company's Board of Directors does hereby establish
a series of the Company's Preferred Stock designated as Series A 10% Convertible
Non-Voting Preferred Stock ("Series A Preferred Stock") and does hereby
designate the rights, preferences, privileges and other attributes of the shares
of Series A Preferred Stock, as amended, as follows:
1. Designation and Number of Shares.
A series of the Company's Preferred Stock is hereby
established, to be designated and known as "Series A 10% Convertible Non-Voting
Preferred Stock" (hereinafter referred to as the "Series A Preferred Stock"),
consisting of twenty thousand (20,000) shares of the authorized and unissued
shares of the Company's Preferred Stock, $0.0001 par value per share. The
Company shall from time to time, in accordance with the laws of the State of
Utah, increase the number of shares of its Common Stock, $0.0001 par value per
share, if at any time the number of shares of the Company's Common Stock
remaining unissued and available for issuance shall not be sufficient to permit
conversion of the Series A Preferred Stock provided herein.
2. Dividends.
The holders of shares of Series A Preferred Stock shall be
entitled to receive an annual dividend out of any of the Company's assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend on the Common Stock of the Company, at the rate of ten
percent (10%) per annum on the stated value of the Series A Preferred Stock (or
$200.00 per share of Series A Preferred Stock). Dividends will be paid either in
cash or in additional shares of Series A Preferred stock at the discretion of
the Board of Directors to holders of record of shares of Series A Preferred
Stock as they appear on the books and records of the Company on such record
dates not less than ten (10) days nor more than sixty (60) days preceding the
payment dates thereof, as may be fixed by the Board of Directors of the Company.
Dividends shall be fully cumulative and shall accrue from the date of original
issuance of the Series A Preferred Stock. Once dividends are paid on the Series
A Preferred Stock, holders of shares of Series A Preferred Stock will not
participate in dividends paid to holders of Common Stock. Except as described
below, no dividends shall be paid or declared and set apart for payment on any
class or series of shares of the Company that are junior to the Series A
Preferred Stock for any period unless full cumulative dividends have been paid
or contemporaneously are declared and paid or set apart for payment on the
Series A Preferred Stock. A dividend payable in shares of Common Stock or in
shares of another class of shares junior to the Series A Preferred Stock may,
however, be made. Dividends on the Series A Preferred Stock may, at the option
of the Company's Board of Directors, be paid in either cash or in additional
shares of Series A Preferred Stock; provided, however, that if accrued dividends
on the Series A Preferred Stock are paid in additional shares of Series A
Preferred Stock, accrued dividends paid subsequent thereto shall not be paid on
shares of Series A Preferred Stock that were previously paid as stock dividends.
Holders of Series A Preferred Stock shall not participate in excess dividends
remaining following payment of all accrued and unpaid dividends owing to holders
of Series A Preferred Stock.
3. Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of Series A Preferred
Stock shall be entitled to receive out of the assets of the Company available
for distribution to shareholders before any distribution or payment is made to
holders of shares of Common Stock, or to holders of any other shares of the
Company ranking junior upon liquidation to the Series A Preferred Stock,
6
liquidation distributions in the amount of Two Dollars ($2.00) per share plus
all accrued and unpaid regular or special dividends, if any, multiplied by 133%,
before any payment is made to holders of shares of the Company's equity
securities that are junior to the Series A Preferred Stock. If upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the assets of the Company shall be insufficient to make the full payment on the
Series A Preferred Stock as described in the immediately preceding sentence, and
similar payments on any other class of shares ranking on a parity with the
Series A Preferred Stock upon liquidation, then the holders of the Series A
Preferred Stock and of such other class of shares will share ratably in any such
distribution of assets of the Company in proportion to the full respective
distributable amounts to which they are entitled.
(b) After payment to the holders of the Series A Preferred
Stock of the amounts set forth in subparagraph 3(a) above, the holders of Series
A Preferred Stock will not be entitled to any further participation in any
distribution or payment by the Company, and the entire remaining assets and
funds of the Company legally available for distribution, if any, shall be
distributed among the holders of shares of Common Stock in proportion to the
shares of Common Stock then held by them.
(c) A consolidation or merger of the Company with or into any
other corporation or corporations, or a sale of all or substantially all of the
assets of the Company that does not involve a distribution by the Company of
cash or other property to the holders of shares of Common Stock, shall be deemed
to be a liquidation, dissolution or winding up of the Company within the meaning
of this Section 3, but rather shall be subject to the provisions of Section 6
below.
4. Voting Rights.
Except as otherwise expressly provided herein or as required
by Utah law, the holders of Series A Preferred Stock shall not be entitled to
voting rights, except that without the approval of holders of a majority of the
outstanding shares of Series A Preferred Stock, the Company will not (i)
authorize, create or issue any shares of any class or series ranking senior to
the Series A Preferred Stock as to liquidation rights; (ii) amend, alter or
repeal by any means the Company's Articles of Incorporation if the powers,
preferences or special rights of the Series A Preferred Stock would be
materially adversely affected; or (iii) become subject to any restriction on the
Series A Preferred Stock other than restrictions arising solely under the Utah
Act or existing under the Company's Articles of Incorporation as in effect on
June 12, 2000. Upon conversion of shares of Series A Preferred Stock by holders
thereof into Common Stock of the Company, holders (to the extent of their Common
Stock) shall be entitled to voting rights pertaining to the Common Stock
received upon such conversion.
5. Conversion of Series A Preferred Stock. The holders of shares
of Series A Preferred Stock shall have the following conversion rights.
(a) Right to Convert. Subject to the Conversion Limitation set
forth in Section 5(b) below, each share of Series A Preferred Stock may be
converted at the holder's option at any time into the number of shares of the
Company's Common Stock determined by dividing $200.00 plus any accrued and
unpaid regular or special dividends by $1.00 (the "Conversion Factor"). As used
herein, "Market Price" shall mean the average closing bid price of the Company's
Common Stock for the three (3) trading days immediately preceding the applicable
Conversion Date (as defined below), as reported by the National Association of
Securities Dealers Automated Quotation System or such other inter-dealer system
as may list the Company's Common Stock.
(b) Conversion Limitation. Notwithstanding the conversion
rights regarding the Series A Preferred Stock set forth in Section 5(a) above,
any single holder (or affiliated holders) may not at any time hold shares of the
Company's Common Stock exceeding 4.9% of the total number of issued and
outstanding shares of Common Stock. Thus, any holder or group of affiliated
holders will only be allowed to convert shares of Series A Preferred Stock into
shares of Common Stock in an amount such that such holder's ownership of shares
of Common Stock does not exceed 4.9% of the total number of issued and
outstanding shares of Common Stock.
(c) Mechanics of Conversion. Each conversion shall be effected
by the holder surrendering the certificate(s) for the shares of Series A
Preferred Stock to be converted to the Company with a Conversion Certificate
7
executed by the holder for not less than $25,000.00 aggregate conversion amount
including any accrued and unpaid regular and special dividends and accompanied,
as required by the Company, by proper assignment. The date of execution of such
Conversion Certificate and delivery by facsimile to the Company at (801)
974-9553 shall be defined as the "Conversion Date." Upon conversion the Company
shall use its reasonable best efforts to deliver to the holder certificates
evidencing shares of the Company's Common Stock within five (5) business days of
the Conversion Date. The Company shall use reasonable best efforts to deliver to
the holder certificates evidencing shares of Series A Preferred Stock that are
not converted within three (3) business days of the Conversion date. In the
event a merger, consolidation or sale of all or substantially all of the assets
of the Company or a similar business combination involving the Company, all of
the shares of Series A Preferred Stock, at the option of the holder, may be
converted into the number of shares of Common Stock into which the shares of
Series A Preferred Stock are convertible at the time of the closing of such
transaction. In the event the Company shall fail to deliver certificates
evidencing shares of the Company's Common Stock upon any conversion of shares of
Series A Preferred Stock within five (5) business days of the Conversion Date,
the Company shall pay the holder daily liquidated damages in an amount equal to
one percent (1%) of the principal amount of the shares of Series A Preferred
Stock converted into Common Stock for each day beyond said five (5) business
days.
(d) Adjustments for Combinations or Subdivisions of Common
Stock. In the event the Company at any time or from time to time after the date
on which a share of Series A Preferred Stock was first issued shall declare or
pay any dividend on the Common Stock payable in shares of Common Stock or in any
right to acquire shares of Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by stock split, reclassification or otherwise), or in the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
then the Series A Preferred Stock conversion formula set forth in Section 5(a)
above in effect immediately prior to such event shall, concurrently with the
effectiveness of such event, be proportionately increased or decreased, as
appropriate.
(e) Other Distributions. In the event the Company shall at any
time or from time to time make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Company or any of its
subsidiaries, if any, then in each such event a provision shall be made so that
the holders of shares of Series A Preferred Stock shall receive, upon the
conversion thereof, the securities of the Company that they would have received
had their Series A Preferred Stock been converted into shares of Common Stock on
the date of such event.
(f) No Impairment. The Company will not, by amendment to its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all of the provisions of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of Series A
Preferred Stock against impairment. No amendment shall be made to the Company's
Articles of Incorporation that would alter or change the powers, preferences or
privileges of the shares of Series A Preferred Stock so as to affect them
adversely without the vote or approval of the holders of at least a majority of
the outstanding shares of Series A Preferred Stock.
(g) Certificates as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Series A Preferred Stock conversion
formula pursuant to this Section 5, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
cause an independent public accountant selected by the Company's Board of
Directors to verify such computation and prepare and furnish to each holder of
Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written request at any time
of any holder of Series A Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments; (ii) the Series A Preferred Stock conversion formula at the time
in effect; and (iii) the number of shares of Common Stock that at the time would
be received upon the conversion of shares of Series A Preferred Stock.
8
(h) Notices of Record Date. In the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, any security or right convertible into or entitling the
holder thereof to receive additional shares of Common Stock, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the Company
shall mail to each holder of Series A Preferred Stock at least ten (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,
security or right, and the amount and character of such dividend, distribution,
security or right.
(i) Issue Taxes. The Company shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock upon conversion of shares of Series A Preferred Stock pursuant
hereto; provided, however, that the Company shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder of shares of
Series A Preferred Stock in connection with any such conversion.
(j) Reservation of Stock Issuable upon Conversion. The Company
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 Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
of the shares of issued and outstanding Series A Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all of the shares of issued and
outstanding Series A Preferred Stock, the Company will 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, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval of any necessary amendment
to the Company's Articles of Incorporation.
(k) Fractional Shares. No fractional share of Common Stock or
securities representing fractional shares of Common Stock shall be issued upon
the conversion of any share or shares of Series A Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one (1) share of Series A Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation,
the conversion would result in the issuance of a fraction of a share of Common
Stock, the Company shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the current
market value of such fraction on the date of conversion.
(l) Notices. Any notice required by the provisions of this
Section 5 to be given to the holders of shares of Series A Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at such holder's address appearing on the
books and records of the Company.
(m) Adjustments. In case of any reorganization or any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation or corporations, or the
conveyance of all or substantially all of the assets of the Company to another
corporation, each share of Series A Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
(including cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such shares of Series A Preferred Stock would
have been entitled upon the record date (or date of, if no record date is fixed)
such reorganization, reclassification, consolidation, merger or conveyance; any,
in any case, appropriate adjustment (as determined by the Company's Board of
Directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of such
Series A Preferred Stock, to the end that the provisions set forth herein shall
thereafter be applicable, as nearly as equivalent as is practicable, in relation
to any shares of stock or the securities or property (including cash) thereafter
deliverable upon the conversion of the shares of such Series A Preferred Stock.
9
6. Merger or Consolidation.
(a) At any time, in the event of:
(i) Any transaction or series of related transactions
(including, without limitation, any reorganization, merger or
consolidation) that will result in the Company's shareholders
immediately prior to such transaction not holding (by virtue of such
shares or securities issued solely with respect thereto) at least fifty
percent (50%) of the voting power of the surviving or continuing
entity; or
(ii) A sale of all or substantially all of the assets
of the Company, unless the Company's shareholders immediately prior to
such sale will, as a result of such sale, hold (by virtue of securities
issued as consideration for the Company's sale) at least fifty percent
(50%) of the voting power of the purchasing entity;
(the foregoing events are individually referred to herein as a "Sales
Transaction"), then, holders of the Series A Preferred Stock of record as of the
date of consummation of the Sales Transaction shall be entitled to receive,
prior and in preference to any payment of consideration to the holders of Common
Stock, in cash or in securities received from the acquiring corporation, or in a
combination thereof, at the closing of any such Sales Transaction, at the
holder's discretion, an amount per share equal to Two Hundred Dollars ($200.00)
per share (as adjusted for any combinations, consolidations, stock distributions
or stock dividends with respect to such shares), plus all declared or
accumulated but unpaid dividends on such shares as of the date of closing of
such Sales Transaction. In the event the proceeds of the Sales Transaction are
not sufficient to make full payment of the aforementioned preferential amounts
to the holders of the Series A Preferred Stock in accordance herewith, then the
entire amount payable in respect of the proposed Sales Transaction shall be
distributed ratably among the holders of the Series A Preferred Stock in
proportion to the product of the liquidation preference of each such share and
the number of such shares owned by each such holder. Upon completion of the
payment to the holders of Series A Preferred Stock as provided above, the
remaining proceeds of such Sales Transaction shall be distributed among the
holders of record (as of the date of the consummation of the Sales Transaction)
of shares of Common Stock in proportion to the number of shares of Common Stock
then held. Unless otherwise consented to by the holders of a majority of the
outstanding shares of Series A Preferred Stock, such payments shall be made with
respect to the Series A Preferred Stock and to holders of Common Stock by
purchase of such shares of Series A Preferred Stock and Common Stock by the
surviving corporation, entity or person, or by redemption of such shares by the
Company, in the discretion of the Company.
(b) Any securities to be delivered to the holders of Series A
Preferred Stock pursuant to Section 6(a) above shall be valued as follows:
(i) Securities not subject to investment letter or
other similar restrictions on free marketability as provided for in
subsection (ii) below:
(A) If traded on a securities exchange or
reported on the NASDAQ SmallCap Market, the value shall be
deemed to be the average of the closing prices of the
securities on such exchange over the thirty (30) day period
ending three (3) days prior to the closing;
(B) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or
sale prices (whichever is applicable) over the thirty (30) day
period ending three (3) days prior to the closing; and
10
(C) If there is no active public market, the
value shall be the fair market value thereof, as mutually
determined by the Company's Board of Directors and the holders
of a majority of the outstanding shares of Series A Preferred
Stock.
(iii) The method of valuation of securities subject
to investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a shareholder's status as
an affiliate or former affiliate of the Company) shall be to make an
appropriate discount from the market value determined in Section
6(b)(i)(A), (B) or (C) above to reflect the approximate fair market
value thereof, as mutually determined by the Company and the holders of
a majority of the outstanding shares of Series A Preferred Stock.
(c) In the event the requirements of Section 6(a) above
are not complied with, the Company shall forthwith either:
(i) Cause such closing to be postponed until
such time as the requirements of this Section 6 have been complied
with; or
(ii) Cancel such transaction, in which event the
rights, preferences and privileges of the holders of Series A Preferred
Stock shall revert to and be the same as such rights, preferences and
privileges existing immediately prior to the date of the first notice
referred to in Section 6(d) below.
(d) The Company shall give each holder of record of Series A
Preferred Stock written notice of such impending transaction not later than ten
(10) days prior to the shareholders' meeting called to approve such transaction.
The notice shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 6, and the Company shall
thereafter give such holders prompt notice of any material changes to the
impending transaction. The transaction shall in no event take place soon than
twenty (20) days after the Company has given the notice provided for herein or
sooner than ten (10) days after the Company has given the notice of any material
changes in the impending transaction as provided for herein; provided, however,
that such periods may be shortened upon the written consent of the holders of a
majority of the outstanding shares of Series A Preferred Stock.
7. Restrictions and Limitations. So long as any shares of
Series A Preferred Stock remain issued and outstanding, the Company shall not
without the consent of the holders of a majority of the shares of Series A
Preferred Stock then outstanding:
(a) Purchase, redeem, or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose) any of the Common Stock of the
Company; provided, however, that this restriction shall not apply to the
repurchase of fractional shares, odd lots or shares of Common Stock from
directors, officers, consultants or employees of the Company or any subsidiary,
if any; or
(b) Effect any reclassification, recapitalization or other
change with respect to any outstanding shares of stock that results in the
issuance of shares of stock having any preference or priority as to dividends,
redemption rights, liquidation preferences, conversion rights, voting rights or
otherwise, that are superior to any such preference or priority of the Series A
Preferred Stock; or
(c) Increase or decrease (other than by redemption or
conversion) the total number of authorized shares of the Company's Preferred
Stock or the total number of shares of the Company's Preferred Stock designated
as Series A Preferred Stock; or
(d) Authorize or issue, or obligate itself to issue, any other
equity security senior to the Series A Preferred Stock as to dividends,
redemption rights, liquidation preferences, conversion rights, voting rights or
otherwise, or create any obligation or security convertible into or exchangeable
for, or having any option or rights to purchase, any such equity security that
11
is senior to, the Series A Preferred Stock. The consent of the holders of a
majority of the shares of Series A Preferred Stock shall not be required if any
other equity security on parity with the Series A Preferred Stock as to
dividends, redemption rights, liquidation preferences, conversion rights, voting
rights, or otherwise is to be issued.
8. No Reissuance of Series A Preferred Stock. No share or shares of
Series A Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be returned to the status of undesignated shares of the Company's Preferred
Stock.
9. Redemption. The Company shall have the right to call for redemption
up to 66-2/3% of the total number of shares of Series A Preferred stock
initially issued at its option at any time. Notwithstanding what the Market
Price or the Conversion Factor may be at any time, the Company may designate a
different and lower conversion price (the "New Conversion Price") and the call
price for all shares of Series A Preferred Stock called for redemption by the
Company shall be a minimum of 133% of the New Conversion Price. The Company's
call option shall be assignable, in whole or in part, and shall be exercised in
writing with payment to accompany the exercise notice or to be paid within two
(2) business days thereafter. If less than all 66-2/3% of the issued and
outstanding shares of Series A Preferred Stock are to be redeemed, the Company
will select those shares to be redeemed by lot or on a pro rata basis or by any
other method deemed by the Company's Board of Directors to be equitable (with
any necessary adjustments to avoid fractional shares). Any shares of Series A
Preferred Stock for which a written notice of redemption has been given may be
converted into shares of Common Stock at any time before the close of business
on the date fixed for the redemption of such shares of Series A Preferred Stock.
After the date fixed for redemption, dividends on shares of Series A Preferred
stock called for redemption shall cease to accrue, such shares shall no longer
be deemed to be issued and outstanding, and all rights of the holders thereof as
shareholders of the Company shall cease unless the Company defaults on the
payment of the redemption price.
10. United States Dollars. All references herein to Dollars shall
be deemed to refer to United States Dollars.
12
CONSENT RESOLUTION
OF THE
SERIES A PREFERRED SHAREHOLDERS
OF
VOLU-SOL, INC.
SIGNATURE PAGE
Date: Signature:
---------------- -------------------------------
Name:
------------------------------------
Number of Shares Held:
-------------------
You are requested to fill out, date, sign and return this Signature Page, which
is solicited by the Board of Directors of the Company as described in the
accompanying Proxy Statement. Your consent is important. Please sign and date
this Signature Page and return it promptly in the enclosed return envelope. The
return envelope requires no postage if mailed in the United States. If mailed
elsewhere, foreign postage must be affixed. Your consent as evidenced by your
signature and return of this page is revocable only if written notice of
revocation is received by the Company prior to close of business on June 12,
2000, as explained in the Proxy Statement.
13