AMENDMENT AND WAIVER TO CERTIFICATE OF
DESIGNATIONS PREFERENCES AND RIGHTS OF THE
SERIES OF THE PREFERRED STOCK OF COVOL
TECHNOLOGIES, INC. TO BE DESIGNATED SERIES D
CUMULATIVE CONVERTIBLE PREFERRED
STOCK(THE "CERTIFICATE OF DESIGNATIONS")
THIS AMENDMENT AND WAIVER TO THE CERTIFICATE OF DESIGNATIONS (this
"Amendment"), dated as of March 15, 2000, by and between COVOL TECHNOLOGIES,
INC., a Delaware corporation (the "Company") and OZ Master Fund, Ltd. (the
"Stockholder"), the sole holder of Series D Cumulative Convertible Preferred
Stock of the Company (the "Series D Stock"),
W I T N E S S E T H:
WHEREAS, the Company may cease to be listed on the Nasdaq Stock Market
if the Company does not increase the amount of its stockholders' equity; and
WHEREAS, amending the Certificate of Designations to remove the
mandatory redemption provisions contained therein will permit the Series D Stock
to be included in stockholders' equity and thereby may help prevent delisting
from the Nasdaq Stock Market; and
WHEREAS, the Stockholder desires the increased liquidity that the
Company's listing on the Nasdaq Stock Market provides; and
WHEREAS, the Stockholder holds 100% of the issued and outstanding
Preferred Stock; and
WHEREAS, the parties desire to amend the Certificate of Designations to
remove the mandatory redemption provisions therein and to make other changes as
more specifically provided for herein; and
WHEREAS, the Stockholder is willing to waive any provisions under the
Certificate of Designations which may have been violated prior to the date
hereof;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise specifically defined herein, each
term used herein which is defined in the Certificate of Designations has the
meaning assigned to such term in the Certificate of Designations.
2. Amendment.
(a) Section 1A of the Certificate of Designations is hereby amended by
inserting the
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phrase "under Section 4 hereof" immediately prior to the final comma of clause
(i) thereof.
(b) The title to Section 4 of the Certificate of Designations is hereby
changed to "Optional Redemption by the Company."
(c) Section 4B of the Certificate of Designations is hereby deleted in
its entirety and replaced by the following new Section 4B:
"4B. Redemption Payments. For each Share which is to be redeemed under
Section 4A, the Company shall provide a notice of redemption pursuant
to Section 4C which shall specify the number of Shares to be redeemed
under Section 4A and the Redemption Date upon which the Company will
pay to the holder thereof(upon surrender by such holder at the
Company's principal office of the certificate representing such Share)
an amount in cash in immediately available funds equal to the
Redemption Price of such Share (plus all accrued and unpaid dividends
thereon)."
(d) Section 4C of the Certificate of Designations is hereby amended by
deleting the parenthetical "(other than a redemption at the request of a holder
or holders of Preferred Stock)" found therein.
(e) Section 4H of the Certificate of Designations is hereby deleted in
its entirety and replaced by the following new Section 4H:
"4H. Change of Control. If a Change of Control has occurred or the
Company obtains knowledge that a Change of Control is proposed to
occur, the Company shall give prompt written notice of such Change of
Control describing in reasonable detail the material terms and date of
consummation thereof to each holder of Preferred Stock, but in any
event such notice shall not be given later than five days after the
occurrence of such Change of Control, and the Company shall give each
holder of Preferred Stock prompt written notice of any material change
in the terms or timing of such transaction. Any holder of Preferred
Stock may, at its option convert all or a portion of such holder's
Preferred Stock (including any fraction of a Share) into a number of
shares of Conversion Stock computed by dividing (A) the sum of (x) the
product obtained by multiplying the number of Shares to be converted by
$100 and (y) all accrued and unpaid dividends, by (B) the Change of
Control Conversion Price.
For purposes hereof, "Change of Control Conversion Price" shall mean
the lower of (1) the lower of (a) the Maximum Conversion Price and (b)
90% of the Market Price of a share of Common Stock on the Business Day
immediately preceding the public announcement of the Change of Control
transaction and (2) the lower of (c) the Maximum Conversion Price and
(d) the Market Price of a share of Common Stock on the Business Day
immediately following such public announcement. Any holder who elects
to convert such holder's Preferred Stock may immediately prior to the
consummation of the Change of Control transaction convert all or a
portion of such holder's Preferred Stock (including any fraction of a
Share) into the number of shares of Conversion Stock calculated as set
forth above.
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Upon receipt of a notice of conversion, the Company
shall effect the immediate conversion into Common Stock (if the holder
has requested conversion into Common Stock). If any proposed Change of
Control does not occur, all requests for conversion in connection
therewith shall be automatically rescinded, or if there has been a
material change in the terms or the timing of the transaction, any
holder of Preferred Stock may rescind such holder's request for
conversion by giving written notice of such rescission to the Company.
The term "Change of Control" means (a) any sale,
transfer or issuance or series of sales, transfers and/or issuances of
Common Stock by the Company or any holders thereof which results in any
Person or group of Persons (as the term "group" is used under the
Exchange Act), beneficially owning (as such term is used in the
Exchange Act) more than 50% of the Common Stock outstanding at the time
of such sale, transfer or issuance or series of sales, transfers and/or
issuances, (b) any sale or transfer of more than 50% of the assets of
the Company and its Subsidiaries on a consolidated basis (measured
either by book value in accordance with generally accepted accounting
principles consistently applied or by fair market value determined in
the reasonable good faith judgment of the Board of Directors) in any
transaction or series of transactions (other than sales in the ordinary
course of business and excluding the sale of the synthetic fuel
facilities set forth on Schedule 8.1(e) of the Purchase Agreement), (c)
any merger or consolidation to which the Company is a party, except for
a merger in which the Company is the surviving Company, the terms of
the Preferred Stock are not changed and the Preferred Stock is not
exchanged for cash, securities or other property, and after giving
effect to such merger, the holders of the Company's outstanding capital
stock possessing a majority of the voting power (under ordinary
circumstances) to elect a majority of the Board of Directors
immediately prior to the merger shall continue to own the Company's
outstanding capital stock possessing the voting power (under ordinary
circumstances) to elect a majority of the Board of Directors and (d)
any Organic Change."
(f) Section 6E of the Certificate of Designations is hereby amended by
deleting the first sentence therein and replacing such sentence with the
following new sentence:
"Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets or
other transaction, in each case which is effected in such a manner that
all the 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".
(g) Section 6H of the Certificate of Designations is hereby deleted and
replace with the following new Section 6H:
"6H Intentionally Omitted."
(h) Subsections (ii) and (iii) of Section 9A of the Certificate of
Designations are hereby deleted in their entirety and replaced with the
following new subsections (ii) and (iii):
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"(ii) the Company fails to make the redemption payment with respect to
the Preferred Stock following the giving of notice pursuant to
paragraph 4C, whether or not such payment is legally permissible or is
prohibited by any agreement to which the Company is subject;
(iii) the Company breaches or otherwise fails to perform or observe any
material provision contained in this Certificate of Designations, in
the Purchase Agreement or in the Related Documents (as defined in the
Purchase Agreement), as each such document may be amended or modified
from time to time, and (other than with respect to Section 8.1 or
8.2(m) of the Purchase Agreement, Section 1(f)(i) of the Registration
Rights Agreement or paragraph 6 hereof, the breach of or failure to
perform which shall result in an immediate Event of Noncompliance) such
failure is not cured within fifteen (15) days after the occurrence
thereof;"
(i) Subsections (i) and (ii) of Section 9B of the Certificate of
Designations are hereby deleted in their entirety and replaced with the
following new subsections (i) and (ii):
"(i) If an Event of Noncompliance has occurred and is continuing, (a)
any holder of any shares of Preferred Stock then outstanding may demand
(by written notice delivered to the Company), notwithstanding any other
provision contained herein, the immediate conversion of all or any
shares of such holder's or holders' Preferred Stock at the applicable
Conversion Price as of the date of such holder's notice and (b) the
dividend rate on the Preferred Stock (including any Preferred Stock not
converted pursuant to clause (a) above) shall increase immediately by
an increment of two percentage points. Any increase of the dividend
rate resulting from the operation of this subparagraph shall terminate
as of the close of business on the date on which no Event of
Noncompliance exists, subject to subsequent increases in the event of
the occurrence of a subsequent Event of Noncompliance pursuant to this
paragraph. The Company shall give prompt written notice of any holder's
election for immediate conversion to the other holders of Preferred
Stock (but in any event within five days after receipt of the initial
demand for conversion), and each such other holder may demand immediate
conversion of all or any portion of such holder's Preferred Stock by
giving written notice thereof to the Company within seven days after
receipt of the Company's notice. The Company shall convert all
Preferred Stock as to which rights under this paragraph have been
exercised within 5 days after receipt of the initial demand for
conversion
(ii) Intentionally Omitted."
(j) Subsection (vi) of Section 9B of the Certificate of Designations is
hereby amended by inserting the following proviso immediately prior to the final
period thereof:
"; provided that in no event shall the Company be obligated to redeem
the Preferred Stock"
(k) Section 12 of the Certificate of Designations is hereby amended by
deleting the definition of "Redemption Date" in its entirety and inserting in
lieu thereof the following new definition of "Redemption Date":
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"Redemption Date" as to any Share means the date specified in the
relevant notice of redemption."
(l) Section 12 of the Certificate of Designations is hereby further
amended by deleting the words "date of redemption" found in the definition of
"Redemption Price" and inserting in lieu thereof the words "Redemption Date".
2. Waiver. Notwithstanding the terms and provisions contained in the
Certificate of Designations, the Purchase Agreement, the Notes, and the Related
Documents (as defined in the Purchase Agreement), the Stockholder, as holder of
at all of the outstanding shares of Preferred Stock and all of the outstanding
aggregate principal amount of the Notes, hereby waives any occurrence of an
Event of Noncompliance that may have arisen prior to the date hereof.
3. Representations and Warranties. Stockholder represents and warrants
that it owns 100% of the issued and outstanding Preferred Stock. Company
represents and warrants that it has not issued Preferred Stock to any person
other than the Stockholder.
4. No Mandatory Redemptions. Each of the parties hereto acknowledges
that the intent of this Amendment is to eliminate all obligations of the Company
to redeem the Preferred Stock, except pursuant to a notice of redemption
delivered by the Company pursuant to Section 4c of the Certificate of
Designations, as amended by this Amendment. Each of the Company and the
Stockholder agrees that in no circumstance shall the Company be obligated to
redeem all or any portion of the Preferred Stock, except pursuant to a notice of
redemption delivered by the Company pursuant to Section 4C of the Certificate of
Designations, as amended by this Amendment.
5. Effect. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Certificate of Designations, the Purchase Agreement or the Notes.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware.
7. Counterparts; Effectiveness; Entire Agreement. This Amendment may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment shall be effective upon the execution thereof by the
Company and the Stockholder.
8. Ratification of Certificate of Designations. Except as amended
hereby, all of the provisions set forth in the Certificate of Designations
remain in full force and effect. As of the effective date of this Amendment, any
reference to the Certificate of Designations shall mean the Certificate of
Designations as supplemented by this Amendment.
9. Severability. If any provision of this Amendment shall be held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
COVOL TECHNOLOGIES, INC.
By /s/ Kirk A. Benson
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Its CEO
OZ MASTER FUND, LTD.
By /s/ Daniel S. Och
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Its Managing Member
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