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<PAGE> <PAGE> <PAGE> <PAGE> <PAGE> <PAGE> <PAGE> <PAGE> <PAGE> <PAGE> REPORTING PERSON SOURCE OF FUNDS AMOUNT OF FUNDS Keystone Working Capital(1) $2,361,924.65 R. Bass Not Applicable Not Applicable FW Partners Other - Contributions $10,000,000.00 (2) from Partners Group Not Applicable Not Applicable J. Crandall Not Applicable Not Applicable FW II Other - Contributions $3,000,000.00 (3) from Partners D. Brown/ M. Brown Personal Funds (4) $146,950.00 <PAGE> KEYSTONE, INC.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D**
Under the Securities Exchange Act of 1934
(Amendment No. 3)*
AER Energy Resources, Inc.
(Name of Issuer)
Common Stock, No Par Value
(Title of Class of Securities)
000944108
(Cusip Number)
J. Taylor Crandall
201 Main Street
Fort Worth, Texas 76102
(817) 390-8400
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 1, 2001
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ].
*The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in
a prior cover page.
The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be
subject to all other provisions of the Act (however, see the Notes).
**The total number of shares reported herein is 9,960,226 shares, which constitutes approximately 31.0% of the 32,140,081 shares of Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) under the Act. Unless otherwise stated, all ownership
percentages set forth herein assume that there are 24,850,263 shares outstanding.
1. Name of Reporting Person:
Keystone, Inc.
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: WC
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: Texas
7. Sole Voting Power: 1,000,000 (1)
Number of
Units
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 1,000,000 (1)
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
1,000,000
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Units:
/ /
13. Percent of Class Represented by Amount in Row (11): 4.0%
14. Type of Reporting Person: CO
- ------------
(1) Power is exercised through its President and sole director, Robert M. Bass.
1. Name of Reporting Person:
Robert M. Bass
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: Not Applicable
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: 1,000,000 (1)
Number of
Units
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 1,000,000 (1)
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
1,000,000 (1)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Units:
/ /
13. Percent of Class Represented by Amount in Row (11): 4.0%
14. Type of Reporting Person: IN
- ------------
(1) Solely in his capacity as President and sole director of Keystone, Inc.
1. Name of Reporting Person:
FW AER Partners, L.P.
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: 00 - Contributions from Partners
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: Texas
7. Sole Voting Power: 1,584,158 (1)
Number of
Units
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 1,584,158 (1)
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
2,419,158 (2)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Units:
/ /
13. Percent of Class Represented by Amount in Row (11): 9.4% (3)
14. Type of Reporting Person: PN
- ------------
(1) Power is exercised by its sole general partner, Group 31, Inc.
(2) Includes 835,000 shares of Common Stock that may be acquired upon the exercise of warrants.
(3) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are 25,685,263 shares of the Stock outstanding.
1. Name of Reporting Person:
Group 31, Inc.
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: Not Applicable
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: Texas
7. Sole Voting Power: 1,584,158 (1)(2)
Number of
Units
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 1,584,158 (1)(2)
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
2,419,158 (2)(3)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Units:
/ /
13. Percent of Class Represented by Amount in Row (11): 9.4% (4)
14. Type of Reporting Person: CO
- ------------
(1) Power is exercised by its President, J. Taylor Crandall.
(2) Solely in its capacity as the sole general partner of FW AER Partners, L.P.
(3) Includes 835,000 shares of Common Stock that may be acquired upon the exercise of warrants.
(4) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are 25,685,263 shares of the Stock outstanding.
1. Name of Reporting Person:
J. Taylor Crandall
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: Not Applicable
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: 1,584,158 (1)
Number of
Units
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 1,584,158 (1)
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
8,873,976 (2)(3)(4)(5)(6)(7)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Units:
/ /
13. Percent of Class Represented by Amount in Row (11): 27.6% (8)
14. Type of Reporting Person: IN
- ------------
(1) Solely in his capacity as the President of Group 31, Inc., general partner of FW AER Partners, L.P.
(2) Solely in his capacity as the President of Group 31, Inc., general partner of FW AER Partners, L.P., with respect to 2,419,158 shares of the Stock.
(3) Includes 835,000 shares of Common Stock that may be acquired upon the exercise of warrants held by FW AER Partners, L.P.
(4) Solely in his capacity as the President of Group III 31, L.L.C., general partner of FW AER II, L.P., with respect to 6,454,818 shares of the Stock.
(5) Includes 1,565,920 shares of Common Stock that may be acquired upon the exercise of warrants held by FW AER II, L.P.
(6) Includes 2,376,616 shares of Common Stock that may be acquired upon the conversion of 202,250 shares of the Issuer's Series A Convertible Preferred Stock.
(7) Includes 2,512,282 shares of Common Stock that may be acquired upon the conversion of 102,250 shares of the Issuer's Series C Convertible Preferred Stock.
(8) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are 32,140,081 shares of the Stock outstanding.
1. Name of Reporting Person:
FW AER II, L.P.
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: 00 - Contributions from Partners
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: Delaware
7. Sole Voting Power: -0-
Number of
Units
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: -0-
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
6,454,818 (1)(2)(3)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Units:
/ /
13. Percent of Class Represented by Amount in Row (11): 20.6% (4)
14. Type of Reporting Person: PN
- ------------
(1) Includes 1,565,920 shares of Common Stock that may be acquired upon the exercise of warrants.
(2) Includes 2,376,616 shares of Common Stock that may be acquired upon the conversion of 202,250 shares of the Issuer's Series A Convertible Preferred Stock.
(3) Includes 2,512,282 shares of Common Stock that may be acquired upon the conversion of 102,250 shares of the Issuer's Series C Convertible Preferred Stock.
(4) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are 31,305,081 shares of the Stock outstanding.
1. Name of Reporting Person:
Group III 31, L.L.C.
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: Not Applicable
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: Delaware
7. Sole Voting Power: -0-
Number of
Units
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: -0-
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
6,454,818 (1)(2)(3)(4)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Units:
/ /
13. Percent of Class Represented by Amount in Row (11): 20.6% (5)
14. Type of Reporting Person: OO-Other
- ------------
(1) Solely in its capacity as the sole general partner of FW AER II, L.P.
(2) Includes 1,565,920 shares of Common Stock that may be acquired upon the exercise of warrants.
(3) Includes 2,376,616 shares of Common Stock that may be acquired upon the conversion of 202,250 shares of the Issuer's Series A Convertible Preferred Stock.
(4) Includes 2,512,282 shares of Common Stock that may be acquired upon the conversion of 102,250 shares of the Issuer's Series C Convertible Preferred Stock.
(5) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are 31,305,081 shares of the Stock outstanding.
1. Name of Reporting Person:
David G. Brown
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: PF
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: -0-
Number of
Units
Beneficially 8. Shared Voting Power: 86,250 (1)
Owned By
Each
Reporting 9. Sole Dispositive Power: -0-
Person
With
10. Shared Dispositive Power: 86,250 (1)
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
86,250 (1)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Units:
/ /
13. Percent of Class Represented by Amount in Row (11): 0.3%
14. Type of Reporting Person: IN
- ------------
(1) Owned in joint tenancy with his wife, Maureen Brown, who shares voting and dispositive power over such shares.
1. Name of Reporting Person:
Maureen Brown
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: PF
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: -0-
Number of
Units
Beneficially 8. Shared Voting Power: 86,250 (1)
Owned By
Each
Reporting 9. Sole Dispositive Power: -0-
Person
With
10. Shared Dispositive Power: 86,250 (1)
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
86,250 (1)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Units:
/ /
13. Percent of Class Represented by Amount in Row (11): 0.3%
14. Type of Reporting Person: IN
- ------------
(1) Owned in joint tenancy with her husband, David G. Brown, who shares voting and dispositive power over such shares.
Pursuant to Regulation 13D-G of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Act"), the undersigned hereby amend their Schedule 13D Statement dated May 30, 1996, as amended by
Amendment No. 1 dated April 11, 2000, as amended by Amendment No. 2 dated October 13, 2000 (the "Schedule 13D"), relating to the Common Stock (the "Stock"), of AER Energy Resources, Inc. (the "Issuer"). Unless otherwise indicated, all defined terms used
herein shall have the same meanings respectively ascribed to them in the Schedule 13D.
Item 1. Security and Issuer.
No material change.
Item 2. Identity and Background.
No material change.
Item 3. Source and Amount of Funds or Other Consideration.
Item 3 is hereby amended and restated in its entirety as follows:
The source and amount of the funds used or to be used by the Reporting Persons to purchase shares of the Stock are as follows:
(1) As used herein, the term "Working Capital" includes income from the business operations of the entity plus sums borrowed from banks and brokerage firm margin accounts to operate such business in general. None of the funds
reported herein as "Working Capital" were borrowed or otherwise obtained for the specific purpose of acquiring, handling, trading or voting the Stock.
(2) This figure represents the total amount expended in purchasing the Stock and the Warrant.
(3) This figure represents the total amount expended by FW II in purchasing the convertible promissory note and the warrant described in Amendment No. 1 to the Schedule 13D and in purchasing the warrant and Series A convertible preferred stock
described in Amendment No. 2 to the Schedule 13D and in purchasing the warrant and Series C convertible preferred stock described in Item 6 herein.
(4) As used herein, the term "Personal Funds" may include sums borrowed from banks and brokerage firm margin accounts, none of which were borrowed or otherwise obtained for the specific purpose of acquiring, handling, trading or voting the Stock
.
Item 4. Purpose of Transaction.
No material change.
Item 5. Interest in Securities of the Issuer.
Item 5 is hereby amended and restated in its entirety as follows:
(a)
Keystone
The aggregate number of shares of the Stock that Keystone owns beneficially, pursuant to Rule 13d-3 of the Act, is 1,000,000, which constitutes approximately 4.0% of the outstanding shares of the Stock.
R. Bass
Because of his position as the President and sole director of Keystone, R. Bass may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of 1,000,000 shares of the Stock, which constitutes approximately 4.0% of the outstanding shares
of the Stock.
FW Partners
The aggregate number of shares of the Stock that FW Partners owns beneficially, pursuant to Rule 13d-3 of the Act, is 2,419,158, which constitutes approximately 9.4% of the 25,685,263 shares of the Stock deemed outstanding pursuant to Rule
13d-3(d)(1)(i).
Group
Because of its position as the sole general partner of FW Partners, Group may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of 2,419,158 shares of the Stock, which constitutes approximately 9.4% of the 25,685,263
shares of the Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i).
J. Crandall
Because of his position as the President of Group, which is the sole general partner of FW Partners, and because of his position as President of Group III, which is the sole general partner of FW II, J. Crandall may, pursuant to Rule 13d-3 of the Act, be
deemed to be the beneficial owner of 8,873,976 shares of the Stock, which constitutes approximately 27.6% of the 32,140,081 shares of the Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i).
FW II
The aggregate number of shares of the Stock that FW II owns beneficially, pursuant to Rule 13d-3 of the Act, is 6,454,818, which constitutes approximately 20.6% of the 31,305,081 shares of the Stock deemed outstanding pursuant to Rule
13d-3(d)(1)(i).
Group III
Because of its position as the sole general partner of FW II, Group III may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of 6,454,818 shares of the Stock, which constitutes approximately 20.6% of the 31,305,081
shares of the Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i).
D. Brown
The aggregate number of shares of the Stock that D. Brown owns beneficially as a joint tenant with M. Brown, pursuant to Rule 13d-3 of the Act, is 86,250, which constitutes approximately 0.3% of the outstanding shares of the Stock.
M. Brown
The aggregate number of shares of the Stock that M. Brown owns beneficially as a joint tenant with D. Brown, pursuant to Rule 13d-3 of the Act, is 86,250, which constitutes approximately 0.3% of the outstanding shares of the Stock.
(b)
Keystone
Acting through its President and sole director, Keystone has the sole power to vote or to direct the vote and to dispose or to direct the disposition of 1,000,000 shares of the Stock.
R. Bass
As the President and sole director of Keystone, R. Bass has the sole power to vote or to direct the vote and to dispose or direct the disposition of 1,000,000 shares of the Stock.
FW Partners
Acting through its sole general partner, FW Partners has the sole power to vote or to direct the vote and to dispose or to direct the disposition of 1,584,158 shares of the Stock.
Group
Acting through its President, and in its capacity as the sole general partner of FW Partners, Group has the sole power to vote or to direct the vote and to dispose or to direct the disposition of 1,584,158 shares of the Stock.
J. Crandall
In his capacity as the President of Group, which is the sole general partner of FW Partners, J. Crandall has the sole power to vote or to direct the vote and to dispose or to direct the disposition of 1,584,158 shares of the Stock.
FW II
FW II has no power to vote or to direct the vote or to dispose or to direct the disposition of any shares of the Stock.
Group III
In its capacity as the sole general partner of FW II, Group III has no power to vote or to direct the vote or to dispose or to direct the disposition of any shares of the Stock.
D. Brown
As joint tenant with M. Brown, D. Brown has the shared power to vote or to direct the vote and to dispose or to direct the disposition of 86,250 shares of the Stock.
M. Brown
As joint tenant with D. Brown, M. Brown has the shared power to vote or to direct the vote and to dispose or to direct the disposition of 86,250 shares of the Stock.
(c) On June 12, 2001, FW II purchased from the Issuer (i) 102,250 shares of Series C Convertible Preferred Stock (the "Series C Preferred Stock") which may, subject to adjustment, be converted into 2,512,282 shares of the Stock and (ii) a
warrant to purchase 982,891 shares of the Stock (the "FW AER II Second Warrant"). The aggregate purchase price of the Series C Preferred Stock and the FW AER II Second Warrant was $1,000,000.
Other than as set forth above, none of the Reporting Persons have purchased or sold any shares of the Stock in the previous 60 days.
(d) Each of the Reporting Persons affirms that no person other than such Reporting Person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of the Stock owned by such
Reporting Person.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.
Item 6 is amended by adding at the end thereof the following:
As described under Item 5(c) above, FW II entered into a Securities Purchase Agreement with the Issuer dated as of June 12, 2001 (the "June 2001 Securities Purchase Agreement") under which FW II acquired from the Issuer the
Series C Preferred Stock and the FW AER II Second Warrant. The description of the Series C Preferred Stock, the FW AER II Second Warrant and the June 2001 Securities Purchase Agreement that follows is not, and does not purport to be, complete and is
qualified in its entirety by reference to the June 2001 Securities Purchase Agreement and the FW AER II Second Warrant dated June 12, 2001, as applicable, the forms of which are attached hereto as Exhibits 99.10 and 99.11, respectively, and by reference
to the Articles of Amendment to the Issuer's Articles of Incorporation containing a statement of the rights and preferences of the Series C Preferred Stock (the "June 2001 Articles of Amendment"), a copy of which is attached hereto as Exhibit 99.12
All of the foregoing Exhibits are hereby fully incorporated into this Item 6 by this reference.
Series C Preferred Stock
The Series C Preferred Stock, which has a stated value of $10.00 per share, is convertible into shares of the Issuer's common stock at a conversion price of $0.407 per share, subject to adjustment as set forth in the June
2001 Articles of Amendment. The Series C Preferred Stock is entitled to receive cumulative dividends at the rate of 6.75% per annum. The Series C Preferred Stock has no voting rights except as expressly provided in the June 2001 Articles of
Amendment or as provided by applicable law.
FW AER II Second Warrant
The FW AER II Second Warrant is exercisable at any time, in whole or in part, prior to June 30, 2006, into 982,891 shares of the Stock at a price of $0.4248 per share, subject to adjustment as described in Section 3 therein.
Registration Rights
Pursuant to Section 4 of the June 2001 Securities Purchase Agreement, FW II and certain associated persons and entities as set forth therein acquired demand and piggyback registration rights with respect to shares of the
Issuer's common stock underlying the Series C Preferred Stock and the FW AER II Second Warrant. Such registration rights will be in effect for a period of eight (8) years from the date of the securities purchase agreement (June 12, 2001).
Except as set forth herein or in the Exhibits filed herewith and previously, there are no contracts, arrangements, understandings or relationships with respect to shares of the Stock owned by the Reporting Persons.
Item 7. Material to be Filed as Exhibits.
Item 7 is hereby amended and restated in its entirety as follows:
Exhibit 99.1 -- Agreement pursuant to Rule 13d-1(k)(1)(iii), filed herewith.
Exhibit 99.2 -- AER Energy Resources, Inc. Securities Purchase Agreement dated as of May 13, 1996 between the Issuer and FW Partners, L.P. previously filed.
Exhibit 99.3 -- Warrant to purchase 835,000 shares of Common Stock dated as of May 20, 1996 and issued in the name of FW AER Partners, L.P., previously filed.
Exhibit 99.4 -- Convertible Promissory Note in the amount of $1,000,000, dated April 3, 2000 between the Issuer and FW AER II, L.P., previously filed.
Exhibit 99.5 -- Warrant to purchase 112,994 shares of Common Stock dated as of April 3, 2000 between the Issuer and FW AER II, L.P., previously filed.
Exhibit 99.6 -- Letter Agreement Amending Stock Purchase Agreement between the Issuer and FW Partners, L.P. previously filed.
Exhibit 99.7 -- Securities Purchase Agreement dated as of September 27, 2000, between the Issuer and FW AER II, L.P., previously filed.
Exhibit 99.8 -- Warrant to purchase 470,035 shares of Common Stock dated as of September 27, 2000, between the Issuer and FW AER II, L.P., previously filed.
Exhibit 99.9 --Articles of Amendment to the Issuer's Articles of Incorporation dated September 27, 2000, previously filed.
Exhibit 99.10 -- Securities Purchase Agreement dated as of June 12, 2001, between the Issuer and FW AER II, L.P., filed herewith.
Exhibit 99.11 -- Warrant to purchase 982,891 shares of Common Stock dated as of June 12, 2001, between the Issuer and FW AER II, L.P., filed herewith.
Exhibit 99.12 --Articles of Amendment to the Issuer's Articles of Incorporation dated June 12, 2001, filed herewith.
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
DATED: June 18, 2001
By: /s/ W. R. Cotham
W. R. Cotham,
Vice President
/s/ W. R. Cotham
W. R. COTHAM
Attorney-in-Fact for:
ROBERT M. BASS (1)
FW AER PARTNERS, L.P.
By: Group 31, Inc., General Partner
By: /s/ J. Taylor Crandall
J. Taylor Crandall,
President
GROUP 31, INC.
By: /s/ J. Taylor Crandall
J. Taylor Crandall,
President
/s/ J. Taylor Crandall
J. TAYLOR CRANDALL
FW AER II, L.P.
By: Group III 31, L.L.C., General Partner
By: /s/ J. Taylor Crandall
J. Taylor Crandall,
President
GROUP III 31, L.L.C.
By: /s/ J. Taylor Crandall
J. Taylor Crandall,
President
/s/ David G. Brown
DAVID G. BROWN
/s/ Maureen Brown
MAUREEN BROWN
(1) A Power of Attorney authorizing W. R. Cotham, et al., to act on behalf of Robert M. Bass previously has been filed with the Securities and Exchange Commission.
Exhibit 99.1
Pursuant to Rule 13d-1(k)(1)(iii) of Regulation 13D-G of the General Rules and Regulations of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the undersigned agrees that the statement to which this Exhibit is
attached is filed on behalf of each of them in the capacities set forth below.
KEYSTONE, INC. |
(1)A Power of Attorney authorizing W. R. Cotham, et al., to act on behalf of Robert M. Bass previously has been filed with the Securities and Exchange Commission.
EXHIBIT 99.10
SECURITIES PURCHASE AGREEMENT
THIS IS A SECURITIES PURCHASE AGREEMENT (this "Agreement") by and between the undersigned ("Purchaser"), and AER Energy Resources, Inc., a Georgia corporation ("AER"), dated as of June 1,
2001, and by which Purchaser and AER, in consideration of the agreements set forth below (the mutuality, adequacy and sufficiency of which are hereby acknowledged), hereby agree as follows:
1. Agreement to Purchase and Sell. Upon the terms set forth in this Agreement, Purchaser hereby agrees to purchase from AER and AER agrees to sell to Purchaser (i) (A) 100,000
shares of AER's no par value Series C Convertible Preferred Stock (the "Preferred Stock") and (B) 2,250 shares of Preferred Stock (representing 50% of the transaction fee to be paid by AER to Purchaser) (collectively, the shares to be issued by
AER pursuant to clauses (A) and (B) above shall be referred to as the "Shares") and (ii) a warrant to purchase 982,891 shares of AER's no par value Common Stock (the "Warrant") in the form attached hereto as Exhibit A. The aggregate purchase price for the Shares and the Warrant shall be $1,000,000.
2. The Closing. The closing shall occur at 10:00 a.m. on June 12, 2001 (the "Closing") at the offices of Sutherland Asbill & Brennan LLP, 999 Peachtree Street,
N.E., Atlanta, Georgia 30309-3996, or as the parties shall otherwise agree. At the Closing, the following shall occur:
(a) AER shall deliver to Purchaser (i) a duly completed and executed share certificate in the name of Purchaser representing the
Shares, and (ii) a duly completed and executed Warrant.
(b) Purchaser shall deliver to AER by wire transfer in immediately available federal funds the aggregate purchase price of the Shares
and the Warrant (less $11,250 representing 50% of the transaction fee to be paid by AER to Purchaser).
3. Representations and Warranties.
(a) By AER. AER hereby represents and warrants to Purchaser that:
(i) AER is a duly incorporated and organized Georgia corporation validly existing and in good standing
under Georgia law;
(ii) AER has the power and authority to issue the Shares and the Warrant to Purchaser pursuant to this
Agreement and to execute, deliver and otherwise perform this Agreement, and without limiting the foregoing, the Board of Directors of AER has authorized and approved the execution, delivery and performance of this Agreement;
(iii) the Shares, the AER Common Stock ("Common Stock") issuable upon exercise of the Warrant (the "Warrant
Shares") and the Common Stock issuable upon conversion of the Shares (the "Conversion Shares") when issued will be validly issued, fully paid and non-assessable shares of capital stock of AER free and clear of any liens, encumbrances, adverse
rights or claims of any kind whatsoever, and AER will at all times maintain a number of authorized but unissued shares of Common Stock for issuance of the Warrant Shares and the Conversion Shares;
(iv) this Agreement and the Warrant each has been duly executed and delivered by AER, and constitutes the
legal, valid and binding obligation of AER, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency and other laws and equitable principles affecting creditors' rights generally and the
discretion of the courts in granting equitable remedies;
(v) the execution, delivery and performance of this Agreement and the Warrant each is in compliance with,
and is not and will not be, after the giving of notice or the passage of time or both, in violation of (A) the articles of incorporation or bylaws of AER as amended or restated, (B) any applicable law, regulation or order to which AER or its assets is
subject or bound, or (C) any agreement to which AER or its assets is subject or bound (and without limiting the foregoing, will not result in any preemptive rights);
(vi) all of the documents (the "SEC Documents") filed by AER within the last thirty-six months prior to the
date of this Agreement with the Securities and Exchange Commission (the "Commission") in accordance with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (collectively
the "Securities Acts"), conformed in all material respects to the requirements of the Securities Acts and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the statements therein not misleading;
(vii) the authorized capital stock of AER consists of 100,000,000 shares of common stock, no par value ("Common
Stock") and 10,000,000 shares of preferred stock, no par value. As of June __, 2001, AER had 25,850,263 shares of Common Stock outstanding, and 506,750 shares of preferred stock outstanding. Other than warrants previously issued to
Purchaser, Elmwood Partners II (or their affiliates) and Rayovac Corporation, stock options granted to employees, restricted stock issued to directors and AER's outstanding Series A and Series B Convertible Preferred Stock, all as described in the SEC
Documents, AER has no outstanding securities convertible into (or exercisable or exchangeable for) or evidencing the right to purchase or subscribe for, shares of its capital stock or authorized subscriptions, options, warrants, calls, rights, commitments
or any other agreements or arrangements, obligating it to issue any shares of its capital stock or securities convertible into capital stock;
(viii) the financial statements (including any related notes) included in the SEC Documents (the "Financial
Statements"), have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved (except as may be noted therein) and fairly present the financial condition, results of operations and cash
flows of AER as of the dates thereof and for the periods ended on such dates (in each case subject, as to interim statements, to changes resulting from year-end adjustments (none of which were or could be expected to be material in amount or effect)); and
(ix) except as set forth in the Financial Statements, since March 31, 2001, AER has conducted its business only
in the ordinary course in substantially the same manner as theretofore conducted, and AER has not undergone or suffered any material adverse change in its condition, financial or otherwise, business, operations, affairs, properties, assets or prospects.
(b) By Purchaser. Purchaser hereby represents and warrants to AER:
(i) this Agreement has been duly executed and delivered by Purchaser, and constitutes the legal, valid and
binding obligation of Purchaser, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency and other laws and equitable principles affecting creditors' rights generally and the discretion of the
courts in granting equitable remedies;
(ii) Purchaser will acquire the Shares, the Conversion Shares, the Warrant and the Warrant Shares (collectively
the "Securities") for its own account, to hold for investment, and with no present intention of dividing its participation with others or reselling or otherwise participating, directly or indirectly, in a distribution of the Securities, and it will not make any sale, transfer, or other disposition of the Securities in violation of the Securities Act or any applicable state securities laws (the "State Acts"). There will be placed on the Warrant and any certificates for the
Shares, the Conversion Shares and the Warrant Shares, a legend stating in substance:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS IN RELIANCE ON ONE OR MORE EXEMPTIONS THEREUNDER AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
TRANSACTIONS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT THEREUNDER. THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFER
CONTAINED IN A SECURITIES PURCHASE AGREEMENT TO WHICH THE CORPORATION IS A PARTY. ANY TRANSFER OF THE SECURITIES REPRESENTED HEREBY IN VIOLATION OF SAID AGREEMENT SHALL BE VOID. THE CORPORATION WILL MAIL TO THE HOLDER OF THESE
SECURITIES A COPY OF SUCH RESTRICTIONS WITHOUT CHARGE WITHIN FIVE (5) DAYS AFTER RECEIPT OF WRITTEN REQUEST THEREFOR ADDRESSED TO THE CORPORATION.
(iii) Purchaser, in offering to subscribe for the Securities hereunder, has been given access to all material and relevant
information concerning AER, thereby enabling Purchaser to make an informed investment decision concerning the Securities. Purchaser has relied solely upon an independent investigation made by it and its representatives, if any, and has, prior
to the date hereof, been given access to and the opportunity to examine data and information relating to AER. In making its investment decision to purchase the Securities, Purchaser is not relying on any oral or written representations or
assurances from AER or any other person or any representation of AER or any other person other than as set forth in this Agreement. Without limiting the foregoing, Purchaser has reviewed AER's Annual Report on Form 10-K for the year ended
December 31, 2000 and AER's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. Purchaser is an "accredited investor" as defined in Rule 501 of Regulation D under the Securities Act.
(iv) Purchaser understands and acknowledges that an investment in the Securities involves a high degree of risk. Purchaser represents
that Purchaser is able to bear the economic risk of an investment in the Securities, which Purchaser acknowledges are currently illiquid and may remain illiquid indefinitely, including a possible total loss of its investment. In making this
statement Purchaser hereby represents and warrants to AER that Purchaser has adequate means of providing for Purchaser's current needs and contingencies; Purchaser is able to afford to hold the Securities for an indefinite period and Purchaser further
represents that Purchaser has such knowledge and experience in financial and business matters that Purchaser is capable of evaluating the merits and risks of the investment in the Securities. Further, Purchaser represents that Purchaser has no
present need for liquidity in the Securities and Purchaser is willing to accept such investment risks.
(v) Purchaser understands that no United States federal or state agency, or similar agency of any other country, has reviewed, approved, passed
upon or made any recommendation or endorsement of AER or the Securities.
(vi) This Agreement is made by AER with Purchaser in reliance upon Purchaser's representations and covenants made in this Section 3(b), which reliance by
its execution of this Agreement Purchaser hereby confirms.
(vii) Purchaser understands that the Securities have not been registered under the Securities Act or any State Acts and are being offered and sold
pursuant to exemptions therefrom based in part upon the representations of Purchaser contained herein.
(viii) Purchaser knows of no public solicitation or advertisement of an offer in connection with the proposed issuance and sale of the Securities.
(ix) Purchaser has reviewed with its tax advisors the U.S. federal, state, local and foreign tax consequences of an investment in the Securities and the
transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or representations of AER or any of its agents and understands that Purchaser (and not AER) shall be responsible for Purchaser's
own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
(x) Purchaser's acquisition of the Securities is not a transaction (or any element of a series of transactions) that is a part of a plan or scheme to evade the
registration provisions of the Securities Act.
4. Registration of Shares.
(a) Demand Registration. If at any time prior to eight (8) years from the date of the
Closing, AER shall receive a written request from Purchaser who is then holding Shares, Conversion Shares, the Warrant and Warrant Shares representing at least 25% of the Common Stock issuable upon conversion of the Shares or exercise of the Warrant that
AER file a registration statement under the Securities Act, covering the registration of at least $500,000 of shares of Common Stock owned by Purchaser, Keystone, Inc., David G. Brown, Mark A. Wolfson or "affiliates" or "associates"
thereof, as such terms are defined in the Securities Act (collectively, the "Third Party Shareholders") to the extent such shares of Common Stock are not then freely tradable under the Securities Act. Purchaser and any Third Party
Shareholder shall have ten (10) days in which to notify AER of its intention to join in the request to register its shares. Not later than ninety (90) days after receipt by AER of a written request for a demand registration pursuant to this
Section 4(a), AER shall file a registration statement with the Commission relating to the shares as to which such request for a demand registration relates (the "Requested Shares") and AER shall use its best efforts to cause the registration statement
(which may cover, without limitation, an offering on a delayed or continuous basis open for up to one hundred eighty (180) days pursuant to Commission Rule 415) for the Requested Shares to become effective under the Securities Act. AER shall be
obligated to effect only three (3) registrations pursuant to this Section 4(a) for Purchaser and the Third Party Shareholders together, and only if the proposed aggregate selling price in any such offering is at least $500,000.
(b) Delay of Registration. Notwithstanding anything to the contrary in Section 4(a), AER shall have the right (i) to
defer the initial filing or request for acceleration of effectiveness of any registration pursuant to Section 4(a) or (ii) after effectiveness, to suspend effectiveness of any such registration statement or to require holders to suspend further sales
pending amendment (collectively a "Delay"), if, in the good faith judgment of the Board of Directors of AER and upon the advice of counsel to AER, such delay in filing or requesting acceleration of effectiveness or such suspension of effectiveness or
suspension of sales is necessary in light of the existence of material non-public information (financial or otherwise) concerning AER disclosure of which at the time is not, in the opinion of the Board of Directors of AER and upon the advice of counsel,
(A) otherwise required and (B) in the best interests of AER; provided, however that AER will not invoke a Delay for more than three (3) months, unless the reason for the Delay is that AER is then engaged in an acquisition, in which case it will use its best efforts to end the Delay as soon as possible
and provided, further that AER will not invoke Delays for more than an aggregate of six (6) months in any calendar year. The one hundred eighty (180) day period referred to herein during which the registration statement may be kept
current after its effective date shall be extended for an additional number of business days equal to the number of business days during which the right to sell shares was suspended pursuant to the preceding sentence, and, if and to the extent necessary
to effect such extension, the eight (8)-year period referred to above shall also be extended. In addition, the eight (8)-year period will also be extended if any registration has been delayed pursuant to the foregoing and cannot be completed
within such period.
(c) "Piggyback" Registration. If at any time prior to eight (8) years from the date of
the Closing, AER shall determine to proceed with the preparation and filing of a registration statement under the Securities Act in connection with the proposed offer and sale for money of any of its equity securities by it or any of its security holders
(other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor or similar form), AER will give written notice of its determination to Purchaser. Upon the written request of Purchaser or any Third Party Shareholder
given to AER within ten (10) days after Purchaser's receipt of any such notice by AER, AER will cause all the Conversion Shares and Warrant Shares and other shares of Common Stock which Purchaser and any of the Third Party Shareholders have requested to
have registered (the "Piggyback Shares") to be included in such registration statement; provided, however, that if the managing underwriter, in the case of an underwritten public offering, determines and advises in writing that the inclusion in the registration statement of all the Piggyback Shares proposed to be included by
Purchaser or the Third Party Shareholders would interfere with the successful marketing of the securities proposed to be registered by AER, then the number of such Piggyback Shares to be included in the registration statement shall be reduced in
accordance with the recommendations of the managing underwriter, except that if the managing underwriter determines and advises that the inclusion in such registration statement of any Piggyback Shares would so interfere, then no Piggyback Shares shall be
included in such registration statement; provided that any such reduction shall be made pro rata with respect to Purchaser and the Third Party Shareholders requesting such registration.
(d) Expenses. With respect to each inclusion of shares in a registration statement pursuant
to Section 4(a) or 4(b), AER shall bear the following fees, costs and expenses: all registration, filing and NASD fees, printing expenses, fees and disbursements of counsel and accountants for AER and all legal fees and disbursements and other
expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered or qualified. Fees and disbursements not expressly included above shall be borne pro rata by Purchaser
and the Third Party Shareholders whose shares are included in such registration statement.
(e) Indemnification, Etc. In the event that shares are registered pursuant to Section
4(a) or 4(b), AER, Purchaser and the Third Party Shareholders shall execute reasonable and customary underwriting, indemnification and lock-up agreements relating to such registration and shall undertake reasonable and customary registration procedures.
(f) Termination of Rights. Notwithstanding anything to the contrary in this Section 4, all
registration rights set forth in this Section 4 shall terminate with respect to Purchaser and each Third Party Shareholder at such time as it or he is able to sell all of its or his Common Stock subject to such registration rights pursuant to Rule 144
under the Securities Act within a single three (3)-month period.
5. Survival; Indemnification. The representations, warranties and agreements made in this Agreement shall survive the Closing. Each party, acknowledging that the
other is entitled to rely on its representations, warranties and agreements in this Agreement in order to preserve the benefit of the bargain otherwise represented by this Agreement, agrees that neither the survival of such representations, warranties and
agreements, nor their enforceability nor any remedies for breaches of them shall be affected by any knowledge of a party regardless of when or how such party acquired such knowledge.
6. Miscellaneous.
(a) Good Faith Efforts; Further Assurances; Cooperation. The parties shall in good faith undertake to perform their
obligations in this Agreement, to satisfy all conditions and to cause the transactions contemplated in this Agreement to be carried out promptly in accordance with the terms of this Agreement. Upon the execution of this Agreement and
thereafter, each party shall do such things as may be reasonably requested by the other in order more effectively to consummate or document the transactions contemplated by this Agreement. The parties shall cooperate with each other and their
respective counsel, accountants or representatives in connection with any actions required to be taken as part of their respective rights and obligations under this Agreement.
(b) Notices. Each notice, communication and delivery under this Agreement (i) shall be made in writing signed by the
party making the same, (ii) shall specify the section of this Agreement pursuant to which it is given, (iii) shall be given either in person or by a nationally recognized next business day delivery service or by telecopier, and (iv) if not given in
person, shall be given to a party at the address set forth below such party's signature (or at such other address as a party may furnish to the other party to this Agreement pursuant to this Section 6(b)). If notice is given pursuant to this
Section 6(b) of a permitted successor or assign of a party, then notice shall also thereafter be given as set forth above to such successor or assign of such party.
(c) Assignment. No assignment or transfer by Purchaser or any Third Party Shareholder of their respective rights and
obligations under this Agreement shall be made by merger or other operation of law or otherwise except with the prior written consent of AER. This Agreement is binding upon the parties and their successors and assigns and inures to the benefit
of the parties and their permitted successors and assigns and, when appropriate to effect the binding nature of this Agreement for the benefit of the other parties, of any other successor or assign.
(d) Severability. Any determination by any court of competent jurisdiction of the invalidity of any provision of this
Agreement that is not essential for accomplishing its purposes shall not affect the validity of any other provision of this Agreement, which shall remain in full force and effect and which shall be construed as to be valid under applicable law.
(e) Controlling Law; Integration; Amendment; Waiver. This Agreement is governed by, and shall be construed and enforced in
accordance with, the laws of the State of Georgia (except the laws of that state that would render such choice of laws ineffective). This Agreement supersedes all prior negotiations, agreements and understandings between the parties as to its
subject matter, constitutes the entire agreement between the parties as to its subject matter and may not be altered or amended except in writing signed by the parties. The failure of any party at any time or times to require performance of any
provision of this Agreement shall in no manner affect the right to enforce the same; and no waiver by any party of any provision or of a breach of any provision of this Agreement, whether by conduct or otherwise, in any one of more instances shall be
deemed or construed either as a further or continuing waiver of any such provision or breach or as a waiver of any other provision or of a breach of any other provision of this Agreement.
(f) Copies. This Agreement may be executed in two or more copies, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement or its terms to produce or account for more than one of such copies.
[signatures commence on the following page]
DULY EXECUTED and delivered by Purchaser and AER, on June __, 2001.
PURCHASER: |
FW AER II, L.P. |
|
By: _____________________ |
|
Address: |
|
201 Main Street, Suite 3100 |
|
Fort Worth, Texas 76102 |
|
Phone: (817) 390-8500 |
|
Fax Number: (817) 338-2064 |
AER: |
AER ENERGY RESOURCES, INC. |
|
By: /s/ J.T. Moore |
J.T. Moore |
|
Vice President and Chief Financial Officer |
|
|
Address: |
|
4600 Highlands Parkway, Suite G |
|
Smyrna, Georgia 30082 |
|
Phone:(770) 433-2127 |
|
Fax Number:(770) 433-2286 |
* * * * * |
|
EXHIBIT 99.11
THIS WARRANT AND THE SECURITIES PURCHASED ON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF UNTIL EITHER (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE
TO THE CORPORATION AND ITS COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION THEREWITH.
Warrant to Purchase
Warrant No. 2001-2
982,891 Shares
Warrant to Purchase Common Stock
of
AER ENERGY RESOURCES, INC.
THIS CERTIFIES that FW AER II, L.P., a Delaware limited partnership ("Holder") or any subsequent holder hereof, has the right to purchase from AER Energy Resources, Inc., a Georgia
corporation (the "Company"), up to 982,891 fully paid and nonassessable shares of the Company's Common Stock, no par value ("Common Stock"), at the Exercise Price (as defined herein), subject to adjustment as provided below, at any
time on or before 5:00 p.m., Atlanta, Georgia time, on June 12, 2006.
This Warrant is issued and all rights hereunder shall be held subject to all of the conditions, limitations and provisions set forth herein.
1. Exercise.
This Warrant may be exercised as to all or any lesser number of full shares of Common Stock covered hereby upon surrender of this
Warrant, with the Subscription Form attached hereto duly executed, together with the full Exercise Price in cash, or by certified or official bank check payable in New York Clearing House Funds or wire transfer payable in immediately available federal
funds for each share of Common Stock as to which this Warrant is exercised, at the office of the Company, AER Energy Resources, Inc., 4600 Highlands Parkway, Suite G, Smyrna, GA 30082, or at such other office or agency as the Company may designate in
writing (such surrender and payment hereinafter called the "Exercise of this Warrant"). The "Date of Exercise" of the Warrant shall be defined as the date that the original Warrant and Subscription Form are received by the Company.
This Warrant shall be canceled upon its Exercise, and, as soon as practicable thereafter, the Holder hereof shall be entitled to receive a certificate or certificates for the number of shares of Common Stock purchased upon such Exercise and a new Warrant
or Warrants (containing terms identical to this Warrant) representing any unexercised portion of this Warrant. Each person in whose name any certificate for shares of Common Stock is issued shall, for all purposes, be deemed to have become the Holder of
record of such shares on the Date of Exercise of this Warrant, irrespective of the date of delivery of such certificate. Nothing in this Warrant shall be construed as conferring upon the Holder hereof any rights as a shareholder of the Company.
2. Payment of Warrant Exercise Price.
Payment of the Exercise Price may be made by any of the following, or a combination thereof, at the election of Holder:
(i) cash, certified check or cashier's check or wire transfer payable in immediately available federal funds; or
(ii) surrender of this Warrant at the principal office of the Company together with notice of election, in which event the Company shall issue
Holder a number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder (not to exceed the number of shares set forth on the cover page of this Warrant, as adjusted pursuant to the provisions of Section 5 of this Warrant).
Y = the number of shares of Common Stock for which this Warrant is being exercised.
A = the Market Price of one share of Common Stock (for purposes of this Section 2(ii), the "Market Price" shall
be defined as the average closing bid price of the Common Stock for the five trading days prior to the Date of Exercise of this Warrant (the "Five-Day Average Closing Bid Price"), as reported on the Nasdaq National Market, or if the Common
Stock is not traded on the Nasdaq National Market, the Five-Day Average Closing Bid Price in the over-the-counter market; provided, however, that if the Common Stock is listed on a stock exchange, the Market Price shall be the Five-Day Average Closing Bid
Price on such exchange).
B = the Exercise Price.
It is intended that the Common stock issuable upon exercise of this Warrant in a cashless exercise transaction shall be deemed to have been acquired at the time this Warrant was issued, for purposes of Rule 144(d)(3)(ii).
3. Exercise Price.
The Exercise Price shall initially be $0.4248 per share. However, if 120% of the average closing bid price of a share of Common Stock
(as reported on any tier of The Nasdaq Stock Market, Inc., including the Over-the-Counter Bulletin Board automated quotation system or on a national securities exchange) for 20 consecutive trading days ending on June 12, 2002 (the "20-Day Average
Closing Bid Price"), is less than the Exercise Price, then the Exercise Price shall be adjusted to equal the greater of (i) 120% of the 20-Day Average Closing Bid Price or (ii) $0.2655. Notwithstanding the foregoing, in the event that the Exercise
Price is adjusted pursuant to this Section 3, no such adjustment shall be made to the number of Shares of Common Stock that may be received upon the Exercise of this Warrant.
4. Transfer and Registration.
Subject to the provisions of Section 8 of this Warrant, this Warrant may be transferred on the books of the Company, wholly or
in part, in person or by attorney, upon surrender of this Warrant properly endorsed, with signature guaranteed. This Warrant shall be canceled upon such surrender and, as soon as practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant transferred, and the Holder of this Warrant shall be entitled to receive a new Warrant or Warrants as to the portion hereof retained.
5. Anti-Dilution Adjustments.
(a) If the Company shall at any time declare a dividend payable in shares of Common Stock, then the Holder hereof, upon Exercise of this Warrant after
the record date for the determination of Holders of Common Stock entitled to receive such dividend, shall be entitled to receive upon Exercise of this Warrant, in addition to the number of shares of Common Stock as to which this Warrant is Exercised, such
additional shares of Common stock as such Holder would have received had this Warrant been Exercised immediately prior to such record date.
(b) If the Company shall at any time effect a recapitalization or reclassification of such character that the shares of Common stock shall be changed
into or become exchangeable for a larger or smaller number of shares, then upon the effective date thereof, the number of shares of Common Stock which the Holder hereof shall be entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease in the number of shares of Common Stock by reason of such recapitalization or reclassification, and the Exercise Price shall be, in the case of an increase in the number of
shares, proportionately decreased and, in the case of a decrease in the number of shares, proportionally increased.
(c) If the Company shall at any time distribute to Holders of Common Stock cash, evidences of indebtedness or other securities or assets (other than cash
dividends or distributions payable out of earned surplus or net profits for the current or preceding year) then, in any such case, the Holder of this Warrant shall be entitled to receive, upon Exercise of this Warrant, with respect to each share of Common
Stock issuable upon such Exercise, the amount of cash or evidences of indebtedness or other securities or assets which such Holder would have been entitled to receive with respect to each such share of Common stock as a result of the happening of such
event had this Warrant been Exercised immediately prior to the record date or other date fixing shareholders to be affected by such event (the "Determination Date") or, in lieu thereof, if the Board of Directors of the Company should so
determine at the time of such distribution, a reduced Exercise Price determined by multiplying the Exercise Price on the Determination Date by a fraction, the numerator of which is the result of such Exercise Price reduced by the value of such
distribution applicable to one share of Common stock (such value to be determined by the Board in its discretion) and the denominator of which is such Exercise Price.
(d) If the Company shall at any time consolidate or merge with any other corporation or transfer all or substantially all of its assets or dissolve, then
the Company shall deliver written notice to the Holder of such merger, consolidation or sale of assets or dissolution at least thirty (30) days prior to the closing of such merger, consolidation or sale of assets or dissolution, and this Warrant shall
terminate and expire immediately prior to the closing of such merger, consolidation or sale of assets or dissolution.
(e) As used in this Warrant, the term "Exercise Price" shall mean the purchase price per share specified in Section 3 of this Warrant until the
occurrence of an event stated in Section 5(b) or 5(c) and thereafter shall mean said price as adjusted from time to time in accordance with the provisions of said sections. No such adjustment pursuant to Section 5(b) or 5(c) shall be made unless such
adjustment would change the Exercise Price at the time by $.01 or more; provided, however, that all adjustments not so made shall be deferred and made when the aggregate thereof would change the Exercise Price at the time by $.01 or more. No adjustment
made pursuant to any provision of this Section 5 shall have the effect of increasing the total consideration payable upon Exercise of this Warrant in respect of all the Common Stock as to which this Warrant may be exercised.
(f) In the event that at any time, as a result of an adjustment made pursuant to this Section 5, the Holder of this Warrant shall, upon Exercise of this
Warrant, become entitled to receive shares and/or other securities or assets (other than Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares and/or other securities
or assets; and thereafter the number of such shares and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this Section 5.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares shall be issuable upon the Exercise of this Warrant, but on
Exercise of this Warrant, the Holder hereof may purchase only a whole number of shares of Common Stock. The Company shall make a payment in cash in respect of any fractional shares which might otherwise be issuable upon Exercise of this Warrant,
calculated by multiplying the fractional share amount by the market price of the Company's Common Stock on the Date of Exercise as reported on the Nasdaq National Market or such other exchange or system on which the Company's Common Stock is traded.
7. Reservation of Shares.
The Company shall at all times reserve for issuance such number of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for Exercise of this Warrant. The Company covenants and agrees that upon Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise shall be duly and validly
issued, fully paid, nonassessable and not subject to preemptive rights of any shareholders.
8. Restrictions on Transfer.
This Warrant and the Common Stock issuable on Exercise hereof have been or will be acquired by the Holder hereof for investment for
its own account and not with a view to the distribution thereof, have not been registered under the Securities Act of 1933, as amended (the "Act"), or under any state securities laws (the "State Acts") and may not be sold, transferred,
pledged, hypothecated or otherwise disposed of in the absence of registration or the availability of an exemption from registration under the Act and any applicable State Acts and, in the event a Holder believes an exemption from the registration
requirements of the Act and any applicable State Acts is available, the Holder must deliver a legal opinion satisfactory in form and substance to the Company and its counsel, stating that such exemption is available. All shares of Common Stock issued
upon Exercise of this Warrant shall bear an appropriate legend to such effect. Holder has represented to the Company that it and any transferee of all or any portion of this Warrant is and will remain at all times while this Warrant is outstanding an
"accredited investor" as defined in Regulation D promulgated under the Act.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any person other than the Company and the Holder of this Warrant any
legal or equitable right, remedy or claim under this Warrant and this Warrant shall be for the sole and exclusive benefit of the Company and the Holder of this Warrant.
10. Applicable Law.
This Warrant is issued under and shall for all purposes be governed by and construed in accordance with the laws of the State of
Georgia. Jurisdiction for any dispute regarding this Warrant lies in Georgia.
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date.
12. Purchase Agreement.
This Warrant is issued and sold pursuant to that certain Securities Purchase Agreement dated as of June 1, 2001 (the "Purchase
Agreement"). The Holder shall be entitled to all of the rights and benefits and subject to all of the obligations of a Purchaser under the Purchase Agreement, including without limitation, rights with respect to registration under the Act. The
terms of the Purchase Agreement are hereby incorporated herein for all purposes and shall be considered a part of this Warrant as if they had been fully set forth herein.
13. Notice to Company and Holder.
Notices or demands pursuant to this Warrant to be given or made by the Holder of this Warrant to or on the Company shall be
sufficiently given or made if sent by certified or registered mail, return receipt requested, postage prepaid, and addressed, until another address is designated in writing by the Company, AER Energy Resources, Inc., 4600 Highlands Parkway, Suite G,
Smyrna, GA 30082, Attention: Chief Executive Officer. Notices or demands pursuant to this Warrant to be given or made by the Company to or on the Holder of this Warrant shall be sufficiently given or made if sent by certified or registered mail, return
receipt requested, postage prepaid, and addressed to the Holder as follows: FW AER II, L.P., 201 Main Street, Suite 3100, Fort Worth, Texas 76102 Attn: Vice President and Controller, with a copy to David G. Brown, c/o Arbor Investors, 2775 Sand Hill Road,
Suite 220, Menlo Park, California 94025 or another person or address designated in writing by Holder.
(signature follows on next page)
IN WITNESS WHEREOF, this Warrant is hereby executed effective as of the date set forth below.
Dated as of June __, 2001.
AER ENERGY RESOURCES, INC.
By: /s/ J.T. Moore
J.T. Moore
Vice President and Chief Financial Officer
SUBSCRIPTION FORM
TO: AER ENERGY RESOURCES, INC.
The undersigned hereby irrevocably exercises the right to purchase _______________ shares of Common Stock of AER Energy Resources, Inc., a Georgia corporation, evidenced by the attached Warrant,
and herewith makes payment of the Exercise Price with respect to such shares in full, all in accordance with the conditions and provisions of said Warrant.
The undersigned represents that it is an "accredited investor" as defined in Regulation D under the Securities Act of 1933, as amended, agrees not to offer, sell, transfer or otherwise
dispose of any of such Common Stock, except in accordance with the provisions of Section 8 of the Warrant, and consents that the following legend may be affixed to the certificates for the Common Stock hereby subscribed for, if such legend is applicable:
"The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities law, and may not be sold, transferred, pledged, hypothecated or otherwise disposed
of until either (i) a registration statement under the Securities Act and applicable state securities laws shall have become effective with regard thereto, or (ii) the corporation shall have received an opinion of counsel acceptable to the corporation and
its counsel that an exemption from registration under the Securities Act or applicable state securities laws is available in connection therewith."
The undersigned requests that certificates for such shares be issued, and a warrant representing any unexercised portion thereof be issued, pursuant to the Warrant in the name of the Registered
Holder and delivered to the undersigned at the address set forth below:
(Check Box if applicable) |
The undersigned hereby elects to make payment of the Exercise Price through a cashless exercise pursuant to Section 2(ii) of the Warrant. |
Dated:
Signature of Registered Holder
Name of Registered Holder (Print)
Address
The attached Warrant and the securities issuable on exercise thereof have not been registered under the Securities Act of 1933, as amended, or any state securities law and may not be sold, transferred, pledged, hypothecated or otherwise disposed of
in the absence of registration or the availability of an exemption from registration under said Act or any state securities law.
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells, assigns and transfers unto the person or persons below named the right to purchase ____________ shares of the Common Stock of AER ENERGY RESOURCES, INC. evidenced by the
attached Warrant and does hereby irrevocably constitute and appoint _____________________________ attorney to transfer the said Warrant on the books of the Company, with full power of substitution in the premises.
Dated:
Signature
Fill in for new Registration of Warrant: Signature Guarantee:
Name
Name of Guarantor
By:
Name:
Address
Title:
Please print name and address of assignee
(including zip code)
NOTICE
The signature to the foregoing Subscription Form or Assignment must correspond to the name as written upon the face of the attached Warrant in every particular, without alteration or enlargement or any change whatsoever.
Exhibit 99.12
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
AER ENERGY RESOURCES, INC.
In accordance with Sections 14-2-602 and 14-2-1006 of the Georgia Business Corporation Code (the "Code"), AER Energy Resources, Inc. (the "Corporation"), a
corporation organized and existing under and by virtue of the Code, DOES HEREBY CERTIFY:
1. The name of the Corporation is AER Energy Resources, Inc.
2. The following resolution setting forth an amendment to the Corporation's Articles of Incorporation has been duly adopted by the Corporation's Board of
Directors:
RESOLVED, that Article II of the Corporation's Articles of Incorporation is hereby amended by adding the following provisions
to the end of Section 2.4: "The Corporation is authorized to issue 500,000 shares of Series C Convertible Preferred Stock, no par value (the "Series C Preferred Stock"). The Series C Preferred
Stock shall have the terms, preferences, limitations and relative rights set forth on Exhibit A hereto."
3. The "Exhibit A" referenced in the foregoing resolution is included in these Articles of Amendment and is the same "Exhibit A
" as is attached hereto.
4. The foregoing resolution containing the amendment was duly adopted on June 8, 2001, by the Corporation's Board of Directors in
accordance with the provisions of Sections 14-2-602 and 14-2-1002 of the Code. This amendment was adopted by the Corporation's Board of Directors without shareholder action and such shareholder action was not
required.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be signed by the undersigned duly authorized officer, this __ day of June, 2001.
AER ENERGY RESOURCES, INC.
By: /s/ J.T. Moore
J.T. Moore
Vice President and Chief Financial Officer
Exhibit A
TERMS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF
SERIES C CONVERTIBLE PREFERRED STOCK OF
AER ENERGY RESOURCES, INC.
The following terms shall have the meanings specified:
"Articles of Incorporation" shall mean the Articles of Incorporation of the Corporation, as amended.
"Board of Directors" shall mean the board of directors of the Corporation.
"Bylaws" shall mean the bylaws of the Corporation, as amended.
"Common Stock" shall mean the common stock, no par value per share, of the Corporation.
"Conversion Notice" shall have the meaning provided in Section (d)(5) hereof.
"Conversion Price" shall equal $0.407; provided, however, that if 115% of the average closing bid price of the Common Stock as reported on the OTC-BB for the 20 consecutive trading days ending on June 1, 2002 (such 20-day
average price being referred to in this definition as the "Adjusted Price") is less than the Conversion Price, then the Conversion Price shall equal the greater of (1) 115% of the Adjusted Price and (2) $0.266; provided, further, that the Conversion Price shall also be subject to the adjustments provided in Section (d)(6) hereof.
"Conversion Rate" shall equal such number of shares of Common Stock equal to (1) the then applicable Liquidation Value, divided by (2) the then applicable Conversion Price.
"Conversion Rights" shall have the meaning provided in Section (d) hereof.
"Conversion Shares" shall mean the shares of Common Stock into which each share of Series C Preferred Stock is convertible pursuant to Section (d) hereof.
"Corporation" shall mean AER Energy Resources, Inc., a Georgia corporation.
"Extraordinary Transaction" shall mean any of the following events:
(1) the consummation of a merger, share exchange, acquisition of stock or other similar transaction, as a result of which the Corporation shall not continue to exist
or shall continue to exist only as a subsidiary of another entity (other than a parent or subsidiary of the Corporation);
(2) the consummation of a sale of all or substantially all the assets of the Corporation to a person or entity (other than a parent or subsidiary of the Corporation);
or
(3) the public announcement of a tender offer (other than by a parent or subsidiary of the Corporation) for all of the outstanding shares of Common Stock.
"Georgia Code" shall mean the Georgia Business Corporation Code, O.C.G.A. 14-2-101 et seq., as amended.
"Liquidation" shall have the meaning provided in Section (b) hereof.
"Liquidation Value," with respect to a share of Series C Preferred Stock, shall equal the Stated Value of such share plus all accrued but unpaid dividends with respect to such share.
"Original Issue Date" shall mean, with respect to a share of Series C Preferred Stock, the date that such share was purchased from the Corporation.
"OTC-BB" shall mean the Over-the-Counter Bulletin Board automated quotation system operated by The Nasdaq Stock Market, Inc. ("Nasdaq"), or any successor quotation system.
"Redemption Notice" shall have the meaning provided in Section (e)(1) hereof.
"Redemption Price" shall have the meaning provided in Section (e)(1) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Preferred Stock" shall mean the 425,000 shares of Series A Convertible Preferred Stock, no par value, established by the Corporation on September 27, 2000.
"Series B Preferred Stock" shall mean the 250,000 shares of Series B Convertible Preferred Stock, no par value, established by the Corporation on February 28, 2001.
"Series C Preferred Stock" shall mean the 500,000 shares of Series C Convertible Preferred Stock, no par value, hereby established.
"Stated Value" per share of the Series C Preferred Stock shall mean the per share issue price for any share of Series C Preferred Stock, as adjusted pursuant to Section (d)(6) hereof after June 1, 2001. The initial Stated Value
per share of Series C Preferred Stock is $10.00.
The terms, preferences, limitations and relative rights of the Series C Preferred Stock are as follows:
(a) Dividend Rights. The following dividend rights shall apply to the Series C Preferred Stock:
(1) The holders of outstanding shares of Series C Preferred Stock shall be entitled to receive cash dividends when, as and if declared
by the Board of Directors out of any funds legally available therefor at the rate of 6.75% of the Liquidation Value per annum, or $0.675 per share of Series C Preferred Stock based upon the initial Stated Value per share.
(2) Dividends shall accrue on each share of Series C Preferred Stock from the Original Issue Date, and shall accrue from day to day,
whether or not earned or declared and whether or not there shall be funds legally available for the payment of such dividends. Such dividends shall be cumulative so that, if such dividends in respect of any previous or current quarterly
dividend period, at the rate specified above, shall not have been paid or declared and a sum sufficient for the payment thereof set apart, the deficiency shall first be fully paid before any dividend or other distribution shall be paid on or declared and
set apart for the Common Stock or any other stock ranking junior to the Series C Preferred Stock. Any accumulation of dividends on the Series C Preferred Stock shall not bear interest.
(3) No cash dividend shall be paid or declared on Common Stock or any other stock ranking junior to the Series C Preferred Stock as to
dividend preference unless (A) full accrued and unpaid dividends on the Series C Preferred Stock for all past dividend periods and the then current dividend period shall have been paid or declared and a sum sufficient for the payment above set apart and
(B) the Corporation shall also pay each holder of the Series C Preferred Stock the amount of such cash dividend per share of Common Stock, multiplied by the number of shares of Common Stock that such holder would have received if, immediately prior to the
declaration date of such dividend, all shares of Series C Preferred Stock owned by such holder were converted into Common Stock pursuant to Section (d) hereof.
(4) Each dividend shall be paid to the holders of record of the Series C Preferred Stock as they shall appear on the stock register of
the Corporation on such record date, not exceeding 45 days nor less than 10 days preceding a dividend payment date, as shall be fixed by the Board of Directors or a duly authorized committee thereof.
(5) The Series C Preferred Stock shall rank as to payment of dividends on a parity with the Series A and Series B Preferred Stock.
(b) Liquidation Rights.
(1) Subject to the rights of any class of stock of the Corporation with liquidation preferences senior to the Series C Preferred Stock,
in the event of the liquidation, dissolution or winding up for any reason, including, without limitation, bankruptcy, of the Corporation or any of the Corporation's subsidiaries, the assets of which constitute all or substantially all the assets of the
business of the Corporation and its subsidiaries taken as a whole (each such event being referred to as a "Liquidation"), the holders of the outstanding shares of Series C Preferred Stock shall be entitled to receive in exchange for and in
redemption of each share of their Series C Preferred Stock, and on a parity with the holders of any capital stock ranking pari passu to the Series C Preferred Stock, from any funds, proceeds or assets legally available for distribution to shareholders, an amount equal to the greater of (1) the Liquidation Value as of the date that the Liquidation is approved by the
shareholders of the Corporation, or, if no such approval is required, the Board of Directors, or (2) the aggregate amount of such funds, proceeds or assets, multiplied by a fraction:
(x) the numerator of which is the number of Conversion Shares to which the holder of such share of Series
C Preferred Stock would be entitled to receive by virtue of converting such share; and
(y) the denominator of which is the aggregate of the number of Conversion Shares, shares of Common Stock
outstanding, and all other shares of outstanding capital stock of any series the holders of which are entitled to participate in the proceeds of a Liquidation.
(2) All the preferential amounts to be paid to the holders of Series C Preferred Stock under this Section (b) shall be paid or set apart for payment before the
payment or setting apart for payment of any amount for, or the distribution of any funds, proceeds or assets of the Corporation to, the holders of shares of Common Stock or any class or series of stock of the Corporation ranking junior to the Series C
Preferred Stock in connection with a Liquidation as to which this Section (b) applies. If the funds, proceeds and assets to be distributed to the holders of Series C Preferred Stock are insufficient to permit the payment to such holders of the
full amounts payable to such holders, the funds, proceeds and assets legally available for distribution shall be distributed ratably among the holders of Series C Preferred Stock in proportion to the full amount each such holder is otherwise entitled to
receive.
(3) The Series C Preferred Stock shall rank as to payments upon Liquidation on a parity with the Series A and Series B Preferred Stock.
(c) Voting Rights. Except as provided herein or by the Code, the Series C Preferred Stock shall not have any voting rights.
(d) Conversion. The holders of Series C Preferred Stock shall have conversion rights as follows (the "Conversion Rights"):
(1) Conversion Rate.
(A) For purposes of this Section (d), each share of Series C Preferred Stock shall be convertible, at the times and under the conditions described in this Section
(d), at the rate of one share of Series C Preferred Stock to the number of shares of Common Stock that equals the Conversion Rate. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of the
surrender of the shares of Series C Preferred Stock to be converted in accordance with the procedures described in Section (d)(5) hereof.
(B) No fractional shares of Common Stock shall be issued upon conversion of Series C Preferred Stock, and any shares of Series C Preferred Stock surrendered for
conversion that would otherwise result in a fractional share of Common Stock shall be redeemed in cash at the then effective Conversion Price per share, payable as promptly as possible when funds are legally available therefor.
(2) Conversion at Option of Holders. Subject to Section (d)(5) hereof, each share of Series C Preferred Stock shall be convertible, at the option of the holder thereof, at any
time after issuance, in whole or in part, at the office of the Corporation or any transfer agent for the Series C Preferred Stock, into Common Stock at the then effective Conversion Rate.
(3) Conversion at Option of Company.
(A) Beginning on June 1, 2004, and if all the conditions of Section (d)(3)(B) are satisfied, the Corporation may require that each holder of Series C
Preferred Stock convert such holder's shares of Series C Preferred Stock into Common Stock in accordance with Section (d) hereof.
(B) All of the following conditions must be met in order for the Corporation to exercise the conversion rights set forth in Section (d)(3)(A) hereof:
(i) the average closing bid price of a share of the Common Stock (as reported on the OTC-BB) for any 20
trading days out of the 30 trading days immediately preceding such exercise shall be greater than or equal to 250% of the Conversion Price as of the date of such exercise;
(ii) a registration statement filed under the Securities Act covering the resale of shares of Common
Stock that may be received upon the conversion of all shares of the Series C Preferred Stock (the "Resale Registration Statement") is effective and has been continuously effective for at least three months;
(iii) from the effective date of the Resale Registration Statement until the date of such exercise, the
Common Stock has been continuously listed or quoted on a national securities exchange, on any tier of The Nasdaq Stock Market, Inc. or on an automated inter-dealer quotation system (including the OTC-BB), and the Corporation has not received any written
notice stating that such exchange, market or system has delisted or is seeking to delist the Common Stock from such exchange, market or system; and
(iv) for a three-month period ending on the Conversion Date with respect to such exercise, there has not
been a public announcement of an Extraordinary Transaction that is pending on or has been consummated before the Conversion Date.
(4) Conversion Upon Extraordinary Transaction. At any time after the date that an Extraordinary Transaction has been announced and is then pending,
any holder of Series C Preferred Stock may convert all of its shares of Series C Preferred Stock into a number of shares of Common Stock calculated by dividing (A) the greater of (i) the then applicable Liquidation Value and (ii) the Stated Value, plus
the dividends that would have accrued on the Series C Preferred Stock in the event that no dividends were declared and paid by the Corporation for a period of three years from the Original Issue Date, by (B) the then applicable Conversion Price.
(5) Mechanics of Conversion. Before any holder of Series C Preferred Stock shall be entitled to receive certificates representing the shares of
Common Stock into which shares of Series C Preferred Stock are converted in accordance with Sections (d)(2), (d)(3), (d)(4) or (e)(2) hereof, such holder shall surrender the certificate or certificates for such shares of Series C Preferred Stock, duly
endorsed, with signatures guaranteed, at the office of the Corporation or of any transfer agent for the Series C Preferred Stock, and shall give written notice to the Corporation at such office of the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued, if different from the name shown on the books and records of the Corporation (the "Conversion Notice"). The Conversion Notice shall also contain such representations
as may reasonably be required by the Corporation to the effect that the shares to be received upon conversion are not being acquired and will not be transferred in any way that might violate the then applicable securities laws. The Corporation
shall, as soon as practicable thereafter and in no event later than 10 days after the delivery of said certificates and Conversion Notice, issue and deliver at such office to such holder of Series C Preferred Stock, or to the nominee or nominees of such
holder as provided in the Conversion Notice, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. The conversion shall be effective at the time the Corporation accepts the
Conversion Notice as being proper in form and substance. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion pursuant to Sections (d)(2), (d)(3), (d)(4) or (e)(2) hereof shall be treated for all
purposes as the record holder or holders of such shares of Common Stock as of the effective date of conversion pursuant to this Section (d). All certificates issued upon the exercise or occurrence of the conversion shall contain a legend
governing restrictions upon such shares imposed by law (if any) or agreement of the holder or his or its predecessors, successors or permitted assigns.
(6) Conversion Price Adjustments. The Stated Value (and therefore, the Liquidation Value, the Conversion Price, the corresponding Conversion
Rate and the $0.407 and $0.266 figures set forth in the definition of Conversion Price) shall be subject to adjustment from time to time as follows:
(A) Common Stock Issued at Less Than the Current Conversion Price. If the Corporation shall issue any Common Stock
other than Excluded Securities (as hereinafter defined) without consideration or for a consideration per share less than the then current Conversion Price, the Conversion Price in effect immediately prior to each such issuance shall immediately (except as
provided below) be reduced by multiplying the Conversion Price by a fraction of which the numerator shall be an amount equal to the sum of (x) the number of shares of Common Stock outstanding immediately prior to such issuance multiplied by the current
Conversion Price plus (y) the consideration, if any, received by the Corporation upon such issuance and the denominator shall be the total number of shares of Common Stock outstanding immediately after such issuance multiplied by the current Conversion
Price.
For the purposes of any adjustment of the Conversion Price pursuant to Section (d)(6)(A) hereof, the following provisions shall be applicable:
(i) Cash. In the case of the issuance of Common Stock for cash, the amount of the
consideration received by the Corporation shall be deemed to be the amount of the cash proceeds received by the Corporation for such Common Stock before deducting therefrom any discounts, commissions, taxes or other expenses allowed, paid or incurred by
the Corporation for any underwriting or otherwise in connection with the issuance and sale thereof.
(ii) Consideration Other Than Cash. In the case of the issuance of Common Stock
(otherwise than upon the conversion of shares of capital stock or other securities of the Corporation) for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so
exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as determined by the Board of Directors, irrespective of any accounting treatment, whose determination shall be conclusive.
(iii) Options and Convertible Securities. Except with respect to any securities that are Excluded Securities, in the
case of the issuance of (1) options, warrants or other rights to purchase or acquire Common Stock (whether or not at the time exercisable), (2) securities by their terms convertible into or exchangeable for Common Stock (whether or not at the time so
convertible or exchangeable) or (3) options, warrants or rights to purchase such convertible or exchangeable securities (whether or not at the time exercisable):
(a) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options,
warrants or other rights to purchase or acquire Common Stock shall be deemed to have been issued at the time such options, warrants or rights were issued and for a consideration equal to the consideration (determined in the manner provided in Sections
(d)(6)(A)(i) and (ii) hereof, if any, received by the Corporation upon the issuance of such options, warrants or rights plus the minimum purchase price provided in such options, warrants or rights for the Common Stock covered thereby;
(b) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange
for any such convertible or exchangeable securities, or upon the exercise of options, warrants or other rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof, shall be deemed to have
been issued at the time such securities were issued or such options, warrants or rights were issued and for a consideration equal to the consideration, if any, received by the Corporation for any such securities and related options, warrants or rights
(excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration (determined in the manner provided in Sections (d)(6)(A)(i) and (ii) hereof), if any, to be received by the Corporation upon the
conversion or exchange of such securities, or upon the exercise of any related options, warrants or rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof;
(c) on any change in the number of shares of Common Stock deliverable upon exercise of any such options,
warrants or rights or conversion or exchange of such convertible or exchangeable securities or any change in the consideration to be received by the Corporation upon such exercise, conversion or exchange, including, but not limited to, a change resulting
from the anti-dilution provisions thereof, the Conversion Price as then in effect shall forthwith be readjusted to such Conversion Price as would have been obtained had an adjustment been made upon the issuance of such options, warrants or rights not
exercised prior to such change, or of such convertible or exchangeable securities not converted or exchanged prior to such change, upon the basis of such change;
(d) on the expiration or cancellation of any such options, warrants or rights, or the termination of the
right to convert or exchange such convertible or exchangeable securities, if the Conversion Price shall have been adjusted upon the issuance thereof, the Conversion Price shall forthwith be readjusted to such Conversion Price as would have been obtained
had an adjustment been made upon the issuance of such options, warrants, rights or such convertible or exchangeable securities on the basis of the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options,
warrants or rights, or upon the conversion or exchange of such convertible or exchangeable securities; and
(e) if the Conversion Price shall have been adjusted upon the issuance of any such options, warrants,
rights or convertible or exchangeable securities, no further adjustment of the Conversion Price shall be made for the actual issuance of Common Stock upon the exercise, conversion or exchange thereof.
(B) Excluded Securities. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section (d) as a result of the issuance or
deemed issuance of any of the foregoing (collectively, the "Excluded Securities"):
(i) any shares of Common Stock upon the conversion of shares of Series A, Series B or Series C Preferred
Stock;
(ii) securities of the Corporation offered to the public pursuant to an effective registration statement
under the Securities Act;
(iii) any securities of the Corporation (including any shares of Common Stock that may be issuable
pursuant to the conversion or exercise of any options, warrants or rights of the Corporation) pursuant to any commercial agreement if the issuance of such securities is approved by the Board of Directors;
(iv) any shares of Common Stock as a result of the adjustments to the Conversion Price and the
Conversion Rate under this Section (d) or the similar provisions of the Series A and Series B Preferred Stock;
(v) any options, warrants or rights of the Corporation, and any shares of Common Stock issued at any time
following the Original Issue Date (including any shares of Common Stock that may be issuable pursuant to the conversion or exercise of any options, warrants or rights of the Corporation), in each case granted under any employee stock option or incentive
plan in which employees or directors of the Corporation may participate;
(vi) any shares of Common Stock issued in a transaction to which Section (d)(6)(C) or (D) applies; or
(vii) any shares of Common Stock issued pursuant to the exchange, conversion or exercise of options,
warrants or other rights of the Corporation that have previously been incorporated into computations hereunder on the date when such options, warrants or other rights of the Corporation were issued.
(C) Stock Dividends, Subdivisions, Reclassifications or Combinations. If the Corporation shall (i) declare a dividend
or make a distribution on its Common Stock in shares of its Common Stock, (ii) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify the outstanding Common Stock into a smaller
number of shares, the Conversion Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the holder of any shares
of Series C Preferred Stock surrendered for conversion after such date shall be entitled to receive the number of shares of Common Stock which he would have owned or been entitled to receive had such Series C Preferred Stock been converted immediately
prior to such date. Successive adjustments in the Conversion Price shall be made whenever any event specified above shall occur.
(D) Other Distributions. In case the Corporation shall fix a record date for making of a distribution to all holders
of shares of its Common Stock of (i) shares of any class other than its Common Stock, (ii) evidences of indebtedness of the Corporation, (iii) assets (excluding cash dividends or distributions, or dividends or distributions referred to in Section
(d)(6)(C) hereof), or (iv) rights or warrants (excluding those referred to in Section (d)(6)(A) hereof), in each such case the Conversion Price in effect immediately prior thereto shall be reduced immediately thereafter to the price determined by dividing
(1) an amount equal to the difference resulting from (x) the number of shares of Common Stock outstanding on such record date multiplied by the Conversion Price per share on such record date, less (y) the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive) of said shares or evidences of indebtedness or assets or rights or warrants to be so distributed, by (2) the number of shares of Common Stock outstanding on such record date. Such adjustment
shall be made successively whenever such a record date is fixed. In the event that such distribution is not so made, the Conversion Price then in effect shall be readjusted, effective as of the date when the Board of Directors determines not to
distribute such shares, evidences of indebtedness, assets, rights or warrants, as the case may be, to the Conversion Price which would then be in effect if such record date had not been fixed.
(7) De Minimis Adjustments. No adjustment to the Conversion Price (and, therefore, the Conversion Rate) shall be made if such adjustment would
result in a change in the Conversion Price of less than $0.01, but any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustments so carried forward,
shall amount to $0.01 or more.
(8) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Series C Preferred Stock such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of
the Series C Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall be insufficient to effect the conversion of all then outstanding shares of the Series C Preferred Stock, the Corporation shall take such
corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.
(9) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any series or class of securities other
than Series C Preferred Stock (A) for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution or (B) with respect to an Extraordinary Transaction (other than a tender offer) or any other action
described in Section (d)(6)(C) or (D) hereof, the Corporation shall mail to each holder of Series C Preferred Stock, at least 10 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose
of such dividend, distribution or action, and the amount and character of such dividend, distribution or action; provided, however, that the failure to give such notice shall not impair the validity of such dividend, distribution, Extraordinary
Transaction or other action.
(e) Redemption.
(1) Optional Redemption. The Series C Preferred Stock is redeemable by the Corporation, in whole or in part, at any time or from time to time
after issuance of the Series C Preferred Stock at the option of the Corporation, on at least 20 but not more than 90 days' written notice (the "Redemption Notice"). With respect to any such redemption, each share of Series C Preferred
Stock will be redeemable at a price equal to the greater of (A) the then applicable Liquidation Value and (B) the Stated Value, plus the dividends that would have accrued on the Series C Preferred Stock in the event that no dividends were declared and
paid by the Corporation for a period of three years from June 1, 2001 (the "Redemption Price"). The Redemption Price is payable in cash. Any holder of Series C Preferred Stock may, in lieu of receiving cash pursuant to this
Section (e), exercise such holder's conversion rights pursuant to Section (d)(2) hereof by giving the Corporation a Conversion Notice no later than 10 days after the Corporation delivers the Redemption Notice.
(2) Mandatory Redemption. On June 1, 2006, the Company must, at its option (A) redeem each share of Preferred Stock for a cash payment equal to the
then applicable Liquidation Value or (B) convert each share of Series C Preferred Stock into a number of shares of Common Stock equal to the then Conversion Rate in accordance with the applicable provisions of Section (d).
(f) Protective Provisions. In addition to any other rights provided by law, so long as any shares of Series C Preferred Stock are then outstanding, except where the vote or
written consent of the holders of a greater number of shares is required by law or by another provision of the Articles of Incorporation, without first obtaining the affirmative vote or written consent of the holders of 66 2/3% of the total number of
shares of Series C Preferred Stock outstanding, voting together as a single class, the Corporation shall not:
(1) amend or repeal any provision of, or add any provision to, the Articles of Incorporation or the Bylaws, if such action would materially and adversely alter the
preferences, rights, privileges or powers of, or restrictions provided for the benefit of, holders of Series C Preferred Stock; or
(2) issue any shares of capital stock with preferences, limitations and relative rights that would be superior to or pari passu with the Series C Preferred
Stock.
(g) Notices. Any notice required by the provisions hereof to be given to the holders of shares of Series C Preferred Stock shall be deemed given (i) on the date of delivery, if
such notice is hand-delivered to such holder or (ii) on the third business day following (and not including) the date on which such notice is either sent via express courier or deposited in the United States Mail, first-class, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the Corporation. Notice by any other means shall not be deemed effective until actually received.
(h) Determination of Market Price. In each case where these Articles of Amendment refer to the OTC-BB to calculate the market price of the Common Stock and at such time the
Common Stock is not quoted on the OTC-BB, the following provisions shall apply:
(1) If the Common Stock is listed on a national securities exchange, the average closing bid price shall be calculated according to the closing price of the Common
Stock as reported by such exchange.
(2) If the Common Stock is not listed on a national securities exchange but is quoted on any tier of Nasdaq, or any successor thereto, the average closing bid price
shall be calculated according to the closing bid price of the Common Stock as reported by such tier of Nasdaq.
(3) If the Common Stock is not listed on a national securities exchange or quoted on a tier of Nasdaq, the average closing bid price shall be calculated according to
the closing price of the Common Stock as reported by the "Pink Sheets" published by The National Quotation Bureau, Inc., or any successor thereto, or as reported by any other electronic or non-electronic quotation system that publishes or
reports daily quotations of the Common Stock.
(4) If none of the foregoing apply, the average closing bid price shall be as determined in good faith by a resolution of the Board of Directors.
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