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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 26, 1996
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Optical Security Group, Inc.
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Colorado 0-17531 84-1094032
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(State of other jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
535 16th Street, Suite 920, Denver, Colorado 80202
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(Address of principal executive offices)
Registrant's telephone number, including area code (303) 534-4500
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(Former name or former address, if changed since last report)
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Form 8-K Current Report
Item 5. Other Events
Private Placements of Series B Stock.
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Optical Security Group, Inc. (the "Corporation") raised $5,068,000 through the
sale in private placements of 5,068 shares of the Corporation's Series B 8%
Cumulative Convertible Exchangeable Preferred Voting Stock (the "Shares"). The
final closing on the Shares was held April 26, 1996.
The Corporation intends to use the proceeds from the placements for working
capital, repayment of certain debts, expansion of its Maryland facility,
improvements at its United Kingdom production facilities and laboratories, and
for funding possible future acquisitions. However, no specific acquisitions
have been identified.
Exchange of Series A Shares for Series B Shares.
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Effective March 26, 1996, Hunt Capital Group, Inc. and Richard H. Bard, the only
holders of the Corporation's Series A Convertible Preferred Stock ("Series A
Shares") exchanged all of their Series A Shares for 1,440 and 960 shares,
respectively, of the Corporation's Series B 8% Cumulative Convertible
Exchangeable Preferred Voting Stock.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OPTICAL SECURITY GROUP, INC.
(Registrant)
Date:____________________ By:_________________________________
Richard H. Bard
Chief Executive Officer
and President
Date:____________________ By:_________________________________
Gerald A. Melfi
Chief Accounting Officer
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Exhibits
3.8 Articles of Amendment to the Amended and Restated Articles of Incorporation
of Optical Security Group, Inc. as filed with the Colorado Secretary of
State on January 18, 1996.
3.9 Articles of Amendment to the Amended and Restated Articles of Incorporation
of Optical Security Group, Inc. as filed with the Colorado Secretary of
State on March 29, 1996.
20.1 Press Release Regarding Completion of Private Placement of Preferred
Shares.
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Mail to: Secretary of State For office use only
Corporations Section
1560 Broadway, Suite 200
Denver, CO 80202
(303) 894-2251
MUST BE TYPED Fax (303) 894-2242
FILING FEE: $25.00
MUST SUBMIT TWO COPIES
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ARTICLES OF AMENDMENT
Please include a typed TO THE
self-addressed envelope AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
OPTICAL SECURITY GROUP, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Amended and Restated Articles of Incorporation:
FIRST: The name of the corporation is OPTICAL SECURITY GROUP, INC.
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SECOND: The following amendment to the Articles of Incorporation was adopted on
October 30, 1995, as prescribed by the Colorado Business Corporation Act,
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in the manner marked with an X below:
No shares have been issued or Directors Elected - Action by
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Incorporators
No shares have been issued but Directors Elected - Action by
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Directors
x Such amendment was adopted by the board of directors where shares have
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been issued.
- -------- Such amendment was adopted by a vote of the shareholders. The
number of shares voted for the amendment was sufficient for approval.
Addition of a new Article. See attached.
THIRD: The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the amendment
shall be effected, is as follows: N/A
If these amendments are to have a delayed effective date, please list that date:
N/A
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(Not to exceed ninety (90) days from the date of filing)
OPTICAL SECURITY GROUP, INC.
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By/s/_______________________
Catherine M. Gotwalt, Secretary
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ARTICLE XII
SERIES B 8% CUMULATIVE CONVERTIBLE EXCHANGEABLE
PREFERRED VOTING STOCK
12.1 Number and Designation. Fifteen thousand shares of the preferred
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stock shall be designated Series B 8% Cumulative Convertible Exchangeable
Preferred Voting Stock (the "Series B Shares").
12.2 Dividends. The holders of the Series B Shares shall be entitled
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to receive cash dividends at the rate of 8% per annum, when and as declared
by the board of directors, out of funds legally available therefor. Said
dividend is payable quarterly each year beginning with the quarter ended
March 31, 1996, on the first day of April, July, October, and January in
each year. Dividends shall be cumulative from the date due so that, if the
board of directors fails to declare or the corporation fails to pay, a
dividend for any quarter, such dividend shall accrue and become payable at
the time the next dividend is due. Dividend payments made by the
corporation in any quarter shall first be applied to the dividend payment
due that quarter and then toward any accrued but unpaid dividends, starting
with the most recent accrued but unpaid dividend. Accruals of dividends
shall not bear interest.
12.3 Liquidation. Upon liquidation, dissolution or winding up of the
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corporation, whether voluntary or involuntary, the holders of the Series B
Shares shall be entitled to receive, out of the assets of the corporation
available for distribution to its shareholders, an amount equal to the
Redemption Price, as defined below, plus all dividends accrued and unpaid
up to the date of such payment, and no more, before any payment shall be
made or any assets distributed to the holders of any stock ranking on
liquidation junior to the Series B Shares. If the assets of the
corporation so distributable shall be insufficient to permit full payment
of such amounts to the holders of the Series B Shares and full payment of
amounts due to holders of the corporation's Series A Convertible Preferred
Stock ("Series A Shares") upon liquidation, dissolution, or winding up of
the corporation, all of the assets shall be distributed ratably (based on
the number of shares of common stock of the corporation ["Common Stock"]
each holder of the Series A Shares or Series B Shares would be entitled to
receive if such holder exercised such holder's conversion right) among the
holders of the Series B Shares and Series A Shares. For the purposes of
this Section 12.3, the voluntary sale, lease, exchange or transfer of all
or substantially all of the corporation's property or assets, or its
consolidation or merger with any other corporation or corporations, shall
not be deemed a liquidation, dissolution or winding up of the corporation
and the Series B Shares shall remain outstanding with the same rights and
preferences as set forth herein, except as provided in paragraph
12.6.5(ii).
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12.4 Voting Rights.
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12.4.1 Each holder of Series B Shares shall have one vote for
each share of Common Stock that such holder would then be entitled to
receive if such holder were to convert such holder's Series B Shares into
Common Stock pursuant to Section 12.6, and shall have the right to vote on
all matters in like manner as the holders of Common Stock.
12.4.2 The holders of the Series A Shares shall be entitled to
vote separately, as a class, on certain matters as provided by Colorado
law.
12.5 Redemption.
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12.5.1 (i) Unless prohibited by Colorado law, from January 19,
1996, the initial closing date of the corporation's private offering of the
Series B Shares (the "Initial Closing Date") until the second anniversary
of the Initial Closing Date, the corporation may redeem, in whole or in
part, the Series B Shares, by lot or pro rata if less than all of the
Series B Shares are being redeemed, at the redemption price and in the
manner set forth below only if the closing bid and asked prices of the
Common Stock on the National Association of Securities Dealer's Inc.
Automated Quotation Service or any national stock exchange or over-the-
counter exchange where the Common Stock is subsequently listed ("NASDAQ"),
is 150% of the Conversion Price (as defined in subsection 12.6.1) for 20
consecutive trading days commencing not more than 60 days prior to the date
of mailing the redemption notice to holders pursuant to Subsection 12.5.2.
(ii) Unless prohibited by Colorado law, on or after the
second anniversary of the Initial Closing Date, the corporation may redeem,
at any time and from time to time, in whole or in part, the Series B
Shares, by lot or pro rata if less than all of the Series B Shares are
being redeemed, at the redemption price and in the manner set forth below.
12.5.2 The corporation shall notify holders of the Series B
Shares in writing at least 30 days prior to the date set for redemption
(the "Redemption Date"), at the addresses of such holders as the same
appear on the records of the corporation. Such notice shall set forth (a)
the Redemption Date, (b) the redemption price, (c) the number of Series B
Shares being redeemed, (d) the place where such holders are to surrender to
the corporation such holder's certificate or certificates representing the
Series B Shares being redeemed, and (e) the holders' rights to convert
Series B Shares as provided in Section 12.6 up to the Redemption Date.
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12.5.3 The redemption price for each Series B Share is as
follows:
<TABLE>
<CAPTION>
Date Redeemed Redemption Price
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<S> <C>
Prior to the third anniversary of
the Initial Closing Date $1,090
On or after the third anniversary
of the Initial Closing Date but
prior to the fourth anniversary of
the Initial Closing Date $1,075
On or after the fourth anniversary
of the Initial Closing Date but
prior to the fifth anniversary of
the Initial Closing Date $1,060
On or after the fifth anniversary
of the Initial Closing Date but
prior to the sixth anniversary of
the Initial Closing Date $1,040
On or after the sixth anniversary
of the Initial Closing Date but
prior to the seventh anniversary of
the Initial Closing Date $1,020
On or after the seventh anniversary
of the Initial Closing Date $1,000
</TABLE>
plus cumulative dividends up to the Redemption Date.
12.5.4 If the corporation shall have been duly given notice of
redemption as provided in Subsection 12.5.2, and if, on or before the
Redemption Date specified in such notice, the funds necessary for such
redemption shall have been delivered to the Company's transfer agent or
other redemption agent so as to be available therefor; then,
notwithstanding that any certificates representing Series B Shares called
for redemption shall not have been surrendered, such Series B Shares shall
no longer be deemed outstanding and all rights of the holders of such
Series B Shares so called for redemption shall forthwith on such Redemption
Date, cease and terminate, except the right of the holders thereof to
receive the redemption price as specified above. In case less than all the
Series B Shares represented by any surrendered certificates are redeemed, a
new certificate shall be issued representing the unredeemed Series B
Shares.
12.5.5 Series B Shares that have been redeemed as provided in this
section shall revert to the status of authorized but unissued Series B
Shares.
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12.6 Conversion. At any time, and from time to time, each holder of
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Series B Shares shall have the right and option to convert any or all whole
Series B Shares into shares of Common Stock on the following terms and
conditions:
12.6.1 Series B Shares may be converted at the option of the
holder thereof into fully paid and nonassessable shares of Common Stock at
the conversion price, determined as hereinafter provided, shall be in
effect at the time of conversion. Each Series B Share shall be valued for
the purpose of such conversion at $1,000 per share. The price at which the
Common Stock shall be delivered, upon conversion (the "Conversion Price"),
shall be $6.00 per share.
12.6.2 In the event the average closing bid and asked prices of
the Common Stock for the 60 trading days immediately preceding the second
anniversary of the Initial Closing Date is less than the Conversion Price
(such price referred to as the "Second Anniversary Price"), 60 days after
the second anniversary of the Initial Closing Date, the Conversion Price
shall be adjusted to the greater of (a) the Second Anniversary Price or
(b) $4.00 per share (such adjusted price referred to as the "Adjusted
Conversion Price").
12.6.3 The corporation shall not issue, in connection with the
conversion of Series B Shares, certificates for fractions, but in lieu
thereof shall pay to any person who would otherwise be entitled thereto an
amount of cash equal to such fraction multiplied by the Market Price (as
hereinafter defined) of the Common Stock on the last business day of the
week preceding the week in which the conversion privilege is or is deemed
to have been exercised. As used herein, "Market Price" means the average
of the closing bid and asked prices as reported on NASDAQ.
12.6.4 In order for any holder of Series B Shares to convert the
same into Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation's
transfer agent. Such certificate shall be accompanied by written notice
setting forth the number of Series B shares represented by the certificate
or certificates which the holder wishes to convert and the name or names in
which such holder wishes the certificate or certificates for Common Stock
to be issued. The corporation's transfer agent will, as soon as practicable
thereafter, issue and deliver to such holder of the Series B Shares, or to
such holder's nominee or nominees, certificate for the full number of
shares of Common Stock to which such holder shall be so entitled, together
with cash in lieu of any fraction of a share as provided in paragraph
12.6.3 above. If surrendered certificates for the Series B Shares are
converted only in part, the corporation will issue and deliver to the
holder, or to such holder's nominee or nominees, a new certificate or
certificates representing the aggregate of the unconverted Series B
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Shares. The Series B Shares shall be deemed to have been converted as of
the date of the surrender of such shares for conversion as provided above,
and the person or persons entitled to receive the Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder
or holders of such Common Stock on such date.
12.6.5 The Conversion Price, or the Adjusted Conversion Price, as
the case may be, shall be subject to adjustment as follows:
(i) In case the corporation shall (a) pay a dividend or
make a distribution on its Common Stock in shares of the capital stock of
the corporation, (b) subdivide or split its outstanding Common Stock, (c)
combine the outstanding Common Stock into a smaller number of shares, or
(d) issue by reclassification of its Common Stock (whether pursuant to a
merger or consolidation or otherwise) any shares of the capital stock of
the corporation, the number and kind of shares issuable upon conversion of
each Series B Share outstanding immediately prior thereto shall be adjusted
so that the holder of each Series B Share shall be entitled to receive the
kind and number of shares of Common Stock or other securities of the
corporation which such holder would have owned or have been entitled to
receive after the happening of any of the events described above had such
Series B Shares been converted in full immediately prior to the earlier of
the happening of such event or any record date with respect thereto. In the
event of any adjustment of the total number of shares of Common Stock
issuable upon the conversion of then outstanding Series B Shares pursuant
to this subsection, the Conversion Price or the Adjusted Conversion Price,
as the case may be, shall be adjusted to be the amount resulting from
multiplying the Conversion Price, or the Adjusted Conversion Price, as the
case may be, prior to the adjustment by a fraction, the denominator of
which is the number of shares of Common Stock (including fractional shares
of Common Stock) issuable upon converting such Series B Shares immediately
after such adjustment, and the numerator of which is the number of shares
issuable upon conversion of such Series B Shares in full immediately prior
to such adjustment. An adjustment made pursuant to this paragraph (i) shall
become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event. Such adjustment
shall be made successively whenever any event listed above shall occur.
(ii) In case of any reclassification or similar change of
outstanding shares of Common Stock (other than as set forth in paragraph
(i) above), or in case of the consolidation or merger of the corporation
with another corporation, or the conveyance of all or substantially all of
the assets of the corporation ration, each Series B Share shall thereafter
be convertible only into the number of shares of stock or other securities
or property, including cash, to which a holder of the number of shares of
Common
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Stock of the corporation deliverable upon conversion of such Series B
Shares would have been entitled upon such reclassification, change,
consolidation, merger or conveyance had such share been converted
immediately prior to the effective date of such event; and, in any such
case, appropriate adjustments (as determined by the board of directors)
shall be made in the application of the provisions herein set forth with
respect to the rights and interests thereafter of the holders of Series B
Shares to the end that the provisions set forth herein (including
provisions with respect to changes in and other adjustments of the
Conversion Price or Adjusted Conversion Price, as the case may be) shall
thereafter be applicable, as nearly as may be reasonably practicable, in
relation to any shares of stock or other securities thereafter deliverable
upon the conversion of Series B Shares. The corporation shall not effect
any such consolidation, merger or sale unless prior to or simultaneously
with the consummation thereof the successor corporation or entity (if other
than the corporation) resulting from such consolidation or merger or the
corporation or entity purchasing such assets or other appropriate
corporation or entity shall assume, by written instrument, the obligation
to deliver to the holder of each Series B Share such shares, securities,
assets or cash as, in accordance with the foregoing provisions, such
holders may be entitled to, and the other obligations hereunder.
(iii) In case the corporation shall issue Common Stock at
a price less than the current Market Price, the Conversion Price or
Adjusted Conversion Price, as the case may be, shall be adjusted by
multiplying it by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding, on a fully diluted basis immediately
prior to such event, plus the number of shares of Common Stock which the
aggregate consideration for the total number of such additional shares
would purchase at the Market Price, and the denominator of which shall be
the number of shares of Common Stock outstanding, on a fully diluted basis
immediately prior to such event, plus the number of such additional shares
of Common Stock issued at a price less than current Market Price.
(iv) In case the corporation shall issue stock purchase
warrants or securities carrying conversion privileges at a conversion price
more favorable than the Conversion Price or the Adjusted Conversion Price,
if in effect at the time of such issuance, for the Series B Shares, the
Conversion Price or Adjusted Conversion Price, as the case may be, shall be
adjusted by multiplying it by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding, on a fully diluted basis
immediately prior to such event, plus the number of shares of Common Stock
which the aggregate consideration for the total number of such shares
issuable pursuant to warrants or convertible securities would purchase at
the Conversion Price or the Adjusted Conversion Price, if in effect at the
time of such event, and the
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denominator of which shall be the number of shares of Common Stock
outstanding, on a fully diluted basis immediately prior to such event, plus
the number of such additional shares issuable pursuant to such warrants or
convertible securities. Stock purchase warrants or convertible securities
shall be deemed to carry more favorable conversion privileges if the amount
determined by dividing (1) the total amount, if any, received or receivable
by the corporation as consideration for the granting of such warrants or
the issuing of such convertible securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the corporation upon
exercise of such warrants or conversion of such convertible securities, by
(2) the total maximum number of common shares issuable upon exercise of
such warrants or upon the conversion of such convertible securities is less
than the amount determined by applying the same formula to the Series B
Shares.
(v) No adjustment in the Conversion Price or Adjusted
Conversion Price, as the case may be, shall be required unless such
adjustment (plus any adjustments not previously made by reason of this
paragraph (iii)) would require an increase or decrease of at least 3% of
the Conversion Price or the Adjusted Conversion Price, as the case may be,
in effect at the time such adjustment would otherwise be required to be
made. Any adjustments that are not required to be made by reason of this
paragraph (iii) shall be carried forward and taken into account in any
subsequent adjustment. All adjustments in the Conversion Price, or the
Adjusted Conversion Price, as the case may be, shall be carried out to the
nearest cent.
(vi) Upon the expiration of any subscription rights or
warrants or the termination of any rights to convert or exchange any
convertible securities on account of which the Conversion Price or Adjusted
Conversion Price, as the case may be, has previously been adjusted (without
exercise of such rights or warrants or conversion or exchange of such
convertible securities), the Conversion Price, or the Adjusted Conversion
Price, as the case may be, shall forthwith be readjusted to such Conversion
Price, or the Adjusted Conversion Price, as the case may be, as would have
been in effect at the time of such expiration or termination, had such
rights, warrants or convertible securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
(vii) Except as specifically provided herein, no
adjustment in the Conversion Price or Adjusted Conversion Price, as the
case may be, shall be made by reason of the issuance of shares of Common
Stock in exchange for cash, property or services.
(viii) Whenever the Conversion Price or Adjusted
Conversion Price, as the case may be, is adjusted as herein provided, the
corporation shall prepare a certificate setting forth such adjustment and
showing in detail the facts upon
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which such adjustment is based, and such certificate shall then be
delivered to the holders of record of the Series B Shares.
(ix) The adjustments herein provided for shall become
effective immediately following the record date for any event for which the
record date is designated and on the effective date for any other event.
12.6.6 So long as any of the Series B Shares remain outstanding,
and the holders thereof have the right to convert them into shares of
Common Stock, the corporation shall reserve from the authorized and
unissued shares of its Common Stock a sufficient number of shares to
provide for such conversion.
12.6.7 In case of any call for redemption of any Series B Shares,
as provided in Section 12.5, the right of conversion provided in this
Section 12.6 shall nevertheless continue, as to the shares called for
redemption, up to the Redemption Date.
12.6.8 Series B Shares that have been converted as provided
herein shall revert to the status of authorized but unissued Series B
Shares.
12.7 The Corporation's Right to Exchange
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Series B Shares for Debentures.
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12.7.1 Any time after the first anniversary of the Initial
Closing Date, the corporation, upon ten days' prior written notice to the
holders of Series B Shares, may exchange, in whole or in part, the Series B
Shares into senior subordinated convertible debentures ("Debentures"), by
lot or pro rata if less than all of the Series B Shares are being
exchanged, at the exchange rate set forth in Section 12.9 and in the manner
set forth below.
12.7.2 The corporation shall notify the holders of the Series B
Shares in writing at least ten days prior to the date set for exchange (the
"Exchange Date"), at the address of such holders as the same appear on the
records of the corporation. Such notice shall set forth (a) the Exchange
Date, (b) the number of Series B Shares being exchanged, and (c) the place
where such holders are to surrender to the corporation such holder's
certificate or certificates representing the Series B Shares being
exchanged.
12.7.3 If the corporation duly gives notice of the exchange, as
provided in Subsection 12.7.2, then, notwithstanding that any certificates
representing the Series B Shares called for exchange shall not have been
surrendered, such Series B Shares shall no longer be deemed outstanding,
and all rights of the holders of such Series B Shares so called for
exchange shall forth with, at such exchange date, cease and terminate,
except the right of the holders thereof to receive the Debentures, together
with
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cash, if the Company opts to pay cumulative dividends in cash as provided
in Section 12.9. In case less than all of the Series B Shares represented
by any surrendered certificate are exchanged, a new certificate shall be
issued representing the unexchanged Series B Shares.
Series B Shares that have been exchanged as provided in this
section shall revert to the status of authorized but unissued Series B
Shares.
12.8 Holders' Right to Exchange Series B
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Shares for Debenture.
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12.8.1 In the event the corporation defaults on the payment of
dividends on the Series B Shares, and such default is not cured within ten
days following the date of default, each holder of the Series B Shares
shall have the right to exchange any or all whole Series B Shares into
Debentures at the exchange rate set forth in Section 12.9 and in the manner
set forth below.
12.8.2 In order for any holder of Series B Shares to exchange the
same into a Debenture representing the Series B Shares, the holder shall
surrender the certificate or certificates representing the Series B Shares,
duly endorsed, at the office of the corporation's transfer agent (the date
of receipt by the corporation's transfer agent of such surrendered
certificate referred to herein as the "Holder's Exchange Date.") Such
certificate shall be accompanied by written notice setting forth the number
of Series B Shares represented by the certificate or certificates which the
holder elects to exchange and the name or names in which the holder wishes
the Debentures to be issued. The corporation's transfer agent will, as soon
as practical thereafter, issue and deliver to such holder of the Series B
Shares, or to such holder's nominee or nominees, the Debentures, together
with cash, if any, for payment of the cumulative but unpaid dividends. If
surrendered certificates for the Series B Shares are exchanged only in
part, the corporation will issue and deliver to the holder, or to such
holder's nominee or nominees, a new certificate or certificates
representing the aggregate of the unexchanged Series B Shares. The Series B
Shares shall be deemed to be exchanged as of the Holder's Exchange Date,
and the person or persons entitled to receive the Debenture upon such
exchange shall be treated for all purposes as the record holder or holders
of such Debentures on the Holder's Exchange Date.
12.8.3 Series B Shares that have been exchanged as provided in
this section shall revert to the status of authorized but unissued Series B
Shares.
12.9 Exchange Rate. Series B Shares shall be exchanged at an exchange
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rate of $1,000 principal for each Series A Share surrendered. The amount
of cumulative dividends shall be added to
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the principal amount of the Debentures except that, at the option of the
corporation, in lieu of exchanging cumulative dividends into principal, the
corporation may pay the cumulative dividends in cash.
12.10 Terms of the Debentures.
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12.10.1 The Debentures will bear interest at the rate of 8% per
annum, payable quarterly, on the first day of April, July, October, and
January in each year. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
12.10.2 The Debentures will be convertible into shares of Common
Stock at any time and from time to time on the same terms and conditions as
the Series B Shares. The shares of Common Stock issuable upon conversion of
the Debentures will have the same registration rights as the shares of
Common Stock issuable upon conversion of the Series B Shares.
12.10.3 If the corporation exchanges the Series B Shares into
Debentures as provided in Section 12.7 prior to the fourth anniversary of
the Initial Closing Date, at the end of the fifth year following the
Initial Closing Date, the corporation shall pay, on a pro rata basis, one-
third of the principal amount of the Debentures, plus accrued but unpaid
interest up to the date of such payment. At the end of the sixth year
following the Initial Closing Date, the corporation shall pay, on a pro
rata basis, one-half of the remaining principal amount of the Debentures,
plus accrued but unpaid interest up to the date of such payment. At the end
of the seventh year following the Initial Closing Date, the corporation
shall pay the balance due on the Debentures.
12.10.4 If the corporation exchanges the Series B Shares into
Debentures as provided in Section 12.7, after the fourth anniversary of
the Initial Closing Date or if a holder of the Series B Shares exercises
such holder's right to exchange the Series B Shares for Debentures pursuant
to Section 12.8, the corporation shall, on the one-year anniversary of the
Exchange Date or the Holder's Exchange Date, as the case may be, pay on a
pro rata basis, one-third of the principal amount of the Debentures plus
accrued but unpaid interest up to the date of such payment. On the second
anniversary of the Exchange Date, or the Holder's Exchange Date, as the
case may be, the corporation shall pay, on a pro rata basis, one-half of
the remaining principal amount of the Debentures, plus accrued but unpaid
interest up to the date of such payment. On the third anniversary of the
Exchange Date, or the Holder's Exchange Date, as the case may be, the
corporation shall pay the balance due on the Debentures.
12.10.5 The Debentures will be subordinated in right of payment
to all Senior Indebtedness. "Senior Indebtedness" means
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Indebtedness of the corporation outstanding at any time for money borrowed
from a bank, insurance company or other lender not subordinated by its
terms to the Debentures. "Indebtedness" means any debt of the corporation
for borrowed money, capitalized leases and purchase money obligations or
evidenced by a note, debenture, letter of credit or similar instrument
given in connection with the acquisition, other than in the ordinary course
of business, of any property or assets; any debt of any subsidiary of the
corporation described in the preceding definition which the corporation has
guaranteed or for which it is otherwise liable; and any amendment, renewal,
extension or refunding of any such debt. The Debentures do not prohibit
the corporation from incurring additional Indebtedness, including Senior
Indebtedness.
12.10.6 (i) If an Event of Default (as defined below) shall have
occurred and be continuing, the holders of 25% in principal amount of the
Debentures then outstanding may declare the principal of all such
Debentures to be due and payable; provided, however, that if any and all
defaults shall have been remedied, the holders of a majority in aggregate
principal amount of Debentures then outstanding may waive such defaults and
rescind and annul such declaration and its consequences.
(ii) "Event of Default" means (a) a default for in excess of 10
days in payment of any principal or interest installment on the Debenture;
(b) a default on the Debentures other than a default under (a) above for 30
days after written notice to the corporation by the holders of 25% in
principal amount of the outstanding Debentures, in the performance of any
other covenant or agreement in the Debentures; (c) a default under any
bond, debenture, note or other evidence of indebtedness for money borrowed
by the corporation or under any mortgage, indenture, or instrument under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the corporation (excluding real property
leases), which default shall constitute a failure to pay any portion of
interest or principal when due after any applicable grace period or shall
have resulted in such indebtedness becoming or being declared due and
payable without such indebtedness having been discharged or such
acceleration having been rescinded or annulled, and the aggregate
indebtedness in default exceeds $250,000; (d) certain events of bankruptcy,
insolvency, and reorganization; and (e) the suspension or termination of
the corporation's reporting obligations pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended. An Event of Default shall
not be deemed to have occurred until the corporation shall have had the
opportunity to fully contest claims asserted by third parties related to
(c) above.
12.10.7 The Debentures shall provide that the corporation ration
may not be consolidated with or merged into another entity, or transfer all
or substantially all of its assets in one or more related transactions,
unless (i) the corporation shall be the
12
<PAGE>
surviving entity, or the successor shall be a United States corporation or
shall expressly assume all the obligations of the corporation under the
Debentures, (ii) immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing, and (iii) the
assuming corporation has a net worth not less than the consolidated net
worth of the corporation.
12.10.8 (i) For purposes of Subsection 12.10.8, the following
terms shall have the meanings set forth below:
"Consolidated Net Income" means, for any period, the aggregate of
the Net Income of the corporation and its subsidiaries for such period, on
a consolidated basis, determined in accordance with generally accepted
accounting principles; provided that (i) the Net Income of any person which
is not a subsidiary or is accounted for by the corporation by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions paid to the corporation or a subsidiary, and
(ii) the Net Income of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded.
"Disqualified Stock" means capital stock subject to mandatory
redemption or redemption at the option of the holder, in either case prior
to the maturity of the Debentures.
"Equity Interests" mean capital stock or warrants, options or
other rights to acquire capital stock.
"Net Income" means the net income (loss) of such corporation,
subsidiary, or person, determined in accordance with generally accepted
accounting principles; excluding, however, from the determination of Net
Income, any gain (but not loss) realized upon the sale or other disposition
(including, without limitation, dispositions pursuant to leaseback
transactions, except any gain from such leaseback transaction may be
amortized into Net Income over the term of the lease) of any real property
or equipment of such corporation, subsidiary, or person which is not sold
or otherwise disposed of in the ordinary course of business, or of any
capital stock of the corporation, subsidiary, or person owned by such
corporation, subsidiary, or person.
(ii) The Debentures shall provide that the corporation may not
declare or pay any dividend or make any distribution on its capital stock
of any class (except on its Series A Shares and Series B Shares) or to its
shareholders (other than dividends or distributions payable in shares of
capital stock of the corporation); (b) purchase, redeem, or otherwise
acquire or retire for value any Equity Interests of the corporation, any
subsidiary or other affiliate (other than any such Equity Interests, owned
by the corporation or any subsidiary), other than its obligation to
repurchase certain shares of Common Stock held by Mr. Yoram Curiel
13
<PAGE>
pursuant to agreements between the corporation and Mr. Curiel; (c) permit
any wholly-owned subsidiary to declare or pay any dividend on, or make any
distribution to the holders of any shares of its capital stock except to
the corporation or a subsidiary (other than dividends or distributions
payable in capital stock of it or the corporation); or (d) permit any
subsidiary to purchase, redeem or otherwise acquire or retire for value any
Equity Interests of such subsidiary, the corporation or any affiliate of
any of them (other than any such Equity Interests owned by the corporation
or any subsidiary), if at the time of such action, an Event of Default
shall have occurred and be continuing, or shall occur as a consequence
thereof, or if upon giving effect to such payment the aggregate amount
expended for all such payments (the amount expended for such purposes, if
other than cash, to be conclusively determined by the board of directors as
evidenced by a board resolution) shall exceed the sum of (1) 25% of the
aggregate Consolidated Net Income of the corporation accrued during fiscal
quarters ending subsequent to the Initial Closing Date; (2) the aggregate
net proceeds, including cash and the fair market value of property other
than cash, received by the corporation from the issue or sale, after the
Initial Closing Date, of capital stock of the corporation (other than
Disqualified Stock) or of warrants to purchase such capital stock (other
than warrants to purchase such Disqualified Stock), other than in
connection with the conversion of any Series B Shares or Debentures; (3)
the aggregate net proceeds received by the corporation subsequent to the
Initial Closing Date from the issue or sale of any debt securities or
Disqualified Stock of the corporation, if, at such time, such debt
securities, or Disqualified Stock, as the case may be, have been converted
into capital stock of the corporation; or (4) $250,000.
12.10.9 The Debentures shall provide that neither the corporation
nor any of its subsidiaries may engage in any transaction with an affiliate
of the corporation on terms less favorable to the corporation or such
subsidiary than that which might be obtained at the time of such
transaction from unrelated entities.
12.11 Rank. No class of capital stock or securities convertible into
----
capital stock shall be authorized which has superior rights to the Series B
Shares as to distributions, liquidation, or both. The Series B Shares
shall rank equal to the Series A Shares with respect to distributions and
liquidation.
14
<PAGE>
Mail to: Secretary of State For office use only
Corporations Section
1560 Broadway, Suite 200
Denver, CO 80202
(303) 894-2251
MUST BE TYPED Fax (303) 894-2242
FILING FEE: $25.00
MUST SUBMIT TWO COPIES
---
ARTICLES OF AMENDMENT
Please include a typed TO THE
self-addressed envelope AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
OPTICAL SECURITY GROUP, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Amended and Restated Articles of Incorporation:
FIRST: The name of the corporation is OPTICAL SECURITY GROUP, INC.
----------------------------
SECOND: The following amendment to the Articles of Incorporation was adopted on
March 19, 1996, as prescribed by the Colorado Business Corporation Act, in the
- --------- ----
manner marked with an X below:
- -------- No shares have been issued or Directors Elected - Action by
Incorporators
- -------- No shares have been issued but Directors Elected - Action by
Directors
x Such amendment was adopted by the board of directors where shares
- --------
have been issued.
- -------- Such amendment was adopted by a vote of the shareholders. The
number of shares voted for the amendment was sufficient for
See attached.
THIRD: The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the amendment
shall be effected, is as follows: N/A
If these amendments are to have a delayed effective date, please list that date:
N/A
- ---
(Not to exceed ninety (90) days from the date of filing)
OPTICAL SECURITY GROUP, INC.
----------------------------
By/s/
-----------------------
Richard H. Bard, President
<PAGE>
ATTACHMENT TO THE ARTICLES OF AMENDMENT TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
OPTICAL SECURITY GROUP, INC.
1. Subsection 12.5.1 is deleted in its entirety and replaced with
the following:
12.5.1 (i) From January 19, 1996, the initial closing date of the
corporation's private offering of the Series B Shares (the "Initial Closing
Date") until March 29, 1998, the corporation may not redeem the Series B
Shares.
(ii) Unless prohibited by Colorado law, on or after March 30,
1998, the corporation may redeem, pro rata if less than all of the Series B
Shares are being redeemed, at the redemption price and in the manner set
forth below only if the closing bid and asked prices of the Common Stock on
the National Association of Securities Dealer's Inc. Automated Quotation
Service or any national stock exchange or over-the-counter exchange where
the Common Stock is subsequently listed ("NASDAQ"), is 150% of the
Conversion Price (as defined in Subsection 12.6.1) for 30 consecutive
trading days commencing not more than 60 days prior to the date of mailing
the redemption notice to holders pursuant to Subsection 12.5.2.
2. Subsection 12.5.3 is deleted in its entirety and replaced with
the following:
12.5.3 The redemption price for each Series B Share is as
follows:
<TABLE>
<CAPTION>
Date Redeemed Redemption Price
------------------------------------------------------------
<S> <C>
On or after March 30, 1998, but
prior to the third anniversary of
the Initial Closing Date $1,090
On or after the third anniversary
of the Initial Closing Date but
prior to the fourth anniversary of
the Initial Closing Date $1,075
On or after the fourth anniversary
of the Initial Closing Date but
prior to the fifth anniversary of
the Initial Closing Date $1,060
On or after the fifth anniversary
of the Initial Closing Date but
prior to the sixth anniversary of
the Initial Closing Date $1,040
</TABLE>
2
<PAGE>
On or after the sixth anniversary
of the Initial Closing Date but
prior to the seventh anniversary of
the Initial Closing Date $1,020
On or after the seventh anniversary
of the Initial Closing Date $1,000
plus cumulative dividends up to the Redemption Date.
3. Subsection 12.7.1 shall be deleted in its entirety and
replaced with the following:
12.7.1 Any time after the first anniversary of the Initial
Closing Date, the corporation, upon ten days' prior written notice to the
holders of Series B Shares, may exchange, in whole or in part, the Series B
Shares into senior subordinated convertible debentures ("Debentures"), pro
rata if less than all of the Series B Shares are being exchanged, at the
exchange rate set forth in Section 12.9 and in the manner set forth below.
4. Subsection 12.8.1 shall be deleted in its entirety and
replaced with the following:
12.8.1 In the event the corporation fails to declare and pay
dividends on the Series B Shares, and such payment is not made within ten
days following the dividend payment date, each holder of the Series B
Shares shall have the right to exchange any or all whole Series B Shares
into Debentures at the exchange rate set forth in Section 12.9 and in the
manner set forth below.
5. Subsection 12.10.6 shall be deleted in its entirety and
replaced with the following:
12.10.6 (i) If the corporation files a voluntary petition for
relief under any bankruptcy law or if any involuntary petition for relief
under any bankruptcy law is filed against the corporation and such
involuntary petition is not dismissed within 60 days of the date of filing,
the outstanding principal of all Debentures shall at once, without any
action by the holders, be due and payable.
(ii) If an Event of Default (as defined below) shall have
occurred and be continuing, the holders of 15% in principal amount of the
Debentures then outstanding may declare the principal of all such
Debentures to be due and payable; provided, however, that if any and all
defaults shall have been remedied, the holders of a majority in aggregate
principal amount of Debentures then outstanding may waive such defaults and
rescind and annul such declaration and its consequences.
3
<PAGE>
(iii) "Event of Default" means (a) a default for in excess of 10
days in payment of any principal or interest installment on the Debenture;
(b) a default on the Debentures other than a default under (a) above for 30
days after written notice to the corporation by the holders of 15% in
principal amount of the outstanding Debentures, in the performance of any
other covenant or agreement in the Debentures; (c) a default under any
bond, debenture, note or other evidence of indebtedness for money borrowed
by the corporation or under any mortgage, indenture, or instrument under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the corporation (excluding real property
leases), which default shall constitute a failure to pay any portion of
interest or principal when due after any applicable grace period or shall
have resulted in such indebtedness becoming or being declared due and
payable without such indebtedness having been discharged or such
acceleration having been rescinded or annulled, and the aggregate
indebtedness in default exceeds $250,000; (d) certain events of bankruptcy,
insolvency, and reorganization; and (e) the suspension or termination of
the corporation's reporting obligations pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended. An Event of Default shall
not be deemed to have occurred until the corporation shall have had the
opportunity to fully contest claims asserted by third parties related to
(c) above.
6. Paragraph 12.10.6(ii) shall be deleted in its entirety and
replaced with the following:
(ii) The Debentures shall provide that the corporation may not
(a) declare or pay any dividend or make any distribution on its capital
stock of any class (except on its Series A Shares and Series B Shares) or
to its shareholders (other than dividends or distributions payable in
shares of capital stock of the corporation) unless the corporation shall
also pay additional interest on the Debentures in an amount equal to the
amount of the dividend that would then be payable to the holders of the
Debentures had such holders converted the Debentures into shares of Common
Stock; (b) purchase, redeem, or otherwise acquire or retire for value any
Equity Interests of the corporation, any subsidiary or other affiliate
(other than any such Equity Interests, owned by the corporation or any
subsidiary), other than its obligation to repurchase certain shares of
Common Stock held by Mr. Yoram Curiel pursuant to agreements between the
corporation and Mr. Curiel; (c) permit any wholly-owned subsidiary to
declare or pay any dividend on, or make any distribution to the holders of
any shares of its capital stock except to the corporation or a subsidiary
(other than dividends or distributions payable in capital stock of it or
the corporation); or (d) permit any subsidiary to purchase, redeem or
otherwise acquire or retire for value any Equity Interests of such
subsidiary, the corporation or any affiliate of any of them
4
<PAGE>
(other than any such Equity Interests owned by the corporation or any
subsidiary), if at the time of such action, an Event of Default shall have
occurred and be continuing, or shall occur as a consequence thereof, or if
upon giving effect to such payment the aggregate amount expended for all
such payments (the amount expended for such purposes, if other than cash,
to be conclusively determined by the board of directors as evidenced by a
board resolution) shall exceed the sum of (1) 25% of the aggregate
Consolidated Net Income of the corporation accrued during fiscal quarters
ending subsequent to the Initial Closing Date; (2) the aggregate net
proceeds, including cash and the fair market value of property other than
cash, received by the corporation from the issue or sale, after the Initial
Closing Date, of capital stock of the corporation (other than Disqualified
Stock) or of warrants to purchase such capital stock (other than warrants
to purchase such Disqualified Stock), other than in connection with the
conversion of any Series B Shares or Debentures; (3) the aggregate net
proceeds received by the corporation subsequent to the Initial Closing Date
from the issue or sale of any debt securities or Disqualified Stock of the
corporation, if, at such time, such debt securities, or Disqualified Stock,
as the case may be, have been converted into capital stock of the
corporation; or (4) $250,000.
7. Section 12.11 shall be deleted in its entirety and replaced with
the following:
12.11 Rank. No class of capital stock or securities convertible into
----
capital stock shall be issued which has superior rights to the Series B
Shares as to distributions, liquidation, or both. If Series A Shares are
issued, Article 11 shall be amended to have terms equal to or subordinate
to Series B Shares.
8. The addition of the following sections:
12.12 Restriction on Payment of Dividends on Common Stock. No
---------------------------------------------------
dividends or other payments (excluding payments to be made on liquidation
pursuant to Section 12.3) shall be declared and paid on the Common Stock
unless the corporation shall also declare and pay dividends on the shares
of Common Stock issuable upon conversion of the Series B Shares and unless
there are no accrued and unpaid dividends on the Series B Shares.
12.13 Furnish Reports. As soon as practicable after available (but,
---------------
in the case of the corporation's Annual Report to Stockholders, within 120
days after the end of each fiscal year of the corporation), the corporation
will furnish to the holders of the Series B Shares or the Debentures, one
copy of (a) its Annual Report to Stockholders which Annual Report shall
contain financial statements audited in accordance with generally accepted
accounting principles by a firm of certified public accountants), (b) if
not included in substance in the Annual
5
<PAGE>
Report to Stockholders, its Annual Report of Form 10-K, and (c) any
Quarterly Reports to Stockholders, and if not included in substance in its
Quarterly Reports to Stockholders, its quarterly reports on Form 10-Q.
6
<PAGE>
[OPSEC LETTERHEAD APPEARS HERE]
FOR IMMEDIATE RELEASE: MAY 7, 1996
OPTICAL SECURITY GROUP, INC. COMPLETES
PRIVATE PLACEMENT OF SERIES B SHARES
Denver, Colorado: Optical Security Group, Inc. (NASDAQ SmallCap Market: OPSC),
today announced the completion of a privately placed funding of $5,068,000
through the issuance of 5,068 Series B 8% Cumulative Convertible Exchangeable
Preferred Voting Shares. The Preferred Shares have not been registered under the
Securities Act of 1933, as amended, and may not be offered or sold in the United
States absent registration unless an exemption from the registration
requirements is available.
Commenting on the transaction, Mr. Richard H. Bard, Chief Executive Officer of
OpSec, said, "Our board recognized the need to put expansion capital in place.
We are now in a position to maintain our sales growth without the need of
additional equity capital in the foreseeable future."
The Company's imaging technology is employed in tamper-evident labels and
authenticating labels and tags for consumer product protection; and, for
protection against counterfeiting for documents of value. Its holographic
imaging and dimensional printing technologies are used in product promotion,
point-of-sale and packaging enhancement.
OpSec's corporate offices are located in Denver, Colorado.
FOR FURTHER INFORMATION CONTACT:
Catherine M. Gotwalt, Corporate Secretary
Optical Security Group, Inc.
535 Sixteenth Street, Suite 920
Denver, Colorado 80202
(303) 534-4500
