<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to _______________________
Commission File Number 0-21926
----------------------------------------------------------
AER ENERGY RESOURCES, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Georgia 34-1621925
-------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4600 Highlands Parkway, Suite G, Smyrna, Georgia 30082
-------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(770) 433-2127
-------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
There were 24,850,263 shares of Common Stock outstanding as of May 9, 2000.
<PAGE> 2
AER ENERGY RESOURCES, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Balance Sheets - March 31, 2000 and December 31, 1999. 3
Condensed Statements of Operations - Three Months Ended March 31, 4
2000 and 1999, and Period From July 17, 1989 (Date of Inception)
to March 31, 2000.
Condensed Statements of Cash Flows - Three Months Ended March 31, 5
2000 and 1999, and Period From July 17, 1989 (Date of Inception)
to March 31, 2000.
Notes to Condensed Financial Statements. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 7
RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
AER ENERGY RESOURCES, INC.
(a Development Stage Company)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (see Note 3) $ 464,209 $ 1,761,268
Trade accounts receivable -- 31,070
Inventories 88,294 82,198
Prepaid expenses and other current assets 93,952 83,355
------------ ------------
Total current assets 646,455 1,957,891
Equipment and improvements 3,629,791 3,624,558
Less accumulated depreciation (3,100,204) (3,012,647)
------------ ------------
529,587 611,911
Other assets 11,191 11,191
------------ ------------
TOTAL ASSETS $ 1,187,233 $ 2,580,993
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 113,631 $ 70,583
Deferred revenue 431,250 431,250
Other accrued expenses 113,334 191,873
------------ ------------
Total current liabilities (see Note 3) 658,215 693,706
Long-term liabilities - deferred revenue 179,688 287,500
Stockholders' equity:
Preferred stock, no par value:
Authorized - 10,000,000 shares; no shares issued and outstanding -- --
Common stock, no par value:
Authorized - 100,000,000 shares; 24,850,263 shares issued and
outstanding at March 31, 2000 and December 31, 1999 66,580,384 66,580,384
Unearned stock compensation (58,072) (66,808)
Deficit accumulated during the development stage (66,172,982) (64,913,789)
------------ ------------
Total stockholders' equity 349,330 1,599,787
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,187,233 $ 2,580,993
============ ============
</TABLE>
See notes to condensed financial statements.
3
<PAGE> 4
AER ENERGY RESOURCES, INC.
(a Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
JULY 17,1989
(DATE OF
THREE MONTHS ENDED INCEPTION) TO
MARCH 31, MARCH 31,
2000 1999 2000
------------ ------------ -------------
<S> <C> <C> <C>
License fees and research and development revenues $ 107,814 $ 482,813 $ 2,404,784
Product sales -- -- 338,174
Cost of product sales -- -- (6,758,985)
------------ ------------ ------------
Gross margin on product sales -- -- (6,420,811)
------------ ------------ ------------
107,814 482,813 (4,016,027)
------------ ------------ ------------
Costs and expenses:
Research and development
- related party -- -- 1,145,913
- other 921,768 1,009,503 38,975,509
Marketing, general and administrative
- related party -- 25,000 1,388,695
- other 458,676 644,310 24,105,966
------------ ------------ ------------
Total costs and expenses 1,380,444 1,678,813 65,616,083
------------ ------------ ------------
Operating loss (1,272,630) (1,196,000) (69,632,110)
Interest income 13,437 55,439 4,060,131
Interest expense - related parties -- -- (264,445)
------------ ------------ ------------
Net loss $ (1,259,193) $ (1,140,561) $(65,836,424)
============ ============ ============
Net loss per share (basic and diluted) $ (0.05) $ (0.05) $ (4.02)
============ ============ ============
Weighted average shares outstanding (basic and diluted) 24,850,263 24,862,263 16,357,068
</TABLE>
See notes to condensed financial statements.
4
<PAGE> 5
AER ENERGY RESOURCES, INC.
(a Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
JULY 17, 1989
(DATE OF
THREE MONTHS ENDED INCEPTION) TO
MARCH 31, MARCH 31,
2000 1999 2000
----------- ----------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $(1,259,193) $(1,140,561) $(65,836,424)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 87,557 114,430 3,931,723
Amortization of unearned stock compensation 8,736 9,534 745,844
Grant of compensatory stock options -- -- 14,063
Forgiveness of promissory notes -- -- 69,875
Loss on disposal of equipment -- -- 68,289
Accretion of discount on short-term investments
and marketable securities -- (31,969) (263,259)
Net changes in operating assets and liabilities (128,926) 1,013,858 819,931
----------- ----------- ------------
Net cash used in operating activities (1,291,826) (34,708) (60,449,958)
INVESTING ACTIVITIES:
Purchases of equipment and improvements (5,233) (13,810) (4,155,926)
Purchases of short-term investments and marketable securities -- (3,224,148) (14,736,444)
Purchase of license agreement -- -- (250,000)
Proceeds from sales/maturities of short-term investments and
marketable securities -- -- 15,000,000
Changes in other assets -- -- (140,501)
----------- ----------- ------------
Net cash used in investing activities (5,233) (3,237,958) (4,282,871)
FINANCING ACTIVITIES:
Proceeds from revolving credit note to related parties -- -- 5,430,000
Issuance of convertible debentures, net of issuance costs -- -- 9,834,500
Payments on notes payable to related parties -- -- (1,150,000)
Payments received on promissory notes -- -- 59,425
Issuance of common stock upon exercise of stock options -- -- 143,558
Issuance of common stock, net of issuance costs -- -- 50,879,555
----------- ----------- ------------
Net cash provided by financing activities -- -- 65,197,038
----------- ----------- ------------
(Decrease) increase in cash and cash equivalents (1,297,059) (3,272,666) 464,209
Cash and cash equivalents at beginning of period 1,761,268 4,249,868 --
----------- ----------- ------------
Cash and cash equivalents at end of period (see Note 3) $ 464,209 $ 977,202 $ 464,209
=========== =========== ============
</TABLE>
See notes to condensed financial statements.
5
<PAGE> 6
AER ENERGY RESOURCES, INC.
(a Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of AER Energy
Resources, Inc. (the "Company") have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. These financial statements should be read in conjunction with the
Company's audited financial statements included in the Company's Annual Report
on Form 10-K filed with the Securities and Exchange Commission for the year
ended December 31, 1999. Operating results for the three month period ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000 or any interim period.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents consist of cash, bank deposits and highly
liquid investments with maturities of three months or less when purchased and
are stated at cost, which approximates market.
Inventories
The Company's inventories are valued at the lower of cost or market,
using the first in, first out (FIFO) method. The inventories balances at March
31, 2000 and December 31, 1999 of $88,294 and $82,198, respectively, consist
entirely of raw materials.
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
In accordance with FASB Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
the Company records impairment losses on long-lived assets used in operations
when events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those
6
<PAGE> 7
assets are less than the carrying amounts of those assets. Based on the
Company's estimate of future undiscounted cash flows, the Company expects to
recover the carrying amounts of its remaining fixed assets. The Company's
estimates of future undiscounted cash flows have taken into consideration its
current research and development operations and contemplate the Company entering
into license agreements and research and development agreements, similar, or
somewhat similar, to the 1998 agreement with Duracell Inc., throughout the
remaining life of the Company's fixed assets. If the Company is unable to enter
into such agreements, a writedown of long-lived assets to fair value may be
required. No write-offs of obsolete equipment were recorded in either of the
three-month periods ended March 31, 2000 or 1999.
3. LOANS AND WARRANTS TRANSACTION
On April 3, 2000, the Company received $1.0 million loans from each of
The Kindt-Collins Company and Keystone, Inc., two major shareholders of the
Company. The Company is required to make quarterly interest payments at prime
plus four percent. The $2.0 million principal is due in March 2002. If the
Company consummates an equity issuance during the term of the loans, the lenders
may convert the loans in whole or in part into equity at the same price at which
the equity is being issued by the Company. Each lender was issued warrants to
purchase 112,994 shares of the Company's common stock at an exercise price of
$1.77 per share. The warrants expire in March 2005.
4. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements"
("SAB 101") which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101 is effective for
fiscal years beginning after December 15, 1999 and allows companies to report
any changes in revenue recognition related to adopting its provisions as an
accounting change at the time of implementation in accordance with APB Opinion
No. 20, "Accounting Changes." The Company has not completed its evaluation of
the impact of SAB 101 on its financial statements, however, the adoption of SAB
101 is not expected to have a material impact on its financial position or
results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company was incorporated in 1989 and has been engaged in the
development and commercialization of high energy density zinc-air batteries.
Until 1998, the Company's operations were focused primarily on developing and
improving its technology, setting up the manufacturing process, testing and
selling rechargeable zinc-air batteries, recruiting personnel, and similar
activities. In 1998, the Company changed its strategy to research and product
development of zinc-air technology with its focus in primary (disposable)
batteries, rather than
7
<PAGE> 8
rechargeable batteries, and plans to commercialize the technology through
alliances with battery and original equipment manufacturers ("OEMs"). This
change allows the Company to capitalize on the capability of its patented
Diffusion Air Manager technology and opportunities in hand-held electronic
products like camcorders, cellular telephones, cordless telephones, digital
cameras, and hand-held computers. The Diffusion Air Manager can extend zinc-air
battery storage life by isolating the cells in zinc-air batteries from exposure
to air during periods when the battery is in storage or not in use.
In September 1998, the Company announced its Technology Licenses and
Services ("TLAS") Agreement with Duracell Inc., a subsidiary of The Gillette
Company, making Duracell the first licensee of the Company's primary
(non-rechargeable) zinc-air technology. Under the terms of the TLAS Agreement,
Duracell agreed to license the rights to the Company's then existing patents. In
addition, Duracell agreed to fund certain joint product development projects
with the Company during 1999. Duracell owns technology developed under the
projects it funds, and the Company has rights to utilize the technology.
Duracell also has options to obtain certain other license rights.
Throughout 2000, the Company will continue to seek additional license
agreements for its patented zinc-air technology with other companies, and focus
on the development of prototype primary zinc-air batteries that utilize
Diffusion Air Manager technology.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 and 1999
The Company generated $0.11 million and $0.48 million of license fees
and research and development revenues under the TLAS Agreement with Duracell
during the first three months ended March 31, 2000 and 1999, respectively.
Research and development expenses decreased 9% to $0.92 million for the
three months ended March 31, 2000 from $1.01 million for the same period in
1999. This decrease resulted primarily from reduced personnel-related expenses
and reduced depreciation expenses.
Marketing, general and administrative expenses decreased 31% to $0.46
million for the three months ended March 31, 2000 from $0.67 million for the
same period in 1999. This decrease resulted primarily from the completion in
1999 of minimum royalty payments to the licensor of certain technology to the
Company, reduced personnel-related expenses, reduced legal and accounting
professional fees, and lower investor relations expenses.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
As of March 31, 2000, the Company had cash and cash equivalents of
$0.46 million. The Company anticipates using these funds as needed to fund
capital equipment purchases, research and product development efforts, marketing
and licensing activities, production of prototype
8
<PAGE> 9
zinc-air battery products, development of alliances with battery manufacturers
and OEMs, working capital and general corporate purposes as determined by
management.
In April 2000, the Company received $2.0 million in cash pursuant to
two $1.0 million loans from two major shareholders of the Company. The Company
is required to make quarterly interest payments at prime plus four percent. The
principal is due in March 2002. Each lender was issued warrants to purchase
112,994 shares of the Company's common stock at an exercise price of $1.77 per
share. The warrants expire in March 2005.
Net cash and cash equivalents used in operating, investing, and
financing activities decreased 60% to $1.30 million for the three months ended
March 31, 2000 from $3.27 million for the same period in 1999 due primarily to
the purchase of $3.22 million of short-term commercial paper in 1999 offset in
part by the 1999 receipt of $1.48 million under the TLAS Agreement with
Duracell.
The Company currently anticipates that its existing cash and cash
equivalents balance, which includes the $2.0 million received in April 2000,
will fund operations and continue technology development at the current level of
activity through the end of the third quarter of 2000. The Company will need to
raise additional funds through additional license agreements, research and
development contracts, debt or equity. There can be no assurance that additional
license agreements or research and development contracts or equity or debt
financing will be available when needed or on terms acceptable to the Company.
The market price of the Company's common stock has fluctuated
significantly since it began to be publicly traded in July 1993 and may continue
to be highly volatile. Factors such as the ability of the Company to achieve
development goals, ability of the Company to commercialize its battery
technology, ability of the Company to license its technology, development of
competing battery technologies, ability of the Company to protect its
proprietary rights to its technology, improvements in conventional battery
technologies, demand for and acceptance of the Company's products in the
marketplace, ability to obtain commitments from battery companies and OEMs,
impact of any future governmental regulations, impact of pricing or material
costs, ability of the Company to raise additional funds, general market
conditions and other factors affecting the Company's business that are beyond
the Company's control may cause significant fluctuations in the market price of
the Company's common stock. The market prices of the stock of many high
technology companies have fluctuated substantially, often unrelated to the
operating or research and development performance of the specific companies.
Such market fluctuations could adversely affect the market price for the
Company's common stock.
FORWARD LOOKING STATEMENTS
This report contains statements which, to the extent that they are not
recitations of historical fact, may constitute "forward looking statements"
within the meaning of applicable federal securities laws and are based on the
Company's current expectations and assumptions. These expectations and
assumptions are subject to a number of risks and uncertainties which could cause
actual results to differ materially from those anticipated, which include but
are not
9
<PAGE> 10
limited to the following: ability of the Company to achieve development goals,
ability of the Company to commercialize its battery technology, ability of the
Company to license its technology, development of competing battery
technologies, ability of the Company to protect its proprietary rights to its
technology, improvements in conventional battery technologies, demand for and
acceptance of the Company's products in the marketplace, ability to obtain
commitments from battery manufacturers and OEMs, impact of any future
governmental regulations, impact of pricing or material costs, ability of the
Company to raise additional funds and other factors affecting the Company's
business that are beyond the Company's control. All forward looking statements
contained in this report are intended to be subject to the safe harbor
protection provided by applicable federal securities laws.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has invested a portion of its cash and cash equivalents in
highly liquid financial instruments. The Company has historically held, and
plans in the future to hold, all such instruments until maturity. If the
instruments were, for some reason not anticipated, redeemed earlier than their
maturity, there might be a gain or loss on the transaction. The Company has no
transactions which qualify for treatment under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities".
AER Energy is a trademark of AER Energy Resources, Inc.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>
4.3 Convertible Promissory Note dated as of March 31,
2000 between The Kindt-Collins Company and AER Energy
Resources, Inc.
4.4 Warrant to Purchase Common Stock of AER Energy
Resources, Inc. dated as of March 31, 2000 between
The Kindt-Collins Company and AER Energy Resources,
Inc.
4.5 Convertible Promissory Note dated as of April 3, 2000
between FW AER II, L.P. and AER Energy Resources,
Inc.
4.6 Warrant to Purchase Common Stock of AER Energy
Resources, Inc. dated as of April 3, 2000 between FW
AER II, L.P. and AER Energy Resources, Inc.
27 Financial Data Schedule (for SEC use only).
</TABLE>
(B) REPORTS ON FORM 8-K:
The registrant did not file any reports on Form 8-K during the
three months ended March 31, 2000.
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.
AER ENERGY RESOURCES, INC.
Date: May 9, 2000 By: /s/ David W. Dorheim
---------------------------------------
David W. Dorheim, President and
Chief Executive Officer
Date: May 9, 2000 By: /s/ J.T. Moore
---------------------------------------
J.T. Moore, Vice President,
Chief Financial Officer, Secretary
and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
11
<PAGE> 1
EXHIBIT 4.3
NEITHER THIS NOTE NOR ANY STOCK ISSUED UPON CONVERSION HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS (THE "STATE LAWS"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER THE ACT AND STATE LAWS
OR AN EXEMPTION FROM REGISTRATION THEREUNDER.
CONVERTIBLE PROMISSORY NOTE
March 31, 2000 $1,000,000
AER ENERGY RESOURCES, INC., a Georgia corporation (the
"Company"), hereby promises to pay to the order of THE KINDT-COLLINS COMPANY, a
Delaware corporation (together with any subsequent holder of this Note, the
"Holder"), the principal amount of ONE MILLION AND NO/100 DOLLARS
($1,000,000.00), together with interest thereon calculated from the date hereof
in accordance with the provisions of this Note. Capitalized terms used herein
and not otherwise defined shall have the meanings assigned to them in Section 7.
1. Payment of Interest.
1.1 Computation and Payment of Interest. Interest on the
unpaid principal amount of this Note outstanding from time to time shall accrue
on a daily basis at a rate per annum equal to the Prime Rate (as defined below)
plus four percent (4.0%) and shall be computed on the basis of a three hundred
sixty (360) day year for the actual number of days elapsed in the period during
which it accrues. On and after the occurrence and during the continuance of an
Event of Default, at the option of the Holder, interest on the unpaid principal
amount of this Note outstanding from time to time shall accrue on a daily basis
at a rate per annum equal to the Prime Rate plus six percent (6.0%) (the
"Default Rate").
Accrued interest shall be due and payable quarterly in arrears
on the first day of January, April, July and October of each year, commencing
July 1, 2000. Accrued interest also shall be due and payable on the date of any
voluntary or mandatory prepayment of this Note, at maturity, whether by
acceleration or otherwise, and on the date of any conversion of this Note
pursuant to Section 5. Interest payable after maturity of this Note (by
acceleration or otherwise) shall be payable upon demand.
As used herein, "Prime Rate" means the rate of interest
publicly announced from time to time by Bank of America, Atlanta, Georgia, as
its "Prime Rate" or "Base Rate" for commercial loans made by such bank. The
interest rate hereunder shall be adjusted on the effective date of any change in
the Prime Rate to reflect the Prime Rate then in effect. In the event that such
bank ceases to publish a "Prime Rate" or "Base Rate" for its commercial loans,
the Holder may specify an alternate source for the Prime Rate by delivering
written notice thereof to the Company.
<PAGE> 2
1.2 Interest Laws. Notwithstanding any provision to the
contrary contained in this Note, the Company shall not be required to pay, and
the Holder shall not be permitted to collect, any amount of interest in excess
of the maximum amount of interest permitted by law ("Excess Interest"). If any
Excess Interest is provided for or determined by a court of competent
jurisdiction to have been provided for in this Note, then in such event: (a) the
provisions of this Section 1.2 shall govern and control; (b) the Company shall
not be obligated to pay any Excess Interest; (c) any Excess Interest that the
Holder may have received hereunder shall be, at the Holder's option, (i) applied
as a credit against the outstanding principal balance of this Note or accrued
and unpaid interest (not to exceed the maximum amount permitted by law), (ii)
refunded to the Company, or (iii) any combination of the foregoing; (d) the
interest rate provided for herein shall be automatically reduced to the maximum
lawful rate allowed from time to time under applicable law (the "Maximum Rate"),
and this Note shall be deemed to have been and shall be, reformed and modified
to reflect such reduction; and (e) the Company shall not have any action against
the Holder for any damages arising out of the payment or collection of any
Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on this Note is calculated at the Maximum Rate rather than the
applicable rate under this Note, and thereafter such applicable rate becomes
less than the Maximum Rate, the rate of interest payable on this Note shall
remain at the Maximum Rate until the Holder shall have received the amount of
interest which the Holder would have received during such period on this Note
had the rate of interest not been limited to the Maximum Rate during such
period.
2. Payment of Principal.
2.1 Scheduled Payment. The Company shall pay in full the
outstanding principal amount of this Note to the Holder on March 30, 2002 (the
"Maturity Date").
2.2 Voluntary Prepayments. The Company may prepay the
principal amount of this Note in whole only upon not less than ten (10) days'
prior written notice to the Holder; provided, however, that the Company may not
prepay this Note after the date that the Company receives a notice of conversion
of this Note pursuant to Section 5 notwithstanding that the Company may have
previously delivered a notice of prepayment to the Holder, and upon delivery of
any such notice of conversion, all outstanding notices of prepayment (regardless
of when delivered) shall be deemed automatically rescinded. The Company may not
prepay the principal amount of this Note in part.
2.3 Mandatory Prepayment. Upon the closing of any Equity
Issuance, the Holder may require the Company to apply all or any portion of the
Net Proceeds of such Equity Issuance in prepayment of the outstanding principal
amount of this Note (or portion thereof); provided, however, in the event that
the holder of the Other Note requires the Company to apply all of any portion of
such Net Proceeds in prepayment of the Other Note and the amount of such Net
Proceeds is less than the aggregate principal of this Note and the Other Note to
be prepaid, then such Net Proceeds shall be applied pro rata in prepayment of
this Note and the Other Note based on the relative amounts of principal as to
which the Holder and the holder of the Other Note require prepayment in
connection with such Equity Issuance.
3. Manner and Time of Payment.
<PAGE> 3
3.1 Payment in Same Day Funds. All payments by the
Company with respect to this Note shall be made without deduction, defense,
setoff or counterclaim and in same day funds and delivered to the Holder by wire
transfer to such account as the Holder may designate from time to time. The
Company shall receive credit for such funds on the date received if such funds
are received by the Holder by 2:00 p.m. (Atlanta, Georgia time) on such day. In
the absence of timely receipt, such funds shall be deemed to have been paid by
the Company on the next succeeding Business Day.
3.2 Payment on Non-Business Days. If any payment on this
Note shall become due on a day that is not a Business Day, such payment shall be
made on the next succeeding Business Day and such extension of time shall in
such case be included in computing any interest due in connection with such
payment.
4. Events of Default.
4.1 Definition. For purposes of this Note, an "Event of
Default" shall be deemed to have occurred:
(a) if the Company fails to pay any interest then accrued
and payable with respect to this Note (and such failure continues for a
period of five (5) days after notice thereof to the Company);
(b) if the Company fails to pay any principal on this
Note when due (and such failure continues for a period of five (5) days
after notice thereof to the Company);
(c) if the Company breaches or otherwise fails to perform
or observe any covenant or agreement contained in this Note and such
failure to perform or observe is not cured within ten (10) days after
the Company receives notice of the occurrence thereof;
(d) if the Company makes an assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally
as they become due; or an order, judgment or decree is entered
adjudicating the Company bankrupt or insolvent; or any order for relief
with respect to the Company is entered under the United States
Bankruptcy Code; or the Company petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of
the Company, or of any substantial part of the assets of the Company,
or commences any proceeding relating to the Company under any
bankruptcy reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction; or any such
petition or application is filed, or any such proceeding is commenced,
against the Company and either (i) the Company by any act indicates its
approval thereof, consents thereto or acquiesces therein or (ii) such
petition, application or proceeding is not dismissed within sixty (60)
days;
3
<PAGE> 4
(e) if any money judgment, writ or warrant of attachment,
or similar process is entered or filed against the Company or any of
its assets, and remains undischarged, unvacated, unbonded and unstayed
for a period of thirty (30) days; or
(f) if any order, judgment or decree is entered against
the Company decreeing the dissolution or split up of the Company and
such order remains undischarged or unstayed for a period in excess of
twenty (20) days.
4.2 Consequences of Event of Default.
(a) If an Event of Default of the type described in
Section 4.1(d) has occurred, the entire outstanding principal amount of this
Note, plus all accrued interest thereon, shall automatically become immediately
due and payable, without any demand or other action on the part of the Holder.
(b) If any Event of Default other than of the type
described in Section 4.1(d) has occurred, the Holder may declare (by written
notice delivered to the Company) all or any portion of the outstanding principal
amount of this Note, plus all accrued interest thereon, due and payable and
demand immediate payment of all or any portion of the outstanding principal
amount of this Note, plus all accrued interest thereon. The Holder shall also
have any other rights which the Holder may have been afforded under any contract
or agreement at any time and any other rights which the Holder may have pursuant
to applicable law.
5. Conversion.
5.1 Conversion Option. If on or prior to the Maturity
Date, the Company consummates an Equity Issuance, then, provided that the Holder
is at that time an "accredited investor" as defined in Regulation D promulgated
under the Act, the Holder shall have the right, on the effective date of such
Equity Issuance, to convert the outstanding principal amount of this Note, in
whole or in part, to shares of the equity securities issued by the Company in
such Equity Issuance. If more than one class or series of shares of equity
securities are issued in such Equity Issuance, then the Holder may elect to
receive in such conversion any one or more of such classes or series of
securities. Upon any such conversion, the Company shall issue to the Holder the
number of shares of each class or series of such equity securities that the
Holder elects to receive, as determined in accordance with the following
formula:
N = O
-
P
4
<PAGE> 5
where:
N = the number of shares of such class or series of equity
securities to be issued to the Holder upon such conversion
O = the outstanding principal amount of this Note to be converted
into such class or series
P = the lowest price per share of such class or series of equity
securities issued to any Person other than the Holder in
connection with such Equity Issuance
5.2 Manner of Conversion. The Holder may exercise the
right to convert this Note pursuant to Section 5.1 by delivering written notice
of such exercise to the Company, which notice shall specify the portion of the
principal balance of this Note as to which the Holder elects such conversion and
the class(es) or series of securities to be received upon such conversion. Such
notice may be delivered to the Company at any time prior to the closing of the
Equity Issuance. In the event that the Holder exercises such conversion option,
then at the closing of the Equity Issuance, the Company shall deliver to the
Holder or to such other Person as the Holder shall designate in its notice of
conversion one or more certificates evidencing the shares of equity securities
into which this Note (or portion) is converted, which certificate(s) shall be in
the name of the Holder or such other Person as the Holder shall designate in its
notice of exercise and, in the case of a partial conversion, a new note in the
amount of the unconverted principal balance hereof. In exchange for such
certificate(s) and any such new note, the Holder shall deliver to the Company
the original of this Note. On the date of any such conversion, the Company shall
pay to the Holder in cash, all accrued but unpaid interest on the portion of the
principal amount of this Note that is so converted.
5.3 Notice of Equity Issuance. Not less than ten (10)
days prior to the expected closing date of any Equity Issuance, the Company
shall deliver to the Holder written notice of such Equity Issuance, which notice
shall set forth the material terms of such Equity Issuance and the expected
closing date thereof.
6. Miscellaneous Provisions.
6.1 Waiver of Demand and Notice. The Company hereby
waives demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of this Note.
6.2 Governing Law. This Note shall be construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note shall be governed by, the
laws of the State of Georgia, without giving effect to provisions thereof
regarding conflict of laws.
6.3 Consent to Jurisdiction and Service of Process. The
Company and, by its acceptance hereof, the Holder hereby consent to the
jurisdiction of any state or federal court located in Atlanta, Georgia and
irrevocably agree that subject to the Holder's election, all actions or
5
<PAGE> 6
proceedings arising out of or relating to this Note shall be litigated in such
courts. The Company accepts for itself and in connection with its properties,
generally and unconditionally, the nonexclusive jurisdiction of the aforesaid
courts and waives any defense of forum non conveniens, and irrevocably agrees to
be bound by any judgment rendered thereby in connection with this Note.
6.4 Expenses and Attorneys' Fees. The Company shall
promptly reimburse the Holder for all fees, costs and expenses (including
reasonable attorneys' fees) incurred by the Holder in any action to enforce this
Note or to collect any payments due from the Company under this Note.
6.5 Notices. Unless otherwise specifically provided
herein, any notice or other communication required or permitted to be given
shall be in writing addressed to the respective party as set forth below and may
be personally served, sent by facsimile, telex or overnight courier service or
United States mail and shall be deemed to have been given: (a) if delivered in
person, when delivered; (b) if delivered by telecopy or telex, on the date of
transmission if transmitted on a Business Day before 4:00 p.m. (Atlanta, Georgia
time) or, if not, on the next succeeding Business Day; (c) if delivered by
overnight courier, one (1) Business Day after delivery to such courier properly
addressed; or (d) if by U.S. Mail, four (4) Business Days after depositing in
the United States mail, with postage prepaid and properly addressed.
Notices shall be addressed as follows:
If to the Company: AER Energy Resources, Inc.
4600 Highlands Parkway
Suite G
Smyrna, Georgia 30082
Attention: President
Facsimile No.: 770 433-2286
If to the Holder: The Kindt-Collins Company
12651 Elmwood Avenue
Cleveland, Ohio 44111
Attention: President
Facsimile No.: 216 252-7624
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this Section
6.5. A notice not given as provided above shall, if it is in writing, be deemed
given if and when actually received by the party to whom given.
6.6 Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of the Holder in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Note are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
6
<PAGE> 7
6.7 Severability. The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or obligation under
this Note shall not affect or impair the validity, legality or enforceability of
the remaining provisions or obligations under this Note or of such provision or
obligation in any other jurisdiction.
6.8 Headings. Section and subsection headings in this
Note are included herein for convenience of reference only and shall not
constitute a part of this Note for any other purpose or be given any substantive
effect.
6.9 Assignments and Participations. Subject to the
requirements of the Act and the State Laws, the Holder may assign its rights
under this Note and further may assign, or sell participations in, all or any
part of this Note to any other Person or Persons. Prior to the effective date of
any assignment of this Note, the Holder shall deliver to the Company written
notice of such assignment, which notice shall specify the identity of the
assignee.
7. Definitions. The following terms used in this Note
shall have the following meanings:
"Business Day" means a day other than Saturday, Sunday or a
bank or legal holiday under the laws of the State of Georgia.
"Conversion Option" means the option of the Holder, pursuant
to Section 5, to convert all or a portion of the unpaid principal and
interest hereunder into equity securities of the Company.
"Equity Issuance" means the public or private issuance by the
Company of equity securities in the Company to any Person.
"Event of Default" means each of the events set forth in
Section 4.1.
"Net Proceeds" means, with respect to any Equity Issuance, the
sale proceeds received by the Company in such Equity Issuance, net of
underwriting fees, commissions and discounts.
"Other Note" means the Convertible Promissory Note of even
date herewith, in the principal amount of $1,000,000, made and executed
by the Company in favor of Keystone, Inc., as such Note may be replaced
or exchanged from time to time.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability
companies, joint ventures, associations, trusts, business trusts or
other organizations, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
7
<PAGE> 8
[Signature appears on following page]
8
<PAGE> 9
IN WITNESS WHEREOF, the Company has executed and delivered
this Note as of the date first written above.
AER ENERGY RESOURCES, INC.
By: /s/ J.T. Moore
--------------------------------------------
Name: J.T. Moore
------------------------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
9
<PAGE> 1
EXHIBIT 4.4
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
112,994 shares
WARRANT TO PURCHASE COMMON STOCK
OF
AER ENERGY RESOURCES, INC.
THIS CERTIFIES that THE KINDT-COLLINS COMPANY, a Delaware corporation
("Holder") or any subsequent holder hereof, has the right to purchase from AER
Energy Resources, Inc., a Georgia corporation (the "Company"), up to 112,994
fully paid and nonassessable shares of the Company?s Common Stock, no par value
("Common Stock"), at a price of $1.77 per share subject to adjustment as
provided below (the "Exercise Price"), at any time on or before 5:00 p.m.,
Atlanta, Georgia time, on March 30, 2005.
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 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
- 1 -
<PAGE> 2
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 cashiers check or wire transfer; 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 4 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 "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 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 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. Transfer and Registration.
- 2 -
<PAGE> 3
Subject to the provisions of Section 7 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.
4. 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
- 3 -
<PAGE> 4
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 this Warrant until the occurrence of
an event stated in Section 4 (b) or (c) and thereafter shall mean said price as
adjusted from time to time in accordance with the provisions of said sections.
No such adjustment 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 4 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 4, 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 4.
5. 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.
6. 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.
7. 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
- 4 -
<PAGE> 5
"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.
8. 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.
9. 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.
10. 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.
11. 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: The Kindt-Collins Company, 12651 Elmwood Avenue, Cleveland,
Ohio 44111, Attn: President, or another person or address designated in writing
by Holder.
- 5 -
<PAGE> 6
(signature follows on next page)
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, this Warrant is hereby executed effective as of the
date set forth below.
Dated as of March 31, 2000.
AER ENERGY RESOURCES, INC.
By: /s/ J.T. Moore
-----------------------------------------------
Name: J.T. Moore
Title: Vice President & Chief Financial Officer
- 7 -
<PAGE> 8
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 7 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:
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.
<PAGE> 9
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.
evidence 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.
<PAGE> 1
EXHIBIT 4.5
NEITHER THIS NOTE NOR ANY STOCK ISSUED UPON CONVERSION HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS (THE "STATE LAWS"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER THE ACT AND STATE LAWS
OR AN EXEMPTION FROM REGISTRATION THEREUNDER.
CONVERTIBLE PROMISSORY NOTE
April 3, 2000 $1,000,000
AER ENERGY RESOURCES, INC., a Georgia corporation (the
"Company"), hereby promises to pay to the order of FW AER II, L.P., a Delaware
limited partnership (together with any subsequent holder of this Note, the
"Holder"), the principal amount of ONE MILLION AND NO/100 DOLLARS
($1,000,000.00), together with interest thereon calculated from the date hereof
in accordance with the provisions of this Note. Capitalized terms used herein
and not otherwise defined shall have the meanings assigned to them in Section 7.
1. Payment of Interest.
1.1 Computation and Payment of Interest. Interest on the
unpaid principal amount of this Note outstanding from time to time shall accrue
on a daily basis at a rate per annum equal to the Prime Rate (as defined below)
plus four percent (4.0%) and shall be computed on the basis of a three hundred
sixty (360) day year for the actual number of days elapsed in the period during
which it accrues. On and after the occurrence and during the continuance of an
Event of Default, at the option of the Holder, interest on the unpaid principal
amount of this Note outstanding from time to time shall accrue on a daily basis
at a rate per annum equal to the Prime Rate plus six percent (6.0%) (the
"Default Rate").
Accrued interest shall be due and payable quarterly in arrears
on the first day of January, April, July and October of each year, commencing
July 1, 2000. Accrued interest also shall be due and payable on the date of any
voluntary or mandatory prepayment of this Note, at maturity, whether by
acceleration or otherwise, and on the date of any conversion of this Note
pursuant to Section 5. Interest payable after maturity of this Note (by
acceleration or otherwise) shall be payable upon demand.
As used herein, "Prime Rate" means the rate of interest
publicly announced from time to time by Bank of America, Atlanta, Georgia, as
its "Prime Rate" or "Base Rate" for commercial loans made by such bank. The
interest rate hereunder shall be adjusted on the effective date of any change in
the Prime Rate to reflect the Prime Rate then in effect. In the event that such
bank ceases to publish a "Prime Rate" or "Base Rate" for its commercial loans,
the Holder may specify an alternate source for the Prime Rate by delivering
written notice thereof to the Company.
<PAGE> 2
1.2 Interest Laws. Notwithstanding any provision to the
contrary contained in this Note, the Company shall not be required to pay, and
the Holder shall not be permitted to collect, any amount of interest in excess
of the maximum amount of interest permitted by law ("Excess Interest"). If any
Excess Interest is provided for or determined by a court of competent
jurisdiction to have been provided for in this Note, then in such event: (a) the
provisions of this Section 1.2 shall govern and control; (b) the Company shall
not be obligated to pay any Excess Interest; (c) any Excess Interest that the
Holder may have received hereunder shall be, at the Holder's option, (i) applied
as a credit against the outstanding principal balance of this Note or accrued
and unpaid interest (not to exceed the maximum amount permitted by law), (ii)
refunded to the Company, or (iii) any combination of the foregoing; (d) the
interest rate provided for herein shall be automatically reduced to the maximum
lawful rate allowed from time to time under applicable law (the "Maximum Rate"),
and this Note shall be deemed to have been and shall be, reformed and modified
to reflect such reduction; and (e) the Company shall not have any action against
the Holder for any damages arising out of the payment or collection of any
Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on this Note is calculated at the Maximum Rate rather than the
applicable rate under this Note, and thereafter such applicable rate becomes
less than the Maximum Rate, the rate of interest payable on this Note shall
remain at the Maximum Rate until the Holder shall have received the amount of
interest which the Holder would have received during such period on this Note
had the rate of interest not been limited to the Maximum Rate during such
period.
2. Payment of Principal.
2.1 Scheduled Payment. The Company shall pay in full the
outstanding principal amount of this Note to the Holder on March 30, 2002 (the
"Maturity Date").
2.2 Voluntary Prepayments. The Company may prepay the
principal amount of this Note in whole only upon not less than ten (10) days'
prior written notice to the Holder; provided, however, that the Company may not
prepay this Note after the date that the Company receives a notice of conversion
of this Note pursuant to Section 5 notwithstanding that the Company may have
previously delivered a notice of prepayment to the Holder, and upon delivery of
any such notice of conversion, all outstanding notices of prepayment (regardless
of when delivered) shall be deemed automatically rescinded. The Company may not
prepay the principal amount of this Note in part.
2.3 Mandatory Prepayment. Upon the closing of any Equity
Issuance, the Holder may require the Company to apply all or any portion of the
Net Proceeds of such Equity Issuance in prepayment of the outstanding principal
amount of this Note (or portion thereof); provided, however, in the event that
the holder of the Other Note requires the Company to apply all of any portion of
such Net Proceeds in prepayment of the Other Note and the amount of such Net
Proceeds is less than the aggregate principal of this Note and the Other Note to
be prepaid, then such Net Proceeds shall be applied pro rata in prepayment of
this Note and the Other Note based on the relative amounts of principal as to
which the Holder and the holder of the Other Note require prepayment in
connection with such Equity Issuance.
3. Manner and Time of Payment.
<PAGE> 3
3.1 Payment in Same Day Funds. All payments by the
Company with respect to this Note shall be made without deduction, defense,
setoff or counterclaim and in same day funds and delivered to the Holder by wire
transfer to such account as the Holder may designate from time to time. The
Company shall receive credit for such funds on the date received if such funds
are received by the Holder by 2:00 p.m. (Atlanta, Georgia time) on such day. In
the absence of timely receipt, such funds shall be deemed to have been paid by
the Company on the next succeeding Business Day.
3.2 Payment on Non-Business Days. If any payment on this
Note shall become due on a day that is not a Business Day, such payment shall be
made on the next succeeding Business Day and such extension of time shall in
such case be included in computing any interest due in connection with such
payment.
4. Events of Default.
4.1 Definition. For purposes of this Note, an "Event
of Default" shall be deemed to have occurred:
(a) if the Company fails to pay any interest then accrued
and payable with respect to this Note (and such failure continues for a
period of five (5) days after notice thereof to the Company);
(b) if the Company fails to pay any principal on this
Note when due (and such failure continues for a period of five (5) days
after notice thereof to the Company);
(c) if the Company breaches or otherwise fails to perform
or observe any covenant or agreement contained in this Note and such
failure to perform or observe is not cured within ten (10) days after
the Company receives notice of the occurrence thereof;
(d) if the Company makes an assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally
as they become due; or an order, judgment or decree is entered
adjudicating the Company bankrupt or insolvent; or any order for relief
with respect to the Company is entered under the United States
Bankruptcy Code; or the Company petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of
the Company, or of any substantial part of the assets of the Company,
or commences any proceeding relating to the Company under any
bankruptcy reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction; or any such
petition or application is filed, or any such proceeding is commenced,
against the Company and either (i) the Company by any act indicates its
approval thereof, consents thereto or acquiesces therein or (ii) such
petition, application or proceeding is not dismissed within sixty (60)
days;
3
<PAGE> 4
(e) if any money judgment, writ or warrant of attachment,
or similar process is entered or filed against the Company or any of
its assets, and remains undischarged, unvacated, unbonded and unstayed
for a period of thirty (30) days; or
(f) if any order, judgment or decree is entered against
the Company decreeing the dissolution or split up of the Company and
such order remains undischarged or unstayed for a period in excess of
twenty (20) days.
4.2 Consequences of Event of Default.
(a) If an Event of Default of the type described in
Section 4.1(d) has occurred, the entire outstanding principal amount of this
Note, plus all accrued interest thereon, shall automatically become immediately
due and payable, without any demand or other action on the part of the Holder.
(b) If any Event of Default other than of the type
described in Section 4.1(d) has occurred, the Holder may declare (by written
notice delivered to the Company) all or any portion of the outstanding principal
amount of this Note, plus all accrued interest thereon, due and payable and
demand immediate payment of all or any portion of the outstanding principal
amount of this Note, plus all accrued interest thereon. The Holder shall also
have any other rights which the Holder may have been afforded under any contract
or agreement at any time and any other rights which the Holder may have pursuant
to applicable law.
5. Conversion.
5.1 Conversion Option. If on or prior to the Maturity
Date, the Company consummates an Equity Issuance, then, provided that the Holder
is at that time an "accredited investor" as defined in Regulation D promulgated
under the Act, the Holder shall have the right, on the effective date of such
Equity Issuance, to convert the outstanding principal amount of this Note, in
whole or in part, to shares of the equity securities issued by the Company in
such Equity Issuance. If more than one class or series of shares of equity
securities are issued in such Equity Issuance, then the Holder may elect to
receive in such conversion any one or more of such classes or series of
securities. Upon any such conversion, the Company shall issue to the Holder the
number of shares of each class or series of such equity securities that the
Holder elects to receive, as determined in accordance with the following
formula:
N = O
-
P
4
<PAGE> 5
where:
N = the number of shares of such class or series of equity
securities to be issued to the Holder upon such conversion
O = the outstanding principal amount of this Note to be converted
into such class or series
P = the lowest price per share of such class or series of equity
securities issued to any Person other than the Holder in
connection with such Equity Issuance
5.2 Manner of Conversion. The Holder may exercise the
right to convert this Note pursuant to Section 5.1 by delivering written notice
of such exercise to the Company, which notice shall specify the portion of the
principal balance of this Note as to which the Holder elects such conversion and
the class(es) or series of securities to be received upon such conversion. Such
notice may be delivered to the Company at any time prior to the closing of the
Equity Issuance. In the event that the Holder exercises such conversion option,
then at the closing of the Equity Issuance, the Company shall deliver to the
Holder or to such other Person as the Holder shall designate in its notice of
conversion one or more certificates evidencing the shares of equity securities
into which this Note (or portion) is converted, which certificate(s) shall be in
the name of the Holder or such other Person as the Holder shall designate in its
notice of exercise and, in the case of a partial conversion, a new note in the
amount of the unconverted principal balance hereof. In exchange for such
certificate(s) and any such new note, the Holder shall deliver to the Company
the original of this Note. On the date of any such conversion, the Company shall
pay to the Holder in cash, all accrued but unpaid interest on the portion of the
principal amount of this Note that is so converted.
5.3 Notice of Equity Issuance. Not less than ten (10)
days prior to the expected closing date of any Equity Issuance, the Company
shall deliver to the Holder written notice of such Equity Issuance, which notice
shall set forth the material terms of such Equity Issuance and the expected
closing date thereof.
6. Miscellaneous Provisions.
6.1 Waiver of Demand and Notice. The Company hereby
waives demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of this Note.
6.2 Governing Law. This Note shall be construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note shall be governed by, the
laws of the State of Georgia, without giving effect to provisions thereof
regarding conflict of laws.
6.3 Consent to Jurisdiction and Service of Process. The
Company and, by its acceptance hereof, the Holder hereby consent to the
jurisdiction of any state or federal court located in Atlanta, Georgia and
irrevocably agree that subject to the Holder's election, all actions or
5
<PAGE> 6
proceedings arising out of or relating to this Note shall be litigated in such
courts. The Company accepts for itself and in connection with its properties,
generally and unconditionally, the nonexclusive jurisdiction of the aforesaid
courts and waives any defense of forum non conveniens, and irrevocably agrees to
be bound by any judgment rendered thereby in connection with this Note.
6.4 Expenses and Attorneys' Fees. The Company shall
promptly reimburse the Holder for all fees, costs and expenses (including
reasonable attorneys' fees) incurred by the Holder in any action to enforce this
Note or to collect any payments due from the Company under this Note.
6.5 Notices. Unless otherwise specifically provided
herein, any notice or other communication required or permitted to be given
shall be in writing addressed to the respective party as set forth below and may
be personally served, sent by facsimile, telex or overnight courier service or
United States mail and shall be deemed to have been given: (a) if delivered in
person, when delivered; (b) if delivered by telecopy or telex, on the date of
transmission if transmitted on a Business Day before 4:00 p.m. (Atlanta, Georgia
time) or, if not, on the next succeeding Business Day; (c) if delivered by
overnight courier, one (1) Business Day after delivery to such courier properly
addressed; or (d) if by U.S. Mail, four (4) Business Days after depositing in
the United States mail, with postage prepaid and properly addressed.
Notices shall be addressed as follows:
If to the Company: AER Energy Resources, Inc.
4600 Highlands Parkway
Suite G
Smyrna, Georgia 30082
Attention: President
Facsimile No.: 770 433-2286
If to the Holder: FW AER II, L.P.
201 Main Street
Suite 2600
Ft. Worth, Texas 76102
Attention: Vice President and
Controller
Facsimile No.: 817 338-2067
with a copy to: David G. Brown
c/o Arbor Investors
2775 Sand Hill Road
Suite 220
Menlo Park, California 94025
Facsimile No.: 650 234-0525
6
<PAGE> 7
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this Section
6.5. A notice not given as provided above shall, if it is in writing, be deemed
given if and when actually received by the party to whom given.
6.6 Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of the Holder in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Note are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
6.7 Severability. The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or obligation under
this Note shall not affect or impair the validity, legality or enforceability of
the remaining provisions or obligations under this Note or of such provision or
obligation in any other jurisdiction.
6.8 Headings. Section and subsection headings in this
Note are included herein for convenience of reference only and shall not
constitute a part of this Note for any other purpose or be given any substantive
effect.
6.9 Assignments and Participations. Subject to the
requirements of the Act and the State Laws, the Holder may assign its rights
under this Note and further may assign, or sell participations in, all or any
part of this Note to any other Person or Persons. Prior to the effective date of
any assignment of this Note, the Holder shall deliver to the Company written
notice of such assignment, which notice shall specify the identity of the
assignee.
7. Definitions. The following terms used in this Note
shall have the following meanings:
"Business Day" means a day other than Saturday, Sunday or a
bank or legal holiday under the laws of the State of Georgia.
"Conversion Option" means the option of the Holder, pursuant
to Section 5, to convert all or a portion of the unpaid principal and
interest hereunder into equity securities of the Company.
"Equity Issuance" means the public or private issuance by the
Company of equity securities in the Company to any Person.
"Event of Default" means each of the events set forth in
Section 4.1.
"Net Proceeds" means, with respect to any Equity Issuance, the
sale proceeds received by the Company in such Equity Issuance, net of
underwriting fees, commissions and discounts.
7
<PAGE> 8
"Other Note" means the Convertible Promissory Note of even
date herewith, in the principal amount of $1,000,000, made and executed
by the Company in favor of The Kindt-Collins Company, as such Note may
be replaced or exchanged from time to time.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability
companies, joint ventures, associations, trusts, business trusts or
other organizations, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
8
<PAGE> 9
IN WITNESS WHEREOF, the Company has executed and delivered
this Note as of the date first written above.
AER ENERGY RESOURCES, INC.
By: /s/ R. Dennis Bentz
------------------------------------------------------
Name: R. Dennis Bentz
Title: Vice President, Product and Process Development
9
<PAGE> 1
EXHIBIT 4.6
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
112,994 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 112,994
fully paid and nonassessable shares of the Company?s Common Stock, no par value
("Common Stock"), at a price of $1.77 per share subject to adjustment as
provided below (the "Exercise Price"), at any time on or before 5:00 p.m.,
Atlanta, Georgia time, on March 30, 2005.
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 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
-1-
<PAGE> 2
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 cashiers check or wire transfer; 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 4 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 "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 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 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. Transfer and Registration.
-2-
<PAGE> 3
Subject to the provisions of Section 7 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.
4. 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
-3-
<PAGE> 4
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 this Warrant until the occurrence of
an event stated in Section 4 (b) or (c) and thereafter shall mean said price as
adjusted from time to time in accordance with the provisions of said sections.
No such adjustment 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 4 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 4, 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 4.
5. 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.
6. 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.
7. 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
-4-
<PAGE> 5
"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.
8. 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.
9. 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.
10. 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.
11. 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 2600, Ft. 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.
-5-
<PAGE> 6
(signature follows on next page)
-6-
<PAGE> 7
IN WITNESS WHEREOF, this Warrant is hereby executed effective as of the
date set forth below.
Dated as of April 3, 2000.
AER ENERGY RESOURCES, INC.
By: /s/ R. Dennis Bentz
------------------------------------------------------
Name: R. Dennis Bentz
Title: Vice President, Product and Process Development
-7-
<PAGE> 8
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 7 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:
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.
- --------------------------------------------------------------------------------
<PAGE> 9
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.
evidence 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.
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AER ENERGY
RESOURCES, INC.'S CONDENSED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 464,209
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 88,294
<CURRENT-ASSETS> 646,455
<PP&E> 3,629,791
<DEPRECIATION> 3,100,204
<TOTAL-ASSETS> 1,187,233
<CURRENT-LIABILITIES> 658,215
<BONDS> 0
0
0
<COMMON> 66,580,384
<OTHER-SE> (66,231,054)
<TOTAL-LIABILITY-AND-EQUITY> 1,187,233
<SALES> 0
<TOTAL-REVENUES> 107,814
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,380,444
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,259,193)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,259,193)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,259,193)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
