EXHIBIT 3(i).3
(Certificate of Designation of
Series A Convertible Preferred Stock)
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED STOCK OF
FLEXPOINT SENSOR SYSTEMS, INC.
The undersigned, Douglas M. Odom and Thomas E. Danielson, hereby certify that:
I. They are the duly elected and acting President and Vice-President,
respectively, of Flexpoint Sensor Systems, Inc., a Delaware corporation (the
"Company").
II. The Certificate of Incorporation of the Company authorizes 1,000,000
shares of preferred stock, par value $.001 per share, of which no shares are
issued and outstanding.
III. The following is a true and correct copy of resolutions duly adopted
by the Board of Directors on July 1, 1999, which constituted all requisite
action on the part of the Company for adoption of such resolutions.
RESOLUTIONS
WHEREAS, the Board of Directors of the Company (the "Board of Directors")
is authorized to provide for the issuance of the shares of preferred stock in
series, and by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designations, powers, preferences
and rights of the shares of each such series and the qualifications,
limitations or restrictions thereof;
WHEREAS, the Board of Directors desires, pursuant to its authority as
aforesaid, to designate a new series of preferred stock, set the number of
shares constituting such series and fix the rights, preferences, privileges
and restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates a new series of preferred stock and the number of shares
constituting such series and fixes the rights, preferences, privileges and
restrictions relating to such series as follows:
Section 1. Designation, Amount and Par Value. The series of preferred
stock shall be designated as the Series A Convertible Preferred Stock (the
"Preferred Stock"), and the number of shares so designated shall be 4,500. The
par value of each share of Preferred Stock shall be $.001. Each share of
Preferred Stock shall have a stated value of $875 per share (the "Stated
Value"). The holders of the Preferred Stock will have no preemptive rights
with respect to any shares of capital stock of the Company or any other
securities of the Company convertible into or carrying rights or options to
purchase any such shares. The Preferred Stock will not be subject to any
sinking fund or other obligations of the Company to redeem or retire the
Preferred Stock. Unless converted, the Preferred Stock will be perpetual. The
Preferred Stock will rank, with respect to rights on liquidation, senior to
all classes of Common Stock and each other class of capital stock or series of
preferred stock established after the date hereof by the Board of Directors
which does not expressly provide that it ranks senior to or on a parity with
the Preferred Stock as to rights on liquidations, winding-up and dissolution.
Section 2. Dividends. No dividends shall be paid or accrue on the
Preferred Stock, unless declared by the Board of Directors.
Section 3. Voting Rights. Except as otherwise required by applicable law,
all voting rights of the Company shall be vested in and exercised by the
holders of the Common and Preferred Stock, voting as a single group, with each
share of Common Stock being entitled to one vote and each share of Preferred
Stock being entitled to 250 votes.
Section 4. Liquidation. Upon dissolution, liquidation or winding up of
the Company, the assets remaining after the payment of all debts and
liabilities of the Company are to be paid to the holders of the Preferred
Stock in an amount equal to the Stated Value, or on a pro rata basis if the
remaining assets of the Company are insufficient therefor. After payment of
any such liquidating payment, the shares of Preferred
Stock will not be entitled to any further participation in any distribution of
assets by the Company. Neither the sale or transfer of all or substantially
all the assets of the Company, nor the merger or consolidation of the Company
into or with any other corporation or a merger of any other corporation with
or into the Company, will be deemed to be a liquidation, dissolution or
winding up of the Company
Section 5. Conversion.
(a) Shares of Preferred Stock may be convertible at any time, in whole
or in part, at the option of the holder thereof into Common Stock at a
conversion price of $3.50 per share (i.e., each share of Preferred Stock shall
be convertible into 250 shares of Common Stock) (the "Conversion Price"). The
holder shall effect conversions by surrendering the certificate or
certificates representing the shares of Preferred Stock to be converted to the
Company, together with the form of conversion notice attached hereto as
Exhibit A (the "Holder Conversion Notice") in the manner set forth in Section
5(i). No fractional shares or other consideration will be issued as a result
of a fractional interest upon conversion. No adjustments as to previously
declared or paid cash dividends, if any, will be made upon any conversion of
Preferred Stock.
(b) The outstanding shares of Preferred Stock will automatically be
converted into Common Stock at the applicable Conversion Price if the closing
bid price for the Common Stock for 15 successive trading days is equal to or
greater than $12.00 per share. Notice of such conversion shall be given by
mail, not less than 20 nor more than 60 days after the conversion has
occurred, to each record holder of the shares of Preferred Stock at the
address of such holder in the stock register of the Company. On the date the
Preferred Stock are converted, if any, such shares will no longer be deemed to
be outstanding, and all rights of the holders thereof as preferred
stockholders of the Company will cease and the holder thereof shall be deemed
to own the number of shares of Common Stock into which the Preferred Stock was
converted.
(c) As soon as reasonably practicable after the conversion of Preferred
Stock into Common Stock hereunder, the Company will send to the holder (i) a
certificate or certificates representing the number of shares of Common Stock
being acquired upon the conversion of shares of Preferred Stock and (ii) one
or more certificates representing the number of shares of Preferred Stock not
converted; provided, however that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon conversion of
any shares of Preferred Stock until certificates evidencing such shares of
Preferred Stock are either delivered for conversion to the Company or any
transfer agent for the Preferred Stock or Common Stock, or the holder notifies
the Company that such certificates have been lost, stolen or destroyed and
provides a bond (or other adequate security reasonably acceptable to the
Company) satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection therewith.
(d) (I) If any transaction shall occur, including without limitations
(a) any recapitalization or reclassification of shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value), (b) any consolidation or merger of the Company with or
into another entity or any merger of another entity into the Company (other
than a merger that does not result in a reclassifications, conversion,
exchange or cancellation of Common Stock), (c) any sale or transfer of all or
substantially all of the assets of the Company, or (d) any compulsory share
exchange, pursuant to which the holders of the Common Stock shall be entitled
to receive other securities, cash or other property, then appropriate
provisions shall be made so that the holder of each share of Preferred Stock
then outstanding shall have the right thereafter to convert the Preferred
Stock into the kind and amount of the securities, cash or other property that
would have been receivable upon such recapitalization, reclassification,
consolidation, merger, sale, transfer, or share exchange by a holders of the
number of shares of Common Stock issuable upon conversion/exercise of such
Preferred Stock immediately prior to such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange.
(ii) If at any time the Company issues a convertible security
(whether in the form of debt or equity) with differing conversion and
suspension characteristics from the Preferred Stock, then each stockholder who
then holds outstanding Preferred Stock and Series A Warrants shall have the
option to convert the such securities into the number of subsequently-issued
securities that such stockholder would have received had such stockholder
invested the funds used to acquire the Preferred Stock and Series A Warrants
to acquire the subsequently-issued securities instead. The conversion rights
described in this paragraph shall not apply to any securities issued solely to
one or more strategic partners of the Company that are reasonably expected to
generate revenues for the Company of at least $1 million following the
issuance of such securities. In addition, the conversion rights described in
this paragraph shall not
apply to non-convertible notes or debentures with warrant coverage not in
excess of 10% of the face amount of such notes or debentures.
(iii) In the event the Company shall at any time (a) pay a dividend
or make a distribution to holders of Common Stock in shares of capital stock,
(b) subdivide its outstanding shares of Common Stock into a larger number of
shares, (c) combine its outstanding shares of Common Stock into a smaller
number of shares, or (d) issue by reclassification or its shares of Common
Stock any shares of the Company, the Conversion Price in effect immediately
prior thereto shall be adjusted so that the holder of any share of Preferred
Stock thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock which such holder would have owned or have
been entitled to receive after the happening of any of the events described
above, had such shares of Preferred Stock been converted immediately prior to
the happening of such event. Any adjustment made pursuant to this subparagraph
(iii) shall become effective retroactively immediately after the record date
after the effective date in the case of a subdivision, combination or
reclassification.
(iv) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(v) Whenever there is an adjustment pursuant to Section 5(d)(i) or
conversion rights are triggered under Section 5(d)(ii), the Company shall
promptly mail to each holder of Preferred Stock, a notice setting forth the
terms of such adjustment and containing a brief statement of the facts
requiring such adjustment.
(e) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the
purpose of issuance upon conversion of Preferred Stock as herein provided,
free from preemptive rights or any other actual contingent purchase rights of
persons other than the holders of Preferred Stock, such number of shares of
Common Stock as shall be issuable (taking into account the adjustments and
restrictions of Section 5(d) hereof) upon the conversion of all outstanding
shares of Preferred Stock. The Company covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid and nonassessable.
(f) Upon conversion no fractional shares or other consideration will be
issued as a result of a fractional interest upon conversion and the Company
shall have no obligation to make a cash payment in respect of any fractional
share upon conversion.
(g) The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the holder of such shares of
Preferred Stock so converted and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid.
(h) Shares of Preferred Stock converted into Common Stock shall be
canceled and shall have the status of authorized but unissued shares of
preferred stock.
(i) Each Holder Conversion Notice shall be given by facsimile and mail,
postage prepaid, addressed to the attention of the Chief Financial Officer of
the Company at the facsimile telephone number and address of the principal
place of business of the Company. Any such notice shall be deemed given and
effective upon the earliest to occur of (i) five business days after deposit
in the United States mails or (ii) upon actual receipt by the Company.
RESOLVED FURTHER, that the Douglas M. Odom and Thomas E. Danielson, the
President and a Vice-President of the Company be, and they hereby are,
authorized and directed to prepare, execute, verify, and file in Delaware, a
Certificate of Designation in accordance with these resolutions and as
required by law.
IN WITNESS WHEREOF, Flexpoint Sensor Systems, Inc. has caused this
certificate to be signed by Douglas M. Odom, its President, and attested by
Thomas E. Danielson, its Vice-President, this 1st day of July, 1999.
FLEXPOINT SENSOR SYSTEMS, INC.
By: /s/ Douglas M. Odom
Douglas M. Odom
President
Attest:
By: /s/ Thomas E. Danielson
Thomas E. Danielson
Vice-President
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares of
Series A Convertible Preferred Stock indicated below into shares of Common
Stock, par value $.001 per share, (the "Common Stock") of Flexpoint Sensor
Systems, Inc. (the "Company") according to the conditions hereof, as of the
date written below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
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Date to Effect Conversion
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Number of shares of Preferred Stock to be Converted
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Signature
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Name
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Address