1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
HOH WATER TECHNOLOGY CORPORATION
FLOYD PANNING and CATHERINE PATTERSON certify that:
A. They are the President and the Secretary, respectively, of HOH
WATER TECHNOLOGY CORPORATION., a California corporation.
B. The Articles of Incorporation of the Corporation, as amended to
the date of filing of this Certificate, including amendments set forth herein
but not separately filed (and with the omissions required by Section 910 of the
Corporations Code) are restated as follows:
ONE: The name of the Corporation is ELECTROPURE, INC.
TWO: The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be incorporated
by the California Corporations Code.
THREE: (a) The Corporation is authorized to issue four classes
of shares designated "Convertible Preferred Stock,""Preferred Stock," "Common
Stock," and "Class B Common Stock, respectively. The number of shares of
Convertible Preferred Stock authorized to be issued is 2,600,000 shares of
$0.01 par value, the number of shares of Preferred Stock authorized to be
issued is 1,000,000 shares, $1.00 par value, the number of shares of Common
Stock authorized to be issued is 20,000,000 shares of $0.01 par value, and the
number of shares of Class B Common Stock authorized to be issued is 83,983
shares of $0.01 par value. The rights, preferences, provisions and
restrictions imposed upon the four classes of shares are set forth in the
succeeding Sections of Article THREE.
Effective upon filing of these Restated Articles of
Incorporation each outstanding shares of Common Stock and Class B Common Stock
shall be reverse split into 1/10 (one-tenth) of a share of Common Stock and
Class B Common Stock, respectively. Any shareholder of the Common Stock or
Class B Common Stock, who, after aggregating all Common Stock and Class B
Common Stock, respectively, owned by such person resulting from such reverse
split would own a fractional share of Common Stock or Class B Common Stock,
respectively, shall have such fractional share rounded up to a whole share of
Common Stock or Class B Common Stock, respectively.
1
2
(b) Convertible Preferred Stock.
(1) Dividend Rights. The holders of the Convertible
Preferred Stock shall not be entitled to receive dividends. Dividends shall be
paid to the holders of the Common Stock and Class B common Stock subject to the
rights of the holders of Preferred Stock, when and as declared by the Board of
Directors. If the Corporation is required to redeem the Convertible Preferred
Stock pursuant to Articles THREE(b)(3)(i) or THREE(b)(4)(viii) hereof, the
Corporation shall not pay any dividends on the Common Stock or the Class B
Common Stock until all shares of Convertible Preferred Stock is so redeemed.
(2) Liquidation. In the event of a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of the Common Stock, Class B Common Stock and Convertible Preferred
Stock, subject to the rights of the holders of Preferred Stock, shall be
entitled to receive, from the assets of this Corporation, whether such assets
are capital or surplus and out of funds legally available therefore, an equal
amount per share of Common Stock and Convertible Preferred Stock, provided,
however, in no case shall each share of Convertible Preferred Stock receive
more than an amount equal to one Cent ($0.01) per share of Convertible
Preferred Stock and in no case shall each share of Class B Common Stock receive
an amount greater than eighty percent (80%) of the amount each share of Common
Stock receives. A reorganization shall not be considered to be a liquidation,
winding up or dissolution within the meaning of this Section 2 and the Common
Stock, Class B Common Stock and Convertible Preferred Stock shall be entitled
only to the rights provided in the plan of reorganization and Chapters 12 and
13 of the California General Corporation Law and elsewhere herein.
(3) Redemption.
(i) This Corporation shall, on January 31, 1991,
redeem all of the outstanding shares of Convertible Preferred Stock for one Cent
($0.01) per share (the "redemption price"). If redemption cannot occur on
January 31, 1991, because there is not legally available funds to redeem all of
the shares of Convertible Preferred Stock, the shares of Convertible Preferred
Stocks shall be redeemed as soon as possible from legally available funds and
the Corporation shall thereafter redeem as many shares of Convertible Preferred
Stock, on a pro rata basis, each time it has funds legally available until all
shares of Convertible Preferred Stock are redeemed.
(ii) Any share of Convertible Preferred Stock
shall be redeemed by the Corporation out of funds legally available therefor,
at the redemption price of one Cent ($0.01) per share (the "redemption price"),
if any transfer of a share of convertible Preferred Stock is made or attempted
to be made in violation of the provisions of Article THREE (b)(7) hereof. Such
redemption shall be deemed to have occurred simultaneously with such transfer
in violation of the provisions of Article THREE (b)(7) hereof and on and after
such deemed redemption, the shares so redeemed will no longer be outstanding
and the holder thereof shall then have ceased to be a holder of such shares
after such date and shall be entitled only to receive the redemption price
without interest upon surrendering the certificate or certificates representing
the redeemed shares.
(iii) For redemptions pursuant to Article THREE (b)
(3) (i) hereof and Article THREE (b)(4)(viii), the Corporation shall mail a
notice of redemption to each holder of record of
2
3
the shares of Convertible Preferred stock to be redeemed addressed to the
holder at the address of such holder appearing on the books of the Corporation
or given by the holder to the Corporation for the purposes of notice or, if no
such address appears or is given at the place where the principal executive
office of the Corporation is located, not earlier than sixty (60) days nor
later than thirty (30) days before the date fixed for redemption. The notice
of redemption shall include (I) the identification of the shares to be
redeemed, (II) the date fixed for redemption, (III) the redemption price, and
(IV) the place at which shareholders may obtain payment of the redemption price
upon surrender of their share certificate. If funds are available on the date
fixed for the redemption, then whether or not the share certificates are
surrendered for payment of the redemption price, the shares designated for
redemption shall no longer be outstanding and the holders thereof shall cease
to be shareholders of the Corporation with respect to such shares on and after
the date fixed for redemption and shall be entitled only to receive the
redemption price without interest upon surrender of the certificate or
certificates representing the redeemed shares. If less than all shares
represented by one share certificate are to be redeemed, the Corporation shall
issue a new share certificate for the shares not redeemed.
(4) Conversion.
(i) On or after the time the first condition in
Article THREE (b)(4)(iv) hereof has been determined by the Board of Directors
to have been met (but on or before the Company is required to redeem a share of
Convertible Preferred Stock pursuant to Article THREE (b)(3) hereof), each
share of Convertible Preferred stock will be automatically converted into one
share of Common Stock on the date the Board of Directors issues the "Conversion
Notice" as provided for in Article THREE (b)(4)(vii) hereof. Upon conversion,
no fractional shares of Common Stock shall be issued and the Corporation shall
in lieu thereof pay in cash the fair value of the fractional share. The
Corporation shall reserve and keep reserved out of its authorized but unissued
shares of Common Stock sufficient shares to effect the conversion of all shares
outstanding from time to time. The Corporation shall mail promptly a
Conversion Notice to each record holder of the Convertible Preferred Stock
after the first condition in Article THREE (b)(4)(iv) hereof shall have been
met, informing them that such condition has been met. From and after the date
of any automatic conversion each share of Convertible Preferred Stock shall
represent the number of shares of Common Stock the share of Convertible
Preferred Stock was converted into.
(ii) A holder of a share of Convertible Preferred
Stock desiring to convert and obtain certificates for Common Stock shall
deliver the relevant share certificate or certificates to the Corporation,
accompanied by a written request to convert, specifying the number of shares of
Convertible Preferred Stock to be converted. The endorsement of the share
certificate of Convertible Preferred Stock and the request to convert, if
applicable, shall be in form satisfactory to the Corporation.
(iii) The number of shares of Common Stock into
which the shares of Convertible Preferred Stock may be converted shall be
subject to adjustment from time to time in certain cases as set forth below:
(A) In case the Corporation shall after the
issuance of any shares of Convertible Preferred Stock (i) pay a
dividend in shares of Common Stock or securities convertible or
exchangeable for Common Stock, or (ii) make a distribution in
shares of
3
4
Common Stock or other securities by way of stock-split, spin-off,
reclassification, combination or subdivision of shares or other
corporate rearrangement, or (iii) be a party to any other event or
transaction, the result of which could be to have an effect
similar to any one or more of the aforesaid, then, and in each
such case, the holder of the shares of Convertible Preferred Stock
shall be entitled to receive upon any conversion of the shares of
Convertible Preferred Stock the kind and number of shares or other
securities which the holder of the shares of Convertible Preferred
Stock would have owned or have been entitled to receive on the
effective date of any of the events described above, had the
shares of Convertible Stock been converted immediately prior to
the effective date of such event or any record date with respect
thereto.
(B) In case of the consolidation or merger
of the Corporation with or into another corporation or the sale or
conveyance of all or substantially all of the assets of the
Corporation to another corporation (any such consolidation,
merger, sale or conveyance is hereinafter referred to as
"Reorganization"), the shares of Convertible Preferred Stock shall
thereafter be convertible into the same kind and amount of
securities (including shares of stock) or other assets, or both,
which were issuable or distributable to the holders of outstanding
shares of Common stock of the Corporation upon such
Reorganization, in respect of that number of shares of Common
Stock into which the shares of Convertible Preferred Stock might
have been converted immediately prior to such Reorganization; and
in any such case, appropriate adjustments (as determined in good
faith by the Board of Directors of the Corporation) shall be made
in the application of the provisions herein set forth with respect
to the rights and interests thereafter of the holder of the shares
of Convertible Preferred Stock, to the end that the provisions set
forth herein shall thereafter be applicable, as nearly as
reasonably may be practicable, in relation to any securities or
other assets thereafter deliverable upon the conversion of the
shares of Convertible Preferred Stock.
(iv) The shares of Convertible Preferred Stock
shall be convertible into Common Stock as provided in Article THREE (b)(4)(i)
hereof upon the first to occur of any of the following events:
(A) The Daily Market Price per share of the
Corporation's Common Stock for thirty (30) consecutive trading
days shall have equaled or exceeded $5.00 per share during the
fiscal year ending October 31, 1988; $6.50 per share during the
fiscal year ending October 31, 1989; or $8.00 per share during the
fiscal year ending October 31, 1990. (The Daily Market Price of
the Company's Common Stock shall he determined by the Company in
the manner set forth in Article THREE (b)(4)(vi) hereof as of the
end of each trading day (or, if no trading occurred in the
Company's Common Stock on such day, as of the end of the
immediately preceding trading day in which trading occurred).
(B) The "Net Earnings Per Share" for the Common
Stock of the Corporation shall equal or exceed $0.41 per share for
the fiscal year ending October 31, 1988; $0.85 per share for the
fiscal year ending October 31, 1989; or $1.36 per share for the
fiscal year ending October 31, 1990. ("Net Earnings Per Share"
shall be computed by dividing the consolidated net income after
taxes, but before any extraordinary earnings or losses, by the
4
5
number of shares of Common Stock outstanding and the maximum
number which are issuable upon the exercise, conversion or
exchange of all rights, options, warrants or convertible
securities then outstanding (whether or not then exercisable,
convertible or exchangeable), including all shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock or the
Class B Common Stock, at the end of the fiscal year of the
Corporation. For purposes of this computation, the consolidated
net income of the Corporation hall be determined according to
generally accepted accounting principles consistently applied.)
(v) Appropriate adjustment shall be made to the
Daily Market Price Per Share and Net Earnings Per Share as set forth in
Article THREE (b)(4)(iv) hereof to take account of stock dividends, stock
splits, reverse stock splits, recapitalizations, mergers, sales of all or
substantially all of the Company's assets and similar transactions.
(vi) For purposes of Article THREE (b)(4)(iv)(A)
hereof, the term "Daily Market Price" shall mean (x) if the Common Stock is
traded in the over-the-counter market and not in the NASDAQ National Market
System nor on any national securities exchange, the closing bid price of the
Common Stock on the trading day in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (y) if the Common Stock is
traded in the NASDAQ National Market System or on a national securities
exchange, the daily per share closing sale price of the Common stock in the
NASDAQ National Market System or on the principal stock exchange on which it
is listed on the trading day in question, as the case may be. For purposes of
clause (x) above, if trading in the Common Stock is not reported by NASDAQ,
the bid price referred to in said clause shall be the lowest bid price as
reported in the "pink sheets" published by National Quotation Bureau,
Incorporated. The closing price referred to in clause (y) above shall be the
last reported sales price or, in case no such reported sale takes place on such
day, the average of the reported closing bid and asked prices, in either case,
in the NASDAQ National Market system or on the national securities exchange on
which the Common Stock is then listed.
(vii) Within sixty (60) days of the date in which
the Board of Directors could first determine whether a condition of Article
THREE (b)(4)(iv) hereof is met, the Board of Directors shall meet to determine
to issue a "Conversion Notice." The Board of Directors shall issue a
Conversion Notice within such sixty (60) day period only if both the following
conditions are met:
(A) The Board of Directors determines that
one of the conditions in Article THREE (b)(4)(iv) hereof has been
met; and
(B) The Board of Directors of the Company
shall have received a favorable report of the Corporation's
independent public accountants that the automatic conversion of
Convertible Preferred Stock into Common Stock will not, under
generally accepted accounting principles or under Regulations S-X
as promulgated by the Securities and Exchange Commission (or any
other public announcement of the Securities and Exchange
Commission) require a charge against the income of the
Corporation.
(viii) Notwithstanding any other provisions of this
Article THREE (b)(4), if the independent public accountants cannot render a
report as provided for in Article THREE
5
6
(b)(4)(vii)(B) hereof, then all of the outstanding shares of the Convertible
Preferred Stock will not be automatically converted into Common Stock, but
shall instead be redeemed for Ten Cents ($0.10) per share (the "redemption
price") as soon as funds are legally available to consummate such redemption.
If such redemption cannot occur because there is not legally available funds to
redeem all of the share of Convertible Preferred Stock, the shares of
Convertible Preferred Stock shall be redeemed as soon as possible from legally
available funds and the Corporation shall redeem thereafter as many shares of
Convertible Preferred Stock, on a pro rata basis, each time it has funds
legally available until all shares of Convertible Preferred Stock are redeemed.
(5) Voting Rights. The holder of each share of Common
Stock, Class B Common Stock and Convertible Preferred Stock shall be entitled
to vote on all matters and each share of Common Stock shall have one vote per
share, each share of Class B Common Stock shall have eight votes per share, and
each share of Convertible Preferred Stock shall have one vote per share.
Except as otherwise may be required by law and in Article THREE (3)(d)(4)
hereof, the holders of the shares of Common Stock, Class B Common Stock and the
Convertible Preferred Stock shall vote together as one class and not as
separate classes.
(6) Preemptive Right. Except as otherwise specifically
provided herein, no holder of the shares of Convertible Preferred Stock shall
be entitled as of right to subscribe for, purchase, or receive any part of any
new or additional shares of any class, whether now or hereafter authorized, or
of bonds, debentures, or other evidences of indebtedness convertible into or
exchangeable for shares of any class, but all such new or additional shares of
any class, or bond, debentures, or other evidences of indebtedness convertible
into or exchangeable for shares, may be issued and disposed of by the Board of
Directors on such terms and for such consideration (to the extent permitted by
law), and to such person or persons as the Board of Directors in their
absolute discretion may deem advisable.
(7) Transfer Restrictions. Except upon death of the
holder thereof, or as otherwise agreed to by a majority of the directors of the
Corporation not owning any Convertible Preferred Stock, the shares of
Convertible Preferred Stock or any interest therein may not be transferred,
assigned, pledged, encumbered, sold, hypothecated or otherwise transferred,
whether by operation of law or not and whether upon marriage dissolution,
divorce or separation. Any attempted transfer in violation of this Article
THREE (b)(7) is void and upon such an attempted transfer the Corporation shall
automatically redeem the shares so attempted to be transferred as set forth in
Article THREE (b)(3)(ii) hereof.
(c) Preferred Stock. The Preferred Stock may be divided into
such number or series as the Board of Directors may determine. The Board of
Directors is authorized to determine and alter the rights, preferences,
privileges and restrictions granted to and imposed upon the Preferred Stock or
any series thereof with respect to any wholly unissued class of series of
Preferred Stock and the designation of any such series of Preferred Stock. The
Board of Directors, within the limits and restrictions stated in any resolution
or resolutions of the Board of Directors originally fixing the number of shares
constituting any series, may increase or decrease (but not below the number of
shares of such series then outstanding) the number of shares of any series
subsequent to the issue of shares of that series.
6
7
(d) Common Stock and Class B Common Stock.
The Common Stock and the Class B Common Stock shall have the same
rights, preferences, privileges and restrictions except as follows:
(1) Dividend Rights. The holders of the Common Stock and
Class B Common Stock shall be entitled to receive non-stock dividends;
provided, however, that the Class B Common Stock shall receive non-stock
dividends in the amount of only eighty percent (80%) of the value of the cash
or other property paid to each share of Common Stock.
No stock dividend shall be declared on the Common Stock in shares
of Common Stock unless an equal percentage dividend is simultaneously declared
on the Class B Common Stock in shares of Class B Common Stock. No reverse
stock split or stock split of the Common Stock shall be effected unless an
equal percentage stock split is effected in the Class B Common Stock. The
provisions of this paragraph do not apply to any stock dividend, reverse stock
split or stock split approved by the holders of a majority of the shares of the
Class B Common Stock at the time the stock dividend is declared or the reverse
stock split or stock split is approved by the shareholders.
(2) Liquidation. In the event of voluntary or involuntary
liquidation, dissolution or winding up of this Corporation, the holders of the
Common Stock, Class B Common Stock and Convertible Preferred Stock shall have
the rights set forth in Article THREE (b)(3) hereof.
(3) Conversion.
(i) Simultaneously with an attempt to transfer a share of
Class B Common Stock in violation of the transfer restrictions of Article THREE
(d)(6) hereof, such share of Class B Common Stock shall automatically, and
without any action of the holder thereof, be converted into one share of Common
Stock. Each share of Class B Common Stock shall automatically, and without any
action of the holder thereof, be converted into one share of Common Stock upon
the death of Harry M. O'Hare, Sr. Upon such automatic conversion, no
fractional shares of Common Stock shall be issued and the Corporation shall in
lieu thereof pay in cash the fair value of the fractional share. The
Corporation shall reserve and keep reserved out of its authorized but unissued
shares of Common Stock sufficient shares to effect the conversion of all shares
of Class B Common Stock outstanding from time to time. On and after an
automatic conversion of the Class B Common Stock into Common Stock, the
certificate, or part thereof, for such former shares of Class B Common Stock
shall represent a certificate for an equal number of shares of Common Stock.
Upon such an automatic conversion, the conversion shall be deemed to have
occurred and the person entitled to receive share certificates for Common Stock
shall be regarded for all corporate purposes from and after such date as the
holder of the number of shares of Common Stock to which he is entitled upon
such conversion.
(ii) The number of shares of Common Stock into which the
shares of Class B Common Stock may be converted shall be subject to adjustment
from time to time in certain cases as set forth below:
7
8
(A) In case the Corporation shall after the
issuance of any share of Class B Common Stock (i) pay a dividend
in shares of Common Stock or securities convertible or
exchangeable for Common Stock, or (ii) make a distribution in
shares of Common Stock or other securities by way of stock-split,
spin-off, reclassification, combination or subdivision of shares
or other corporate rearrangement, or (iii) be a party to any other
event or transaction, the result of which could be to have an
effect similar to any one or more of the aforesaid, then, and in
each such case, the holder of the shares of Class B Common Stock
shall be entitled to receive upon any conversion of the shares of
Class B Stock the kind and number of shares or other securities
which the holder of the shares of Class B Stock would have owned
or have been entitled to receive on the effective date of any of
the events described above, had the shares of Class B Stock been
converted immediately prior to the effective date of such event or
any record date with respect thereto.
(B) In case of the consolidation or merger of the
Corporation with or into another corporation or the sale or
conveyance of all or substantially all of the assets of the
Corporation to another corporation (any such consolidation,
merger, sale or conveyance is hereinafter referred to as
"Reorganization"), the shares of Class B Stock shall thereafter be
convertible into the same kind and amount of securities (including
shares of stock) or other assets, or both, which were issuable or
distributable to the holders of outstanding shares of Common Stock
of the Corporation upon such Reorganization, in respect of that
number of shares of Common Stock into which the shares of Class B
Stock might have been converted immediately prior to such
Reorganization; and in any such case, appropriate adjustments (as
determined in good faith by the Board of Directors of the
Corporation) shall be made in the application of the provisions
herein set forth with respect to the rights and interests
thereafter of the holder of the shares of Class B Stock, to the
end that the provisions set forth herein shall thereafter be
applicable, as nearly as reasonably may be practicable, in
relation to any securities or other assets thereafter deliverable
upon the conversion of the shares of Class B Stock.
(4) Voting Rights. The holder of each share of Common Stock,
Class B Common Stock and Convertible Preferred Stock shall be entitled to
voting rights set forth in Article THREE (b)(5) and Article THREE (d)(1) hereof.
(5) Preemptive Right. Except as otherwise specifically
provided herein, no holder of the shares of Common Stock or Class B Common
Stock shall be entitled as of right to subscribe for, purchase, or receive any
part of any new or additional shares of any class, whether now or hereafter
authorized, or of bonds, debentures, or other evidences of indebtedness
convertible into or exchangeable for shares of any class, but all such new or
additional shares of any class, or bond, debentures, or other evidences of
indebtedness convertible into or exchangeable for shares, may be issued and
disposed of by the Board of Directors on such terms and for such consideration
(to the extent permitted by law), and to such person or persons as the Board of
Directors in their absolute discretion may deem advisable.
(6) Transfer Restrictions. A share of Class B Common Stock
or any interest therein may not be transferred, assigned, pledged, encumbered,
sold, hypothecated or otherwise transferred, whether by operation of law or not
and whether upon marriage, dissolution, divorce or separation, death
8
9
or revocation of a trust or transfer to a beneficiary of a trust. Any
attempted transfer in violation of this Article THREE (d)(6) is void and upon
such an attempted transfer, the shares of Class B Common Stock shall be
automatically converted into a share of Common Stock as set forth in Article
THREE (d)(3)(i) hereof.
FOUR: The liability of the directors of the Corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.
FIVE: The Corporation is authorized to provide indemnification
of agents (as defined in Section 317 of the Corporations Code) for breach of
duty to the Corporation and its shareholders through bylaw provisions, through
agreements with the agents, or both, or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the Corporations Code,
subject to the limits of such excess indemnification set forth in Section 204
of the Corporations Code.
C. The amendments herein set forth have been duly
approved by the Board of Directors.
D. The amendments herein set forth have been duly
approved by the required vote of the shareholders in accordance
with Sections 902 and 903 of the Corporations Code. The total
number of outstanding shares of the Corporation entitled to vote
on the foregoing amendments is Eighteen Million Nine Hundred
Sixty Thousand Six Hundred Ninety Five (18,960,695) shares of
Common Stock and Eight Hundred Thirty Nine Thousand Eight Hundred
Twenty Five (839,825) shares of Class B Common Stock. The number
of shares voting in favor of the amendment equaled or exceeded
the vote required. The percentage vote required for the approval
of the amendment herein set forth was more than 50%.
/s/ FLOYD PANNING
---------------------------------
Floyd Panning, President
/s/ CATHERINE PATTERSON
----------------------------------
Catherine Patterson, Secretary
FLOYD PANNING and CATHERINE PATTERSON declare under penalty of
perjury that they have read the foregoing Restated Articles of Incorporation
and know the contents thereof and that the same are true of their own
knowledge.
EXECUTED at Laguna Hills, California on July 11, 1996.
/s/ FLOYD PANNING
----------------------------------
Floyd Panning
/s/ CATHERINE PATTERSON
----------------------------------
Catherine Patterson
9