CERTIFICATE OF DESIGNATION, NUMBER, POWERS
PREFERENCES AND RELATIVE, PARTICIPATING
OPTIONAL, AND OTHER SPECIAL RIGHTS AND THE
QUALIFICATIONS, LIMITATIONS, RESTRICTIONS, AND
OTHER DISTINGUISHING CHARACTERISTICS OF
SERIES A PREFERRED STOCK
OF
INNOVATIVE SOFTWARE TECHNOLOGIES, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation) is
Innovative Software Technologies, Inc.
2. The certificate of incorporation of the Corporation authorizes
issuance of 25,000,000 shares of Preferred Stock with a par value to be
determined by the Board of Directors and expressly vests in the Board of
Directors of the Corporation the authority provided therein to issue any or all
of said shares in one or more series and by resolution or resolutions, the
designation, number, full or limited voting powers, or the denial of voting
powers, preferences and relative participating, optional, and other special
rights and the qualifications, limitations, restrictions, and other
distinguishing characteristics of each series to be issued.
3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a Series A issue of Preferred Stock:
RESOLVED, that one million five hundred thousand (1,500,000) shares of the
Preferred Stock (par value $.001 per share) are authorized to be issued by this
Corporation pursuant to its certificate of incorporation, and that there be and
hereby is authorized and created a series of preferred stock, hereby designed as
the Series A Preferred Stock, which shall have the voting powers, designations,
preferences and relative participating, optional or other rights, if any, or the
qualifications, limitations, or restrictions, set forth in such certificate of
incorporation and in addition thereto, those following:
(a) DESIGNATION. The Preferred Stock subject hereof shall be designated
Series A Preferred Stock ("Series A Preferred"). No other shares of
Preferred Stock shall be designated as Series A Preferred stock.
(b) DIVIDENDS. The holders of the shares of Series A Preferred shall be
entitled to receive dividends at the rate of 4% per annum of the
liquidation preference per share payable yearly in fully paid and
non-assessable shares of the Corporation's common stock. The number of
shares of common stock to be distributed as a dividend will be
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calculated by dividing such payment by 95% of the Market Price on the
first trading day after January 1 of each year. The term "Market Price"
means, as of any date, the average of the daily closing price for the
five consecutive trading days ending on such date. Delivery of such
shares of common stock shall be made not later than January 15 of each
year. The closing price for each day shall be the last sales price or
in case no such reported sales take place on such day, the average of
the last reported bid and asked and asked price, in either case, on the
national securities exchange on which the shares of common stock are
admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the representative closing bid price as reported by
the NASDAQ National Market, or other similar organization if the NASDAQ
National Market is no longer reporting such information, the OTC
Bulletin Board, or if not so available, the fair market price as
determined, in good faith, by the Board of Directors of the Company.
No dividends may be declared or paid any other outstanding Corporation
securities unless all dividends on the Series A Preferred and any other
shares of Preferred Stock on a parity with the Series A Preferred have
been declared and paid in full through the immediately preceding
dividend date. The holders of the Series A Preferred at the close of
business on January 1 of each year will be entitled to receive the
dividend on the dividend payment date.
(c) CONVERSION. The Series A Preferred shall, at the option of the holder
thereof, at any time and from time to time, be convertible into that
number of fully paid and non-assessable shares of the common stock of
the Corporation, equal to the par value of the shares of Series A
Preferred Stock being converted plus accrued but unpaid dividends,
divided by 95% of the Market Price (as that term is defined above) of
the Corporation's common stock at the time of conversion. Subject to
the provisions of (d) and (e), below, in no event shall the holders of
the Class A Preferred Stock be entitled to receive more than 3,000,000
shares of common stock upon conversion of the Series A Preferred Stock.
The conversion right of the holders of Series A Preferred Stock shall
be exercised by the surrender of the certificates representing shares
to be converted to the Corporation or its transfer agent for the Series
A Preferred, accompanied by written notice electing conversion.
Immediately prior to the close of business on the date the Corporation
receives written notice of conversion, each converting holder of Series
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A Preferred shall be deemed to be the holder of record of common stock
issuable upon conversion of such holder's Series A Preferred
notwithstanding that the share register of the Corporation shall then
be closed or that certificates representing such common stock shall not
then be actually delivered to such person. When shares of Series A
Preferred are converted, all accumulated and unpaid dividends (whether
or not declared or currently payable) on the Series A Preferred so
converted, to and not including the conversion date, shall be due and
payable. The conversion price shall be subject to adjustment if any of
the events described in the next paragraph of this paragraph ( c )
occurs. The adjustment will be accomplished from time to time as
described in the following paragraph.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR STOCK DIVIDENDS AND FOR
COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event that the
Corporation at any time or from time to time after the date of the
filing of this Certificate shall declare or pay, without consideration,
any dividend on the common stock or in any right to acquire common
stock for no consideration, or shall effect a subdivision of the
outstanding shares of common stock into a greater number of shares of
common stock (by stock split, reclassification or otherwise than by
payment of a dividend in common stock or in any right to acquire common
stock), or in the event the outstanding shares of common stock shall be
combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of common stock, then the Market Price, before
such event used to calculate dividends and the conversion rate, shall
be proportionately decreased or increased, as appropriate. In the event
that this Corporation shall declare or pay, without consideration, any
dividend on the common stock payable in any right to acquire common
stock for no consideration, then the Corporation shall be deemed to
have made a dividend payable in common stock in an amount of shares
equal to the maximum number of shares issuable upon exercise of such
rights to acquire common stock.
(e) ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the common
stock issuable upon conversion of the Series A Preferred shall be
changed into the same or different number of shares of any other class
or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination
of shares provided for in ((d)) above), the Market Price shall,
concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted so that the Series A
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Preferred shall be convertible into, in lieu of the number of shares of
common stock which the holders would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of common stock that would have been
subject to receipt by the holders upon conversion of the Series A
Preferred immediately before that change.
(f) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at any
time or from time to time after the date of this Certificate, there is
a capital reorganization of the common stock (other than as
subdivision, combination or reclassification of shares provided for in
((d)) and ((e)), above), as a part of such capital reorganization,
provision shall be made so that the holders of the Series A Preferred
shall thereafter be entitled to receive upon conversion of the Series A
Preferred the number of shares of stock or other securities or property
of the Company to which a holder of the number of shares of common
stock deliverable upon conversion would have been entitled on such
capital reorganization. In any case, appropriate adjustment shall be
made in the application of the provisions of (b), (c) and (f) with
respect to the rights of the holders of Series A Preferred after the
capital reorganization to the end that the provisions of (b), (c) and
(f) (including adjustment of the Market Price then in effect and the
number of shares issuable upon conversions of the Series A Preferred)
shall be applicable after that event and be as nearly equivalent as
practicable.
(g) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder
by the Corporation, but will at all times in good faith assist in the
carrying out all the provisions of this Certificate and in the taking
of all such action as may be necessary or appropriate in order to
protect the dividend and conversion rights of the holders of the Series
A Preferred against impairment.
(h) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each adjustment
or readjustment of the Market Price pursuant to this Certificate, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred a certificate executed by
the Corporation's president or Chief Financial Officer setting forth
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such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The Corporation shall,
upon the written request at any time of any holder of Series A
Preferred, furnish or cause to be furnished to such holder a like
certificate setting forth such adjustments and readjustments.
(i) ISSUE TAXES. The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares
of common stock on conversion of Series A Preferred pursuant hereto;
provided, however, that the Corporation shall no be obligated to pay
any transfer taxes resulting from any transfer requested by any holder
in connection with any such conversion.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall at
all times reserve and keep available out of its authorized but unissued
shares of common stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred, such number of its
shares of common stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series A
Preferred; and if at any time the number of authorized but unissued
shares of common stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series A Preferred, the
Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued
shares of common stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best
efforts to obtain the requisite stockholder approval of any necessary
amendment to this Certificate.
(k) FRACTIONAL SHARES. No fractional share shall be issued upon the
conversion of any shares or shares of Series A Preferred. All shares of
common stock (including fractions thereof) issuable upon conversion of
more than one share of Series A Preferred by a holder thereof shall be
aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance
of a fraction of a share of common stock, the Corporation shall, in
lieu of issuing any fractional share, pay the holder otherwise entitled
to such fraction a sum in cash equal to the Market Price of such
fraction on the date of conversion.
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(l) REDEMPTION. The Series A Preferred shall be redeemable by the
Corporation at any time at the rate of $1.00 per share plus accrued and
unpaid dividends. The redemption price is payable in shares of the
Corporation's common stock within 45 days after the delivery by the
Corporation to each holder of Series A Preferred of a written
redemption notice. If redeemed, each holder of redeemed Series A
Preferred shall deliver to the Corporation the certificates evidencing
the redeemed Series A Preferred. Upon receipt of the redemption notice,
the holders of the Preferred Stock shall have 30 days to convert the
Series A Preferred Stock into common stock at the conversion rate set
forth in (c), above.
(m) SINKING FUND. No provision shall be made for any sinking fund.
(n) LIQUIDATION RIGHTS. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders
of the Series A Preferred shall be entitled to receive $1.00 per share
before the holders of common shares and any other class or series of
preferred stock (other than a class or series created after the date
hereof which is entitled to share ratably with the Series A Preferred
in the payment of dividends or shall, in the event the amounts payable
thereon in liquidation are not paid in full, be entitled to share
ratably with the Series A Preferred in any other distribution of
assets, which class or series is hereinafter referred to as "Pari Passu
Stock") receive any amount as a result of liquidation, dissolution or
winding up of the Corporation. If the assets to be distributed among
the holders of the Series A preferred and any Pari Passu Stock are
insufficient to permit the Corporation to pay the full amount of the
liquidation preference, the Corporation shall distribute its assets
among the holders of the Series A Preferred and Pari Passu Stock
ratably based on the respective amounts otherwise payable to them. The
purchase or redemption by the Corporation of stock of any class, in any
number permitted by law, shall not for the purpose of this paragraph be
regarded as a liquidation, dissolution or winding up of the
Corporation. The Corporation shall not create, authorize, or issue any
shares of stock, which are superior in preference to dividends or
liquidation proceeds to the Series A Preferred.
(o) INVOLUNTARY LIQUIDATION. In the event of involuntary liquidation, the
shares of this series shall be entitled to the same amounts as in the
event of voluntary liquidation.
(p) PREFERENCE TO DIVIDEND. No dividends shall be declared or paid on the
common stock of the Corporation before all accumulated dividends on the
Series A Preferred Stock have been paid.
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(q) OTHER RESTRICTIONS. There shall be no conditions or restrictions upon
the creation of indebtedness of the Corporation, or any subsidiary or
upon the creation of any other series of preferred stock with any other
preferences.
(r) VOTING. (i) Each holder of shares of Series A Preferred shall be
entitled to one vote per share of Series A Preferred (except as
otherwise expressly provided herein or as required by law, voting
together with the Common Stock as a single class) and shall be entitled
to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation. If any of the events described in (d), (e), or (f)
above occur, the number of votes to which the holders of the Series A
Preferred are entitled shall be adjusted, as appropriate, to preserve
their voting power.
(ii) In addition to the voting rights set forth in (r)(i)
above, the holders of Series A Preferred, voting together as a class,
shall be entitled to elect two members of the Board of Directors at
each meeting and pursuant to each consent of the Corporation's
shareholders for the election of directors. In case of any vacancy of
an office in the office of a director occurring among the directors
elected by the holders of the Series A Preferred, the remaining
director so elected by the holders of the Series A Preferred may elect
a successor to hold the office for the unexpired term of the director
whose place shall be vacant. Any director who shall have been elected
by the holders of the Series A Preferred or any director so elected as
provided in the preceding sentence hereof, may be removed during the
aforesaid term of office, whether with or without cause, only by the
affirmative vote of the holders of a majority of the Series A
Preferred.
(s) STATED VALUE. The shares of Series A Preferred shall have a stated
value of $1.00 per share.
(t) OTHER PREFERENCES. The shares of the Series A Preferred shall no other
preferences, rights, restrictions, or qualifications, except as
otherwise provided by law or the certificate of incorporation of the
Corporation.
FURTHER RESOLVED, that the statements contained in the foregoing
resolution creating and designating the said series A Preferred Stock
and fixing the number, powers, preferences and relative, optional,
participating, and other special rights and the qualifications,
limitations, restrictions, and other distinguishing characteristics
thereof shall, upon the effective date of said series, be deemed to be
included in and be a part of the certificate or incorporation of the
Corporation.
Signed on January ___, 2002
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