EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS
OF
SERIES C PREFERRED STOCK
AND
SERIES D PREFERRED STOCK
OF
PALADYNE CORP.
(Pursuant to Section 151(g) of
the Delaware General Corporate Law)
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1. The name of the corporation is Paladyne Corp., a corporation organized
and existing under the laws of the State of Delaware (the "Corporation").
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2. The Certificate of Incorporation, as amended, of the Corporation
authorizes the issuance of Ten Million (10,000,000) shares of preferred stock,
$.001 par value per share (the "Preferred Stock"), and expressly vests in the
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Board of Directors of the Corporation the authority to establish and designate
one or more series of Preferred Stock, to fix the number of shares constituting
each series, and to fix the designations, powers, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, and the variations and the relative rights, preferences
and limitations as between each series.
3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, by unanimous written consent, dated as of
September 24, 2001, has adopted the following resolutions creating a Series C
issue of Preferred Stock and a Series D issue of Preferred Stock:
"RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by Article 4 of the
Corporation's Certificate of Incorporation, (i) One Million Eight Hundred
Thousand (1,800,000) authorized shares of Preferred Stock shall be designated as
8% Cumulative Convertible Series C Preferred Stock (the "Series C Preferred
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Stock") and (ii) One Million Fifty Thousand (1,050,000) authorized shares of
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Preferred Stock shall be designated as 8% Cumulative Convertible Series D
Preferred Stock (the "Series D Preferred Stock"), and shall possess the rights
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and privileges set forth below:
A. General. All shares of Series C Preferred Stock and of Series D
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Preferred Stock shall be identical to each other in all respects except for
certain voting rights as specified in Part C below and certain liquidation
preferences as specified in Part E below. All shares of Series C Preferred Stock
and of Series D Preferred Stock shall be of such rank as to any other
outstanding series of Preferred Stock, if any, of the Corporation as to
dividends and as to distributions upon liquidation, dissolution or winding up
(except as described below), as shall be provided herein and in the resolutions
of the Board of Directors of the Corporation creating such other series of
Preferred Stock.
B. Conversion. Each of the holders of Series C Preferred Stock and
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Series D Preferred Stock shall have the following conversion rights:
(i) Right to Convert and Automatic Conversion. Each share of Series C
Preferred Stock and Series D Preferred Stock then outstanding shall be
convertible, at the option of the holder thereof, without the payment of any
additional consideration, into ten (10) shares fully-paid and non-assessable of
the Corporation's Common Stock, $.001 par value per share (the "Common Stock"),
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subject to adjustment as provided below (the "Conversion Ratio"), at any time,
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and from time to time commencing one hundred and fifty (150) days after the
initial issuance of any shares of the Series C Preferred Stock. Conversion shall
become mandatory when the average closing market price for the Common Stock for
any fifteen (15) consecutive trading days is at least $1.25 per share (the
"Conversion Event").
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(ii) Mechanics of Optional Conversion. Each holder of
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Series C Preferred Stock and Series D Preferred Stock who desires to convert the
same into shares of Common Stock shall provide notice to the Corporation by the
execution and delivery to it of a notice of conversion, together with the
certificates for the shares of Series C Preferred Stock or Series D Preferred
Stock, as the case may be, which are to be converted. The Corporation shall use
its reasonable best efforts to issue and deliver, within five (5) days business
days after it receives the certificate or certificates for the shares of
Series C Preferred Stock or Series D Preferred Stock, as the case may be, to be
converted, with proper endorsement if necessary, from the holder electing
conversion, a certificate or certificates for the number of shares of Common
Stock to which the holder shall be entitled upon the conversion, together with a
certificate for any Series C Preferred Stock or Series D Preferred Stock, as the
case may be, which are represented by the certificate or certificates
surrendered by the holder but which the holder had not elected to convert.
(iii) Mechanics of Mandatory Conversion. After a Conversion Event, the
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Corporation shall send to each holder of Series C Preferred Stock and each
holder of Series D Preferred Stock a written notice specifying (x) the date on
which the Conversion Event has occurred, (y) the date as of which the shares of
Series C Preferred Stock and shares of Series D Preferred Stock shall be
converted to Common Stock, and (z) the number of shares of Common Stock issuable
by reason of the Conversion Event. Upon the Conversion Event, the Series C
Preferred Stock and the Series D Preferred Stock shall be automatically
converted into the number of shares of Common Stock that the holder would have
the right to convert at the Conversion Ratio in effect on the day immediately
prior to the last trading day in the measuring period for the Conversion Event.
The Corporation shall use its reasonable best efforts to issue and deliver,
within five (5) business days after it receives the certificate or certificates
for the shares of Series C Preferred Stock or the shares of Series D Preferred
Stock, as the case may be, to be converted, with proper endorsement if
necessary, from the holders, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled to upon the
conversion. Closing market price for purposes of determining whether a
Conversion Event has occurred shall mean (x) if the Common Stock is then listed
on the Nasdaq Small-Cap or National System or on a national securities exchange,
the average of the last reported sales prices for each trading day during the
measurement period or (y) if the Common Stock is then traded on the OTC Bulletin
Board or other trading system, the average of the closing bid prices for each
trading day during the measurement period.
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(iv) Adjustment. In the event of a stock split, stock dividend,
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reorganization, recapitalization or other event affecting the Common Stock or
the Series C Preferred Stock or the Series D Preferred Stock, as the case may
be, the Board of Directors of the Corporation shall make an equitable adjustment
in the Conversion Ratio, if necessary, to reflect such event in order to
preserve substantially the initial Conversion Ratio. In the case of any capital
reorganization of the Corporation, or any consolidation or merger of the
Corporation with or into another corporation, or any sale or conveyance to
another corporation of all or substantially all of the property of the
Corporation, the holder of each share of Series C Preferred Stock and Series D
Preferred Stock then outstanding shall have the right thereafter to convert such
share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, consolidation, merger, sale or
conveyance by a holder of shares of Common Stock of the Corporation into which
such share of Series C Preferred Stock or the Series D Preferred Stock, might
have been converted immediately prior to such reorganization, consolidation,
merger, sale or conveyance, and shall have no further conversion rights under
these provisions; and any such resulting or surviving corporation shall
expressly assume the obligation to deliver, upon the exercise of the conversion
privilege, such shares, securities or property as the holders of the Series C
Preferred Stock and Series D Preferred Stock shall be entitled to receive
pursuant to the provisions hereof. In the case securities or property other than
Common Stock shall be issuable or deliverable upon conversion as aforesaid, then
all references in this Paragraph (iv) to Common Stock shall be deemed to apply,
so far as appropriate and as nearly as may be, to such other securities or
property. The provisions of this Paragraph shall apply to successive stock
splits, stock dividends, reorganizations, recapitalizations or other events
affecting the Common Stock or the Series C Preferred Stock or the Series D
Preferred Stock, as the case may be. Whenever the Conversion Ratio and/or the
securities issuable upon conversion is adjusted as herein provided, the
Corporation shall give written notice to the holders of the Series C Preferred
Stock and the Series D Preferred Stock of such adjustment setting forth the new
Conversion Ratio and the number of shares of Common Stock (or other securities)
issuable upon conversion and a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made.
(v) Fractional Shares. No fractional shares of Common Stock shall be
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issued upon the conversion of any shares of Series C Preferred Stock or shares
of Series D Preferred Stock. All shares of Common Stock (including fractions
thereof) issuable upon conversion of shares of Series C Preferred Stock or
Series D Preferred Stock, as the case may be, 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, round up
or down any fractional share to the nearest whole share of Common Stock.
(vi) Reservation of Common Stock Issuable Upon Conversion. The
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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 C Preferred Stock and Series D Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all then
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outstanding shares of the Series C Preferred Stock and Series D Preferred Stock.
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 C Preferred Stock and Series D Preferred Stock, the Corporation
will use its best efforts to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
(vii) Status of Converted Stock. Upon the Corporation receiving a
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notice of conversion for any shares of Series C Preferred Stock or Series D
Preferred Stock, as the case may be, pursuant to this Part B, or upon the
Corporation giving a notice of mandatory conversion pursuant to this Part B, the
shares of Series C Preferred Stock or Series D Preferred covered by such notice
of conversion shall no longer be deemed outstanding and all rights with respect
to such shares shall cease and be cancelled (except for the right of the holders
thereof to receive shares of Common Stock upon conversion thereof), and such
shares of Series C Preferred Stock or Series D Preferred Stock, as the case may
be, shall return to the status of authorized but unissued Preferred Stock of no
designated class or series, and shall not be issuable by the Corporation as
Series C Preferred Stock or Series D Preferred Stock.
C. Voting Rights.
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(i) Generally. Except as set forth in Paragraph (ii) below and as
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required by applicable law, (x) the holder of each issued and outstanding share
of Series C Preferred Stock or Series D Preferred Stock, as the case may be,
shall have the right to cast that number of votes equal to number of shares of
Common Stock issuable upon conversion of such shares of Series C Preferred Stock
and Series D Preferred Stock at the then Conversion Ratio on every matter duly
brought before the holders of Common Stock at all meetings of stockholders of
the Corporation to be held prior to the conversion of the Series C Preferred
Stock or Series D Preferred Stock, and (y) the holders of Series C Preferred
Stock and Series D Preferred Stock and the holders of Common Stock shall vote
together as one class on all matters submitted to a vote of the stockholders of
the Corporation.
(ii) Separate Vote. The approval of the holders of a majority of the
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outstanding shares of Series C Preferred Stock or Series D Preferred Stock, each
voting as a separate class and having one vote per share, shall be required for:
(a) the amendment of any of the terms and conditions of the
Series C Preferred Stock or Series D Preferred Stock, as the case may be,
(b) the issuance of any securities with rights, preferences and
privileges (the "Preferences") equal to or superior than the Preferences of the
Series C Preferred Stock or the Series D Preferred Stock, as the case may be,
and
(c) as otherwise required by the General Corporation Law of the
State of Delaware.
D. Dividends.
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(i) Declaration and Payment. The holders of the Series C Preferred
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Stock and the Series D Preferred Stock shall be entitled to receive, when and as
declared by the Board of the Directors of the Corporation, a cumulative dividend
at the rate of $.13 1/3 per share per annum, based upon a twelve (12) month
year, subject to pro rata reduction for a dividend
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measurement period of less than twelve (12) months, payable either in cash or in
shares of Common Stock at the election of the Board of Directors of the
Corporation, on the last business day of October in each year, commencing
October 31, 2002, to each holder of record on a date which is ten (10) days
prior to the applicable payment date. So long as any shares of Series C
Preferred Stock or Series D Preferred Stock are outstanding, no dividend shall
be declared or paid or other distribution made on the Common Stock or any other
class or series of the Corporation's capital stock ranking as to dividends on a
parity with or junior to the Series C Preferred Stock and Series D Preferred
Stock, unless the preferential dividends on the Series C Preferred Stock and
Series D Preferred Stock through the dividend declaration date shall have been
paid in full or declared and set aside for payment. No dividends shall be paid
on the Series C Preferred Stock or the Series D Preferred Stock at such time as
such payment would violate the laws of the State of Delaware or any agreement to
which the Corporation is a party or may be bound. Should the Corporation elect
to pay any dividend in shares of Common Stock, the number of shares to be issued
shall be the result of dividing (x) the average market value for the Common
Stock for the ten (10) consecutive trading days immediately preceding the record
date for the dividend by (y) the amount of the dividend payable per share of
Series C Preferred Stock or Series D Preferred Stock, as the case may be. The
market value shall be determined by the procedure in the last sentence of
Paragraph (iii) of Part B above. Further, upon conversion of any shares of
Series C Preferred Stock or Series D Preferred Stock pursuant to Part B above,
any accumulated but unpaid dividends on the shares being converted shall be
deemed waived.
(ii) Adjustment. In the event of a stock dividend, stock split-up,
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share combination, recapitalization or other capital transaction effecting the
Series C Preferred Stock or Series D Preferred Stock, as the case may be, the
Board of Directors of the Corporation shall determine whether such transaction
would cause an adjustment to the amount of the preferential annual dividend on
the Series C Preferred Stock and the Series D Preferred Stock, the Board of
Directors shall give written notice to each holder of the Series C Preferred
Stock or the Series D Preferred Stock, as the case may be, specifying the
applicable transaction, the adjusted preferential dividend amount and a
calculation of the adjustment.
E. Liquidation Preference. In the event of any liquidation, dissolution
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or other winding-up of the Corporation, either voluntary or involuntary (a
"Liquidation"), each holder of the shares of the Series C Preferred Stock or
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Series D Preferred Stock, as the case may be, shall be entitled to be paid out
of the assets of the Corporation available for distribution to its stockholders,
from any source, and be senior to all other equity securities of the Corporation
and shall be entitled to receive, prior to and in preference to any payments to
any of the holders of any other equity securities, for the following:
(i) Series C Preferred Stock. For each share of Series C Preferred
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Stock then held by a holder, cash in an amount equal to $1.66 per share, plus
declared, unpaid and accrued dividends (the "Preferential C Amount"). Such
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payment shall be made pari passu to the holders of the Series D Preferred Stock
and of any other series of Preferred Stock ranking on a parity (the "Parity
Stock") with the Series C Preferred Stock with respect to payment on Liquidation
of the Corporation. All payments to holders of Series C Preferred Stock upon
Liquidation shall be in cash.
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(ii) Series D Preferred Stock. For each share of Series D Preferred
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Stock then held by a holder, cash or assets of the Corporation in an amount
equal to $1.66 per share, plus declared, unpaid and accrued dividends (the
"Preferential D Amount"). Such payment shall be made pari passu to the holders
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of the Series C Preferred Stock and of any other series of Parity Stock, subject
to the right of the holders of the Series D Preferred Stock set forth in this
Paragraph. Upon Liquidation, in payment of all or part of their Preferential D
Amount the holders of the Series D Preferred Stock shall have the right to take
assets of the Corporation designated by each such holder in lieu of cash
payment. The assets designated by the holders of Series D Preferred Stock shall
be valued at the value of such assets as shown on the most recent publicly
available balance sheet of the Corporation.
(iii) Priorities. If the assets (including securities) thus
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distributed or distributable among the holders of the Series C Preferred Stock
or Series D Preferred Stock, as the case may be, and holders, if any, of Parity
Stock, shall be insufficient to permit the payment to such holders of the full
Preferential C Amount and the full Preferential D Amount and preferential
dividend to the holders of any Parity Stock, then the entire assets (including
securities) available for distribution shall be distributed pro-rata among the
holders of the Series C Preferred Stock or Series D Preferred Stock, and such
holders of Parity Stock ratably in proportion to the preferential amount of each
such holder is otherwise entitled to receive. After payment shall have been made
to the holders of shares of Series C Preferred Stock or Series D Preferred Stock
of the full Preferential C Amount and the full Preferential D Amount, the
holders of shares of the Series C Preferred Stock or Series D Preferred Stock
shall be entitled to no further distributions thereon, and the holders of the
shares of the Common Stock and of shares of any other series of stock of the
Corporation ranking junior to the Series C Preferred Stock or Series D Preferred
Stock in respect of distribution of assets, shall be entitled to share,
according to their respective rights and preferences, in all remaining assets of
the Corporation available for distribution to its stockholders.
(iv) Merger not Liquidation. A merger or consolidation of the
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Corporation with or into any other corporation, or a sale, lease, exchange or
transfer of all or any part of the assets of the Corporation which shall not
result in the liquidation (in whole or in part) of the Corporation and the
distribution of its assets to its stockholders shall not be deemed to be a
Liquidation within the meaning of this Part E.
F. Redemption Rights. Neither the Corporation nor any holder of shares of
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Series C Preferred Stock or Series D Preferred Stock shall have the right to
cause or permit the redemption by the Corporation of any outstanding shares of
Series C Preferred Stock or Series D Preferred Stock.
G. Preemptive Rights. The holders of the Series C Preferred Stock and of
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the Series D Preferred Stock shall not be entitled to any preemptive or
subscription rights in respect of any securities of the Corporation by reason of
their ownership of the Series C Preferred Stock or Series D Preferred Stock, as
the case may be.
FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the Series C Preferred Stock and the
Series D Preferred Stock and fixing the number, powers, preferences and
relative, optional, participating and other special
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rights and the qualifications, limitations, restrictions and other
distinguishing characteristics thereof, shall, upon the effective date of these
Series, be deemed to be included in and be a part of the Certificate of
Incorporation of the Corporation pursuant to the provisions of Sections 104 and
151 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be executed by a duly authorized officer on the 22nd day of
October, 2001.
PALADYNE CORP.
By: ___________________________________
Terrence J. Leifheit
Chairman and CEO
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