CERTIFICATE OF DESIGNATION
OF
SERIES A PREFERRED STOCK
OF
ALBION AVIATION, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Albion Aviation, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority conferred upon the board of directors
of the Corporation (the "Board") by the Certificate of Incorporation (the
"Certificate of Incorporation") and Section 151 of the General Corporation Law
of the State of Delaware (the "DGCL"), the Board, at a special meeting held
March 31, 2003, duly adopted the following resolution creating a series of
preferred stock, par value $0.001 per share, designated as Series A Preferred
Stock.
RESOLVED, that Series A Preferred Stock, par value $0.001 per share, of
the Corporation be and hereby is created and that the designation and
amount of, and the rights, powers, preferences, privileges,
qualifications, limitations and restrictions of the shares of this
series are as follows:
The first series of preferred stock shall be designated
"Series A Preferred Stock" and shall consist of two hundred thousand
(200,000) shares. The preferences, limitations, and relative rights of
the Series A Preferred Stock are as set forth below:
(a) Liquidation Preference.
(1) In the event of any liquidation, dissolution, or
winding up of the Corporation, either voluntary or
involuntary, subject to the rights of other preferred stock,
if any, the holders of the Series A Preferred Stock shall be
entitled to receive, prior and in preference to any
distribution of any of the assets of the Corporation to the
holders of common stock by reason of their ownership thereof,
an amount per share equal to the price per share for which the
Series A Purchase Price was first issued by the Corporation
("Series A Purchase Price") for each share of Series A
Preferred Stock then held by them, plus declared but unpaid
dividends, if any. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the
Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential
amounts, then, subject to the rights of other preferred stock,
if any, the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among
the holders of the Series A Preferred Stock in proportion to
the preferential amount each such holder is otherwise entitled
to receive.
(2) Upon the completion of the distribution required
by subsection (a)(1) above and any other distribution that may
be required with respect to other preferred stock, if any, the
remaining assets of the Corporation available for distribution
to stockholders shall be distributed as follows: among the
holders of the Series A Preferred Stock and the common stock
pro rata based on the number of shares of common stock held by
each (assuming conversion of all such Series A Preferred
Stock).
(3) For purposes of this subsection (a), a
liquidation, dissolution, or winding up of the Corporation
shall be deemed to be occasioned by or to include, (i) the
acquisition of the Corporation by another entity by means of
any transaction or series of related transactions (including
any reorganization, merger, or consolidation, but excluding
any merger effected exclusively for the purpose of changing
the domicile of the Corporation); or (ii) a sale of all or
substantially all of the assets of the Corporation, unless the
Corporation's stockholders of record as constituted
immediately prior to such acquisition or sale will,
immediately after such acquisition or sale (by virtue of
securities issued as consideration for the Corporation's
acquisition or sale or otherwise) hold at least 50% of the
voting power of the surviving or acquiring entity.
(4) In any of the events specified in subsection (3)
above, if the consideration received by the Corporation is
other than cash, its value will be deemed its fair market
value. Any securities shall be valued as follows:
(i) Securities not subject to investment
letter or other similar restrictions on free
marketability:
(A) If traded on a securities
exchange or the Nasdaq National Market
System, the value shall be deemed to be the
average of the closing prices of the
securities on such exchange over the 30-day
period ending three days prior to the
closing;
(B) If actively traded
over-the-counter, the value shall be deemed
to be the average of the closing bid or sale
prices (whichever is applicable) over the
30-day period ending three days prior to the
closing; and
(C) If there is no active public
market, the value shall be the fair market
value thereof, as mutually determined by the
Corporation and the holders of at least a
majority of the voting power of all
then-outstanding shares of preferred stock.
(ii) The method of valuation of securities
subject to investment letter or other restrictions on
free marketability (other than restrictions arising
solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an
appropriate discount from the market value determined
as above in subsections (i)(A), (B) or (C) to reflect
the approximate fair market value thereof, as
mutually determined by the Corporation and the
holders of at least a majority of the voting power of
all then-outstanding shares of preferred stock.
(iii) In the event the requirements of
subsection (a)(4) are not complied with, the
Corporation shall forthwith either:
(A) cause such closing to be
postponed until such time as the
requirements of this subsection (a) have
been complied with; or
(B) cancel such transaction, in
which event the rights, preferences, and
privileges of the holders of the Series A
Preferred Stock shall revert to and be the
same as such rights, preferences, and
privileges existing immediately prior to the
date of the first notice referred to in
subsection (a)(4)(iv) hereof.
(iv) The Corporation shall give each holder
of record of Series A Preferred Stock written notice
of such impending transaction not later than 20 days
prior to the stockholders' meeting called to approve
such transaction, or 20 days prior to the closing of
such transaction, whichever is earlier, and shall
also notify such holders in writing of the final
approval of such transaction. The first of such
notices shall describe the material terms and
conditions of the impending transaction and the
provisions of this subsection (a)(4)(iv), and the
Corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall
in no event take place sooner than 20 days after the
Corporation has given the first notice provided for
herein or sooner than 10 days after the Corporation
has given notice of any material changes provided for
herein; provided, however, that such periods may be
shortened upon the written consent of the holders of
preferred stock that are entitled to such notice
rights or similar notice rights and that represent at
least a majority of the voting power of all
then-outstanding shares of such preferred stock.
(b) Redemption.
(1) Corporation Initiated Redemption. At any time,
the Corporation may redeem all or a portion of the
then-outstanding shares of Series A Preferred Stock at the
Series A Purchase Price, plus declared and unpaid dividends,
if any, and the Redemption Premium (as defined below) (the
"Redemption Price"). In the event the Corporation determines
to redeem a portion of the outstanding shares of Series A
Preferred Stock, the Corporation shall effect such redemption
pro rata according to the number of shares held by each holder
thereof.
(2) Notice for Corporation Initiated Redemption. With
respect to a redemption of Series A Preferred Stock initiated
by the Corporation, at least 30 days' prior written notice by
certified or registered mail, postage prepaid, shall be given
to the holders of record of the Series A Preferred Stock to be
redeemed, such notice to be addressed to each such stockholder
at the address of such holder given to the Corporation for the
purpose of notice, or if no such address appears or is so
given, at the place where the principal office of the
Corporation is located. Such notice shall state (i) the date
on which such shares shall be redeemed (the "Corporation
Redemption Date"), (ii) the Redemption Price, (iii) the
then-current conversion price, and (iv) the date of
termination of the right to convert (which date shall not be
earlier than 30 days and not later than 60 days after the
above written notice by mail has been given) and shall call
upon each such holder to surrender to the Corporation on said
date at the place designated in the notice such holder's
certificate or certificates representing the shares to be
redeemed. On or after the Corporation Redemption Date stated
in such notice, the holder of each share of Series A Preferred
Stock called for redemption shall surrender the certificate
evidencing such shares to the Corporation at the place
designated in such notice and shall thereupon be entitled to
receive payment of the Redemption Price for the shares of
Series A Preferred Stock surrendered. If less than all the
shares represented by any such surrendered certificate are
redeemed, a new certificate shall be issued representing the
unredeemed shares. If such notice of redemption shall have
been duly given and if on the Corporation Redemption Date
funds necessary for the redemption shall be available
therefor, then, as to any certificates evidencing any Series A
Preferred Stock so called for redemption and not surrendered,
all rights of the holders of such shares so called for
redemption and not surrendered shall cease with respect to
such shares, except only the right of the holders to receive
the Redemption Price for such shares of Series A Preferred
Stock that they hold, without interest, upon surrender of
their certificates therefor.
(3) Trust Fund. On or prior to any Corporation
Redemption Date and notwithstanding any notice of redemption
pursuant to subsection (b)(2), the Corporation shall deposit
with any bank or trust company in the state of Utah, as a
trust fund, a sum sufficient to redeem, on the Corporation
Redemption Date thereof, the shares called for redemption,
with irrevocable instructions and authority to the bank or
trust company to give the notice of redemption thereof (or to
complete the giving of such notice if theretofore commenced)
and to pay, on or after the Corporation Redemption Date or
prior thereto, the Redemption Price of the shares to their
respective holders upon the surrender of their share
certificates, then from and after the date of the deposit
(although prior to the Corporation Redemption Date), the
shares so called shall be redeemed. The deposit shall
constitute full payment of the shares to their holders, and
from and after the date of the deposit the shares shall no
longer be outstanding, and the holders thereof shall cease to
be stockholders with respect to such shares and shall have no
rights with respect thereto, except the right to notice
pursuant to subsection (2) above and to receive from the bank
or trust company payment of the Redemption Price for the
Series A Preferred Stock that they hold, upon the surrender of
their certificates therefor and the right to convert said
shares as provided herein at any time up to but not after the
close of business on the fifth day prior to the Corporation
Redemption Date of such shares (which date will not be earlier
than 30 days after the written notice of redemption has been
mailed to holders of record of the Series A Preferred Stock
called for redemption). Any monies so deposited on account of
the Redemption Price of Series A Preferred Stock converted
subsequent to the making of such deposit shall be repaid to
the Corporation forthwith upon the conversion of such Series A
Preferred Stock. If the holders of Series A Preferred Stock so
called for redemption shall not, at the end of six years from
the Corporation Redemption Date thereof, have claimed any
funds so deposited, such bank or trust company shall thereupon
pay over to the Corporation such unclaimed funds, and such
bank or trust company shall thereafter be relieved of all
responsibility in respect thereof to such holders and such
holders shall look only to the Corporation for payment of the
Redemption Price for the Series A Preferred Stock that they
hold.
(4) Redemption Premium. "Redemption Premium" shall
mean the per share amount equal to the original Series A
Purchase Price plus 8% of the Series A Purchase Price per
annum accrued daily from the Final Adjustment Date to the
Corporation Redemption Date compounded annually.
(c) Conversion. The holders of the Series A Preferred
Stock shall have conversion rights as follows (the
"Conversion Rights"):
(1) Right to Convert. Subject to subsection (c)(3)
below, each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time
after the date of issuance of such share, at the office of the
Corporation or any transfer agent for such stock, into 10
fully-paid and nonassessable shares of common stock (the
"Conversion Rate").
(2) Automatic Conversion. Each share of Series A
Preferred Stock shall automatically be converted into shares
of common stock at the Conversion Rate at the time in effect
for such share immediately upon (except as provided below in
subsection (c)(3)) the Corporation's sale of its common stock
in a firm commitment underwritten public offering pursuant to
a registration statement under the Securities Act of 1933, as
amended, the public offering price of which is not less than
$0.50 per share (adjusted to reflect subsequent stock
dividends, stock splits, or recapitalization) and which
results in aggregate cash proceeds to the Corporation of at
least $10,000,000 (net of underwriting discounts and
commissions).
(3) Mechanics of Conversion. Before any holder of
Series A Preferred Stock shall be entitled to convert the same
into shares of common stock, the holder shall surrender the
certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice to the
Corporation at its principal corporate office, of the election
to convert the same and shall state therein the name or names
in which the certificate or certificates for shares of common
stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to
such holder of Series A Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the
number of shares of common stock to which such holder shall be
entitled as aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on the
date of such surrender of the shares of Series A Preferred
Stock to be converted, and the person or persons entitled to
receive the shares of common stock issuable upon such
conversion shall be treated for all purposes as the record
holder or holders of such shares of common stock as of such
date. If the conversion is in connection with an underwritten
offering of securities registered pursuant to the Securities
Act of 1933, the conversion may, at the option of any holder
tendering Series A Preferred Stock for conversion, be
conditioned upon the closing with the underwriters of the sale
of securities pursuant to such offering, in which event the
person(s) entitled to receive common stock upon conversion of
such preferred stock shall not be deemed to have converted
such preferred stock until immediately prior to the closing of
such sale of securities.
(4) Other Distributions. In the event the Corporation
shall declare a distribution payable in securities of other
persons, evidences of indebtedness issued by the Corporation
or other persons, assets (excluding cash dividends), or
options or rights, then, in each such case for the purpose of
this subsection (c)(4), the holders of Series A Preferred
Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of
shares of common stock of the Corporation into which their
shares of preferred stock are convertible as of the record
date fixed for the determination of the holders of common
stock of the Corporation entitled to receive such
distribution.
(5) Recapitalizations. If at any time or from time to
time there shall be a recapitalization of the common stock
(other than a subdivision, combination or merger, or sale of
assets transaction provided for elsewhere in these
designations), provision shall be made so that the holders of
the Series A Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock the
number of shares of stock or other securities or property of
the Corporation or otherwise to which a holder of the number
of shares of common stock deliverable upon conversion of the
Series A Preferred Stock would have been entitled on such
recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of these
designations with respect to the rights of the holders of the
Series A Preferred Stock after the recapitalization to the end
that the provisions of these designations (including
adjustment of the conversion price then in effect and the
number of shares purchasable upon conversion of the Series A
Preferred Stock) shall be applicable after that event.
(6) No Impairment. The Corporation will not, by
amendment of its Certificate of Incorporation or through any
reorganization, recapitalization, 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 of all
the provisions of these designations and in the taking of all
such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of preferred
stock against impairment.
(7) No Fractional Shares and Certificate as to
Adjustments.
(i) No fractional shares shall be issued
upon the conversion of any share or shares of the
Series A Preferred Stock, and the number of shares of
common stock to be issued shall be rounded to the
nearest whole share (with one-half being rounded
upward). Whether or not fractional shares are
issuable upon such conversion shall be determined on
the basis of the total number of shares of Series A
Preferred Stock the holder is at the time converting
into common stock and the number of shares of common
stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment
or readjustment of the conversion price of Series A
Preferred Stock pursuant to these designations, the
Corporation, upon the written request of any holder
of Series A Preferred Stock, at the expense of the
Corporation, shall promptly compute such adjustment
or readjustment in accordance with the terms hereof
and prepare and furnish to each holder of Series A
Preferred Stock a certificate setting forth 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 Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the conversion price
for the Series A Preferred Stock at the time in
effect, and (C) the number of shares of common stock
and the amount, if any, of other property that at the
time would be received upon the conversion of a share
of the Series A Preferred Stock.
(8) Notices of Record Date. In the event of any
taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a
cash dividend) or other distribution, any right to subscribe
for, purchase, or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any
other right, the Corporation shall mail to each holder of
Series A Preferred Stock, at least 20 days prior to the date
specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend,
distribution, or right, and the amount and character of such
dividend, distribution, or right.
(9) 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 Stock, 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 Series A Preferred Stock; 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 Series A Preferred Stock, in addition to such other
remedies as shall be available to the holder of such Preferred
Stock, 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 purposes, including
engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to the Certificate of
Incorporation.
(10) Notices. Any notice required by the provisions
of these designations to be given to the holders of shares of
Series A Preferred Stock shall be deemed given if deposited in
the United States mail, postage prepaid, and addressed to each
holder of record at such holder's address appearing on the
books of the Corporation.
(d) Voting Rights. The holder of each share of Series A
Preferred Stock shall have the right to one vote for each share of
common stock into which such preferred stock could then be converted,
and with respect to such vote, such holder shall have full voting
rights and powers equal to the voting rights and powers of the holders
of common stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the
bylaws of the Corporation, and shall be entitled to vote, together with
holders of common stock (in a single voting group), with respect to any
question upon which holders of common stock have the right to vote.
Fractional votes shall not, however, be permitted and any fractional
voting rights available on an as-converted basis (after aggregating all
shares into which shares of Series A Preferred Stock held by each
holder could be converted) shall be rounded to the nearest whole number
(with one-half being rounded upward).
(e) Protective Provisions. Subject to the rights of any series
of preferred stock that may from time to time come into existence, so
long as any shares of Series A Preferred Stock are outstanding, the
Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least 50% of
the then-outstanding shares of Series A Preferred Stock, voting
together as a single voting group:
(1) declare or pay dividends or other distributions
on common stock of the Corporation, unless identical, pro rata
dividends are paid on the Series A Preferred Stock;
(2) alter or change the rights, preferences, or
privileges of the shares of Series A Preferred Stock so as to
adversely affect the shares of such series, provided that a
transaction resulting in a change of control of the
Corporation, in and of itself, shall not be deemed to
adversely affect such shares; or
(3) redeem, purchase, or otherwise acquire (or pay
into or set funds aside for a sinking fund for such purpose)
any share or shares of common stock; provided, however, that
this restriction shall not apply to the repurchase of shares
of common stock from employees, officers, directors,
consultants, or other persons performing services for the
Corporation or any subsidiary pursuant to agreements under
which the Corporation has the option to repurchase such shares
at cost or at cost upon the occurrence of certain events, such
as the termination of employment.
(f) Status of Redeemed or Converted Stock. In the event any
shares of Series A Preferred Stock shall be redeemed or converted
pursuant to these designations, the shares so redeemed or converted
shall be canceled and shall not be issuable by the Corporation. The
Certificate of Incorporation of the Corporation shall be appropriately
amended to effect the corresponding reduction in the Corporation's
authorized capital stock.
IN WITNESS WHEREOF, the undersigned hereby execute this document and
affirm that the facts set forth herein are true under penalty of perjury this
____ day of March, 2003.
ATTEST: ALBION AVIATION, INC.
By By
, Secretary , President
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
On March __, 2003, before me, the undersigned, a notary public in and
for the above county and state, personally appeared _______________ and
_______________, who being by me duly sworn, did state, each for themselves,
that he, _______________, is the president, and that he, _______________, is the
secretary, of Albion Aviation, Inc., a Delaware corporation, and that the
foregoing Certificate of Designation of Series A Preferred Stock of Albion
Aviation, Inc. was signed on behalf of such corporation by authority of a
resolution of its board of directors, and that the statements contained therein
are true.
WITNESS MY HAND AND OFFICIAL SEAL.
Notary Public