Exhibit 3.4
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 B 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 B issue of Preferred Stock:
RESOLVED, that Three million (3,000,000) shares of the Preferred Stock
(stated value $1.00 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 B 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 B Preferred Stock ("Series B Preferred"). No other shares of
Preferred Stock shall be designated as Series B Preferred stock.
(b) DIVIDENDS. The holders of the shares of Series B Preferred Stock 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
calculated by dividing such payment by 95% of
the Average Market Price on the first five trading days after January
1 of each year. The term "Market Price" means, as of any date, the
daily closing price 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 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 B Preferred and any
other shares of Preferred Stock on a parity with the Series B
Preferred have been declared and paid in full through the immediately
preceding dividend date. The holders of the Series B 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 B 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 stated value of the shares of Series B
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 Series B Preferred Stock be entitled to receive more than
3,000,000 shares of common stock upon conversion of the Series B
Preferred Stock. The conversion right of the holders of Series B
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 B 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 B Preferred shall be deemed to be the
holder of record of common stock issuable upon conversion of such
holder's Series B 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 B Preferred are converted, all accumulated and
unpaid dividends (whether or not declared or currently payable) on the
Series B 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
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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.
(e) ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the common
stock issuable upon conversion of the Series B 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 B
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 B
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 B Preferred
shall thereafter be entitled to receive upon conversion of the Series
B 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 B 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 B 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
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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 B 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 B Preferred a certificate executed by
the Corporation's president or Chief Financial Officer 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 B
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 B 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 B 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 B
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 B 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 B Preferred. All shares
of common stock (including fractions thereof) issuable upon conversion
of more than one share of Series B 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.
(l) REDEMPTION. The Series B Preferred may be redeemable by the
Corporation at any time at the rate of $1.00 per share plus accrued
and unpaid dividends. The
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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 B Preferred of a written redemption notice. If
redeemed, each holder of redeemed Series B Preferred shall deliver to
the Corporation the certificates evidencing the redeemed Series B
Preferred. Upon receipt of the redemption notice, the holders of the
Preferred Stock shall have 30 days to convert the Series B 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 B 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 B 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 B 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 B 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 B 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 B 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 B Preferred Stock have been paid.
(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. Each holder of shares of Series B Preferred shall be entitled
to one vote per share of Series B 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
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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 B Preferred are entitled shall be adjusted, as
appropriate, to preserve their voting power.
(s) STATED VALUE. The shares of Series B Preferred shall have a stated
value of $1.00 per share.
(t) OTHER PREFERENCES. The shares of the Series B 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 B 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 March 1, 2002
/s/ D. Shane Hackett /s/ Shawn M. Thomas
President Secretary
Douglas Shane Hackett Shawn Michael Thomas
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