DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES
FOR THE
SERIES B VOTING PREFERRED STOCK
OF
VIDEOLOCITY INTERNATIONAL, INC.
We, the undersigned, Larry R. McNeill, Vice President and CFO, and D.
T. Norman, Secretary, of Videolocity International, Inc., a Nevada corporation,
hereinafter referred to as the "Corporation," hereby certify:
FIRST: The name of the Corporation is VIDEOLOCITY INTERNATIONAL, INC.
SECOND: As of the date of this Designation, no shares of the
Corporation's Series B Voting Preferred Stock have been issued or are
outstanding.
THIRD: The following resolution establishing a series of Preferred
Stock designated as the "Series B Voting Preferred Stock" consisting of
1,000,000 shares, $0.001 par value, was duly adopted by the board of directors
of the Corporation effective as of January 19, 2001, in accordance with the
articles of incorporation of the Corporation and the corporation laws of the
state of Nevada:
RESOLVED, that there is hereby created a series of preferred stock of
the Corporation to be designated as the "Series B Voting Preferred
Stock" consisting of 1,000,000 shares, $0.001 par value, with the
following powers, preferences, rights, qualifications, limitations, and
restrictions:
1. Liquidation.
1.01. In the event of any voluntary or involuntary liquidation
(whether complete or partial), dissolution, or winding up of the
Corporation, after the requirements with respect to the liquidation
preference of the Series A Voting Preferred Stock have been satisfied,
the holders of the Series B Voting Preferred Stock shall be entitled to
be paid out of the remaining assets of the Corporation available for
distribution to its shareholders, whether from capital, surplus, or
earnings, an amount in cash equal to $5.00 per share. No distribution
shall be made on any common stock of the Corporation (the "Common
Stock") or series of preferred stock of the Corporation other than the
Series A Voting Preferred Stock by reason of any voluntary or
involuntary liquidation (whether complete or partial), dissolution, or
winding up of the Corporation unless each holder of any Series B Voting
Preferred Stock shall have received all amounts to which such holder
shall be entitled under this subsection.
1.02 If on any liquidation (whether complete or partial),
dissolution, or winding up of the Corporation, the assets of the
Corporation available for distribution to holders of Series B Voting
Preferred Stock shall be insufficient to pay the holders of outstanding
Series B Voting Preferred Stock the full amounts to which they
otherwise would be entitled under section 1.01, the assets of the
Corporation available for distribution to holders of the Series B
Voting Preferred Stock shall be distributed to them pro rata on the
basis of the number of shares of Series B Voting Preferred Stock held
by each such holder.
1.03 Upon completion of the distribution required by Section
1.01 above, if assets remain in the Corporation, the holders of the
Corporation's Common Stock shall receive all the remaining assets of
the Corporation.
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2. Voting Rights. The holders of the Series B Voting Preferred
Stock shall be entitled to one vote for each share of the Series B
Voting Preferred Stock held by them, and to vote with the Series A
Voting Preferred Stock and the Common Stock of the Corporation on all
matters submitted to a vote of the Corporation's stockholders. Except
as otherwise provided herein or by the laws of the State of Nevada, the
holders of the Series A Voting Preferred Stock, the Series B Voting
Preferred Stock, and Common Stockholders shall vote together as one
class on all matters submitted to a shareholder vote of the
Corporation.
3. Dividends. The Series B Voting Preferred Stock shall
participate with the Series A Voting Preferred Stock and the Common
Stock on any dividends declared and paid thereon on a share-for-share
basis. The Series B Voting Preferred Stock shall not have any
preference as to dividends.
4. Redemption by Corporation. The Series B Voting Preferred
Stock shall be redeemed by the Corporation at a price of $5.00 per
share, upon the written request for redemption from any holder thereof
received during the twenty-eight day period commencing February 1, 2002
and expiring at the close of business on February 28, 2002. Before any
holder of Series B Voting Preferred Stock shall be entitled to have his
or her shares redeemed by the Corporation, he or she shall surrender
the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Series B Voting
Preferred Stock, and shall give written notice to the Corporation at
its principal corporate office, of the request for redemption as
provided above. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series B
Voting Preferred Stock a check in the amount of the redemption price
multiplied by the number of shares surrendered for redemption. Such
redemption 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
B Voting Preferred Stock to be redeemed. The Corporation's obligations
to pay the redemption price for the Series B Voting Preferred Stock
shall be subordinate to the Corporation's obligation to pay the
redemption price for the Series A Voting Preferred Stock.
5. Call by Corporation. The Series B Voting Preferred Stock
shall be callable by the Corporation at a price of $5.00 per share by
delivering a written notice of call to the holders of the Series B
Voting Preferred Stock within the period commencing on the day
following the issuance of the Series B Voting Preferred Stock and
expiring at the close of business on February 28, 2002, which notice
shall indicate the Corporation's intent to call the Series B Voting
Preferred Stock and shall specify the effective date of the call. The
effective date shall be not less than 30 days from the delivery date of
the notice. Any holder of Series B Voting Preferred Stock may elect to
convert his or her Series B Voting Preferred Stock to Common Stock
prior to the effective date of the call; provided that notice of such
conversion is received by the Corporation not less than five (5) days
prior to the effective date of the call. On the effective date of the
call, all issued and outstanding shares of Series B Voting Preferred
Stock (not previously redeemed or converted to Common Stock) shall
automatically be converted into the right to receive payment of the
call price of $5.00 per share upon surrender of the certificate or
certificates for the Series B Voting Preferred Stock, duly endorsed, at
the office of the Corporation or of any transfer agent for the Series B
Voting Preferred Stock.
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6. Conversion.
6.01 Conversion Rate. Each share of the Series B Voting
Preferred Stock is convertible into one share of Common Stock of the
Corporation at the times, in the manner, and subject to the conditions
provided in this section 6.
6.02 Voluntary Conversion. Each share of the Series B Voting
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.
6.03 Mechanics of Conversion. Before any holder of Series B
Voting Preferred Stock shall be entitled to convert the same into
shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation
or of any transfer agent for the Series B Voting 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 B Voting 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
B Voting 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.
6.04 Automatic Conversion. On March 1, 2002, each share of the
Series B Voting Preferred Stock which has not been surrendered for
redemption in accordance with the provisions of Section 4 hereof,
called by the Corporation in accordance with the provisions of Section
5 hereof, or surrendered for conversion in accordance with the
provisions of Sections 6.02 and 6.03 hereof, shall be automatically
converted into one share of Common Stock of the Corporation on March 1,
2002, without any further notice or action by the Corporation or the
holders of the Series B Voting Preferred Stock, and from and after
March 1, 2002, each certificate representing such shares of Series B
Voting Preferred Stock shall be deemed to represent the number of
shares of the Corporation's Common Stock into which such Series B
Voting Preferred Stock has been converted.
6.05 Anti-Dilution. In order to prevent dilution of the rights
granted hereunder, the conversion and voting rights shall be subject to
adjustment from time to time in accordance with this section.
(a) In the event the Corporation shall declare a
dividend or make any other distribution on any capital stock
of the Corporation payable in Common Stock, options to
purchase Common Stock, or securities convertible into Common
Stock of the Corporation, shall at any time subdivide (other
than by means of a dividend payable in Common Stock) its
outstanding shares of Common Stock into a greater number of
shares or combine such outstanding stock into a smaller number
of shares, and if there is not a corresponding dividend or
distribution on or to, or split or subdivision of, the Series
B Voting Preferred Stock, then in each such event, the
conversion rate shall be adjusted so that the holders of the
Series B Voting Preferred Stock shall be entitled to receive
the kind and number of shares of Common Stock or other
securities of the Corporation which they would have owned or
have been entitled to receive after the happening of any of
the events described above, had such shares of the Series B
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Voting Preferred Stock been converted immediately prior to the
happening of such event or any record date with respect
thereto; an adjustment made pursuant to this paragraph (a)
shall become effective immediately after the effective date of
such event retroactive to the record date for such event.
(b) If any capital reorganization or reclassification
of the capital stock of the Corporation, consolidation or
merger of the Corporation with another corporation, or the
sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities,
or assets with respect to or in exchange for Common Stock,
then, as a condition of such reorganization, reclassification,
consolidation, merger, or sale, lawful adequate provisions
shall be made whereby the holders of the Series B Voting
Preferred Stock shall thereafter, have the right to acquire
and receive on conversion of the Series B Voting Preferred
Stock such shares of stock, securities, or assets as would
have been issuable or payable (as part of the reorganization,
reclassification, consolidation, merger, or sale) with respect
to or in exchange for such number of outstanding shares of the
Corporation's Common Stock as would have been received on
conversion of the Series B Voting Preferred Stock immediately
before such reorganization, reclassification, consolidation,
merger, or sale. In any such case, appropriate provisions
shall be made with respect to the rights and interests of the
holders of the Series B Voting Preferred Stock to the end that
the provisions hereof (including without limitation provisions
for adjustments of the conversion rate and for the number of
shares issuable on conversion of the Series B Voting Preferred
Stock) shall thereafter be applicable in relation to any
shares of stock, securities, or assets thereafter deliverable
on the conversion of the Series B Voting Preferred Stock. In
the event of a merger or consolidation of the Corporation with
or into another corporation or the sale of all or
substantially all of its assets as a result of which a number
of shares of Common Stock of the surviving or purchasing
corporation greater or lesser than the number of shares of
Common Stock of the Corporation outstanding immediately prior
to such merger, consolidation, or purchase are issuable to
holders of Common Stock of the Corporation, then the
conversion rate shall be adjusted in the same manner as though
there was a subdivision or combination of the outstanding
shares of Common Stock of the Corporation.
(c) No adjustment shall be made in the conversion
rate of the number of shares of Common Stock issuable on
conversion of Series B Voting Preferred Stock (i) in
connection with the issuance of any shares of Common Stock,
securities, or assets on account of the anti-dilution
provisions set forth in this section 6.05; (ii) in connection
with the purchase or other acquisition by the Corporation of
any capital stock, evidence of its indebtedness, or other
securities of the Corporation; or (iii) in connection with the
sale or exchange by the Corporation of any Common Stock,
evidence of its indebtedness, or other securities of the
Corporation, including securities containing the right to
subscribe for or purchase Common Stock of the Corporation.
6.06 The Corporation covenants and agrees that:
(a) The shares of Common Stock issuable on any
conversion of any shares of Series B Voting Preferred Stock
shall have been deemed to have been issued to the person on
the date such shares are surrendered to the Corporation for
conversion as provided in Section 6.02 or the date such shares
are automatically converted as provided
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in Section 6.04, and on such date such person shall be deemed
for all purposes to have become the record holder of such
Common Stock.
(b) All shares of Common Stock which may be issued on
any conversion of the Series B Voting Preferred Stock will, on
issuance, be fully paid and nonassessable and free from all
taxes, liens, and charges with respect to the issue thereof.
(c) The issuance of certificates for Common Stock on
conversion of the Series B Voting Preferred Stock shall be
made without charge to the registered holder thereof for any
issuance tax in respect thereof or other costs incurred by the
Corporation in connection with the conversion of the Series B
Voting Preferred Stock and the related issuance of Common
Stock or other securities.
7. Subordination. Any redemption hereunder shall be
subordinated to payment in full of the redemption payments applicable
to the Series A Voting Preferred Stock and to all Senior Debt as
defined herein. "Senior Debt" shall mean the principal of and premium,
if any, and interest on all indebtedness of the Corporation to any
financial institution, including, but not limited to, (i) banks whether
currently outstanding or hereinafter created and whether or not such
loans are secured or unsecured; (ii) any other indebtedness, liability,
obligation, contingent or otherwise of the Corporation whether created
or assumed by the Corporation prior to or after the date of the
creation of the Series B Voting Preferred Stock, which is, when
created, specifically designated by the Corporation as Senior Debt; and
(iii) any refunding, renewals, or extensions of any indebtedness or
similar obligations described as Senior Debt in subparagraphs (i) and
(ii) above.
8. Additional Provisions
8.01 No change in the provisions of the Series B Voting
Preferred Stock set forth in this Designation affecting any interests
of the holders of any shares of Series B Voting Preferred Stock shall
be binding or effective unless such change shall have been approved by
the holders of all of the outstanding Series B Voting Preferred Stock
in the manner provided in the corporation laws of the state of Nevada,
as the same may be amended from time to time.
8.02 The shares of Series B Voting Preferred Stock shall be
transferable only on the books of the Corporation maintained at its
principal office, on delivery thereof duly endorsed by the holder or by
his duly authorized attorney or representative or accompanied by proper
evidence of succession, assignment, or authority to transfer. In all
cases of transfer by an attorney, the original letter of attorney, duly
approved, or an official copy thereof, duly certified, shall be
deposited and remain with the Corporation. In case of transfer by
executors, administrators, guardians, or other legal representatives,
duly authenticated evidence of their authority shall be produced and
may be required to be deposited and remain with the new certificate
representing the share of Series B Voting Preferred Stock so
transferred to the person entitled thereto.
8.03 The Corporation shall not be required to issue any
fractional shares of Common Stock on the conversion of any share of
Series B Voting Preferred Stock.
8.04 Any notice required or permitted to be given to the
holders of the Series B Voting Preferred Stock under this Designation
shall be deemed to have been duly given if mailed by first class mail,
postage prepaid to such holders at their respective addresses appearing
on the
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stock records maintained by or for the Corporation and shall be deemed
to have been given two days following the date they are deposited in
the United States mail.
IN WITNESS WHEREOF, the foregoing Designation of Rights, Privileges,
and Preferences of Series B Voting Preferred Stock of the Corporation has been
executed as of this 19th day of January 2001.
ATTEST: VIDEOLOCITY INTERNATIONAL, INC.
By /s/ D. T. Norman By /s/ Larry R. McNeill
------------------------ -----------------------------
D. T. Norman, Secretary Larry R. McNeill,
Vice President and CFO
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