Exhibit 3.1
CERTIFICATE OF DETERMINATION OF PREFERENCES AND RIGHTS OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
American Ammunition, Inc.
a California corporation
The undersigned, Andres F. Fernandez and Emilio D. Jara certify that:
1. They are the duly acting President and Secretary, respectively, of
American Ammunition, Inc., a corporation organized and existing under the
Corporations Code of the State of California (the "Corporation").
2. Pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of the Corporation, and pursuant to the provisions of
Section 401 of Title 1 of the Corporations Code of the State of California, said
Board of Directors, pursuant to a meeting held November 26, 2004, adopted a
resolution establishing the rights, preferences, privileges and restrictions of,
and the number of shares comprising, the Corporation's Series C Convertible
Preferred Stock, which resolution is as follows:
RESOLVED, that a series of Preferred Stock in the Corporation, having the
rights, preferences, privileges and restrictions, and the number of shares
constituting such series and the designation of such series, set forth below be,
and it hereby is, authorized by the Board of Directors of the Corporation
pursuant to authority given by the Corporation's Articles of Incorporation.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes
and determines the number of shares constituting, and the rights, preferences,
privileges and restrictions relating to, a new series of Preferred Stock as
follows:
(a) Determination. The series of Preferred Stock is hereby designated
Series C Convertible Preferred Stock (the "Series C Preferred Stock"). The
par value of each share of Series C Preferred Stock shall be $0.001.
(b) Authorized Shares. The number of authorized shares constituting
the Series C Preferred Stock shall be 1,905,882 shares of such series.
(c) Dividend.
(i) Commencing on the date of issuance of the Series C Preferred Stock
and continuing until the date that the Series C Preferred Stock has
been converted hereunder, the Corporation shall pay on each
outstanding share of Series C Preferred Stock out of funds legally
available therefor a monthly dividend (the "Dividend"), at an annual
rate equal to the product of multiplying (i) $0.17 per share (the
"Series C Purchase Price"), by (ii) four percent (4.0%). The Dividend
shall be payable monthly in arrears on the last day of each month
based on the numbers of shares of Series C Preferred Stock outstanding
as of the first (1st) day of such month. The holder of the Series C
Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from
time to time by the Board of Directors.
(ii) All dividends payable on the Series C Preferred Stock may be paid
in cash or in shares of Common Stock of the Company, as determined in
the discretion of the Board of Directors of the Company. In the event
that the Board determines that any dividend accrued hereunder shall be
paid in shares of Common Stock, the total number of shares to be
issued shall equal the nearest whole number of shares (rounded up)
obtained by dividing the amount of the dividend to be paid by the
Market Price (as hereinafter defined) as of the date on which such
dividend is declared by the Board of Directors.
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(d) Liquidation Preference.
(i) Preference upon Liquidation, Dissolution or Winding Up. In the
event of any dissolution or winding up of the Corporation, whether
voluntary or involuntary, holders of each outstanding share of Series
C Preferred Stock shall be entitled to be paid first out of the assets
of the Corporation available for distribution to shareholders, an
amount equal to the Series C Purchase Price (as adjusted for any stock
splits, stock dividends or recapitalizations of the Series C Preferred
Stock) and any declared but unpaid dividends on such shares, before
any payment shall be made to the holders of the Common Stock, or any
other stock of the Corporation ranking junior to the Series C
Preferred Stock with regard to any distribution of assets upon
liquidation, dissolution or winding up of the Corporation. The holders
of the Series C Preferred Stock shall be entitled to share ratably, in
accordance with the respective preferential amounts payable on such
stock, in any distribution which is not sufficient to pay in full the
aggregate of the amounts payable thereon. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets to be
distributed to the holders of the Series C Preferred Stock shall be
insufficient to permit payment to such shareholders of the full
preferential amounts aforesaid, then all of the assets of the
Corporation available for distribution to shareholders shall be
distributed to the holders of Series C Preferred Stock. Each holder of
the Series C Preferred Stock shall be entitled to receive that portion
of the assets available for distribution as the number of outstanding
shares of Series C Preferred Stock held by such holder bears to the
total number of shares of Series C Preferred Stock. Such payment shall
constitute payment in full to the holders of the Series C Preferred
Stock upon the liquidation, dissolution or winding up of the
Corporation. After such payment shall have been made in full, or funds
necessary for such payment shall have been set aside by the
Corporation in trust for the account of the holders of Series C
Preferred Stock, so as to be available for such payment, such holders
of Series C Preferred Stock shall be entitled to no further
participation in the distribution of the assets of the Corporation.
(ii) Consolidation, Merger and Other Corporate Events. A consolidation
or merger of the Corporation (except into or with a subsidiary
corporation) or a sale, lease, mortgage, pledge, exchange, transfer or
other disposition of all or substantially all of the assets of the
Corporation or any reclassification of the stock of the Corporation
(other than a change in par value or from no par to par, or from par
to no par or as the result of an event described in subsection (iv),
(v), (vi) or (vii) of paragraph (f)), shall be regarded as a
liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of this paragraph (d), provided,
however, in the case of a merger, if (a) the Corporation is the
surviving entity, (b) the Corporation's shareholders hold a majority
of the shares of the surviving entity, and (c) the Corporation's
directors hold a majority of the seats on the board of directors of
the surviving entity, then such merger shall not be regarded as a
liquidation, dissolution or winding up within the meaning of this
paragraph (d). In no event shall the issuance of new classes of stock,
whether senior, junior or on a parity with the Series C Preferred
Stock, or any stock splits, be deemed a "reclassification" under or
otherwise limited by the terms hereof.
(iii) Distribution of Cash and Other Assets. In the event of a
liquidation, dissolution or winding up of the Corporation resulting in
the availability of assets other than cash for distribution to the
holders of the Series C Preferred Stock, the holders of the Series C
Preferred Stock shall be entitled to a distribution of cash and/or
assets equal to the value of the liquidation preference stated in
subsection (i) of this paragraph (d), which valuation shall be made
solely by the Board of Directors, and provided that such Board of
Directors was acting in good faith, shall be conclusive.
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(iv) Distribution to Junior Security Holders. After the payment or
distribution to the holders of the Series C Preferred Stock of the
full preferential amounts aforesaid, the holders of Series C Preferred
Stock shall have no further rights in respect of such Series C Stock
which shall become null and void, and the holders of the Common Stock
then outstanding, or any other stock of the Corporation ranking as to
assets upon liquidation, dissolution or winding up of the Corporation
junior to the Series C Preferred Stock, shall be entitled to receive
ratably all of the remaining assets of the Corporation.
(v) Preference; Priority. References to a stock that is "senior" to,
on a "parity" with or "junior" to other stock as to liquidation shall
refer, respectively, to rights of priority of one series or class of
stock over another in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation. The Series C Preferred
Stock shall be senior to the Common Stock of the Corporation and
senior to any subsequent series of Preferred Stock issued by the
Corporation.
(e) Voting Rights. Except as otherwise required by law, the holder of
shares of Series C Preferred Stock shall have the right to vote on matters
that come before the shareholders. For voting purposes, such Series C
Preferred Stock shall be considered part of the Common Shares and shall
vote with the common stock, rather than as a separate series of preferred
stock. Each share of Series C Preferred Stock shall have 20 votes per
share.
(f) Conversion Rights. The holders of Series C Preferred Stock will
have the following conversion rights:
(i) Right to Convert. Subject to and in compliance with the provisions
of this paragraph (f), any issued and outstanding shares of Series C
Preferred Stock may, at the option of the holder, be converted at any
time or from time to time into fully paid and non-assessable shares of
Common Stock at the conversion rate in effect at the time of
conversion, determined as provided herein.
(ii) Mechanics of Conversion. Before any holder of Series C 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 Common Stock, and shall give written notice to the
Corporation at such office that he elects to convert the same and
shall state therein the number of shares of Series C Preferred Stock
being converted. Thereupon, the Corporation shall promptly issue and
deliver at such office to such holder of Series C Preferred Stock a
certificate or certificates for the number of shares of Common Stock
to which he shall be entitled. 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 C 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 on such date.
(iii) Conversion Price. The number of shares into which one share of
Series C Preferred Stock shall be convertible shall be determined by
dividing the Series C Purchase Price by the then existing Conversion
Price (as set forth below) (the "Conversion Ratio"). The "Conversion
Price" per share for the Series C Preferred Stock shall be $0.18;
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The "Market Price" shall equal the closing price of the Corporation's
Common Stock on November 24, 2004.
If an Event of Default occurs, as defined in the Subscription
Agreement for the Series C Preferred Stock, the Conversion Price shall
be reduced to 90% of the Market Price.
(iv) Adjustment for Stock Splits and Combinations. If the Corporation
shall at any time, or from time to time after the date shares of the
Series C Preferred Stock are first issued (the "Original Issue Date"),
effect a subdivision of the outstanding Common Stock, the Conversion
Price in effect immediately prior thereto shall be proportionately
decreased, and conversely, if the Corporation shall at any time or
from time to time after the Original Issue Date combine the
outstanding shares of Common Stock, the Conversion Price then in
effect immediately before the combination shall be proportionately
increased. Any adjustment under this paragraph (f)(iv) shall become
effective at the close of business on the date the subdivision or
combination becomes effective.
(v) Adjustment for Certain Dividends and Distributions. In the event
the Corporation at any time, or from time to time after the Original
Issue Date, shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the Conversion Price then in effect
shall be decreased as of the time of such issuance or, in the event
such a record date shall have been fixed, as of the close of business
on such record date, by multiplying the Conversion Price then in
effect by a fraction:
(A) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and
(B) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution.
(vi) Adjustments for Other Dividends and Distributions. In the event
the Corporation at any time or from time to time after the Original
Issue Date shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, then and in each such
event provision shall be made so that the holders of such Series C
Preferred Stock shall receive upon conversion thereof in addition to
the number of shares of Common Stock receivable thereupon, the amount
of securities of the Corporation that they would have received had
their Series C Preferred Stock been converted into Common Stock on the
date of such event and had thereafter, during the period from the date
of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period giving
application to all adjustments called for during such period under
this paragraph (f) with respect to the rights of the holders of the
Series C Preferred Stock.
(vii) Adjustment for Reclassification Exchange or Substitution. If the
Common Stock issuable upon the conversion of the Series C Preferred
Stock shall be changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination
of shares or stock dividend provided for above, or a reorganization,
merger, consolidation or sale of assets provided for elsewhere in this
paragraph (f)), then and in each such event the holder of each share
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of Series C Preferred Stock 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,
reclassification or other change, by holders of the number of shares
of Common Stock into which such shares of Series C Preferred Stock
might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as
provided herein.
(viii) Reorganization, Mergers, Consolidations or Sales of Assets. If
at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for
elsewhere in this paragraph (f)) or a merger or consolidation of the
Corporation with or into another corporation, or the sale of all or
substantially all of the Corporation's properties and assets to any
other person, then, as a part of such reorganization, merger,
consolidation or sale, provision shall be made so that the holders of
the Series C Preferred Stock shall thereafter be entitled to receive
upon conversion of such Series C Preferred Stock, the number of shares
of stock or other securities or property of the Corporation or of the
successor corporation resulting from such merger or consolidation or
sale, to which a holder of Common Stock deliverable upon conversion
would have been entitled on such capital reorganization, merger,
consolidation or sale. In any such case, appropriate adjustment shall
be made in the application of the provisions of this paragraph (f)
with respect to the rights of the holders of the Series C Preferred
Stock after the reorganization, merger, consolidation or sale to the
end that the provisions of this paragraph (f) (including the number of
shares purchasable upon conversion of the Series C Preferred Stock)
shall be applicable after that event as nearly equivalent as may be
practicable.
(ix) Sale of Common Stock or Securities Convertible Into Common Stock.
In the event, after the date upon which the Series C Preferred Stock
is first issued, the Corporation sells Common Stock or other
securities convertible into or exercisable for Common Stock at a per
share price, exercise price or conversion price lower than the
Conversion Price then in effect (other than (1) shares issued in
connection with an acquisition of the securities, assets or business
of another company, joint ventures, licensing, leasing, commercial
credit arrangements and strategic partnering arrangements, (2) stock
options granted at a price not below fair market value on the grant
date to employees, officers, directors and consultants, (3) shares of
Common Stock issued upon conversion of the Series C Preferred Stock
authorized herein, and (4) shares issued as a dividend or distribution
on Series C Preferred or any event for which adjustment is made
pursuant to sections f(iv), f(v), and f(vi) hereof), such securities
to be defined as "Additional Shares of Common Stock"), then and in
such event, the Conversion Price shall be reduced, concurrently with
such issue, to a price determined by multiplying the Conversion Price
that would otherwise be in effect in accordance with Section (f)(iii)
hereof, by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue
plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of
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Additional Shares of Common Stock so issued would purchase at such
Conversion Price; and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued;
and provided further that for purposes of this subsection (iv), all
shares of Common Stock issuable upon conversion of outstanding Series
C Preferred Stock and outstanding evidences of indebtedness, shares
(other than the Series C Preferred Stock and Common Stock) or other
securities directly or indirectly convertible into or exchangeable for
Common Stock or exercise of outstanding rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or
any such securities convertible into or exchangeable for Common Stock,
shall be deemed to be outstanding.
(x) Certificate of Adjustment. In each case of an adjustment or
readjustment of the securities issuable upon conversion of the Series
C Preferred Stock, the Corporation shall compute such adjustment or
readjustment in accordance herewith and the Corporation's Chief
Financial Officer shall prepare and sign a certificate showing such
adjustment or readjustment, and shall mail such certificate by first
class mail, postage prepaid, to each registered holder of the Series C
Preferred Stock at the holder's address as shown in the Corporation's
books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment
or readjustment is based.
(xi) Notices of Record Date. In the event of (A) any taking by the
Corporation of a record of the holders of any class or series of
securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution or (B) any
reclassification or recapitalization of the capital stock of the
Corporation, any merger or consolidation of the Corporation or any
transfer of all or substantially all of the assets of the Corporation
to any other corporation, entity or person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation,
the Corporation shall mail to each holder of Series C Preferred Stock
at least 10 days prior to the record date specified therein, a notice
specifying (1) the date on which any such record is to be taken for
the purpose of such dividend or distribution and a description of such
dividend or distribution, (2) the date on which any such
reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up is expected to become effective
and (3) the time, if any is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to
exchange their shares, of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up.
(xii) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of the Series C Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay the holder of the fractional share an amount of
cash equal to the fraction times the fair value of one share of Common
Stock.
(xiii) 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
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effecting the conversion of the shares of the Series C Preferred
Stock, 1,800,000 shares of Common 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 C 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 purpose.
(xiv) Notices. Any notice required by the provisions of this paragraph
(f) to be given to the holders of shares of Series C Preferred Stock
shall be deemed given (A) if deposited in the United States mail,
postage prepaid, or (B) if given by any other reliable or generally
accepted means (including by facsimile or by a nationally recognized
overnight courier service), in each case addressed to each holder of
record at his address (or facsimile number) appearing on the books of
the Corporation.
(xv) Payment of Taxes. The Corporation will pay all transfer taxes and
other governmental charges that may be imposed in respect of the issue
or delivery of shares of Common Stock upon conversion of shares of
Series C Preferred Stock.
(xvi) No Dilution or Impairment. The Corporation shall not amend its
Articles of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale
of securities or any other voluntary action, for the purpose of
avoiding or seeking to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation,
without the approval of a majority of the then outstanding Series C
Preferred Stock.
(g) No Re-issuance of Preferred Stock. Any shares of Series C
Preferred Stock acquired by the Corporation by reason of purchase,
conversion or otherwise shall be canceled, retired and eliminated from the
shares of Series C Preferred Stock that the Corporation shall be authorized
to issue. All such shares shall upon their cancellation become authorized
but unissued shares of Preferred Stock and may be reissued as part of a new
series of Preferred Stock subject to the conditions and restrictions on
issuance set forth in the Articles of Incorporation or in any Certificate
of Determination creating a series of Preferred Stock or any similar stock
or as otherwise required by law.
(h) Severability. If any right, preference or limitation of the Series
C Preferred Stock set forth herein is invalid, unlawful or incapable of
being enforced by reason of any rule, law or public policy, all other
rights, preferences and limitations set forth herein that can be given
effect without the invalid, unlawful or unenforceable right, preference or
limitation shall nevertheless remain in full force and effect, and no
right, preference or limitation herein shall be deemed dependent upon any
other such right, preference or limitation unless so expressed herein.
3. The number of authorized shares of Preferred Stock of the Corporation is
10,000,000, and the number of shares of Series C Stock, none of which has been
issued, is 1,905,882.
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Each of the undersigned declares under penalty of perjury that the matters
set out in the foregoing Certificate are true of his own knowledge. Executed at
Miami-Dade, Florida, on this 29th day of November, 2004.
/s/ Andres F. Fernandez
- --------------------------------
Andres F. Fernandez, President
/s/ Emilio D. Jara
- --------------------------------
Emilio D. Jara, Secretary
STATE OF FLORIDA :
: SS
COUNTY OF MIAMI-DADE :
ACKNOWLEDGMENT
Personally appeared before me, a notary public in and for said County and
State, Andre Fernandez, known to me or duly proved to me, who stated that he was
the President of American Ammunition, Inc., a California corporation, and he
acknowledged that he had executed the Certificate of Designation on behalf of
such corporation for the purposes stated therein.
/s/ Andre Fernandez
----------------------
Andre Fernandez, President
/s/illegible
----------------------
Notary Public
STATE OF FLORIDA :
: SS
COUNTY OF MIAMI-DADE :
ACKNOWLEDGMENT
Personally appeared before me, a notary public in and for said County and
State, Emilio D. Jara, known to me or duly proved to me, who stated that he was
the Secretary of American Ammunition, Inc., a California corporation, and he
acknowledged that he had executed the Certificate of Designation on behalf of
such corporation for the purposes stated therein.
/s/ Emilio D. Jara
----------------------
Emilio D. Jara, Secretary
/s/illegible
----------------------
Notary Public
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