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EXHIBIT 4.1
CERTIFICATE OF THE POWERS DESIGNATION, RIGHTS AND PREFERENCES
FOR THE
SERIES A CONVERTIBLE PREFERRED STOCK
OF
PRECIS SMART CARD SYSTEMS, INC.
Precis Smart Card Systems, Inc. (the "CORPORATION"), a corporation
organized and existing under and by virtue of the General Business Corporation
Act of the State of Oklahoma,
DOES HEREBY CERTIFY THAT:
Pursuant to authority vested in the Board of Directors pursuant to
Section 4 of the Certificate of Incorporation, the Board of Directors of the
Corporation, pursuant to a Record and Memorandum of Action, dated March 17,
2000, duly adopted the certain resolutions creating a series of Preferred Stock,
$1.00 par value per share, designated as "Series A Convertible Preferred Stock,"
as follows:
RESOLVED, that pursuant to the authority expressly granted
to the Board of Directors of the Corporation pursuant to Section 4 of
the Certificate of Incorporation of the Corporation, the Board of
Directors hereby (i) creates a series of Preferred Stock, par value
$1.00 per share, of the Corporation, to consist of 166,667 shares,
(ii) reserves for issuance the number of shares of the Corporations
common stock, $.001 par value (the "Common Stock") issuable upon
conversion of such Preferred Stock as hereinafter set forth, and (iii)
fixes and determines the powers, preferences and rights of the shares
of such series and the qualifications, limitations or restrictions
thereof in addition to those relating to all series of Preferred Stock
as set forth in Section 4 of the Certificate of Incorporation of the
Corporation, as follows:
(a) DESIGNATION OF SERIES AND NUMBER OF SHARES. There shall
be a series of the Preferred Stock, par value $1.00 per share, of the
Corporation which shall consist of 166,667 shares having a stated
value of $12.00 per share (the "Stated Value"), and shall be
designated as the "Series A Convertible Preferred Stock" (hereinafter
referred to as this "Series").
(b) DIVIDENDS. Out of the surplus or net profits of the
Corporation legally available for dividends, the holder of this Series
shall be entitled to receive, when and as declared or paid upon or set
apart for, dividends in cash in the amount of One Dollar Forty-Four
Cents ($1.44) per share per annum, payable monthly on such date as
determined by the Board of Directors of the Corporation (the "BOARD").
Dividends on shares of this Series are cumulative from the Date of
Accrual with respect to the shares (whether or not there will be net
profits or net assets of the Corporation legally available for payment
of the dividends) so that, if at any time Full Cumulative Dividends
upon this Series to the end of the last completed dividend period will
not have been paid, or declared and a sum sufficient for payment
thereof set apart, the amount of the deficiency in the dividends will
be fully paid, but without interest, before any dividend will be
declared or paid or any other distribution ordered or made upon, or
any purchase or redemption made of, any stock ranking as to dividends
or upon liquidation junior to this Series (other than a dividend
payable in junior stock, or a purchase or redemption made by issue or
delivery of the junior stock); provided, however, that any moneys
deposited in any sinking fund with respect to any preferred stock or
preference stock of the Corporation in compliance with the provisions
of the sinking fund may thereafter be applied to the purchase or
redemption of such preferred sock or preference stock in accordance
with the terms of the sinking fund regardless of whether at the time
of the application Full Cumulative Dividends upon shares of this
Series outstanding to the end of the last completed dividend period
will have been paid or declared and set apart for payment. All
dividends declared upon the shares of this Series and any other
preferred stock or preference stock ranking on a parity as to dividend
with this Series will be declared pro rata, so that the amounts of
dividends declared per share on this Series and the other preferred
stock and preference stock will in all cases bear to each other the
same ratio that accrued dividends per share on the shares of this
Series and the preference stock bear to each other. Holders of shares
of this Series will not be entitled to any dividends, whether payable
in cash, property or stock, in excess of Full Cumulative Dividends. As
used herein the term "DATE OF ACCRUAL", as to any shares of this
Series, means the date on which the
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shares in question were issued. The term "FULL CUMULATIVE DIVIDENDS"
means (whether or not in any dividend period, or any part of it, in
respect of which the term is used there will have been net profits or
net assets of the Corporation legally available for payment of such
dividends) that amount which will be equal to dividends at the full
rate fixed for this Series provided in this Section (b) for the period
of time elapsed from the Date of Accrual to the date as of which Full
Cumulative Dividends are to be computed (including an amount equal to
the dividend at the rate for any fraction of a dividend period
included in the period of time calculated on the basis of a 360-day
year of 12 30-day months).
(c) VOTING RIGHTS. This Series shall be non-voting, except the
consent of the holders of at least a majority of the outstanding
shares of this Series, voting separately as a single class in person
or by proxy, at a special or annual meeting of shareholders called for
the purpose, shall be necessary to amend the Certificate of
Incorporation, including the provisions of this Certificate of
Designations, Preferences and Rights of Series A Convertible Preferred
Stock, in any manner which would adversely affect the holders thereof.
The authorization or creation of any class or series of preferred
stock of the Corporation ranking senior to, or on parity with, this
Series as to dividends or liquidation, will be deemed to adversely
affect the holders. Notwithstanding the foregoing or anything herein
to the contrary, no approval by the holders of this Series, voting as
a class, shall be required for (i) the approval of any amendment which
effects the division of this Series into a greater number of shares or
creates other series of Preferred Stock, which may be senior or junior
to, or on parity with, this Series, (ii) the approval of any action
concerning the issuance or sale by the Corporation of its Common
Stock, or (iii) the approval of the Corporation incurring any debt,
whether secured or unsecured, and issuing any debt or security
instruments. The holders of this Series shall have no voting rights
except as expressly granted in this Section (c).
(d) CONVERSION RIGHTS. The holders of shares of this Series
shall the right, at their option exercisable in whole and not in part,
to convert the shares of this Series into One Hundred Sixty-Six
Thousand Six Hundred Sixty-Seven (166,667) shares of Common Stock, in
the aggregate, or One (1) share of this Series per share of Common
Stock at any time on and subject to the following terms and
conditions:
(i) The shares of this Series shall be convertible
at the office of the Corporation or at the office of any transfer
agent for this Series, and at such other office or offices, if
any, as the Board may designate, into fully paid and
nonassessable shares of Common Stock of the Corporation.
(ii) In order to convert the shares of this Series into
Common Stock, the holders of this Series shall surrender at any
office hereinabove mentioned the certificate or certificates
therefor, duly endorsed in blank or accompanied by proper
instruments of assignment and transfer thereof duly endorsed in
blank, together with any payment required by this paragraph (ii)
and transfer tax stamps or funds therefor, is required pursuant
to paragraph (vii) below, and give written notice to the
Corporation at said office that the holders elect to convert
the shares of this Series.
Shares of this Series shall be deemed to have been
converted immediately prior to the close of business on the
day of the surrender of the shares for conversion in accordance
with the foregoing provisions, and the person or persons
entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record
holder or holders of such Common Stock at such time; provided,
however, that any such surrender on any date when the stock
transfer books of the Corporation shall be closed shall
constitute the person or persons in whose name or names the
certificates for such shares of Common Stock are to be issued
as the record holder or holders thereof for all purposes
immediately prior to the close of business on the next succeeding
day on which such stock transfer books are opened and such
conversion shall be at the conversion ratio in effect at such
time on such succeeding day. As promptly as practicable after
the conversion date, the Corporation shall issue and shall
deliver at said office a certificate or certificates for the
number of shares
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of Common Stock issuable upon such conversion to the person or
persons entitled to receive same.
(iii) No fractional shares of Common Stock shall be
be issued upon conversion of shares of this Series and any
fractional shares shall be rounded to the nearest full share.
(iv) The number of shares of Common Stock to be
issued upon conversion of shares of this Series shall be
adjusted from time to time as follows:
(A) In case the Corporation shall (I) subdivide
its outstanding shares of Common Stock, (II) combine its
outstanding shares of Common Stock into a smaller number of
shares, or (III) issue any shares by reclassification of its
shares of Common Stock, in such case the number of shares of
Common Stock to be issued upon conversion of shares of this
Series at the time of the effective date of such subdivision,
combination or reclassification shall be adjusted, effective
at the opening of business on the business day next following
such record date or effective date so that the holder of any
shares of this Series surrendered for conversion after such
record date or effective date shall be entitle to receive the
number of shares of capital stock of the Corporation which he
would have owned or been entitled to receive had such shares
of this Series been converted immediately prior to such time.
If, as a result of an adjustment made pursuant to this clause
if the holder thereafter surrendered for conversion shall
become entitled to receive shares of two or more classes of
capital stock of the Corporation, the Board of Directors
(whose determination shall be conclusive) shall determine the
allocations of the adjusted conversion ratio between or among
shares of such classes of capital stock.
(B) In any case in which this paragraph (iv)
shall require that an adjustment as a result of any event
become effective at the opening of business on the business
day next following a record date, the Corporation may elect to
defer, until after the occurrence of such event, issuing to
the holder of any shares of this Series converted after such
record date and before the occurrence of such event the
additional shares of Common Stock issuable upon such
conversion and, in lieu of the shares the issuance of which is
so deferred, the corporation shall issue or cause its transfer
agent to issued due bills or other appropriate evidence of the
right to reserve such shares should such event occur.
(v) In the event (A) the Corporation shall declare a dividend or
any other distribution on its Common Stock payable otherwise than
in cash out of its retained earnings, (B) the Corporation shall
authorize the granting to the holders of its Common Stock of rights
to subscribe for or purchase any shares of capital stock of any
class or of any other rights, (C) of any reclassification of the
capital stock (other than a subdivision or combination of its
outstanding shares of Common Stock), or of any consolidation or
merger to which the Corporation is a party and for which approval
of any shareholders of the Corporation is required, or of the sale
or transfer of all or substantially all of the assets of the
Corporation, or (D) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, then in such event
the Corporation shall cause to be mailed to the transfer agent for
this Series, in the event the Corporation is not acting as its
transfer agent for this Series, and to the holders of record of the
outstanding shares of this Series, at least 20 days (or 10 days in
any case specified in (A) or (B) above) prior to the applicable
record date hereinafter specified, a notice stating (I) the date on
which a record is to be taken for the propose of such dividend,
distribution or rights, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to
such dividend, distribution or rights are to be determined, or (II)
the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which its is expected that holders of
Common Stock of
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record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or
winding up.
(vi) The Corporation shall at all times reserve and keep
available, free from pre- emptive rights, out of its authorized but
unissued Common Stock, for the purpose of effecting the conversion
of the shares of this Series, the full number of shares of Common
Stock then deliverable upon the conversion of all shares of this
Series then outstanding, provided that nothing contained herein
shall be construed to preclude the Corporation from satisfying its
obligations in respect of the conversion of the shares of this
Series by delivery of this Series by delivery of purchased shares
of Common Stock which are held in the treasury of the Corporation.
(vii) The Corporation shall pay any and all taxes that may be
payable in respect to the issuance or delivery of shares of Common
Stock on conversion of shares of this Series pursuant hereto. The
Corporation shall not, however, be required to pay any tax which
may be payable in respect to any transfer involved in the issuance
and delivery of shares of Common Stock in a name other than that in
which the shares of this Series so converted were registered, and
no such issue or delivery shall be made unless and until the person
requesting such issue shall have paid to the Corporation the amount
of any such tax or shall have established, to the satisfaction of
the Corporation, that such tax shall have been paid.
(viii) For the purpose of this Section (f), the term "COMMON
STOCK" shall include any stock of any class of the Corporation
which has no preference in respect of dividends or of amounts in
the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, and which is not subject to
redemption by the Corporation. However, except as otherwise
provided in paragraph (ix), shares issuable on conversion of shares
of this Series shall include only shares of the class designated as
Common Stock of the Corporation as of the original date of issue of
this Series or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no
preference in respect of dividends or of amount payable in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation and which are not subject to
redemption by the Corporation, provided that if at any time there
shall be more than one such resulting class, the shares of each
such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting
from all such reclassifications bears to the total number of shares
of all such classes resulting from all such reclassifications.
(ix) If either of the following shall occur, namely: (A) any
consolidation or merger to which the Corporation is a party, other
than a consolidation or a merger in which consolidation or merger
the Corporation is a continuing corporation and which does not
result in any reclassification of or change (other than a change in
par value or from par value to no par value or from no par value to
par value, or as a result of a subdivision or combination) in,
outstanding shares of Common Stock, or (B) any sale or conveyance
to another corporation of the property, of the Corporation as an
entirety or substantially as an entirety; then the holder of each
share of this Series then outstanding shall have the right to
convert such share only into the kind and amount of shares of stock
or other securities and property receivable upon such
consolidation, merger, sale or conveyance subject to adjustments
which shall be nearly equivalent as may be practicable to the
adjustments provided for in paragraph (iv) above. The provisions of
this paragraph (ix) shall similarly apply to successive
consolidations, mergers, sales or conveyances.
(x) Any shares of this Series which shall at any time have
been converted into shares of Common Stock shall, after such
conversion, have the status of authorized but unissued
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shares of Preferred Stock, without designation as a series until such
shares are once more designated as part of a particular series by the
Board of Directors.
(e) LIQUIDATION RIGHTS.
(i) Upon the liquidation, dissolution or winding up of
the Corporation, the holders of the shares of this Series shall be
entitled to receive out of the assets of the Corporation available
for distribution to its shareholders, before any payment or
distribution shall be on the Common Stock or any other capital
stock of the Corporation, the Stated Value per share, plus a sum
equal to any unpaid Full Cumulative Dividends per share to the date
of final distribution.
(ii) This Series shall be preferred over the Common
Stock and any other capital stock of the Corporation as to assets
in the event of any liquidation, dissolution or winding up of the
Corporation, and in that event the holders of the Series shall be
entitled to receive, out of the assets of the Corporation available
for distribution to its shareholders, an amount determined as
provided in this Certificate for every share of their holdings of
the shares of this Series before any distribution of the assets
shall be made to the holders of the Common Stock and any other
capital stock of the Corporation; and, if in the event of any such
liquidation, dissolution or winding up the holders of this Series
shall have received all amounts to which they shall be entitled as
aforesaid, the holders of the Common Stock and other capital stock
of the Corporation shall be entitled, to the exclusion of the holders
of the shares of this Series, to share ratably in all of the assets
of the Corporation available for distribution to the shareholders
then remaining according to the number of shares of the Common
Stock and other capital stock of the Corporation held by them
respectively and in accordance with the rights of the holders of
the Common Stock and such capital stock. If upon any liquidation,
dissolution or winding up of the Corporation the amounts payable on
or with respect to the shares of this Series are not paid in full,
the holders of the shares of this Series shall share ratably in any
distribution of assets according to the respective amount which
would be payable in respect of the shares of this Series held by
them upon such distribution if all amounts payable on or with
respect to the shares of this Series were paid in full.
(iii) Neither the sale, lease or exchange (for cash,
shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Corporation nor
the merger or consolidation of the Corporation into or with any
other corporation or the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation for the
purposes of this Section (e).
(f) OPTIONAL REDEMPTION. This Series will be redeemable, in
whole and not in part, at the option of the Corporation at any time on
not less than 30-days' written notice, at the Stated Value per
share, plus a sum equal to all dividends accrued and unpaid thereon
to the redemption date. Notice of redemption of this Series shall
be mailed to each holder of record of the shares of this Series not
less than 30 days prior to the redemption date. For at least 30
days following the notice of redemption and until two full business
days prior to the date of redemption, the holders shall have the
right to convert shares of this Series into shares of Common Stock
in accordance with Section (f) hereof. The notice of redemption shall
specify the date and place of redemption shall specify the date and
place of redemption, the redemption price and the date when the
shares of this Series cease to be convertible. Unless default shall
be made in the payment in full of the redemption price and any
accrued and unpaid dividends, dividends on the shares of this
Series shall cease to accrue on the redemption date, and all rights
of the holders of the shares of this Series as shareholders of the
Corporation by reason of the ownership of the shares of this Series
shall cease on the redemption date, except the right to convert to
Common Stock any shares theretofore tendered for conversion and
except the right to receive the amount payable upon redemption of
the shares of this Series and surrender of the respective certificates
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representing the shares of this Series, and the shares of this Series
shall not, after the redemption date, be deemed to be outstanding.
IN WITNESS WHEREOF, Precis Smart Card Systems, Inc. has caused this
certificate to be signed by its Chief Executive Officer and attested by its
Secretary, this 17th day of March, 2000.
PRECIS SMART CARD SYSTEMS, INC.
By: /s/ LARRY E. HOWELL
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Larry E. Howell, Chief Executive Officer
ATTEST:
/s/ MARK R. KIDD
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Mark R. Kidd, Secretary
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