CERTIFICATE OF DESIGNATION
Andrew Hromyk certifies that he is the President and Secretary of Autoeye Inc.,
a Delaware corporation (hereinafter referred to as the "Company") and that,
pursuant to the Company's Certificate of Incorporation, as amended, and Section
151 of the General Business Corporation Law, the Board of Directors of the
Company adopted the following resolutions on January, 27, 2000 and that none of
the shares of Series A Convertible Preferred Stock referred to in this
Certificate of Designation have been issued.
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Creation of Series A Convertible Preferred Stock
1. There is hereby created a series of preferred stock consisting of
750 shares and designated as the Series A Convertible Preferred Stock (
"Preferred Stock"), having the voting powers, preferences, relative,
participating, limitations, qualifications, optional and other special rights
and the qualifications, limitations and restrictions thereof that are set forth
below.
Conversion Provisions
2. The holders of Preferred Stock shall have conversion rights as follows
(the "Conversion Rights"):
Conversion
(a) Right to Convert. From and after the forty-fifth (45th) calendar
day following the day on which the Company receives payment in
full for Preferred Stock from and issues Preferred Stock to a
particular holder of Preferred Stock (the "Issuance Date"), all
Preferred Stock held by that holder shall be convertible at the
option of the holder into such number of shares of common stock
of the Company ("Common Stock") as is calculated by the
Conversion Rate (as hereinafter defined). The Conversion Rate,
subject to the exception defined in paragraph 2(b) hereof, shall
be that number of shares of Common Stock equal to $1,000 divided
by seventy five per cent (75%) of the average Market Price (as
hereinafter defined) of the shares of Common Stock for the ten
trading days immediately prior to the Conversion Date (as
hereinafter defined), provided that in no event shall: (i) less
than 250 shares of Common Stock be issued upon conversion of each
one share of Preferred Stock; and (ii) more than 5,000 shares of
Common Stock be issued upon conversion of each one share of
Preferred Stock.
(b) Failure to Register Exemption. In the event that a registration
statement in respect of the Common Stock to be issued upon the
conversion of the Preferred Stock has not been filed with and
declared effective by the Securities and Exchange Commission on
or before the date which is twelve months following the Issuance
Date (the "Anniversary Date"), the number of shares of Common
Stock issued to a particular holder will be calculated by the
Failure to Register Conversion Rate. The Failure to Register
Conversion Rate shall be that number of shares of Common Stock
equal to $1,000 divided by fifty per cent (50%) of the Market
Price of the shares of Common Stock on the day immediately
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preceding the Anniversary Date, provided that in no event shall:
(i) less than 250 shares of common Stock be issued upon
conversion of each one share of Preferred Stock; and (ii) more
than 5,000 shares of Common Stock be issued upon conversion of
each one share of Preferred Stock.
(c) Market Price. Market Price for a particular date shall be the
closing bid price of the shares of Common Stock on such date, as
reported by the National Association of Securities Dealers
Automated Quotation System (`NASDAQ"), or the closing bid price
in the over-the-counter market if other than NASDAQ.
(d) No Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of the Preferred Stock, and in lieu
thereof the number of shares of Common Stock to be issued for
each share of Preferred Stock converted shall be rounded down to
the nearest whole number of shares of Common Stock. Such number
of whole shares of Common Stock to be issued upon the conversion
of one share of Preferred Stock shall be multiplied by the number
of shares of Preferred Stock submitted for conversion pursuant to
the Notice of Conversion (defined below) to determine the total
number of shares of Common Stock to be issued in connection with
any one particular conversions.
(e) Method of Conversion. In order to convert Preferred Stock into
shares of Common Stock, a holder of Preferred Stock shall
(A) complete, execute and deliver to the Company and the
Company's Transfer Agent, Interwest Transfer Co. Inc. (the
"Transfer Agent") the conversion certificate attached hereto
as Exhibit A (the "Notice of Conversion"), and
(B) surrender the certificate or certificates representing the
Preferred Stock being converted (the "Converted
Certificate") to the Transfer Agent.
Subject to paragraph 2(h) hereof, the Notice of Conversion shall
be effective and in full force and effect for a particular date
if delivered to the Company and the Transfer Agent on that
particular date prior to 5:00 pm, pacific time, by facsimile
transmission or otherwise, provided that particular date is a
business day, and provided that the original Notice of Conversion
and the Converted Certificate are delivered to and received by
the Transfer Agent within three (3) business days thereafter at
1981 East Murray Holladay Road, Suite 100, PO Box 17136, Salt
Lake City, Utah 84117 Telephone 801-272-9294 and that particular
date shall be referred to herein as the "Conversion Date". The
person or persons entitled to receive the shares of Common Stock
to be issued upon conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock as of
the Conversion Date. If the original Notice of Conversion and the
Converted Certificate are not delivered to and received by the
Transfer Agent within three (3) business days following the
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Conversion Date, the Notice of Conversion shall become null and
void as if it were never given and the Company shall, within two
(2) business days thereafter, instruct the Transfer Agent to
return to the holder by overnight courier any Converted
Certificate that may have been submitted in connection with any
such conversion. In the event that any Converted Certificate
submitted represents a number of shares of Preferred Stock that
is greater than the number of such shares that is being converted
pursuant to the Notice of Conversion delivered in connection
therewith, the Transfer Agent shall advise the Company to deliver
a certificate representing the remaining number of shares of
Preferred Stock not converted.
(f) Absolute Obligation to issue Common Stock. Upon receipt of a
Notice of Conversion, the Company shall absolutely and
unconditionally be obligated to cause a certificate or
certificates representing the number of shares of Common Stock to
which a converting holder of Preferred Stock shall be entitled as
provided herein, which shares shall constitute fully paid and
non-assessable shares of Common Stock and shall be issued to,
delivered by overnight courier to, and received by such holder by
the sixth (6th) business day following the Conversion Date. Such
delivery shall be made at such address as such holder may
designate therefor in its Notice of Conversion or in its written
instructions submitted together therewith.
(g) Minimum Conversion. No less than 10 shares of Preferred Stock may
be converted at any one time by a particular holder, unless the
holder then holds less than 10 shares and converts all such
shares held by it at that time.
(h) Deemed Conversion. Notwithstanding any other provision herein,
and provided that a registration statement in respect of the
Common Stock to be issued upon the conversion of the Preferred
Stock has been filed with and declared effective by the
Securities and Exchange Commission on or before the Anniversary
Date, all of the Preferred Stock outstanding on Anniversary Date
shall be deemed to convert into shares of Common Stock as is
calculated by the Conversion Rate as defined in paragraph 2(a)
hereof, provided that, in the event that this paragraph would
result in a particular holder of Preferred Stock holding,
together with the shares of Common Stock then held by that
holder, more than 9.9% of the Company's then issued and
outstanding Common Stock, the conversion deemed hereby shall be
postponed until such time as the particular holder holds such
number of shares of Common Stock that, together with the shares
of Common Stock then held by that holder, would constitute less
than 9.9% of the Company's then issued and outstanding Common
Stock. The onus for notifying the Company of the application of
this qualification shall be upon the particular holder.
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Adjustments to Conversion Rate
(i) Reclassification, Exchange and Substitution. If the Common Stock
to be issued on conversion of the Preferred Stock shall be
changed into the same or a different number of shares of any
other class or classes of stock, whether by capital
reorganization, reclassification, reverse stock split or forward
stock split or stock dividend or otherwise (other than a
subdivision or combination of shares provided for above), the
holders of the Preferred Stock shall, upon its conversion be
entitled to receive, in lieu of the Common Stock which the
holders would have become entitled to receive but for such
change, a number of shares of such other class or classes of
stock that would have been subject to receipt by the holders if
they had exercised their rights of conversion of the Preferred
Stock immediately before that changes.
(j) Reorganizations, Mergers, Consolidations or Sale of Assets. If at
any time there shall be a capital reorganization of the Company's
common stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in
this Section 2) or merger of the Company into another
corporation, or the sale of the Company's properties and assets
as, or substantially as, an entirety to any other person, then,
as a part of such reorganization, merger or sale, lawful
provision shall be made so that the holders of the Preferred
Stock receive the number of shares of stock or other securities
or property of the Company, or of the successor corporation
resulting from such merger, to which holders of the Common Stock
deliverable upon conversion of the Preferred Stock would have
been entitled on such capital reorganization, merger or sale if
the Preferred Stock had been converted immediately before that
capital reorganization, merger or sale to the end that the
provisions of this paragraph (including adjustment of the
Conversion Rate then in effect and the number of shares
purchasable upon conversion of the Preferred Stock) shall be
applicable after that event as nearly equivalently as may be
practicable.
(k) No Impairment. The Company will not, by amendment of its Articles
of Incorporation or through any reorganization, recapitalization,
transfer of assets, merger, dissolution, 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
Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 2 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 the
Preferred Stock against impairment.
(l) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for any shares
of Preferred Stock pursuant to paragraphs 2(i) or (j) hereof, the
Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Preferred Stock effected thereby a
certificate setting forth such adjustment or readjustment and
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showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written
request at any time of any holder of Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting
forth: (i) such adjustments and readjustments; (ii) the
Conversion Rate at the time in effect; and (iii) the number of
shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of such
holder's shares of Preferred Stock.
Liquidation Provisions
3. In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, holders of Preferred Stock shall be
entitled to receive an amount equal to $1,000.00 per share, plus any accrued and
unpaid dividends. After the full preferential liquidation amount has been paid
to, or determined and set apart for the Preferred Stock and all other series of
preferred stock hereafter authorized and issued, if any, the remaining assets of
the Company available for distribution to shareholders shall be distributed
ratably to the holders of the Common Stock. In the event the assets of the
Company available for distribution to its shareholders are insufficient to pay
the full preferential liquidation amount per share required to be paid to the
holders of Company's Preferred Stock, the entire amount of assets of the Company
available for distribution to shareholders shall be paid up to their respective
full liquidation amounts first to the holders of Preferred Stock, then to any
other series of preferred stock hereafter authorized and issued, all of which
amounts shall be distributed ratably among holders of each such series of
preferred stock, and the Common Stock shall receive nothing. A reorganization or
any other consolidation or merger of the Company with or into any other
corporation, or any other sale of all or substantially all of the assets of the
Company, shall not be deemed to be a liquidation, dissolution or winding up of
the Company within the meaning of this Section 3, and the Preferred Stock shall
be entitled only to: (i) the rights provided in any agreement or plan governing
the reorganization or other consolidation, merger or sale of assets transaction;
(ii) the rights contained in the Delaware General Business Corporation Law; and
(iii) the rights contained in other Sections hereof.
Dividend Provisions
4. The holders of shares of Preferred Stock shall not be entitled to
receive any dividends.
Reservation of Stock to be issued upon Conversion
5. The Company 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 Preferred Stock such number of
its shares of Common Stock as shall from time to time be sufficient, based on
the Conversion Rate then in effect, to effect the conversion of all then
outstanding shares of the Preferred Stock. 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 Preferred Stock, then, in
addition to all rights, claims and damages to which the holders of the Preferred
Stock shall be entitled to receive at law or in equity as a result of such
failure by the Company to fulfill its obligations to the holders hereunder, the
Company will take any and all corporate or other action as may, in the opinion
of its counsel, be helpful, appropriate or necessary to increase its authorized
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but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
Notices
6. In the event of the establishment by the Company 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 distribution, the Company shall mail to
each holder of Preferred Stock at least twenty (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 distribution and the amount and character of such
distribution.
7. Any notices required by the provisions hereof to be given to the
holders of shares of Preferred Stock shall be deemed given if deposited in the
United States mail, postage prepaid and return receipt requested, and addressed
to each holder of record at its address appearing on the books of the Company or
to such other address of such holder or its representative as such holder may
direct.
Voting Provisions
8. Except as otherwise expressly provided or required by law, the
Preferred Stock shall have no voting rights.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation of Series A Convertible Preferred Stock to be duly executed by its
President and attested to by its Secretary this 27th day of January, 2000 who,
by signing their names hereto, acknowledge that this Certificate of Designation
is the act of the Company and state to the best of their knowledge, information
and belief, under the penalties of perjury, that the above matters and facts are
true in all material respects.
AUTOEYE INC.
/s/ ANDREW HROMYK
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Andrew Hromyk, President
/s/ ANDREW HROMYK
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Andrew Hromyk, Secretary
