<PAGE>
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
AVIATION GROUP, INC.
I, the undersigned natural person of the age of eighteen (18) years or
more, acting as the incorporator of a corporation under the Texas Business
Corporation Act, do hereby adopt the following Articles of Incorporation for
such corporation
ARTICLE ONE
The name of the corporation is Aviation Group, Inc.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose for which the corporation is organized is to transact any and
all lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares of stock that the corporation shall have
authority to issue is fifteen million (15,000,000) shares, which shall be
divided into two (2) classes as follows:
(a) Ten million (10,000,000) shares of Common Stock, having a par value of
one cent ($0.01) each (hereinafter "Common Stock"); and
(b) Five million (5,000,000) shares of Preferred Stock, having a par value
of ten cents ($0.01) each (hereinafter "Preferred Stock").
The Board of Directors of the corporation shall have authority to establish
series of unissued shares of the Preferred Stock by fixing and determining the
relative rights and preferences of the shares of any series so established in
accordance with and to the extent permitted by the applicable provisions of the
Texas Business Corporation Act, and to increase or decrease the number of shares
within each such series, except that the Board of Directors may not decrease the
number of shares within a series to less than the number of shares within such
series that are then issued and may not increase or decrease the number of
shares in a series if prohibited by the resolution or resolutions adopted by the
Board of Directors providing for such series of Preferred Stock. Each such
series of Preferred Stock shall have distinctive serial designations.
Without limiting the generality of the foregoing, each series of Preferred
Stock
(a) may have such number of shares;
(b) may have such voting powers, full or limited, or may be without voting
powers;
<PAGE>
(c) may be subject to redemption at such time or times and at such prices;
(d) may be entitled to receive distributions (which may be cumulative,
noncumulative, or partially cumulative) at such rate or rates, on such
conditions, and at such times, and payable in preference to, or in
such relation to, the dividends payable on any other class or classes
or series of stock;
(e) may have such rights upon the dissolution of, or upon any distribution
of the assets of, the corporation;
(f) may be made convertible into shares of any other class or classes or
of any other series of the same or any other class or classes of stock
of the corporation at such ratios or prices, and with such
adjustments;
(g) may be entitled to the benefit of a sinking fund or purchase fund to
be applied to the purchase or redemption of shares of such series in
such amount or amounts;
(h) may be exchangeable, subject to compliance with applicable Texas law,
for such property or indebtedness of the corporation; and
(i) may have such other relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof,
all as shall be stated in the resolution or resolutions of the Board of
Directors providing for the establishment of such series of Preferred Stock.
Shares of any series of Preferred Stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or purchased by the
corporation, or which, if convertible or exchangeable, have been converted into
shares of stock or exchanged for property or indebtedness of the corporation
shall have the status of authorized and unissued shares of Preferred Stock and
may be reissued as a part of the series for which they were originally apart or
may be reclassified and reissued as part of a new series of Preferred Stock to
be created by resolution or resolutions of the Board of Directors or as part of
any other series of Preferred Stock, all subject to the conditions or
restrictions on issuance set forth in the resolution or resolutions adopted by
the Board of Directors providing for the establishment of any series of
Preferred Stock and to any filing required by law.
Except as otherwise provided by law or by the resolution or resolutions of
the Board of Directors providing for the establishment of any series of the
Preferred Stock, the Common Stock shall have the exclusive right to vote for the
election of directors and for all other purposes, each holder of the Common
Stock being entitled to one (1) vote for each share held.
Subject to all of the rights of the Preferred Stock or any series thereof,
the holders of the Common Stock on account thereof shall be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available therefor, distributions payable in cash, stock or otherwise.
Upon any liquidation, dissolution or winding-up of the corporation, whether
voluntary or involuntary, and after the holders of the Preferred Stock of each
series shall have been paid in full the amounts to which they respectively shall
be entitled, or a sum sufficient for such payment in full shall have been set
aside for payment, the remaining net assets of the corporation shall be
distributed pro rata to the
2
<PAGE>
holders of the Common Stock in accordance with their respective rights and
interests, to the exclusion of the holders of the Preferred Stock.
ARTICLE FIVE
The corporation will not commence business until it has received for the
issuance of its shares consideration at least equal to the aggregate value of
$1,000.00, consisting of money, labor done or property actually received.
ARTICLE SIX
The street address of the corporation's initial registered office is 1327
Empire Central, Suite 260, Dallas, Texas 75247, and the name of its initial
registered agent at such address is Lee Sanders.
ARTICLE SEVEN
The initial Board of Directors shall consist of one (1) director; however,
thereafter, the number of directors constituting the Board shall be fixed in the
manner provided in the bylaws. The name and address of the person who shall
serve as initial director of the corporation until the first annual meeting of
the shareholders or until his successor is elected and qualified is as follows:
Lee Sanders 1327 Empire Central, Suite 260
Dallas, Texas 75247
ARTICLE EIGHT
The corporation shall indemnify any person who (i) is or was a director,
officer, employee, or agent of the corporation, or (ii) while a director,
officer, employee, or agent of the corporation, is or was serving at the request
of the corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, to the fullest extent that a corporation may
or is required to grant indemnification to a director under the. Texas Business
Corporation Act as now written or as hereafter amended. The corporation may
indemnify any person to such further extent as permitted by law.
The corporation may purchase and maintain insurance on behalf of any person
who holds or who has held any position named hereinabove as allowed under the
Texas Business Corporation Act, as now written or as hereafter amended.
ARTICLE NINE
A director of the corporation shall not be liable to the corporation or its
shareholders for monetary damages for an act or omission in the director's
capacity as director, except that this Article does not eliminate or limit the
liability of a director for:
(a) a breach of a director's duty of loyalty to the corporation or its
shareholders;
(b) an act or omission not in good faith or that involves intentional
misconduct or a knowing violation of the law;
3
<PAGE>
(c) a transaction from which a director received an improper benefit,
whether or not the benefit resulted from an action taken within the
scope of the director's office;
(d) an act or omission for which the liability of a director is expressly
provided for by statute; or
(e) an act related to an unlawful stock repurchase or payment of a
dividend.
ARTICLE TEN
The name and address of the incorporator of the corporation is as follows:
Susan E. Mitchell 500 North Akard Street
Suite 4000
Dallas, Texas 75201
ARTICLE ELEVEN
Preemptive rights of shareholders of the corporation are expressly denied.
No holder of any shares of stock of the corporation shall be entitled as a
matter of right to purchase or subscribe for any part of any shares of stock of
the corporation authorized by these Articles or of any additional shares of
stock of any class to be issued by reason of any increase in the authorized
capital stock of the corporation, or of any bonds, certificates of indebtedness,
debentures, warrants, options or other securities or rights convertible into any
class of capital stock of the corporation, but any shares of stock authorized by
these Articles or any such additional authorized issue of any capital stock,
rights or securities convertible into any shares of such stock may be issued and
disposed of by the Board of Directors to such persons, firms, corporations or
associations for such consideration, upon such terms and in such manner as the
Board of Directors may, in its discretion, determine without any offering
thereof on the same terms or on any other terms to the shareholders then of
record or to any class of shareholders; provided only that such issuance may not
be inconsistent with any provisions of law or with any of the provisions of
these Articles.
ARTICLE TWELVE
Cumulative voting is expressly prohibited. At each election of directors
every shareholder entitled to vote at such election shall have the right to
vote, in person or by proxy, the number of shares owned by him with respect to
each of the persons nominated for election as a director and for whose election
he has a right to vote; and no shareholder shall be entitled to cumulate his
votes by giving one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of shares owned by such shareholder, or
by distributing such votes on the same principle among any number of candidates.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of December,
1995.
/s/ Susan E. Mitchell
----------------------------------------
Susan E. Mitchell
4
<PAGE>
ARTICLES OF CORRECTION
OF
AVIATION GROUP, INC.
Pursuant to the provisions of Article 1302-7.02 of the Texas Miscellaneous
Corporation Laws Act, the following correction is hereby made to the Articles of
Incorporation of Aviation Group, Inc. (the "Corporation"):
ARTICLE ONE
The name of the Corporation is Aviation Group, Inc.
ARTICLE TWO
The document to be corrected is the Articles of Incorporation of Aviation
Group, Inc. (the "Articles"), which was filed in the Office of the Secretary of
State on the 4th day of December, 1995.
ARTICLE THREE
Subparagraph (b) of Article Four of the Articles incorrectly states: "Five
million (5,000,000) shares of Preferred Stock, having a par value of ten cents
($0.01) each (hereinafter "Preferred Stock")."
ARTICLE FOUR
Subparagraph (b) of Article Four of the Articles of Incorporation is
corrected to read in its entirety as follows: "Five million (5,000,000) shares
of Preferred Stock, having a par value of one cent ($0.01) each (hereinafter
"Preferred Stock")."
DATED as of this 21st day of January, 1997.
AVIATION GROUP, INC.
By: /s/ Lee Sanders
---------------
Lee Sanders, President
5
<PAGE>
STATEMENT OF RESOLUTION ESTABLISHING
SERIES OF SHARES
(Series A Convertible Preferred Stock)
To the Secretary of State of
the State of Texas:
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of establishing and designating a series of shares and fixing and
determining the relative rights and preferences thereof:
1. The name of the Corporation is Aviation Group, Inc., a Texas corporation
(the "Corporation").
2. The Board of Directors duly adopted the following resolution by a
Unanimous Consent of the Board of Directors of the Corporation, dated March 23,
2000:
WHEREAS, the Corporation's directors have reviewed and approved the
Certificate of Designation ("Certificate of Designation"), attached hereto and
incorporated herein by reference, delineating the number of shares, the voting
powers, designations, preferences and relative, participating, optional,
redemption, conversion, exchange, dividend or other special rights and
qualifications, limitations or restrictions of a series of Preferred Stock to be
issued by the Corporation and designated Series A Convertible Preferred Stock,
par value $0.01 per share (the "Series A Preferred Stock"); now, therefore, be
it
RESOLVED, that 2,000 shares of authorized but unissued Preferred
Stock be designated Series A Preferred Stock and that the Series A
Preferred Stock have the rights, preferences, limitations and restrictions
set forth herein; and, be it
FURTHER RESOLVED, that the Chairman, the President or any Vice
President of the Corporation, individually or collectively, be, and such
officers hereby are, authorized and directed to execute, acknowledge,
attest, record and file with the Secretary of State of the State of Texas
the Certificate of Designation in accordance with the Texas Business
Corporation Act and to take all other actions that such officers deem
necessary to effectuate the Certificate of Designation.
6
<PAGE>
CERTIFICATE OF DESIGNATION
1. Series A Preferred Stock. The Series A Convertible Preferred Stock (the
"Series A Preferred") will consist of 2,000 shares and will have the
designations, preferences, voting powers, relative, participating, optional or
other special rights and privileges, and the qualifications, limitations and
restrictions as follows:
2. Dividends and Distributions. The holders of record of shares of Series A
Preferred shall be entitled to receive, when and if declared by the Board of
Directors of the Corporation out of funds legally available for the payment of
dividends, monthly dividends at a rate of nine percent (9%) of the Liquidation
Value (as defined in Section 3 below) per annum per share of Series A Preferred,
out of funds legally available therefor, which shall be prior and in preference
to any declaration or payment of any dividend on the Common Stock (excluding any
stock splits and stock dividends payable in shares of Common Stock) or any other
class or series of Preferred Stock (other than the Company's Series B Preferred
Stock (the "Series B Preferred") and Series C Preferred Stock (the "Series C
Preferred"), to which the Series A Preferred shall rank junior with respect to
dividend rights). Any such dividends that are not paid shall accrue and be
cumulative.
Monthly dividends shall commence to accrue on the first day of each month
of the year except that the first monthly dividend for each share shall commence
to accrue on the date of original issuance of such share, and shall end on and
include the day immediately preceding the first day of the next monthly dividend
period. Dividends on the shares of Series A Preferred shall be payable on the
first day of each month of each year (a "Dividend Payment Date"), commencing
April 1, 2000; provided, however, that no obligation to pay a dividend shall
exist until such dividends are declared by the Board of Directors. Each such
dividend shall be paid to the holders of record of the Series A Preferred as
they shall appear on the stock register of the Corporation on such record date,
not exceeding 45 days preceding such Dividend Payment Date, as shall be fixed by
the Board of Directors of the Corporation or a duly authorized committee
thereof.
3. Liquidation Rights. In the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a
"Liquidation"), distributions shall be made to the holders of Series A Preferred
in respect of such Series A Preferred after the liquidation preference amounts
of the Series B Preferred and Series C Preferred shall be paid to the holders of
the Series B Preferred and Series C Preferred, but before any amount shall be
paid to the holders of any other class or series of capital stock of the
Corporation in the following manner:
After the holders of the Series B Preferred and Series C Preferred
have been paid the full liquidation preferences payable to the holders of the
Series B Preferred and Series C Preferred, the holders of the Series A Preferred
shall be entitled to be paid out of the assets of the Corporation available for
distribution to holders of its capital stock an amount per share of Series A
Preferred equal to the sum of (i) $10,000 ("Liquidation Value"), plus (ii) all
accrued but unpaid dividends (calculated through the date of liquidation)
(collectively, with the Liquidation Value, the "Liquidation Preference"), prior
to any distribution to the holders of any other Preferred Stock (other than the
Series B Preferred and Series C Preferred to which the Series A Preferred shall
rank junior with respect to the Liquidation Preference) or Common Stock. If the
proceeds from a
7
<PAGE>
Liquidation are not sufficient to pay to the holders of Series A Preferred the
full Liquidation Preference, then such holders shall instead be entitled to
receive the entire assets and funds of the Corporation legally available for
distribution to the holders of capital stock, which assets and funds shall be
distributed ratably among the holders of the Series A Preferred.
4. Voting Rights.
(a) Voting with Common Stock. Except as otherwise required by law or
by Section 8 hereof, the holder of each share of Series A Preferred will not be
entitled to vote as a shareholder on any matters prior to the earlier of the
following events (the "Triggering Event") (a) September 30, 2000 or (b) the
consummation of the merger between the Corporation or a subsidiary of the
Corporation and travelbyus.com ltd., an Ontario corporation (the "Merger").
After the occurrence of a Triggering Event, except as otherwise required by law
or by Section 8 hereof, the holder of each share of Series A Preferred will be
entitled to vote on all matters with the Common Stock as a single class, and not
as a separate class or series, with each share of Series A Preferred entitling
the holder thereof to the number of votes per share equal to the full number of
shares of Common Stock into which each share of Series A Preferred is
convertible on the record date for such vote. After the occurrence of a
Triggering Event, the holders of the Series A Preferred shall receive notice of
and shall be entitled to attend in person or by proxy any meeting of the holders
of Common Stock.
(b) Majority Class Vote. In addition to the special voting rights
provided in Section 8 and Section 4(a), the holders of the Series A Preferred
shall also have the right to vote as a separate class on any matter if required
by the Texas Business Corporation Act or any successor statute (the "Act").
Pursuant to the Act, with respect to any matter for which the affirmative vote
of the holders of a specified portion in excess of the majority of the
outstanding shares of Series A Preferred entitled to vote is required by the
Act, the act of the holders of Series A Preferred on that matter shall be the
affirmative vote of the holders of a majority of the outstanding shares of
Series A Preferred entitled to vote on that matter, rather than the affirmative
vote of the greater percentage otherwise required by the Act.
5. Redemptions.
(a) Right to Redemption. At any time on or prior to September 30,
2000, the Corporation shall have the right, at its option, to redeem (the
"Mandatory Redemption") all or part of the shares of Series A Preferred then
outstanding at a price per share equal to the Liquidation Preference (the
"Redemption Price").
(b) Redemption Procedure. The Corporation may effect a Mandatory
Redemption by giving written notice to the holders of the Series A Preferred not
less than thirty (30) days nor more than one hundred fifty (150) days prior to
the intended effective date of the Mandatory Redemption of such election to
exercise a Mandatory Redemption, the number of shares of Series A Preferred
subject to the Mandatory Redemption, and the intended effective date of the
Mandatory Redemption (the "Redemption Date"). Upon receipt of the written
notice of a Mandatory Redemption, the holders of the Series A Preferred will
have the right to convert
8
<PAGE>
their shares of Series A Preferred into shares of Common Stock pursuant to
Section 6(b). A holder of the Series A Preferred shall not have the right to
receive payment of the Redemption Price unless and until the holder surrenders
the certificate or certificates representing the holder's Series A Preferred at
the principal office of the Corporation or of the Corporation's transfer agent.
Following the Redemption Date, the Corporation shall, as soon as practicable
after such surrender, send payment to the holder of Series A Preferred
surrendering such certificates in the form of a check of the Corporation for the
total amount of the Redemption Price to which the holder may be entitled.
(c) Dividends; Rights of Holders. No share of Series A Preferred is
entitled to any dividends declared after the date on which the Redemption Price
of such share of Series A Preferred is paid or irrevocably set aside for
payment. On such date, all rights of the holder of such share of Series A
Preferred will cease, and such share of Series A Preferred will be deemed to be
not outstanding.
(d) Reissuance; New Certificates. Any shares of Series A Preferred
which are redeemed or otherwise acquired by the Corporation will be canceled and
will not be reissued, sold or transferred and will be returned to the status of
authorized but unissued shares of Preferred Stock without designation as to a
series or class of Preferred Stock. If fewer than the total number of shares of
Series A Preferred represented by any certificate are redeemed, a new
certificate representing the number of unredeemed shares of Series A Preferred
will be issued to the holder thereof without cost to such holder within three
(3) business days after surrender of the certificate representing the redeemed
shares.
(e) Ratable Offers. Neither the Corporation nor any of its
subsidiaries will redeem, repurchase or otherwise acquire any shares of Series A
Preferred pursuant to this Section 5, except on a pro-rata basis from all
holders of shares of Series A Preferred on the basis of the number of shares of
Series A Preferred owned by each such holder.
6. Conversion.
(a) Corporation's Right to Convert. Each share of Series A Preferred
shall be automatically and mandatorily convertible, at the option of the
Corporation, at any time after the issuance of such shares of Series A Preferred
into shares of Common Stock at the Conversion Rate (as defined in Section 6(c)
hereof). The Corporation shall give each holder of the Series A Preferred ten
(10) days prior written notice stating the date that the automatic and mandatory
conversion of the Series A Preferred will occur under this Section 6(a). The
Corporation and the holders of the Series A Preferred shall carry out the
exchange procedures set forth in Section 6(d) as soon as practicable after the
Corporation has given the written notice of automatic conversion required by
this Section 6(a). 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 immediately prior to
the close of business on the effective date of the conversion stated in the
notice from the Corporation. The Corporation's conversion right terminates when
the Corporation completes a new Common Stock, preferred stock or debt financing
that is on terms reasonably acceptable to the Corporation, that occurs after or
upon the consummation of the Merger and that provides new gross cash proceeds to
the
9
<PAGE>
Corporation of at least US $25 million.
(b) Holder's Right to Convert. Each share of Series A Preferred shall
be convertible, at the option of the holder thereof, at any time after October
31, 2000 or, if earlier, after the holder has received notice of the
Corporation's election to exercise a Mandatory Redemption under Section 5
hereof, into shares of Common Stock at the Conversion Rate (as defined in
Section 6(c) hereof). To effect such conversion, the holder of Series A
Preferred shall (i) give the Corporation written notice stating that the holder
elects to exercise the right to convert and the number of shares of Series A
Preferred that the holder elects to convert, and (ii) deliver the certificate of
certificates evidencing the Series A Preferred to be converted in accordance
with Section 6(d) below. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such delivery of the
certificate or certificates for the Series A Preferred 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.
(c) Conversion Rate. Upon a conversion pursuant to Section 6(a) or
Section 6(b) hereof, each share of Series A Preferred shall be converted into a
number of shares of Common Stock equal to the quotient (the "Conversion Rate")
obtained by dividing (i) the Liquidation Preference on the Conversion Date (as
defined in Section 6(d) hereof), by (ii) the greater of (x) US $6.00 (the
"Minimum Conversion Price") or (y) the arithmetic mean of the closing bid prices
of the Common Stock as reported by Bloomberg, L.P. for the twenty-one (21)
trading days preceding the Conversion Date (the "Mean Trading Price").
(d) Mechanics of Voluntary Conversion. After any conversion of shares
of Series A Preferred into shares of Common Stock under Section 6(a) or Section
6(b), before certificates of Common Stock therefor shall be issued, the
certificate or certificates representing the shares of Series A Preferred shall
be surrendered, duly endorsed, at the principal office of the Corporation or of
the Corporation's transfer agent. The Corporation shall as soon as practicable
after such delivery, issue and deliver to the holder of Series A Preferred
surrendering such certificates, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled as aforesaid. The
effective date of the automatic and mandatory conversion under Section 6(a) or
the date on which the voluntary conversion is deemed to have been made under
Section 6(b), or such other date as may be fixed by the mutual agreement of the
Corporation and the holder as the date for the particular conversion, is
referred to as the "Conversion Date".
(e) Status of Converted Stock. In case any shares of Series A
Preferred shall be converted pursuant to this Section 6, the shares so converted
shall be canceled and shall not be reissued, sold or transferred and shall be
returned to the status of authorized but unissued shares of Preferred Stock
without designation as to a series or class of Preferred Stock.
(f) Fractional Shares. In lieu of any fractional shares in the
aggregate to which the holder of Series A Preferred would otherwise be entitled
upon conversion, the Corporation shall pay cash equal to such fraction
multiplied by the fair market value of one share
10
<PAGE>
of Common Stock as determined by the Board of Directors.
(g) 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 Series A 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 Series A Preferred. 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 A 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.
(h) Payment of Taxes. The Corporation shall pay all issued taxes, if
any, incurred in connection with the issuance of the Common Stock on conversion
of any shares of Series A Preferred, but the Corporation shall not pay any
transfer or other taxes incurred by reason of the issuance of such Common Stock
in any name other than the name in which the share or shares of Series A
Preferred surrendered for conversion may stand.
(i) Adjustments to Minimum Conversion Price. In the event of any stock
dividend on the Common Stock, any stock split, reverse stock split, stock
combination or reclassification of the Common Stock or any merger, consolidation
or combination of the Corporation with any other corporation or corporations,
the Minimum Conversion Price shall be proportionately adjusted so that the
holders of the Preferred Stock after such event shall be entitled to receive
upon conversion the number and kind of shares which such holders would have
owned or been entitled to receive had such Preferred Stock been converted
immediately prior to such event, in any case as if the Conversion Rate were
determined using the Minimum Conversion Price and not the Mean Trading Price.
Such adjustment shall be made successively upon the occurrence of any of the
events listed in this Section 6(i).
7. Notices. Any notice required by the provisions of this Certificate to
be given to the holders of Series A Preferred shall be deemed to have been
sufficiently received (except as otherwise provided herein) (a) upon receipt
when personally delivered, (b) or one (1) day after sent by overnight delivery
or telecopy providing confirmation or receipt of delivery, or (c) three (3) days
after being sent by certified or registered mail, postage and charges prepaid,
return receipt requested, and addressed to each holder of record at such
holder's address appearing on the share transfer books of the Corporation.
8. Approval of Certain Transactions While Any Series A Preferred is
Outstanding. So long as any shares of Series A Preferred are outstanding, the
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of at least a majority of the Series A Preferred then
outstanding, voting as a separate class, take any action that:
11
<PAGE>
(a) alters the rights, preferences or privileges of the Series A
Preferred;
(b) increases or decreases the authorized number of shares of Series
A Preferred;
(c) creates any new class or series of shares, or issues any such
shares or options exercisable or convertible into such shares, that have a
preference over or are on a parity with the Series A Preferred with respect to
dividends or liquidation preferences other than shares of Series B Preferred;
(d) reclassifies stock into shares having a preference over or that
are on parity with the Series A Preferred with respect to dividends or
liquidation preferences other than shares of Series B Preferred; or
(e) alters or amends the provisions of this Section 8.
3. The resolutions set forth above have been duly adopted by all
necessary action on the part of the Corporation.
IN WITNESS WHEREOF, Aviation Group, Inc. has caused this Certificate to be
executed by Bill Kerby, its President, and attested by Richard L. Morgan, its
Secretary, this 30th day of March, 2000.
Aviation Group, Inc
By: /s/ Bill Kerby
---------------
Bill Kerby, President
ATTESTED:
By: /s/ Richard L. Morgan
----------------------
Richard L. Morgan, Secretary
12
<PAGE>
STATEMENT OF RESOLUTION ESTABLISHING
SERIES OF SHARES
(SERIES B PREFERRED STOCK)
To the Secretary of State of
the State of Texas:
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of establishing and designating a series of shares and fixing and
determining the relative rights and preferences thereof:
1. The name of the Corporation is Aviation Group, Inc., a Texas
corporation (the "Corporation").
2. The Board of Directors duly adopted the following resolution by a
Unanimous Consent of the Board of Directors of the Corporation, dated as of
March 23, 2000:
WHEREAS, the Corporation's directors have reviewed and approved the
Certificate of Designation ("Certificate of Designation"), attached hereto and
incorporated herein by reference, delineating the number of shares, the voting
powers, designations, preferences and relative, participating, optional,
redemption, conversion, exchange, dividend or other special rights and
qualifications, limitations or restrictions of a series of Preferred Stock to be
issued by the Corporation and designated Series B Preferred Stock, par value
$0.01 per share (the "Series B Preferred Stock"); now, therefore, be it
RESOLVED, that 2,000 shares of authorized but unissued Preferred Stock
be designated Series B Preferred Stock and that the Series B Preferred
Stock have the rights, preferences, limitations and restrictions set forth
herein; and, be it
FURTHER RESOLVED, that the Chairman, the President or any Vice
President of the Corporation, individually or collectively, be, and such
officers hereby are, authorized and directed to execute, acknowledge,
attest, record and file with the Secretary of State of the State of Texas
the Certificate of Designation in accordance with the Texas Business
Corporation Act and to take all other actions that such officers deem
necessary to effectuate the Certificate of Designation.
13
<PAGE>
CERTIFICATE OF DESIGNATION
1. Series B Preferred Stock. The Series B Preferred Stock (the "Series B
Preferred"), will consist of 2,000 shares and will have the designations,
preferences, voting powers, relative, participating, optional or other special
rights and privileges, and the qualifications, limitations and restrictions as
follows:
2. Dividends and Distributions. The holders of record of shares of
Series B Preferred shall be entitled to receive, when and if declared by the
Board of Directors of the Corporation out of funds legally available for the
payment of dividends, quarterly dividends at a rate of twelve percent (12%) of
the Liquidation Value (as defined in Section 3 below) per annum per share of
Series B Preferred, out of funds legally available therefor, which shall be
prior and in preference to any declaration or payment of any dividend on the
Common Stock (excluding any stock splits and stock dividends payable in shares
of Common Stock) or any other class or series of Preferred Stock (other than the
Company's Series C Convertible Preferred Stock (the "Series C Preferred"), to
which the Series B Preferred shall rank pari passu with respect to dividend
rights). Any such dividends that are not paid shall accrue and be cumulative.
Quarterly dividends shall commence to accrue on January 1, April 1, July 1,
and October 1, in each year, except that the first quarterly dividend for each
share shall commence to accrue on the date of original issuance of such share,
and shall end on and include the day immediately preceding the first day of the
next quarterly dividend period. Dividends on the shares of Series B Preferred
shall be payable on January 1, April 1, July 1, and October 1 of each year (a
"Dividend Payment Date"), commencing April 1, 2000; provided, however, that no
obligation to pay a dividend shall exist until such dividends are declared by
the Board of Directors. Each such dividend shall be paid to the holders of
record of the Series B Preferred as they shall appear on the stock register of
the Corporation on such record date, not exceeding 45 days preceding such
Dividend Payment Date, as shall be fixed by the Board of Directors of the
Corporation or a duly authorized committee thereof.
3. Liquidation Rights. In the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a
"Liquidation"), distributions shall be made to the holders of Series B Preferred
and Series C Preferred, on a pari passu basis, in respect of such Series B
Preferred and Series C Preferred before any amount shall be paid to the holders
of any other class or series of capital stock of the Corporation in the
following manner:
The holders of the Series B Preferred and Series C Preferred shall be
entitled to be paid first out of the assets of the Corporation available for
distribution to holders of its capital stock an amount per share of Series B
Preferred or Series C Preferred equal to the sum of (i) $10,000 ("Liquidation
Value"), plus (ii) all accrued but unpaid dividends (calculated through the date
of liquidation) (collectively, with the Liquidation Value, the "Liquidation
Preference"), prior to any distribution to the holders of any other Preferred
Stock or Common Stock. If the proceeds from a Liquidation are not sufficient to
pay to the holders of Series B Preferred and Series C Preferred the full
Liquidation Preference, then such holders shall instead be entitled to receive
the entire assets and funds of the Corporation legally available for
distribution to the holders of capital stock, which assets and funds shall be
distributed ratably among the holders of the Series B
14
<PAGE>
Preferred and Series C Preferred.
4. Voting Rights.
The holder of each share of Series B Preferred will not be entitled to vote
on any matter; provided, however, that to the extent required by law or by
Section 7 hereof, the holder of each share of Series B Preferred will be
entitled to vote on matters as a separate class or series.
5. Redemptions.
(a) Mandatory Redemption. At any time after February 28, 2001, the
Corporation shall have the right, at its option, to redeem all or part of the
shares of Series B Preferred then outstanding. In addition, at any time before
or after February 28, 2001, the Corporation shall be required to redeem, prior
to any redemption of the Series A Convertible Preferred Stock, shares of Series
B Preferred then outstanding from and to the extent of the net cash proceeds
from (i) the sale of any assets of the Corporation other than in the ordinary
course of business and (ii) the sale of public debt or equity securities
subsequent to the completion of the business combinations and financings
contemplated by the two amended letters of intent dated as of March 16,2000
between the Corporation and Global Leisure Travel, Inc. and the Corporation and
travelbyus.com ltd. The redemption effected under either of the foregoing
sentences in this Section 5(a) shall be referred to as a "Mandatory Redemption"
and shall be effected at a price per share equal to the Liquidation Preference
(the "Redemption Price").
(b) Redemption Procedure. The Corporation shall effect a Mandatory
Redemption by giving written notice to the holders of the Series B Preferred not
less than thirty (30) days nor more than one hundred fifty (150) days prior to
the intended effective date of the Mandatory Redemption of such election to
exercise or such requirement to effect a Mandatory Redemption, the number of
shares of Series B Preferred subject to the Mandatory Redemption, and the
intended effective date of the Mandatory Redemption (the "Redemption Date"). A
holder of the Series B Preferred shall not have the right to receive payment of
the Redemption Price unless and until the holder surrenders the certificate or
certificates representing the holder's Series B Preferred at the principal
office of the Corporation or of the Corporation's transfer agent. Following the
Redemption Date, the Corporation shall, as soon as practicable after such
surrender, send payment to the holder of Series B Preferred surrendering such
certificates in the form of a check of the Corporation for the total amount of
the Redemption Price to which the holder may be entitled.
(c) Dividends; Rights of Holders. No share of Series B Preferred is
entitled to any dividends declared after the date on which the Redemption Price
of such share of Series B Preferred is paid or irrevocably set aside for
payment. On such date, all rights of the holder of such share of Series B
Preferred will cease, and such share of Series B Preferred will be deemed to be
not outstanding.
(d) Reissuance; New Certificates. Any shares of Series B Preferred
which are redeemed or otherwise acquired by the Corporation will be canceled and
will not be reissued, sold or transferred and will be returned to the status of
authorized but unissued shares
15
<PAGE>
of Preferred Stock without designation to a series or class of Preferred Stock.
If fewer than the total number of shares of Series B Preferred represented by
any certificate are redeemed, a new certificate representing the number of
unredeemed shares of Series B Preferred will be issued to the holder thereof
without cost to such holder within three (3) business days after surrender of
the certificate representing the redeemed shares.
(e) Ratable Redemptions. Neither the Corporation nor any of its
subsidiaries will redeem, repurchase or otherwise acquire any shares of Series B
Preferred pursuant to this Section 5, except on a pro-rata basis from all
holders of shares of Series B Preferred on the basis of the number of shares of
Series B Preferred owned by each such holder.
6. Notices. Any notice required by the provisions of this Certificate to
be given to the holders of Series B Preferred shall be deemed to have been
sufficiently received (except as otherwise provided herein) (a) upon receipt
when personally delivered, (b) one (1) day after being sent by overnight
delivery or telecopy providing confirmation or receipt of delivery, or (c) three
(3) days after being sent by certified or registered mail, postage and charges
prepaid, return receipt requested, and addressed to each holder of record at
such holder's address appearing on the books of the Corporation.
7. Approval of Certain Transactions While Any Series B Preferred is
Outstanding. So long as at least 100 shares of Series B Preferred are
outstanding, the Corporation shall not, without first obtaining the written
approval of the holders of at least a majority of the Series B Preferred then
outstanding, voting as a separate class, take any action that:
(a) alters the rights, preferences or privileges of the Series B
Preferred;
(b) increases or decreases the authorized number of shares of Series B
Preferred;
(c) creates any new class or series of shares, or issues any such
shares or options exercisable or convertible into such shares, that have a
preference over or are on a parity with the Series B Preferred with respect to
dividends or liquidation preferences;
(d) reclassifies stock into shares having a preference over or that
are on parity with the Series B Preferred with respect to dividends or
liquidation preferences; or
(e) alters or amends the provisions of this Section 7.
16
<PAGE>
3. The resolutions set forth above have been duly adopted by all
necessary action on the part of the Corporation.
IN WITNESS WHEREOF, Aviation Group, Inc. has caused this Statement to be
executed by Lee B. Sanders, its Chairman, and attested by Richard L. Morgan, its
Secretary, as of this 30th day of March, 2000.
Aviation Group, Inc.
By: /s/ Bill Kerby
---------------
Bill Kerby, President
ATTESTED:
By: /s/ Richard L. Morgan
----------------------
Richard L. Morgan, Secretary
17
<PAGE>
STATEMENT OF RESOLUTION INCREASING NUMBER OF SHARES
IN SERIES B PREFERRED STOCK
To the Secretary of State of
the State of Texas:
Pursuant to the provisions of Article 2.13B of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of amending the Certificate of Designation for the Series B
Preferred Stock (the "Certificate of Designation") to increase the number of
authorized shares in the Corporation's Series B Preferred Stock (the "Series B
Preferred Stock"):
1. The name of the Corporation is Aviation Group, Inc., a Texas
corporation (the "Corporation").
2. The Board of Directors duly adopted the following resolutions at a
duly called meeting of the Board of Directors of the Corporation, held on May 3,
2000:
WHEREAS, the Corporation's directors have deemed it in the best interest of
the Corporation to amend the Certificate of Designation for the Series B
Preferred Stock to increase the authorized number of shares of Series B
Preferred Stock from 2,000 to 3,000;
NOW, THEREFORE, BE IT RESOLVED, that the Corporation's directors do
hereby fix and determine the new number of authorized shares of Series B
Preferred Stock to be 3,000 and do hereby amend Section 1 of the
Certificate of Designation creating the Series B Preferred Stock, filed
with the Texas Secretary of State on April 3, 2000, to read in its entirety
as follows:
"1. Series B Preferred Stock. The Series B Preferred Stock
(the "Series B Preferred") will consist of 3,000 shares and will have
the designations, preferences, voting powers, relative, participating,
optional or other special rights and privileges, and the
qualifications, limitations and restrictions as follows:"
FURTHER RESOLVED, that the Chairman, the President or any Vice
President of the Corporation, individually or collectively, be, and such
officers hereby are, authorized and directed to execute, acknowledge,
attest, record and file with the Secretary of State of the State of Texas a
copy of these resolutions in accordance with the Texas Business Corporation
Act and to take all other actions that such officers deem necessary to
effectuate these Resolutions.
3. The resolutions set forth above have been duly adopted by all
necessary action on the part of the Corporation.
18
<PAGE>
4. Except as provided herein, the Certificate of Designation shall
otherwise remain in full force and effect, as amended hereby.
IN WITNESS WHEREOF, Aviation Group, Inc. has caused this Statement of
Resolution Increasing Number of Shares to be executed by Bill R. Kerby, its
President, and attested by Richard L. Morgan, its Secretary, as of this 11th day
of May, 2000.
Aviation Group, Inc.
By: /s/ Bill R. Kerby
------------------
Bill R. Kerby, President
ATTESTED:
By: /s/ Richard L. Morgan
----------------------
Richard L. Morgan, Secretary
19
<PAGE>
STATEMENT OF RESOLUTION ESTABLISHING
SERIES OF SHARES
(Series C Convertible Preferred Stock)
To the Secretary of State of
the State of Texas:
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of establishing and designating a series of shares and fixing and
determining the relative rights and preferences thereof:
1. The name of the Corporation is Aviation Group, Inc., a Texas
corporation (the "Corporation").
2. The Board of Directors duly adopted the following resolution by a
Unanimous Consent of the Board of Directors of the Corporation, dated March 23,
2000:
WHEREAS, the Corporation's directors have reviewed and approved the
Certificate of Designation ("Certificate of Designation"), attached hereto and
incorporated herein by reference, delineating the number of shares, the voting
powers, designations, preferences and relative, participating, optional,
redemption, conversion, exchange, dividend or other special rights and
qualifications, limitations or restrictions of a series of Preferred Stock to be
issued by the Corporation and designated Series C Convertible Preferred Stock,
par value $0.01 per share (the "Series C Preferred Stock"); now, therefore, be
it
RESOLVED, that 2,000 shares of authorized but unissued Preferred Stock
be designated Series C Preferred Stock and that the Series C Preferred
Stock have the rights, preferences, limitations and restrictions set forth
herein; and, be it
FURTHER RESOLVED, that the Chairman, the President or any Vice
President of the Corporation, individually or collectively, be, and such
officers hereby are, authorized and directed to execute, acknowledge,
attest, record and file with the Secretary of State of the State of Texas
the Certificate of Designation in accordance with the Texas Business
Corporation Act and to take all other actions that such officers deem
necessary to effectuate the Certificate of Designation.
20
<PAGE>
CERTIFICATE OF DESIGNATION
1. Series C Preferred Stock. The Series C Convertible Preferred Stock
(the "Series C Preferred") will consist of 2,000 shares and will have the
designations, preferences, voting powers, relative, participating, optional or
other special rights and privileges, and the qualifications, limitations and
restrictions as follows:
2. Dividends and Distributions. The holders of record of shares of
Series C Preferred shall be entitled to receive, when and if declared by the
Board of Directors of the Corporation out of funds legally available for the
payment of dividends, monthly dividends at a rate of nine percent (9%) of the
Liquidation Value (as defined in Section 3 below) per annum per share of Series
C Preferred, out of funds legally available therefor, which shall be prior and
in preference to any declaration or payment of any dividend on the Common Stock
(excluding any stock splits and stock dividends payable in shares of Common
Stock) or any other class or series of Preferred Stock (other than the Company's
Series B Preferred Stock (the "Series B Preferred"), to which the Series C
Preferred shall rank pari passu with respect to dividend rights). Any such
dividends that are not paid shall accrue and be cumulative.
Monthly dividends shall commence to accrue on the first day of each month
of the year except that the first monthly dividend for each share shall commence
to accrue on the date of original issuance of such share, and shall end on and
include the day immediately preceding the first day of the next monthly dividend
period. Dividends on the shares of Series C Preferred shall be payable on the
first day of each month of each year (a "Dividend Payment Date"), commencing
April 1, 2000; provided, however, that no obligation to pay a dividend shall
exist until such dividends are declared by the Board of Directors. Each such
dividend shall be paid to the holders of record of the Series C Preferred as
they shall appear on the stock register of the Corporation on such record date,
not exceeding 45 days preceding such Dividend Payment Date, as shall be fixed by
the Board of Directors of the Corporation or a duly authorized committee
thereof.
3. Liquidation Rights. In the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a
"Liquidation"), distributions shall be made to the holders of Series C Preferred
and Series B Preferred, on a pari passu basis, in respect of such Series C
Preferred and Series B Preferred before any amount shall be paid to the holders
of any other class or series of capital stock of the Corporation in the
following manner:
The holders of the Series C Preferred and Series B Preferred shall be
entitled to be paid out of the assets of the Corporation available for
distribution to holders of its capital stock an amount per share of Series C
Preferred and Series B Preferred Stock equal to the sum of (i) $10,000
("Liquidation Value"), plus (ii) all accrued but unpaid dividends on such shares
(calculated through the date of liquidation) (collectively, with the Liquidation
Value, the "Liquidation Preference"), prior to any distribution to the holders
of any other Preferred Stock or Common Stock. If the proceeds from a Liquidation
are not sufficient to pay to the holders of Series C Preferred and Series B
Preferred the full Liquidation Preference, then such holders shall instead be
entitled to receive the entire assets and funds of the Corporation legally
available for distribution to the holders of capital stock, which assets and
funds shall be distributed ratably
21
<PAGE>
among the holders of the Series C Preferred and Series B Preferred.
4. Voting Rights.
(a) Voting with Common Stock. Except as otherwise required by law or
by Section 8 hereof, the holder of each share of Series C Preferred will not be
entitled to vote as a shareholder on any matters prior to the earlier of the
following events (the "Triggering Event") (a) September 30, 2000 or (b) the
consummation of the merger between the Corporation or a subsidiary of the
Corporation and travelbyus.com ltd., an Ontario corporation (the "Merger").
After the occurrence of a Triggering Event, except as otherwise required by law
or by Section 8 hereof, the holder of each share of Series C Preferred will be
entitled to vote on all matters with the Common Stock as a single class, and not
as a separate class or series, with each share of Series C Preferred entitling
the holder thereof to the number of votes per share equal to the full number of
shares of Common Stock into which each share of Series C Preferred is
convertible on the record date for such vote. After the occurrence of a
Triggering Event, the holders of the Series C Preferred shall receive notice of
and shall be entitled to attend in person or by proxy any meeting of the holders
of Common Stock.
(b) Majority Class Vote. In addition to the special voting rights
provided in Section 8 and Section 4(a), the holders of the Series C Preferred
shall also have the right to vote as a separate class on any matter if required
by the Texas Business Corporation Act or any successor statute (the "Act").
Pursuant to the Act, with respect to any matter for which the affirmative vote
of the holders of a specified portion in excess of the majority of the
outstanding shares of Series C Preferred entitled to vote is required by the
Act, the act of the holders of Series C Preferred on that matter shall be the
affirmative vote of the holders of a majority of the outstanding shares of
Series C Preferred entitled to vote on that matter, rather than the affirmative
vote of the greater percentage otherwise required by the Act.
5. Redemptions.
(a) Right to Redemption. At any time on or prior to September 30,
2000, the Corporation shall have the right to redeem (the "Mandatory
Redemption") all or part of the shares of Series C Preferred then outstanding at
a price per share equal to the Liquidation Preference (the "Redemption Price").
(b) Redemption Procedure. The Corporation may effect a Mandatory
Redemption by giving written notice to the holders of the Series C Preferred not
less than thirty (30) days nor more than one hundred fifty (150) days prior to
the intended effective date of the Mandatory Redemption of such election to
exercise a Mandatory Redemption, the number of shares of Series C Preferred
subject to the Mandatory Redemption, and the intended effective date of the
Mandatory Redemption (the "Redemption Date"). Upon receipt of the written notice
of a Mandatory Redemption, the holders of the Series C Preferred will have the
right to convert their shares of Series C Preferred into shares of Common Stock
pursuant to Section 6(b). A holder of the Series C Preferred shall not have the
right to receive payment of the Redemption Price unless and until the holder
surrenders the certificate or certificates representing the holder's
22
<PAGE>
Series C Preferred at the principal office of the Corporation or of the
Corporation's transfer agent. Following the Redemption Date, the Corporation
shall, as soon as practicable after such surrender, send payment to the holder
of Series C Preferred surrendering such certificates in the form of a check of
the Corporation for the total amount of the Redemption Price to which the holder
may be entitled.
(c) Dividends; Rights of Holders. No share of Series C Preferred is
entitled to any dividends declared after the date on which the Redemption Price
of such share of Series C Preferred is paid or irrevocably set aside for
payment. On such date, all rights of the holder of such share of Series C
Preferred will cease, and such share of Series C Preferred will be deemed to be
not outstanding.
(d) Reissuance; New Certificates. Any shares of Series C Preferred
which are redeemed or otherwise acquired by the Corporation will be canceled and
will not be reissued, sold or transferred and will be returned to the status of
authorized but unissued shares of Preferred Stock without designation at to a
series or class of Preferred Stock. If fewer than the total number of shares of
Series C Preferred represented by any certificate are redeemed, a new
certificate representing the number of unredeemed shares of Series C Preferred
will be issued to the holder thereof without cost to such holder within three
(3) business days after surrender of the certificate representing the redeemed
shares.
(e) Ratable Redemptions. Neither the Corporation nor any of its
subsidiaries will redeem, repurchase or otherwise acquire any shares of Series C
Preferred pursuant to this Section 5, except on a pro-rata basis from all
holders of shares of Series C Preferred on the basis of the number of shares of
Series C Preferred owned by each such holder.
6. Conversion.
(a) Corporation's Right to Convert. At any time after February 28,
2001, each share of Series C Preferred shall be automatically and mandatorily
convertible, at the option of the Corporation, into shares of Common Stock at
the Conversion Rate (as defined in Section 6(c) hereof). The Corporation shall
give each holder of the Series C Preferred ten (10) days prior written notice
stating the date that the automatic and mandatory conversion of the Series C
Preferred will occur under this Section 6(a). The Corporation and the holders
of the Series C Preferred shall carry out the exchange procedures set forth in
Section 6(d) as soon as practicable after the Corporation has given the written
notice of automatic conversion required by this Section 6(a). 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 immediately prior to the close of business on the
effective date of the conversion stated in the notice from the Corporation.
(b) Holder's Right to Convert. Each share of Series C Preferred shall
be convertible, at the option of the holder thereof, at any time after October
31, 2000 or, if earlier, after the holder has received notice of the
Corporation's election to exercise a Mandatory Redemption under Section 5
hereof, into shares of Common Stock at the Conversion Rate (as defined in
Section 6(c) hereof). To effect such conversion, the holder of Series C
Preferred shall
23
<PAGE>
(i) give the Corporation written notice stating that the holder elects to
exercise the right to convert and the number of shares of Series C Preferred
that the holder elects to convert, and (ii) deliver the certificate or
certificates evidencing the Series C Preferred to be converted in accordance
with Section 6(d) below. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such delivery of the
certificate or certificates for the Series C Preferred 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.
(c) Conversion Rate. Upon a conversion pursuant to Section 6(a) or
Section 6(b) hereof, each share of Series C Preferred shall be converted into a
number of shares of Common Stock equal to the quotient (the "Conversion Rate")
obtained by dividing (i) the Liquidation Preference on the Conversion Date (as
defined in Section 6(d) hereof), by (ii) the greater of (x) US $6.00 (the
"Minimum Conversion Price") or (y) the arithmetic mean of the closing bid prices
of the Common Stock as reported by Bloomberg, L.P. for the twenty-one (21)
trading days preceding the Conversion Date (the "Mean Trading Price").
(d) Mechanics of Voluntary Conversion. After any conversion of shares
of Series C Preferred into shares of Common Stock under Section 6(a) or Section
6(b), before certificates of Common Stock therefor shall be issued, the
certificate or certificates representing the shares of Series C Preferred shall
be surrendered, duly endorsed, at the principal office of the Corporation or of
the Corporation's transfer agent. The Corporation shall as soon as practicable
after such delivery, issue and deliver to the holder of Series C Preferred
surrendering such certificates, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled as aforesaid. The
effective date of the automatic and mandatory conversion under Section 6(a) or
the date on which the voluntary conversion is deemed to have been made under
Section 6(b), or such other date as may be fixed by the mutual agreement of the
Corporation and the holder as the date for the particular conversion, is
referred to as the "Conversion Date".
(e) Status of Converted Stock. In case any shares of Series C
Preferred shall be converted pursuant to this Section 6, the shares so converted
shall be canceled and shall not be reissued, sold or transferred and shall be
returned to the status of authorized but unissued shares of Preferred Stock
without designation as to a series or class of Preferred Stock.
(f) Fractional Shares. In lieu of any fractional shares in the
aggregate to which the holder of Series C Preferred would otherwise be entitled
upon conversion, the Corporation shall pay cash equal to such fraction
multiplied by the fair market value of one share of Common Stock as determined
by the Board of Directors.
(g) 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 Series C 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 Series C Preferred. 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
24
<PAGE>
shares of Series C 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.
(h) Payment of Taxes. The Corporation shall pay all issued taxes, if
any, incurred in connection with the issuance of the Common Stock on conversion
of any shares of Series C Preferred, but the Corporation shall not pay any
transfer or other taxes incurred by reason of the issuance of such Common Stock
in any name other than the name in which the share or shares of Series C
Preferred surrendered for conversion may stand.
(i) Adjustments to Minimum Conversion Price. In the event of any stock
dividend on the Common Stock, any stock split, reverse stock split, stock
combination or reclassification of the Common Stock or any merger, consolidation
or combination of the Corporation with any other corporation or corporations,
the Minimum Conversion Price shall be proportionately adjusted so that the
holders of the Preferred Stock after such event shall be entitled to receive
upon conversion the number and kind of shares which such holders would have
owned or been entitled to receive had such Preferred Stock been converted
immediately prior to such event, in any case as if the Conversion Rate were
determined using the Minimum Conversion Price and not the Mean Trading Price.
Such adjustment shall be made successively upon the occurrence of any of the
events listed in this Section 6(i).
7. Notices. Any notice required by the provisions of this Certificate to
be given to the holders of Series C Preferred shall be deemed to have been
sufficiently received (except as otherwise provided herein) (a) upon receipt
when personally delivered, (b) one (1) day after sent by overnight delivery or
telecopy providing confirmation or receipt of delivery, or (c) three (3) days
after being sent by certified or registered mail, postage and charges prepaid,
return receipt requested, and addressed to each holder of record at such
holder's address appearing on the share transfer books of the Corporation.
8. Approval of Certain Transactions While Any Series C Preferred is
Outstanding. So long as any shares of Series C Preferred are outstanding, the
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of at least a majority of the Series C Preferred then
outstanding, voting as a separate class, take any action that:
(a) alters the rights, preferences or privileges of the Series C
Preferred;
(b) increases or decreases the authorized number of shares of Series C
Preferred;
(c) creates any new class or series of shares, or issues any such
shares or options exercisable or convertible into such shares, that have a
preference over or are on a parity with the Series C Preferred with respect to
dividends or liquidation preferences other than shares of Series B Preferred;
25
<PAGE>
(d) reclassifies stock into shares having a preference over or that
are on parity with the Series C Preferred with respect to dividends or
liquidation preferences other than shares of Series B Preferred; or
(e) alters or amends the provisions of this Section 8.
3. The resolutions set forth above have been duly adopted by all
necessary action on the part of the Corporation.
IN WITNESS WHEREOF, Aviation Group, Inc. has caused this Certificate to be
executed by Bill Kerby, its President, and attested by Richard L. Morgan, its
Secretary, this 30th day of March, 2000.
Aviation Group, Inc.
By: /s/ Bill Kerby
---------------
Bill Kerby, President
ATTESTED:
By: /s/ Richard L. Morgan
----------------------
Richard L. Morgan, Secretary
26
<PAGE>
STATEMENT OF RESOLUTION INCREASING NUMBER OF SHARES
IN SERIES C CONVERTIBLE PREFERRED STOCK
To the Secretary of State of
the State of Texas:
Pursuant to the provisions of Article 2.13B of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of amending the Certificate of Designation for the Series C
Convertible Preferred Stock (the "Certificate of Designation") to increase the
number of authorized shares in the Corporation's Series C Convertible Preferred
Stock (the "Series C Preferred Stock"):
1. The name of the Corporation is Aviation Group, Inc., a Texas
corporation (the "Corporation").
2. The Board of Directors duly adopted the following resolutions at a duly
called meeting of the Board of Directors of the Corporation, held on May 3,
2000:
WHEREAS, the Corporation's directors have deemed it in the best interest of
the Corporation to amend the Certificate of Designation for the Series C
Preferred Stock to increase the authorized number of shares of Series C
Preferred Stock from 2,000 to 3,000;
NOW, THEREFORE, BE IT RESOLVED, that the Corporation's directors do
hereby fix and determine the new number of authorized shares of Series C
Preferred Stock to be 3,000 and do hereby amend Section 1 of the
Certificate of Designation creating the Series C Preferred Stock, filed
with the Texas Secretary of State on April 3, 2000, to read in its entirety
as follows:
"1. Series C Preferred Stock. The Series C Convertible Preferred
Stock (the "Series C Preferred") will consist of 3,000 shares and will
have the designations, preferences, voting powers, relative,
participating, optional or other special rights and privileges, and
the qualifications, limitations and restrictions as follows:"
FURTHER RESOLVED, that the Chairman, the President or any Vice
President of the Corporation, individually or collectively, be, and such
officers hereby are, authorized and directed to execute, acknowledge,
attest, record and file with the Secretary of State of the State of Texas a
copy of these resolutions in accordance with the Texas Business Corporation
Act and to take all other actions that such officers deem necessary to
effectuate these Resolutions.
5. The resolutions set forth above have been duly adopted by all
necessary action on the part of the Corporation.
27
<PAGE>
6. Except as provided herein, the Certificate of Designation shall
otherwise remain in full force and effect, as amended hereby.
IN WITNESS WHEREOF, Aviation Group, Inc. has caused this Statement of
Resolution Increasing Number of Shares to be executed by Bill R. Kerby, its
President, and attested by Richard L. Morgan, its Secretary, as of this 11th day
of May, 2000.
Aviation Group, Inc.
By: /s/ Bill R. Kerby
--------------------
Bill R. Kerby, President
ATTESTED:
By: /s/ Richard L. Morgan
----------------------
Richard L. Morgan, Secretary
28
