NOVEX SYSTEMS INTERNATIONAL, INC.
Certificate of Designation,
Preference and Rights
Of Series A, Convertible Redeemable Preferred Shares
The Undersigned, being the President of Novex Systems International, Inc.
("Novex") , a corporation organized and existing under the laws of the State of
New York, do hereby certify that, pursuant to authority conferred upon the Board
of Directors by the Certificate of Incorporation, the Board of Directors adopted
the following resolution providing for the issuance of a series of Preferred
Stock:
RESOLVED that, pursuant to authority vested in the Board of Directors by
Section 2 of the Certificate of Incorporation of this Corporation, a series of
Preferred Stock is hereby established, the distinctive designation of which
shall be Series A Preferred Stock (hereinafter "Series A"), and the preferences
and relative, participating, optional or other special rights of Series A, and
the qualifications, limitations or restrictions thereof shall be as follows:
(i) The number of shares which shall constitute Series A shall be two
million (2,000,000) which number may be increased or decreased
from time to time by resolution of the Board of Directors. One (1)
share of Series A shall equal one dollar ($1.00). Novex shall
issue one share of Series A for each one dollar ($1.00) of
indebtedness owed by Novex to The Sherwin-Williams Company
(hereinafter "Sherwin-Williams") pursuant to a Loan Agreement and
Promissory Note ("Note") both dated, August 13, 1999.
The initial issuance of Series A shares to Sherwin-Williams, to be
evidenced by duly authorized certificate(s), shall be for one
million two hundred and eighty one thousand three hundred and
fifty shares (1,281,350), plus one additional share of Series A
for every one dollar ($1.00) of accrued and outstanding interest
on the Note on the date such Note shall be converted into shares
of Series A (hereinafter the value of the initial issuance of
Series A shares shall be referred to as "the Face Value").
Thereafter, on each anniversary date of this Certificate of
Designation up to the Final Redemption Date (as defined below),
Novex shall issue to Sherwin-Williams a duly authorized
certificate(s) evidencing ownership of Series A shares for all
annual and special dividends that have accumulated in the previous
twelve month period.
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(ii) Novex shall have the sole right to redeem for cash payable in
United States currency, any or all of the Face Value of the Series
A shares, including any and all outstanding accrued annual
dividends at any time prior to 5:00 p.m. on the second anniversary
date of this Certificate of Designation ( hereinafter "Final
Redemption Date"). If the Final Redemption Date shall fall on a
weekend or national holiday the next business day shall be deemed
the Final Redemption Date. If Novex shall redeem only a portion of
the Series A shares, it shall be obligated to also redeem all
outstanding accrued dividends on the redeemed shares. Any
remaining outstanding Series A shares shall continue to accrue
dividends until such shares are redeemed or converted into common
stock on the Final Redemption Date, subject to the terms of this
Certificate of Designation. There shall be no penalty for any
early redemption of the Series A shares.
Notice of any partial or full redemption shall be in writing to
the holders of Series A shares, by regular U.S. Mail with a copy
transmitted by facsimsile pursuant to Section xi. The notice shall
specify the number of Series A shares to be redeemed and the date
that payment shall be made to redeem such shares. If fewer than
all the Series A shares represented by any certificate are
redeemed, a new certificate representing the unredeemed Series A
shares shall be issued to the holder thereof without cost.
(iii) The outstanding Series A shares shall accrue dividends at a rate
equal to ten percent (10%) per annum of the Face Value of the
Series A shares. On the anniversary date of this Certificate of
Designation, Novex shall issue to Sherwin-Williams one (1) share
of Series A shares for each one dollar ($1.00) of dividends
payable to Sherwin-Williams. In the event the Series A shares,
including all shares issued as dividends, are not redeemed in
entirety on, or prior to, the Final Redemption Date, Novex shall
be obligated to issue to Sherwin-Williams additional Series A
shares that shall be equal to fifteen percent (15%) of the Face
Value of the Series A shares (hereinafter "Special Dividend").
Novex shall not declare and pay any cash or stock dividends on any
other class of its equity securities prior to the Final Redemption
Date, or the full redemption of all the outstanding Series A
shares, whichever the case may be.
(iv) In the event any of the Series A shares are not redeemed prior to
the Final Redemption Date, all outstanding shares of Series A
(including all annual and special dividends) shall, automatically
and without further notice to Sherwin-Williams or action by Novex
other than for the issuance of certificates of its common stock,
be converted into shares of Novex's $.001 par value common stock
("Common Shares") at a rate equal to eighty-five percent (85%) of
the average final trading price for Novex's
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Common Shares for twenty consecutive trading days prior to the
Final Redemption Date. Upon the conversion of Series A shares into
Common Shares all rights, preferences and obligations hereunder
shall terminate and shall no longer be in effect and all Series A
shares shall be deemed cancelled and returned to treasury shares.
Any Common Shares issueable to Sherwin-Williams will have the same
rights and privileges as all other common shareholders owning
Novex's Common Shares on the date of this Certificate of
Designation, subject only to any changes that Novex's common
shareholders shall elect to modify at a duly called special or
annual meeting of its shareholders.
(v) In the case Novex shall be liquidated pursuant to a voluntary or
involuntary bankruptcy proceeding, dissolution or winding-up of
its affairs, the holders of Series A shares shall be entitled to
receive payment of one dollar ($1.00) per share of outstanding
Series A shares, plus all accrued and unpaid dividends, thereon,
from the assets remaining, after paying the debts and liabilities
of Novex, before payment shall be made to the holders of shares of
any other class of equity securities, but the Series A holders
shall not be entitled to participate further in the distribution
of any remaining assets owned by Novex.
(vi) As part of its issuance of Series A shares, Sherwin-Williams shall
terminate all rights, and any obligations, it has in the Note,
Loan Agreement (except as provided for below in section viii),
Security Agreement and Mortgage, including all security, mortgage
or collateral interests, liens, and encumbrances it has in assets
owned by Novex and it shall undertake to execute and file all
necessary documents to terminate its secured creditor interests
arising from the Security Agreement, Loan Agreement, Note and
Mortgage all of which were entered into with Novex on August 13,
1999.
(vii) As part of its issuance of Series A shares, Sherwin-Williams shall
waive any and all rights to liquidated damages under the
Registration Rights Agreement dated August 13, 1999, between Novex
and Sherwin-Williams.
(viii) Novex shall agree to incorporate into this Certificate of
Designation and adhere to, other than with the prior written
consent of Sherwin-Williams, only those obligations set forth in
Section IV (subsections A through C), Section V (except for
subsections (B) and (D) which shall be deemed void upon the
issuance of Series A shares) and Section VII of the aforementioned
Loan Agreement, said agreement being annexed hereto and
incorporated herein as part of this Certificate of Designation.
(ix) In exchange for Sherwin-Williams agreeing to convert its rights
under the Note into Series A shares, Novex shall waive any and all
potential claims
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relating to any alleged breach of a representation or warranty
made by Sherwin-Williams with respect to the Financial Statements
as defined in Section 3.02 of the Amended and Restated Purchase
Agreement dated August 13, 1999.
(x) The Shares of Series A shall not have any relative powers,
preferences and rights, nor any qualifications, limitations or
restrictions thereof, other than as set forth herein or in Novex's
Certificate of Incorporation. In particular, the holders of Series
A shares shall have no right to vote such shares.
(xi) All notices required by, or made as part of the Certificate of
Designation shall be as follows:
To: The Sherwin-Williams Company
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115-1075
Attn: Vice President, Corporate Planning and Development
Facsimile: 216-566-2947
To: Novex Systems International, Inc.
16 Cherry Street
Clifton, New Jersey 07014
Attn: President and Chief Executive Officer
Facsimile: 973-777-7713
IN WITNESS WHEREOF, the Corporation has made under its corporate seal and the
hands of its duly empowered officers, the foregoing certificate and have caused
the corporate seal of said corporation to be hereunto affixed this 7th day of
July, 2000.
NOVEX SYSTEMS INTERNATIONAL, INC.
By: /s/ Daniel W. Dowe
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Daniel W. Dowe, President
THE SHERWIN-WILIIAMS COMPANY
By: /s/ Conway G. Ivy
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Conway G. Ivy, Vice President
