CERTIFICATE
OF DESIGNATION
OF
SERIES A CONVERTIBLE
PREFERRED
STOCK, $0.001 PAR VALUE PER SHARE
OF
OPTEX
SYSTEMS HOLDINGS, INC.
(formerly,
Sustut Exploration, Inc.)
1. Designation:
Number of Shares. The designation of said series of Preferred Stock shall be
Series A Convertible Preferred Stock (the "Series A Preferred Stock"). The
number of shares of Series A Preferred Stock shall be 1,027. Each share of
Series A Preferred Stock shall have a stated value equal to $6,000 (as adjusted
for any stock dividends, combinations or splits with respect to such shares)
(the "Series A Stated Value"), and $.001 par value. The existence of the
Preferred Stock shall be perpetual.
2. Liquidation Rights.
Upon the occurrence of a "Liquidation Event" (as defined below), the
Holders of the Series A Preferred Stock shall be entitled to receive, and before
any payment or distribution shall be made on any Junior Stock, out of the assets
of the Corporation available for distribution to stockholders, an amount equal
to one (1) times the Series A Stated Value per share of Series A Preferred
Stock. Upon the payment in full of all amounts due to the Holders of the Series
A Preferred Stock and Junior Stock shall receive all remaining assets of the
Corporation legally available for distribution. If the assets of the Corporation
available for distribution to the Holders of the Series A Preferred Stock shall
be insufficient to permit payment in full of the amounts payable as aforesaid to
the Holders of Series A Preferred Stock upon a Liquidation Event, then all such
assets of the Corporation shall be distributed to the exclusion of the Holders
of Junior Stock ratably among the Holders of the Series A Preferred Stock.
"Liquidation Event" shall mean (i) the liquidation, dissolution or winding-up,
whether voluntary or involuntary, of the Corporation, (ii) the purchase or
redemption by the Corporation of shares of any class of stock or the merger or
consolidation of the Corporation with or into any other corporation or
corporations unless (a) the Holders of the Series A Preferred Stock receive
securities of the surviving corporation having substantially similar rights as
the Series A Preferred Stock and the stockholders of the Corporation immediately
prior to such transaction are holders of at least a majority of the voting
securities of the successor corporation immediately thereafter or (b) the sale,
license or lease of all or substantially all, or any material part of, the
Corporation's assets, unless the Holders of a majority of the shares of Series A
Preferred Stock elect otherwise. "Junior Stock" shall mean any equity securities
of the Corporation other than the Series A Preferred Stock.
3. Conversion into Common
Stock. Holders of shares of Series A Preferred Stock shall
have the following conversion rights and obligations:
(a) Subject
to the further provisions of this paragraph 4 each Holder of Series A Preferred
Stock shall have the right at any time commencing after the issuance to the
Holder of shares of Series A Preferred Stock, to convert such shares
(collectively "Stated Value") into fully paid and non-assessable shares of
Common Stock of the Corporation determined in accordance with the applicable
"Conversion Price" provided in paragraph 3(b) below (the "Conversion
Price").
(b) The
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock shall the number of shares of Series A Preferred Stock being
converted multiplied by the Stated Value per share being converted divided by
the Conversion Price.
The Conversion Price of the Series A Preferred Stock shall initially be $0.15.
The Conversion Price shall also be subject to adjustment as described
below.
(c) Holder
will give notice of its decision to exercise its right to convert the Series A
Preferred Stock, or part thereof by telecopying an executed and completed Notice
of Conversion (a form of which is annexed as Exhibit A to this
Certificate of Designation) to the Corporation via confirmed telecopier
transmission. The Holder will not be required to surrender the Series A
Preferred Stock certificate until the Series A Preferred Stock has been fully
converted. Each date on which a Notice of Conversion is telecopied to the
Corporation in accordance with the provisions hereof shall be deemed a
Conversion Date. The Corporation will itself or cause the Corporation's transfer
agent to transmit the Corporation's Common Stock certificates representing the
Common Stock issuable upon conversion of the Series A Preferred Stock to the
Holder via express courier for receipt by such Holder within five (5) business
days after receipt by the Corporation of the Notice of Conversion (the "Delivery
Date"). In the event the Common Stock is electronically transferable, then
delivery of the Common Stock must be made by electronic transfer provided
request for such electronic transfer has been made by the Holder. A Series A
Preferred Stock certificate representing the balance of the Series A Preferred
Stock not so converted will be provided by the Corporation to the Holder if
requested by Holder, provided the Holder has delivered the original Series A
Preferred Stock certificate to the Corporation. To the extent that a Holder
elects not to surrender Series A Preferred Stock for reissuance upon partial
payment or conversion, the Holder hereby indemnifies the Corporation against any
and all loss or damage attributable to a third-party claim in an amount in
excess of the actual amount of the Series A Stated Value then owned by the
Holder.
In the
case of the exercise of the conversion rights set forth in paragraph 4(a) the
conversion privilege shall be deemed to have been exercised and the shares of
Common Stock issuable upon such conversion shall be deemed to have been issued
upon the date of receipt by the Corporation of the Notice of Conversion. The
person or entity entitled to receive Common Stock issuable upon such conversion
shall, on the date such conversion privilege is deemed to have been exercised
and thereafter, be treated for all purposes as the recordholder of such Common
Stock and shall on the same date cease to be treated for any purpose as the
record Holder of such shares of Series A Preferred Stock so
converted.
Upon the
conversion of any shares of Series A Preferred Stock no adjustment or payment
shall be made with respect to such converted shares on account of any dividend
on the Common Stock, except that the Holder of such converted shares shall be
entitled to be paid any dividends declared on shares of Common Stock after
conversion thereof.
The
Corporation shall not be required, in connection with any conversion of Series A
Preferred Stock, and payment of dividends on Series A Preferred Stock to issue a
fraction of a share of its Series A Preferred Stock or Common Stock and may
instead deliver a stock certificate representing the next whole
number.
(d) The
Conversion Price determined pursuant to Paragraph 4(b) shall be subject to
adjustment from time to time as follows:
(i) In
case the Corporation shall at any time (A) declare any dividend
or distribution on its Common Stock or other securities of the Corporation other
than the Series A Preferred Stock, (B) split or subdivide the outstanding Common
Stock, (C) combine the outstanding Common Stock into a smaller number of shares,
or (D) issue by reclassification of its Common Stock any shares or other
securities of the Corporation, then in each such event the Conversion Price
shall be adjusted proportionately so that the Holders of Series A Preferred
Stock shall be entitled to receive the kind and number of
shares or
other securities of the Corporation which such Holders would have owned or have
been entitled to receive after the happening of any of the events described
above had such shares of Series A Preferred Stock been converted immediately
prior to the happening of such event (or any record date with respect thereto).
Such adjustment shall be made whenever any of the events listed above shall
occur. An adjustment made to the Conversion Price pursuant to this paragraph
4(d)(i) shall become effective immediately after the effective date of the
event.
(ii) For
so long as the Series A
Preferred Stock is outstanding, other
than in the case of an "Excepted Issuance" (as defined below), if the Corporation shall issue any Common Stock, prior to the
complete conversion of the Series A Preferred Stock for a consideration less than the Conversion
Price that would be in effect at the time of such issue, then, and thereafter successively upon each
such issuance, the Conversion Price shall be reduced to such other lower issue price. For purposes
of this adjustment, the issuance of any security or debt instrument of the Corporation, carrying
the right to convert such
security or debt instrument into Common Stock or of any warrant, right
or option to purchase Common Stock or the modification of any of the foregoing which may be
outstanding shall result in an adjustment to the Conversion Price upon the modification or issuance of
the above-described security, debt instrument, warrant, right, or option and again upon the issuance
of shares of Common Stock upon exercise of such conversion or purchase rights if
such issuance is at a price lower than the then applicable Conversion Price..
"Excepted
Issuances" shall include the Corporation's issuance of (i) options to
purchase Common Stock pursuant to stock option plans and employee stock purchase
plans and any options to purchase Common Stock pursuant to stock option plans
and employee stock purchase plans created thereafter, so long as such new plans
are approved by the Corporation's shareholders, (ii) Common Stock upon exercise
of the options referred to in clause (i), (iii) Common Stock upon the exercise
of warrants or other convertible securities outstanding prior to the date
hereof, (iv) securities which results in an adjustment to the Conversion Price
under Section 4(d)(i) above, (v) Series A Preferred Stock or any shares of
Common Stock on conversion thereof, and (vi) securities as payment of liquidated
damages in respect of the Series A Preferred Stock.
(e) (i)
In case of any merger of the Corporation with or into any other corporation
(other than a merger in which the Corporation is the surviving or continuing
corporation and which does not result in any reclassification, conversion, or
change of the outstanding shares of Common Stock) then unless the right to
convert shares of Series A Preferred Stock shall have terminated as part of such
merger, lawful provision shall be made so that Holders of Series A Preferred
Stock shall thereafter have the right to convert each share of Series A
Preferred Stock into the kind and amount of shares of stock and/or other
securities or property receivable upon such merger by a Holder of the number of
shares of Common Stock into which such shares of Series A Preferred Stock might
have been converted immediately prior to such consolidation or merger. Such
provision shall also provide for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in subparagraph (d)
of this paragraph 4. The foregoing provisions of this paragraph 4(e) shall
similarly apply to successive mergers.
(ii) In
case of any sale or conveyance to
another person or entity of the property
of the Corporation as an entirety, or substantially as an entirety, in
connection with which shares or
other securities or cash or other property shall be issuable, distributable,
payable, or deliverable for outstanding shares of Common Stock, then,
unless the right to convert such shares shall have terminated, lawful provision
shall be made so that the Holders of Series A Preferred Stock shall thereafter
have the right to convert each share of the Series A Preferred Stock into the
kind and amount of shares of stock or other securities or property that shall be
issuable, distributable, payable, or deliverable upon such sale or conveyance
with respect to each share of Common Stock immediately prior to such
conveyance.
(f) Whenever
the number of shares to be issued upon conversion of the Series A Preferred
Stock is required to be adjusted as provided in this paragraph 4, the
Corporation shall forthwith compute the adjusted number of shares to be so
issued and prepare a certificate setting forth such adjusted conversion amount
and the facts upon which such adjustment is based, and such certificate shall
forthwith be filed with the Transfer Agent for the Series A Preferred Stock and
the Common Stock; and the Corporation shall mail to each Holder of record of
Series A Preferred Stock notice of such adjusted conversion price not later than
the first business day after the event, giving rise to the
adjustment.
(g) In case
at any time the Corporation shall propose:
(i) to offer
for subscription to the Holders of its Common Stock any additional shares of any
class or any other rights; or
(ii) any
capital reorganization or reclassification of its shares or the merger of the
Corporation with another corporation (other than a merger in which the
Corporation is the surviving or continuing corporation and which does not result
in any reclassification, conversion, or change of the outstanding shares of
Common Stock); or
(iii) the
voluntary dissolution, liquidation or winding-up of the Corporation;
then, and
in any one or more of said cases, the Corporation shall cause at least five (5)
days prior notice of the date on which (A) the books of the Corporation shall
close or a record be taken for such stock dividend, distribution, or
subscription rights, or (B) such capital reorganization, reclassification,
merger, dissolution, liquidation or winding-up shall take place, as the case may
be, to be mailed to the Holders of record of the Series A Preferred
Stock.
(h) The term
"Common Stock" as used in this Certificate of Designation shall mean the $0.001
par value Common Stock of the Corporation as such stock is constituted
at the date of issuance thereof or as it may from time to time be changed, or
shares of stock of any class or other securities and/or property into which the
shares of the Series A Preferred Stock shall at any time become convertible
pursuant to the provisions of this paragraph 4.
(i) The
Corporation shall pay the amount of any and all issue taxes (but not income
taxes) which may be imposed in respect of any issue or delivery of stock upon
the conversion of any shares of Series A Preferred Stock, but all transfer taxes
and income taxes that may be payable in respect of any change of ownership of
Series A Preferred Stock or any rights represented thereby or of stock
receivable upon conversion thereof shall be paid by the person or persons
surrendering such stock for conversion.
(j) In
the event a Holder shall elect to convert any shares of Series A Preferred
Stock as provided herein, the Corporation may not refuse conversion based on any
claim that such Holder or any one associated or affiliated with such Holder has
been engaged in any violation of law, or for any other reason unless, an
injunction from a court, on notice, restraining and or enjoining conversion of
all or part of said shares of Series A Preferred Stock shall have been sought
and obtained by the Corporation or at the Corporation's request or with . the
Corporation's assistance and the Corporation posts a surety bond for the benefit
of such Holder equal to 120% of the Stated Value sought to be converted, which
is subject to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Holder in the event it obtains judgment.
(k) In
addition to any other rights available to the Holder, if the Corporation
fails to
deliver to the Holder such certificate or certificates pursuant to Section 4(c)
by the Delivery Date and if within five (5) business days after the Delivery
Date the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Holder of the Common
Stock which the Holder anticipated receiving upon such conversion (a "Buy-In"),
then the Corporation shall pay in cash to the Holder (in addition to any
remedies available to or elected by the Holder) within five (5) business days
after written notice from the Holder, the amount by which (A) the Holder's total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (B) the aggregate Stated Value of the shares
of Series A Preferred Stock for which such conversion was not timely honored.
The Holder shall provide the Corporation written notice indicating the amounts
payable to the Holder in respect of the Buy-In.
(1) The
Corporation represents to the Holders of shares of Series A Preferred
Stock
that for purposes of "tacking" under Rule 144 promulgated under the Securities
Act of 1933 the original date of ownership of any shares of Series A Preferred
Stock shall be the date of original ownership by such Holder of the shares of
Common Stock owned by such Holder which • were surrendered in exchange for
shares of Series A Preferred Stock. The Corporation also covenants to comply
with all applicable requirements of an issuer for its equity securities to be
eligible for resale under Rule 144 (including, but not limited to, requirements
as to current reporting).
4. Voting Rights. The
Holders of shares of Series A Preferred Stock shall vote together with the
holders of the Common Stock on an as converted basis and shall have one vote per
share for each share of Common Stock it would have as if the Holder's shares of
Series A Preferred Stock had been converted into Common Stock prior to the
vote.
5. Dividends.
(a) The
holders of shares of the outstanding Series A Preferred Stock shall be entitled,
when, as and if declared by the Board of Directors out of funds of the
Corporation legally available therefor, to receive cumulative cash dividends at
the rate per annum of 6.0% per share on the Liquidation Preference (equivalent
to the then in effect Series A Stated Value per annum per share), payable
quarterly in arrears (the "Dividend Rate"). Dividends payable for each full
quarterly period will be computed by dividing the Dividend Rate by four and
shall be payable in arrears on the last day of each calendar quarter ("Quarterly
Payment Date") (commencing March 31, 2009) for the quarterly period ending
immediately on such Quarterly Payment Date, to the holders of record of
Preferred Stock at the close of business on the Quarterly Payment Date. Such
dividends shall be cumulative from the issue date for the Series A Preferred
Stock ("Issue Date") (whether or not in any period or periods the Board of
Directors shall have declared such dividends or there shall be funds of the
Corporation legally available for the payment of such dividends) and shall
accumulate on a day-to-day basis, whether or not earned or declared, from and
after the Issue Date. Dividends payable for any partial period shall be computed
on the basis of days elapsed over a 360-day year consisting of twelve 30-day
months. Accumulated unpaid dividends accrue and cumulate dividends at the annual
rate of 6.0% and are payable in the manner provided in this Section
3.
(b) No
dividends will be declared or paid upon, or any sum set apart for the payment of
dividends upon, any outstanding share of the Series A Preferred Stock with
respect to any period unless all dividends for all preceding periods have been
declared and paid or declared
and a
sufficient sum set apart for the payment of such upon all outstanding shares of
Series A Preferred Stock.
(c) No
dividends or other distributions (other than a dividend or distribution payable
solely in shares of Junior Stock and other than cash paid in lieu of fractional
shares) may be declared, made or paid, or set apart for payment upon, any Junior
Stock, nor may any Junior Stock be redeemed, purchased or otherwise acquired for
any consideration (or any money paid to . or made available for a sinking fund
for the redemption of any Junior Stock) by or on behalf of the Corporation
(except by conversion into or exchange for shares of Junior Stock, unless full
accumulated dividends on the Series A Preferred Stock shall have been or
contemporaneously are declared and paid, or are declared and a sum sufficient
for the payment thereof is set apart for such payment, on the Series A Preferred
Stock for all payment periods terminating on or prior to the date of such
declaration, payment, redemption, purchase or acquisition.
(d) Holders
of shares of Series A Preferred Stock shall not be entitled to any dividends on
the Series A Preferred Stock, whether payable in cash, property or stock, in
excess of full cumulative dividends.
(e) In
any case where any dividend payment date of any Series A Preferred
Stock
shall not be a business day, at any place of payment, then payment of dividends
need not be made on such date, but may be made on the next succeeding business
day at such place of payment with the same force and effect as if made on the
payment date; and no dividends shall accumulate on the amount so payable for the
period from and after such payment date, as the case may be, to such business
day.
6. Prior Approval to Enter Into
Transactions. The Corporation may not enter into any transaction which
shall result in the issuance of any of its equity except for Excepted Issuances
or incur, create, assume or permit to exist any indebtedness except for third
party trade indebtedness in the ordinary course of business or indebtedness
incurred with respect to a financing with a commercial banking institution
without the prior written consent of the holders of at least 50.1% of the then
outstanding Series A Preferred Stock.
EXHIBIT A
NOTICE OF
CONVERSION
(To Be
Executed By the Registered Holder in Order to Convert Series A Preferred Stock
of Optex Systems Holdings, Inc.)
The
undersigned hereby irrevocably elects to convert
$ ____________________________________________________of the Stated
Value of
the above Series A Preferred Stock into shares of Common Stock of Optex Systems,
Inc. (the "Corporation") according to the conditions hereof, as of the date
written below.
Date of Conversion:
___________________________________________________________
Applicable Conversion Price Per Share:
_____________________________________________
Number of
Common Shares Issuable Upon This Conversion:
_____________________________
Select
one:
o
A Series A Convertible Preferred Stock certificate is being delivered herewith.
The unconverted
portion of such certificate should be reissued and delivered to the
undersigned.
o A Series A
Convertible Preferred Stock certificate is not being delivered to Optex Systems,
Inc.
Signature:
/s/ Andrey
Oks
Print
Name: AndreyOks
Address:
2702 Watch Hill Drive
Tarrytown, NY 10591
Deliveries
Pursuant to this Notice of Conversion Should Be Made to:
-7-