Exhibit 10.16

 

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

of

SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK

of

BANCTEC, INC.

 

(Pursuant to Section 151 of the Delaware General Corporation Law)

 

 

BANCTEC, INC., a corporation organized and existing under the laws of the State
of Delaware (the “Corporation”), hereby certifies that, pursuant to authority
vested in the Board of Directors of the Corporation by Article Fourth of the
Certificate of Incorporation of the Corporation, the following resolution was
adopted as of March 31, 2004 by the Board of Directors of the Corporation
pursuant to Section 141 of the Delaware General Corporation Law:

 

 “RESOLVED that, pursuant to authority vested in the Board of Directors of the
Corporation by Article Fourth of the Corporation’s Certificate of Incorporation,
of the total authorized number of 200,000 shares of Preferred Stock, $.01 par
value per share, of the Corporation, there shall be designated a series of
35,520 shares which shall constitute a single series to be known as “Series B
Preferred Stock” (hereinafter called the “Series B Preferred Stock”).  The
Series B Preferred Stock shall have the voting powers, designations, preferences
and other special rights, and qualifications, limitations and restrictions
thereof set forth below.  In addition, the voting powers, designations,
preferences and other special rights, and qualifications, limitations and
restrictions of the 100,667 shares of Series A Preferred Stock previously issued
by the Corporation (hereinafter called the “Series A Preferred Stock” and,
collectively with the Series B Preferred Stock, the “Preferred Stock”) are
hereby amended and restated as set forth below:

 

Except as otherwise expressly provided herein, (a) all shares of Series A
Preferred Stock shall be identical and shall entitle the holders thereof to the
same rights and privileges, and all shares of Series B Preferred Stock shall be
identical and shall entitle the holders thereof to the same rights and
privileges and (b) with respect to dividend rights, redemption rights and rights
on liquidation, winding up, corporate reorganization and dissolution, the
Series A Preferred Stock and the Series B Preferred Stock shall (i) rank pari
passu with each other and (ii) rank senior to (A) the Common Stock, $.01 par
value per share, of the Corporation (the “Common Stock”), (B) the Class A Common
Stock, $.01 par value per share, of the Corporation (the “Class A Common Stock”)
and (C) all classes and series of stock of the Corporation now or hereafter
authorized, issued or outstanding ranking pari passu or junior to the Preferred
Stock (such stock, collectively with the Common Stock and the Class A Common
Stock, being hereinafter called the “Junior Stock”).

 

SERIES A AND SERIES B PREFERRED STOCK

 

1.               Dividends.

 

1A.  Dividends.  The holders of Preferred Stock shall be entitled to receive,
out of funds legally available for such purpose, cash dividends at the rate of
(i) in the case of the Series A Preferred Stock, 7% per annum (computed on the
basis of a 365-day year) of the Stated Value (as defined below) per share and
(ii) in the case of the Series B Preferred Stock, 25% per annum (computed on the
basis of a 365-day year) of the Stated Value (as defined below) per share.  Such
dividends shall be payable (x) quarterly in arrears on March 1, June 1,
September 1 and December 1 of each year (each such payment date being referred
to herein as a “Dividend Payment Date”), commencing on the Dividend Payment Date
immediately following the date of issuance thereof, or (y) when and as declared
by the Board of Directors of the Corporation.  Dividends on the Preferred Stock
shall be cumulative and shall accrue quarterly from and after the date of issue
of the Preferred Stock whether or not declared and whether or not there are any
funds of the Corporation legally available for the payment of dividends.  The
Board of Directors of the Corporation may fix a record date for the
determination of holders of Preferred Stock entitled to receive payment of a
dividend declared thereon, which record date shall be no more than 60 days prior
to the date fixed for the payment thereof.

 

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1B.  Adjustment to Stated Value.  Notwithstanding anything to the contrary
provided in this Certificate of Designations, in the event that any portion of
the quarterly dividend on the Preferred Stock is not declared and paid in cash
on any Dividend Payment Date, the amount of such accrued dividend which is not
so paid shall be accumulated and shall automatically be added to the Stated
Value of such share on such Dividend Payment Date.  Accumulated dividends on
shares of Preferred Stock that have previously been added to the Stated Value
thereof pursuant to the terms of this subparagraph 1B, may, in the discretion of
the Board of Directors of the corporation, be paid in cash on any Dividend
Payment Date.  Accumulated dividends on any share of Preferred Stock which are
added to the Stated Value of such share pursuant to this subparagraph 1B shall
not be deemed to be in arrears for any purpose whatsoever.  As used herein, the
“Stated Value” per share of the Preferred Stock shall mean the sum of (i) $150,
plus (ii) all accumulated and unpaid dividends, if any, added to such Stated
Value pursuant to this subparagraph 1B, less (iii) all amounts paid in cash in
respect of such previously accumulated and unpaid dividends, if any, that were
originally added to such Stated Value pursuant to this subparagraph 1B.

 

1C.  Dividend Preference.  As long as any shares of Preferred Stock shall remain
outstanding, in no event shall any dividend be declared or paid upon, nor shall
any distribution be made upon, any shares of Junior Stock, nor (without the
consent of the holders of a majority in interest of the outstanding Preferred
Stock voting together as a single class) shall any shares of Junior Stock be
purchased or redeemed by the Corporation (other than purchases and repurchases
of shares of Common Stock from employees, consultants and other stockholders of
the Corporation pursuant to, and in accordance with the terms of, an employee
stock option plan established by the Corporation pursuant to which the
Corporation has the right to repurchase such shares of Common Stock for a
consideration not greater than the consideration paid for such shares by such
employee, consultant or stockholder), nor shall any moneys be paid to or made
available for a sinking fund for the purchase or redemption of shares of any
Junior Stock.

 

2.   Redemption.  The shares of Preferred Stock shall be redeemable as follows:

 

2A.  Redemption at Option of Holders.  In case of (i) a merger or consolidation
of the Corporation with or into another entity (other than a merger in which the
Corporation is the surviving corporation and which will not result in more than
50% of the capital stock of the Corporation outstanding immediately after the
effective date of such merger being owned of record or beneficially by persons
other than the holders of such capital stock immediately prior to such merger),
(ii) the sale or other disposition of all or substantially all of the assets or
properties of the Corporation or any of its subsidiaries, or of any division of
the Corporation or any of its subsidiaries, (iii) the acquisition of “beneficial
ownership” by any “person” or “group” (other than Welsh, Carson, Anderson &
Stowe VIII, L.P.  or its affiliates) of voting stock of the Corporation
representing more than 50% of the voting power of all outstanding shares of such
voting stock, whether by way of merger or consolidation or otherwise, or (iv) a
“Qualified IPO” as defined in subparagraph 4H (any event described in the
foregoing clauses (i) through (iv) being referred to herein as a “Liquidity
Event”), the Corporation shall, not later than 45 days prior to the effective
date of any such Liquidity Event, give written notice thereof (the “Liquidity
Event Notice”) to each holder of shares of Preferred Stock. In the event that
within 15 days after receipt of the Liquidity Event Notice, the holders of a
majority of the outstanding shares of Series A Preferred Stock elect, by written
notice to the corporation, to have any or all of their shares of Series A
Preferred Stock redeemed, the Corporation shall redeem, to the extent legally
permitted, the same (in the manner and with the effect provided in subparagraphs
2C through 2F below) not later than the day prior to the effective date of such
Liquidity Event.

 

As used herein, (i) the terms “person” and “group” shall have the meaning set
forth in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), whether or not applicable, (ii) the term “beneficial
owner” shall have the meaning set forth in Rules 13d-3 and 13d-5 under the
Exchange Act, whether or not applicable, except that a person shall be deemed to
have “beneficial ownership” of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time or upon the occurrence of certain events, and (iii) any “person” or
“group” will be deemed to beneficially own any voting stock of the Corporation
so long as such person or group beneficially owns, directly or indirectly, in
the aggregate a majority of the voting stock of a registered holder of the
voting stock of the Corporation.

 

2B.  Redemption at Option of Corporation.  The Corporation may, in its sole
discretion, redeem at any time and from time to time (in the manner and with the
effect provided in subparagraphs 2C through 2F below), any whole number of
shares of Series A Preferred Stock or Series B Preferred Stock.

 

2C.  Redemption Price.  Any date on which the Corporation elects or is required
to redeem shares of Preferred Stock as provided in subparagraph 2A or 2B shall
be referred to as a “Redemption Date.”  The Preferred Stock to be redeemed on a
Redemption Date shall be redeemed by paying for each share the sum of (i) the
Stated Value per share as of such Redemption Date, plus (ii) an amount equal to
dividends accumulated and unpaid thereon (to the extent not included in the
Stated Value of such shares) up to such Redemption Date, the sum of (i) and
(ii) being herein sometimes referred to as the “Redemption Price”.  In the case
of a redemption pursuant to subparagraph 2B above, not less than 30 days before
such

 

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Redemption Date, written notice shall be given by registered mail, postage
prepaid to the holders of record of the Preferred Stock to be redeemed, such
notice to be addressed to each such stockholder at his post office address as
shown by the records of the Corporation, specifying the number of shares of
Series A Preferred Stock to be redeemed, the paragraph or paragraphs of this
Certificate of Designations pursuant to which such redemption shall be made, the
Redemption Price and the place and date of such redemption, which date shall not
be a day on which banks in the City of New York are required or authorized to
close.  If a notice of redemption shall have been duly given under subparagraph
2A or 2B and if on or before such Redemption Date the funds necessary for
redemption shall have been set aside so as to be and continue to be available
therefor, then, notwithstanding that any certificate for shares of Preferred
Stock to be redeemed shall not have been surrendered for cancellation, after the
close of business on such Redemption Date, the shares so called for redemption
shall no longer be deemed outstanding, the dividends thereon shall cease to
accrue, and all rights with respect to such shares shall forthwith after the
close of business on the Redemption Date, cease, except only the right of the
holders thereof to receive, upon presentation of the certificate representing
shares so called for redemption, the Redemption Price therefor, without interest
thereon.

 

2D.  Redeemed or Otherwise Acquired Shares to Be Retired.  Any shares of the
Preferred Stock redeemed pursuant to this paragraph 2 or otherwise acquired by
the Corporation in any manner whatsoever shall be permanently retired and shall
not under any circumstances be reissued; and the Corporation may from time to
time take such appropriate corporate action as may be necessary to reduce the
number of authorized shares of Preferred Stock accordingly.

 

2E.  Shares to be Redeemed.  In case of the redemption under this paragraph 2,
for any reason, of only a part of the outstanding shares of the Series A
Preferred Stock or the Series B Preferred Stock on a Redemption Date, all shares
of Preferred Stock to be redeemed shall be selected pro rata, and there shall be
so redeemed from each registered holder in whole shares, as nearly as
practicable to the nearest share, that proportion of all the shares of the
applicable class to be redeemed which the number of shares held of record by
such holder bears to the total number of shares of Preferred Stock of the
applicable class at the time outstanding.

 

2F.  Credit Facility.  Notwithstanding anything herein to the contrary, any
redemption of shares of Preferred Stock pursuant to subparagraph 2A above is
subject to the following:  Any cash proceeds or other consideration received by
the Corporation or any subsidiary of the Corporation, as the case may be, in
connection with any of the transactions described in subparagraph 2A shall be
used by the Corporation to repay any and all amounts owed by the Corporation
pursuant to the terms and conditions of the Credit Agreement, dated as of
July 22, 1999, among the Corporation and the other parties signatory thereto,
prior to the Corporation’s redemption of any Preferred Stock pursuant to
subparagraph 2A.

 

3.   Liquidation.  Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of
Preferred Stock, before any distribution or payment is made upon the Junior
Stock, shall be entitled to be paid for each share, with each series being
determined separately the sum of (x) the Stated Value per share as of such date
of liquidation, dissolution or winding up (the “Liquidation Date”), plus (y) an
amount equal to dividends accumulated but unpaid thereon (to the extent not
included in the Stated Value of such share) up to the Liquidation Date, the sum
of (x) and (y) above being herein sometimes referred to as the “Liquidation
Payments”.

 

If, upon such liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Preferred Stock shall be insufficient to permit payment to such holders of the
preferential amounts to which they are entitled, then the entire assets of the
Corporation to be so distributed shall be distributed ratably among the holders
of Preferred Stock.  Upon any such liquidation, dissolution or winding up of the
Corporation, after the holders of Preferred Stock shall have been paid in full
the amounts to which they shall be entitled, the remaining net assets of the
Corporation available for distribution to its shareholders may be distributed to
the holders of the Junior Stock. Written notice of such liquidation, dissolution
or winding up, stating a payment date, the amount of the Liquidation Payments,
and the place where said Liquidation Payments shall be payable, shall be given
by registered mail, postage prepaid, not less than 45 days prior to the payment
date stated therein, to the holders of record of Preferred Stock, such notice to
be addressed to each such holder at his post office address as shown by the
records of the Corporation. A Liquidity Event shall not be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
the provisions of this paragraph 3.

 

4.   Conversion of Series B Preferred Stock.

 

4A.  Right to Convert.  Subject to the terms and conditions of this paragraph 4,
the holder of any share or shares of Series B Preferred Stock shall have the
right, at its option at any time, to convert any such shares of Series B
Preferred Stock (except that upon any liquidation, dissolution or winding up of
the Corporation the right of conversion shall terminate at the close of business
on the last full business day next preceding the date fixed for payment of the
amount distributable on the Series B Preferred Stock), into such number of fully
paid and nonassessable whole shares of Common Stock as is obtained by
multiplying the number of shares of the Series B Preferred Stock so to be
converted by $150 and dividing the result by

 

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$8.325 per share, or by the conversion price as last adjusted and in effect at
the date any share or shares of Series B Preferred Stock are surrendered for
conversion (such conversion price as last adjusted being referred to herein as
the “Series B Conversion Price”).

 

The rights of conversion contained in this subparagraph 4A shall be exercised by
the holder of shares of Series B Preferred Stock by giving written notice that
such holder elects to convert a stated number of shares of Series B Preferred
Stock into Common Stock and by surrender of a certificate or certificates for
the shares so to be converted to the Corporation at its principal office (or
such other office or agency of the Corporation as the Corporation may designate
by notice in writing to the holder or holders of the Series B Preferred Stock)
at any time during its usual business hours on the date set forth in such
notice, together with a statement of the name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be issued.

 

4B.  Issuance of Certificates; Time Conversion Effected.  Promptly after the
receipt of the written notice referred to in subparagraph 4A and surrender of
the certificate or certificates for the share or shares of Series B Preferred
Stock to be converted, the Corporation shall issue and deliver, or cause to be
issued and delivered, to the holder, registered in such name or names as such
holder may direct, a certificate or certificates for the number of whole shares
of Common Stock issuable upon the conversion of such share or shares of Series B
Preferred Stock.  To the extent permitted by law, such conversion shall be
deemed to have been effected, and the Series B Conversion Price shall be
determined, as of the close of business on the date on which such written notice
shall have been received by the Corporation and the certificate or certificates
for such share or shares shall have been surrendered as aforesaid, and at such
time the rights of the holder of such share or shares of Series B Preferred
Stock shall cease, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby.

 

4C.  Dividends; Fractional Shares; Partial Conversion. Notwithstanding any other
provision of this Certificate of Designations, upon any conversion of shares of
Series B Preferred Stock into Common Stock, the holder of such shares shall
relinquish any right to receive dividends accumulated and unpaid thereon
(whether or not included in the Stated Value of such shares).  No fractional
shares may be issued upon conversion of the Series B Preferred Stock into Common
Stock.  In case the number of shares of Series B Preferred Stock represented by
the certificate or certificates surrendered pursuant to subparagraph 4A exceeds
the number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder thereof, at the expense of the Corporation, a
new certificate or certificates for the number of shares of Series B Preferred
Stock represented by the certificate or certificates surrendered which are not
to be converted.  If any fractional interest in a share of Common Stock would,
except for the provisions of the first sentence of this subparagraph 4C, be
deliverable upon any such conversion, the Corporation, in lieu of delivering the
fractional share thereof, shall pay to the holder surrendering the Series B
Preferred Stock for conversion an amount in cash equal to the current market
price or fair value of such fractional interest as determined in good faith by
the Board of Directors of the Corporation.

 

4D.  Adjustment of Series B Conversion Price Upon Issuance of Common Stock. 
Except as provided in subparagraph 4F hereof, if the Corporation shall issue or
sell, or is in accordance with subparagraphs 4D(1) through 4D(6) deemed to have
issued or sold, any shares of its Common Stock without consideration or for a
consideration per share less than the Series B Conversion Price in effect
immediately prior to the time of such issue or sale, then, forthwith upon such
issue or sale, the Series B Conversion Price shall be reduced to the price
(calculated to the nearest cent) determined by dividing (i) an amount equal to
the sum of (a) Adjusted Outstanding Common Stock (as defined below) multiplied
by the then existing Series B Conversion Price, plus (b) the consideration, if
any, received by the Corporation upon such issue or sale, by (ii) an amount
equal to the sum of Adjusted Outstanding Common Stock plus the number of shares
of Common Stock issued or sold or deemed to have been issued or sold.

 

For the purposes of this subparagraph 4D, the following terms shall have the
meanings set forth below:

 

“Adjusted Outstanding Common Stock” shall mean the sum of (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
(including as outstanding all shares of Common Stock issuable upon conversion of
outstanding Series B Preferred Stock), plus (ii) the number of shares of Common
Stock issuable upon the exercise of any outstanding stock subscription warrants
and vested stock options (reduced by the number of shares which, when multiplied
by the then current Series B Conversion Price, would equal the aggregate
exercise price for such warrants or options, as the case may be).

 

For purposes of this subparagraph 4D, the following subparagraphs 4D(1) to
4D(6) shall also be applicable:

 

4D(1)  Issuance of Rights or Options.  In case at any time the Corporation shall
in any manner grant (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or securities convertible into or exchangeable for
Common Stock (such rights or

 

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options being herein called “Options” and such convertible or exchangeable stock
or securities being herein called “Convertible Securities”) whether or not such
Options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the granting
of such Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options, plus, in the
case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be less
than the Series B Conversion Price in effect immediately prior to the time of
the granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options and thereafter shall be deemed
to be outstanding.  Except as otherwise provided in subparagraph 4D(3), no
adjustment of the Series B Conversion Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities upon exercise of such
Options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.

 

4D(2)  Issuance of Convertible Securities.  In case the Corporation shall in any
manner issue (whether directly or by assumption in a merger or otherwise) or
sell any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange (determined by
dividing (i) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Series B Conversion Price in
effect immediately prior to the time of such issue or sale, then the totalmum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except as
otherwise provided in subparagraph 4D(3) below, no adjustment of the Series B
Conversion Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities, and (b) if any such issue
or sale of such Convertible Securities is made upon exercise of any Option to
purchase any such Convertible Securities for which adjustments of the Series B
Conversion Price have been or are to be made pursuant to other provisions of
this subparagraph 4D, no further adjustment of the Series B Conversion Price
shall be made by reason of such issue or sale.

 

4D(3)  Change in Option Price or Conversion Rate. Upon the happening of any of
the following events, namely, if (i) the purchase price provided for in any
Option referred to in subparagraph 4D(1), (ii) the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities
referred to in subparagraph 4D(1) or 4D(2) or subparagraph 4D(1) or 4D(2) are
convertible into or exchangeable for Common Stock shall change at any time (in
each case other than under or by reason of provisions designed to protect
against dilution), then the Series B Conversion Price in effect at the time of
such event shall, as required, forthwith be readjusted to such Series B
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold; and on the expiration of any such Option
or the termination of any such right to convert or exchange such Convertible
Securities, the Series B Conversion Price then in effect hereunder shall, as
required, forthwith be increased to the Series B Conversion Price which would
have been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding.  If the purchase price
provided for in any such Option referred to in subparagraph 4D(1) or the rate at
which any Convertible Securities referred to in subparagraph 4D(1) or 4D(2) are
convertible into or exchangeable for Common Stock shall be reduced at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then, in case of the delivery of Common Stock upon the
exercise of any such Option or upon conversion or exchange of any such
Convertible Securities, the Series B Conversion Price then in effect hereunder
shall, as required, forthwith be adjusted to such respective amount as would
have been obtained had such Option or Convertible Securities never been issued
as to such Common Stock and had adjustments been made upon the issuance of the
shares of Common Stock delivered as aforesaid, but only if as a result of such
adjustment the Series B Conversion Price then in effect hereunder is thereby
reduced.

 

4D(4)  Stock Dividends.  In case the Corporation shall declare a dividend or
make any other distribution upon any stock of the Corporation payable in Common
Stock, Options or Convertible Securities (other than any such dividend payable
solely in Common Stock, which shall be treated as a subdivision of the
Corporation’s shares of Common Stock into a greater number of shares pursuant to
subparagraph 4E below), any Common Stock, Options or Convertible Securities, as

 

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the case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.

 

4D(5)  Consideration for Stock.  In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation
therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Corporation in
connection therewith.  In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation as
confirmed by the Corporation’s auditors, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Corporation in connection therewith.  In case any Options shall be issued
in connection with the issue and sale of other securities of the Corporation,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the Corporation, such Options shall be deemed to
have been issued without consideration, and the Series B Conversion Price shall
be reduced as if the Corporation had subdivided its outstanding shares of Common
Stock into a greater number of shares, as provided in subparagraph 4E hereof.

 

4D(6)  Record Date.  In case the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them (i) to receive a dividend
or other distribution payable in Common Stock, Options or Convertible
Securities, or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be, provided that such shares of Common Stock shall in
fact have been issued or sold.

 

4E.    Subdivision or Combination of Stock.  In case the Corporation shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Series B Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Corporation shall be combined into a
smaller number of shares, the Series B Conversion Price in effect immediately
prior to such combination shall be proportionately increased.

 

4F.    Certain Issues of Common Stock Excepted.  Anything herein to the contrary
notwithstanding, the Corporation shall not be required to make any adjustment of
the Series B Conversion Price upon the issuance of Common Stock upon (i) the
conversion of outstanding shares of Series B Preferred Stock or (ii) the
exercise of warrants to purchase Common Stock issued by the Company prior to the
date of first issuance of Series B Preferred Stock.

 

4G.    Reorganization, Reclassification, Consolidation, Merger or Sale.  If any
capital reorganization or reclassification of the capital stock of the
Corporation or any consolidation or merger of the Corporation with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way (including, without limitation, by
way of consolidation or merger) that holders of Common Stock shall be entitled
to receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions (in form
satisfactory to the holders of at least 66-2/3% of the outstanding shares of
Series B Preferred Stock) shall be made whereby each holder of a share or shares
of Series B Preferred Stock shall thereafter have the right to receive, upon the
basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock of the Corporation immediately theretofore receivable
upon the conversion of such shares of Series B Preferred Stock, such shares of
stock, securities or assets as may be issuable or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Series B
Conversion Price) shall thereafter be applicable, as nearly practicable, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights (including, if necessary to effect
the adjustments contemplated herein, an immediate adjustment, by reason of such
reorganization, reclassification, consolidation, merger or sale, of the Series B
Conversion Price to the value for the Common Stock reflected by the terms of
such reorganization, reclassification, consolidation, merger or sale if the
value so reflected is less than the Series B Conversion Price in effect
immediately prior to such reorganization, reclassification, consolidation,
merger or sale).  In the event of a merger or consolidation of the Corporation
as a result of which a greater or lesser number of shares of common stock of the
surviving corporation is issuable to holders of Common Stock of the Corporation
outstanding immediately prior to such merger or consolidation, the Series B
Conversion Price in effect immediately prior to such merger or consolidation
shall be adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock of the Corporation.  The
Corporation will not effect any such consolidation or merger, or any sale of all
or substantially all of its assets and properties, unless prior to the
consummation thereof the successor corporation (if other than the Corporation)

 

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resulting from such consolidation or merger or the corporation purchasing such
assets shall assume by written instrument (in form reasonably satisfactory to
the holders of at least a majority of the shares of Series B Preferred Stock at
the time outstanding), executed and mailed or delivered to each holder of shares
of Series B Preferred Stock at the last address of such holder appearing on the
books of the Corporation, the obligation to deliver to such holder such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to receive.

 

4H.  Conversion Upon Qualified IPO.  In the event that, at any time while any of
the Series B Preferred Stock shall be outstanding, (i) the Corporation shall
complete an underwritten public offering underwritten by a securities firm of
nationally recognized standing involving the sale by the Corporation of shares
of Common Stock in which the aggregate net proceeds to the Corporation are at
least $20,000,000 (a “Qualified IPO”) and (b) the holders of a majority of the
Series B Preferred Stock shall have elected, by giving written notice to the
Corporation within 15 days after receipt of the related Liquidity Event Notice,
to cause all outstanding shares of Series B Preferred Stock to be converted into
Common Stock pursuant to this subparagraph 4H (and such holders shall not have
elected to have their shares of Series B Preferred Stock redeemed by the
Corporation pursuant to subparagraph 2B), then all outstanding shares of
Series B Preferred Stock shall, automatically and without further action on the
part of the holders of the Series B Preferred Stock, be converted into shares of
Common Stock in accordance with the terms of this paragraph 4 with the same
effect as if the certificates evidencing such shares had been surrendered for
conversion, such conversion to be effective simultaneously with the closing of
such public offering, provided, however, that certificates evidencing the shares
of Common Stock issuable upon such conversion shall not be issued except on
surrender of the certificates for the shares of the Series B Preferred Stock so
converted.

 

4I.  Notice of Adjustment.  Upon any adjustment of the Series B Conversion
Price, then and in each such case the Corporation shall give written notice
thereof, by first class mail, postage prepaid, addressed to each holder of
shares of Series B Preferred Stock at the address of such holder as shown on the
books of the Corporation, which notice shall state the Series B Conversion Price
resulting from such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.

 

4J.  Other Notices.  In case at any time:

 

(1)  the Corporation shall declare any dividend upon its Junior Stock payable in
cash or stock or make any other distribution to the holders of its Junior Stock;

 

(2)  the Corporation shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or other rights;

 

(3)  there shall be any capital reorganization or reclassification of the
capital stock of the Corporation, or a consolidation or merger of the
Corporation with, or a sale of a substantial portion of its assets to, another
entity; or

 

(4)  there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;

 

then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, addressed to each holder of any shares of Series B
Preferred Stock at the address of such holder as shown on the books of the
Corporation, (a) at least 45 days’ prior written notice of the date on which the
books of the Corporation shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least 45 days’ prior written notice of the date
when the same shall take place.  Such notice in accordance with the foregoing
clause (a) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause
(b) shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.

 

4K.  Stock to be Reserved.  The Corporation will at all times reserve and keep
available out of its authorized Common Stock or its treasury shares, solely for
the purpose of issue upon the conversion of the Series B Preferred Stock as
herein provided, such number of shares of Common Stock as may then be issuable
upon the conversion of all outstanding shares of Series B Preferred Stock.  The
Corporation covenants that all shares of Common Stock which shall be so issued
shall be duly and validly issued and fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof and, without
limiting the generality of the foregoing, the Corporation covenants that it will
from time to time take all such action as may be requisite to assure that the
par value per share of the Common Stock is at all times equal to or less than
the effective Series B Conversion Price.  The Corporation will take all such
action as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable law or regulation, or of

 

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any requirements of any national securities exchange upon which the Common Stock
of the Corporation may be listed.  The Corporation will not take any action
which results in any adjustment of the Series B Conversion Price f the total
number of shares of Common Stock issued and issuable after such action upon
conversion of the Series B Preferred Stock would exceed the total number of
shares of Common Stock then authorized by the Corporation’s Certificate of
Incorporation.

 

4L.  No Reissuance of Series B Preferred Stock.  Shares of Series B Preferred
Stock which are converted into shares of Common Stock as provided herein shall
not be reissued.

 

4M.  Issue Tax.  The issuance of certificates for shares of Common Stock upon
conversion of the Series B Preferred Stock shall be made without charge to the
holders thereof for any issuance tax in respect thereof.

 

4N.  Closing of Books.  The Corporation will at no time close its transfer books
against the transfer of any Series B Preferred Stock or of any shares of Common
Stock issued or issuable upon the conversion of any shares of Series B Preferred
Stock in any manner which interferes with the timely conversion of such Series B
Preferred Stock.

 

4O.  Definition of Common Stock.  As used in this paragraph 4, the term “Common
Stock” shall mean and include the Corporation’s authorized Common Stock, $.01
par value, and the Corporation’s authorized Class A Common Stock, $.01 par
value, as constituted on the date of the filing of this Certificate of
Designations, and shall also include any capital stock of any class of the
Corporation thereafter authorized which shall not be limited to a fixed sum or
percentage of par value in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, provided,
however, that such term, when used to describe the securities receivable upon
conversion of shares of the Series B Preferred Stock of the Corporation, shall
include only shares designated as Common Stock of the Corporation on the date of
filing of this Certificate of Designations, any shares resulting from any
combination or subdivision thereof referred to in subparagraph 4E, or in case of
any reorganization or reclassification of the outstanding shares thereof, the
stock, securities or assets provided for in subparagraph 4G.

 

5.   Voting. Except as otherwise provided by law, the Certificate of
Incorporation of the Corporation or this Certificate of Designations, the
holders of Preferred Stock shall not be entitled to vote on any matters to be
voted on by the stockholders of the Corporation.

 

6.   Restrictions.  At any time when shares of Preferred Stock are outstanding,
except where the vote or written consent of the holders of a greater number of
shares of Preferred Stock of the Corporation is required by law or the
Certificate of Incorporation of the Corporation, and in addition to any other
vote required by law, without the prior consent of the holders of at least
66-2/3% of the outstanding Preferred Stock, given in person or by proxy, either
by written consent without a meeting or at a special meeting called for that
purpose, at which meeting the holders of the shares of such Preferred Stock
shall vote together as a class:

 

(1)  the Corporation will not (i) create or authorize the creation of any
additional class or series of shares unless the same ranks junior to the
Preferred Stock as to the payment of dividends, redemption rights and the
distribution of assets upon the liquidation, dissolution or winding up of the
Corporation, (ii) increase the authorized amount of the Preferred Stock or the
authorized amount of any additional class or series of shares unless the same
ranks junior to the Preferred Stock as to the payment of dividends, redemption
rights and the distribution of assets upon the liquidation, dissolution or
winding up of the Corporation, (iii) create or authorize any obligation or
security convertible into shares of Preferred Stock or into shares of any other
class or series unless the same ranks junior to the Preferred Stock as to the
payment of dividends, redemption rights and the distribution of assets upon the
liquidation, dissolution or winding up of the Corporation, whether any such
creation or authorization or increase shall be by means of amendment of the
Certificate of Incorporation, by a Certificate of Designations, or by merger,
consolidation or otherwise, (iv) modify or amend any right, preference or term
of the Preferred Stock or (v) create or authorize any debt obligation or
security of the Corporation convertible into (or which is issued or sold as a
unit with a warrant or other right to subscribe for) any equity security of the
Corporation (including, without limitation, Common Stock or equity securities
junior to the Preferred Stock);

 

(2)  the Corporation will not amend, alter or repeal the Corporation’s
Certificate of Incorporation or By-laws in any manner, or file any directors’
resolutions pursuant to the General Corporation Law of the State of Delaware
containing any provision, in either case, which adversely affects the respective
preferences, qualifications, special or relative rights or privileges of the
Preferred Stock or which in any manner adversely affects the Preferred Stock or
the holders thereof;

 

(3)  the Corporation will not purchase or set aside any sums for the purchase of
any shares of stock of the Corporation or the purchase of any options, warrants
or other rights to acquire any shares of stock of the Corporation, except for
redemptions of Preferred Stock pursuant to paragraph 2 hereof; or

 

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(4)  the Corporation will not declare, or set aside funds for the payment of,
dividends or distributions on any class of stock of the Corporation, other than
dividends on Preferred Stock pursuant to paragraph 1 hereof.”

 

IN WITNESS WHEREOF, this Certificate of Designations has been executed by the
Corporation as of this 31st day of March, 2004.

 

 

BANCTEC, INC.

 

 

 

By

 

/ s /    Brian R. Stone

 

 

Brian R. Stone

 

Secretary

 

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