**Exhibit 10.16**

 

CERTIFICATE OFDESIGNATIONS, PREFERENCES AND RIGHTSofSERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCKofBANCTEC, INC.

 

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

 

 

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

 

 “RESOLVED that, pursuant to authority vestedin the Board of Directors of the Corporation by Article Fourth of theCorporation’s Certificate of Incorporation, of the total authorized number of200,000 shares of Preferred Stock, $.01 par value per share, of theCorporation, there shall be designated a series of 35,520 shares which shallconstitute a single series to be known as “Series B Preferred Stock”(hereinafter called the “Series B Preferred Stock”).  The Series B Preferred Stock shall havethe voting powers, designations, preferences and other special rights, andqualifications, limitations and restrictions thereof set forth below.  In addition, the voting powers, designations,preferences and other special rights, and qualifications, limitations andrestrictions of the 100,667 shares of Series A Preferred Stock previouslyissued by the Corporation (hereinafter called the “Series A PreferredStock” and, collectively with the Series B Preferred Stock, the “PreferredStock”) are hereby amended and restated as set forth below:

 

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

 

SERIES A AND SERIES BPREFERRED STOCK

 

1.               Dividends.

 

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

 

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1B.  Adjustment to Stated Value.  Notwithstanding anything to the contraryprovided in this Certificate of Designations, in the event that any portion ofthe quarterly dividend on the Preferred Stock is not declared and paid in cashon any Dividend Payment Date, the amount of such accrued dividend which is notso paid shall be accumulated and shall automatically be added to the StatedValue of such share on such Dividend Payment Date.  Accumulated dividends on shares of PreferredStock that have previously been added to the Stated Value thereof pursuant tothe terms of this subparagraph 1B, may, in the discretion of the Board ofDirectors of the corporation, be paid in cash on any Dividend PaymentDate.  Accumulated dividends on any shareof Preferred Stock which are added to the Stated Value of such share pursuantto this subparagraph 1B shall not be deemed to be in arrears for any purposewhatsoever.  As used herein, the “StatedValue” per share of the Preferred Stock shall mean the sum of (i) $150,plus (ii) all accumulated and unpaid dividends, if any, added to suchStated Value pursuant to this subparagraph 1B, less (iii) all amounts paidin cash in respect of such previously accumulated and unpaid dividends, if any,that were originally added to such Stated Value pursuant to this subparagraph1B.

 

1C.  Dividend Preference.  As long as any shares of Preferred Stockshall remain outstanding, in no event shall any dividend be declared or paidupon, 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 theoutstanding Preferred Stock voting together as a single class) shall any sharesof Junior Stock be purchased or redeemed by the Corporation (other thanpurchases and repurchases of shares of Common Stock from employees, consultantsand other stockholders of the Corporation pursuant to, and in accordance withthe terms of, an employee stock option plan established by the Corporationpursuant to which the Corporation has the right to repurchase such shares ofCommon Stock for a consideration not greater than the consideration paid forsuch shares by such employee, consultant or stockholder), nor shall any moneysbe paid to or made available for a sinking fund for the purchase or redemptionof 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 consolidationof the Corporation with or into another entity (other than a merger in whichthe Corporation is the surviving corporation and which will not result in morethan 50% of the capital stock of the Corporation outstanding immediately afterthe effective date of such merger being owned of record or beneficially bypersons other than the holders of such capital stock immediately prior to suchmerger), (ii) the sale or other disposition of all or substantially all ofthe assets or properties of the Corporation or any of its subsidiaries, or ofany division of the Corporation or any of its subsidiaries, (iii) theacquisition of “beneficial ownership” by any “person” or “group” (other thanWelsh, Carson, Anderson & Stowe VIII, L.P.  or its affiliates) of voting stock of theCorporation representing more than 50% of the voting power of all outstandingshares of such voting stock, whether by way of merger or consolidation orotherwise, or (iv) a “Qualified IPO” as defined in subparagraph 4H (anyevent described in the foregoing clauses (i) through (iv) beingreferred to herein as a “Liquidity Event”), the Corporation shall, not laterthan 45 days prior to the effective date of any such Liquidity Event, give writtennotice thereof (the “Liquidity Event Notice”) to each holder of shares ofPreferred Stock. In the event that within 15 days after receipt of theLiquidity Event Notice, the holders of a majority of the outstanding shares of Series APreferred Stock elect, by written notice to the corporation, to have any or allof their shares of Series A Preferred Stock redeemed, the Corporation shallredeem, to the extent legally permitted, the same (in the manner and with theeffect provided in subparagraphs 2C through 2F below) not later than the dayprior to the effective date of such Liquidity Event.

 

As used herein, (i) theterms “person” and “group” shall have the meaning set forth in Section 13(d)(3) ofthe Securities Exchange Act of 1934, as amended (the “Exchange Act”), whetheror not applicable, (ii) the term “beneficial owner” shall have the meaningset forth in Rules 13d-3 and 13d-5 under the Exchange Act, whether or notapplicable, 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 rightis exercisable immediately or only after the passage of time or upon theoccurrence of certain events, and (iii) any “person” or “group” will bedeemed to beneficially own any voting stock of the Corporation so long as suchperson or group beneficially owns, directly or indirectly, in the aggregate amajority of the voting stock of a registered holder of the voting stock of theCorporation.

 

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 effectprovided in subparagraphs 2C through 2F below), any whole number of shares of Series APreferred Stock or Series B Preferred Stock.

 

2C.  Redemption Price.  Any date on which the Corporation elects oris required to redeem shares of Preferred Stock as provided in subparagraph 2Aor 2B shall be referred to as a “Redemption Date.”  The Preferred Stock to be redeemed on aRedemption Date shall be redeemed by paying for each share the sum of (i) theStated Value per share as of such Redemption Date, plus (ii) an amountequal to dividends accumulated and unpaid thereon (to the extent not includedin 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 tosubparagraph 2B above, not less than 30 days before such

 

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Redemption Date, writtennotice shall be given by registered mail, postage prepaid to the holders ofrecord of the Preferred Stock to be redeemed, such notice to be addressed toeach such stockholder at his post office address as shown by the records of theCorporation, specifying the number of shares of Series A Preferred Stockto be redeemed, the paragraph or paragraphs of this Certificate of Designationspursuant to which such redemption shall be made, the Redemption Price and theplace and date of such redemption, which date shall not be a day on which banksin the City of New York are required or authorized to close.  If a notice of redemption shall have beenduly given under subparagraph 2A or 2B and if on or before such Redemption Datethe funds necessary for redemption shall have been set aside so as to be andcontinue to be available therefor, then, notwithstanding that any certificatefor shares of Preferred Stock to be redeemed shall not have been surrenderedfor cancellation, after the close of business on such Redemption Date, theshares so called for redemption shall no longer be deemed outstanding, thedividends thereon shall cease to accrue, and all rights with respect to suchshares shall forthwith after the close of business on the Redemption Date,cease, except only the right of the holders thereof to receive, upon presentationof the certificate representing shares so called for redemption, the RedemptionPrice therefor, without interest thereon.

 

2D.  Redeemed or Otherwise Acquired Shares to BeRetired.  Any shares of the PreferredStock redeemed pursuant to this paragraph 2 or otherwise acquired by theCorporation in any manner whatsoever shall be permanently retired and shall notunder any circumstances be reissued; and the Corporation may from time to timetake such appropriate corporate action as may be necessary to reduce the numberof authorized shares of Preferred Stock accordingly.

 

2E.  Shares to be Redeemed.  In case of the redemption under thisparagraph 2, for any reason, of only a part of the outstanding shares of the Series APreferred Stock or the Series B Preferred Stock on a Redemption Date, allshares of Preferred Stock to be redeemed shall be selected pro rata, and thereshall be so redeemed from each registered holder in whole shares, as nearly aspracticable to the nearest share, that proportion of all the shares of theapplicable class to be redeemed which the number of shares held of record bysuch holder bears to the total number of shares of Preferred Stock of theapplicable class at the time outstanding.

 

2F.  Credit Facility.  Notwithstanding anything herein to thecontrary, any redemption of shares of Preferred Stock pursuant to subparagraph2A above is subject to the following: Any cash proceeds or other consideration received by the Corporation orany subsidiary of the Corporation, as the case may be, in connection with anyof the transactions described in subparagraph 2A shall be used by theCorporation to repay any and all amounts owed by the Corporation pursuant tothe terms and conditions of the Credit Agreement, dated as of July 22,1999, among the Corporation and the other parties signatory thereto, prior tothe Corporation’s redemption of any Preferred Stock pursuant to subparagraph2A.

 

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 beentitled to be paid for each share, with each series being determinedseparately the sum of (x) the Stated Value per share as of such date ofliquidation, dissolution or winding up (the “Liquidation Date”), plus (y) anamount equal to dividends accumulated but unpaid thereon (to the extent notincluded in the Stated Value of such share) up to the Liquidation Date, the sumof (x) and (y) above being herein sometimes referred to as the “LiquidationPayments”.

 

If, upon suchliquidation, dissolution or winding up of the Corporation, whether voluntary orinvoluntary, the assets to be distributed among the holders of Preferred Stockshall be insufficient to permit payment to such holders of the preferentialamounts to which they are entitled, then the entire assets of the Corporationto be so distributed shall be distributed ratably among the holders ofPreferred Stock.  Upon any suchliquidation, dissolution or winding up of the Corporation, after the holders ofPreferred Stock shall have been paid in full the amounts to which they shall beentitled, the remaining net assets of the Corporation available for distributionto its shareholders may be distributed to the holders of the Junior Stock.Written notice of such liquidation, dissolution or winding up, stating apayment date, the amount of the Liquidation Payments, and the place where saidLiquidation Payments shall be payable, shall be given by registered mail,postage prepaid, not less than 45 days prior to the payment date statedtherein, to the holders of record of Preferred Stock, such notice to beaddressed to each such holder at his post office address as shown by therecords of the Corporation. A Liquidity Event shall not be deemed to be aliquidation, dissolution or winding up of the Corporation within the meaning ofthe provisions of this paragraph 3.

 

4.   Conversion of Series B Preferred Stock.

 

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

 

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

 

The rights of conversioncontained in this subparagraph 4A shall be exercised by the holder of shares ofSeries B Preferred Stock by giving written notice that such holder electsto convert a stated number of shares of Series B Preferred Stock intoCommon Stock and by surrender of a certificate or certificates for the sharesso to be converted to the Corporation at its principal office (or such otheroffice or agency of the Corporation as the Corporation may designate by noticein writing to the holder or holders of the Series B Preferred Stock) atany 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 thecertificate or certificates for shares of Common Stock shall be issued.

 

4B.  Issuance of Certificates; Time ConversionEffected.  Promptly after the receipt ofthe written notice referred to in subparagraph 4A and surrender of thecertificate or certificates for the share or shares of Series B PreferredStock to be converted, the Corporation shall issue and deliver, or cause to beissued and delivered, to the holder, registered in such name or names as suchholder may direct, a certificate or certificates for the number of whole sharesof Common Stock issuable upon the conversion of such share or shares of Series BPreferred Stock.  To the extent permittedby law, such conversion shall be deemed to have been effected, and the Series BConversion Price shall be determined, as of the close of business on the dateon which such written notice shall have been received by the Corporation andthe certificate or certificates for such share or shares shall have beensurrendered as aforesaid, and at such time the rights of the holder of suchshare or shares of Series B Preferred Stock shall cease, and the person orpersons in whose name or names any certificate or certificates for shares ofCommon Stock shall be issuable upon such conversion shall be deemed to havebecome the holder or holders of record of the shares represented thereby.

 

4C.  Dividends; Fractional Shares; PartialConversion. Notwithstanding any other provision of this Certificate ofDesignations, upon any conversion of shares of Series B Preferred Stockinto Common Stock, the holder of such shares shall relinquish any right toreceive dividends accumulated and unpaid thereon (whether or not included inthe Stated Value of such shares).  Nofractional shares may be issued upon conversion of the Series B PreferredStock into Common Stock.  In case thenumber of shares of Series B Preferred Stock represented by thecertificate or certificates surrendered pursuant to subparagraph 4A exceeds thenumber of shares converted, the Corporation shall, upon such conversion,execute and deliver to the holder thereof, at the expense of the Corporation, anew certificate or certificates for the number of shares of Series BPreferred Stock represented by the certificate or certificates surrenderedwhich are not to be converted.  If anyfractional interest in a share of Common Stock would, except for the provisionsof the first sentence of this subparagraph 4C, be deliverable upon any suchconversion, the Corporation, in lieu of delivering the fractional sharethereof, shall pay to the holder surrendering the Series B Preferred Stockfor conversion an amount in cash equal to the current market price or fairvalue of such fractional interest as determined in good faith by the Board ofDirectors of the Corporation.

 

4D.  Adjustment of Series B Conversion PriceUpon Issuance of Common Stock.  Except asprovided in subparagraph 4F hereof, if the Corporation shall issue or sell, oris in accordance with subparagraphs 4D(1) through 4D(6) deemed tohave issued or sold, any shares of its Common Stock without consideration orfor a consideration per share less than the Series B Conversion Price ineffect immediately prior to the time of such issue or sale, then, forthwithupon such issue or sale, the Series B Conversion Price shall be reduced tothe price (calculated to the nearest cent) determined by dividing (i) anamount equal to the sum of (a) Adjusted Outstanding Common Stock (asdefined below) multiplied by the then existing Series B Conversion Price,plus (b) the consideration, if any, received by the Corporation upon suchissue or sale, by (ii) an amount equal to the sum of Adjusted OutstandingCommon Stock plus the number of shares of Common Stock issued or sold or deemedto have been issued or sold.

 

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

 

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

 

For purposes of thissubparagraph 4D, the following subparagraphs 4D(1) to 4D(6) shallalso be applicable:

 

4D(1)  Issuance ofRights or Options.  In case at any timethe Corporation shall in any manner grant (whether directly or by assumption ina merger or otherwise) any rights to subscribe for or to purchase, or anyoptions for the purchase of, Common Stock or any stock or securities convertibleinto or exchangeable for Common Stock (such rights or

 

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options being hereincalled “Options” and such convertible or exchangeable stock or securities beingherein called “Convertible Securities”) whether or not such Options or theright to convert or exchange any such Convertible Securities are immediatelyexercisable, and the price per share for which Common Stock is issuable uponthe exercise of such Options or upon conversion or exchange of such ConvertibleSecurities (determined by dividing (i) the total amount, if any, receivedor receivable by the Corporation as consideration for the granting of suchOptions, plus the minimum aggregate amount of additional consideration payableto the Corporation upon the exercise of all such Options, plus, in the case ofsuch Options which relate to Convertible Securities, the minimum aggregateamount of additional consideration, if any, payable upon the issue or sale ofsuch Convertible Securities and upon the conversion or exchange thereof, by (ii) thetotal maximum number of shares of Common Stock issuable upon the exercise ofsuch Options or upon the conversion or exchange of all such ConvertibleSecurities issuable upon the exercise of such Options) shall be less than the Series BConversion Price in effect immediately prior to the time of the granting ofsuch Options, then the total maximum number of shares of Common Stock issuableupon the exercise of such Options or upon conversion or exchange of the totalmaximum amount of such Convertible Securities issuable upon the exercise ofsuch Options shall be deemed to have been issued for such price per share as ofthe date of granting of such Options and thereafter shall be deemed to beoutstanding.  Except as otherwiseprovided in subparagraph 4D(3), no adjustment of the Series B ConversionPrice shall be made upon the actual issue of such Common Stock or of suchConvertible Securities upon exercise of such Options or upon the actual issueof such Common Stock upon conversion or exchange of such ConvertibleSecurities.

 

4D(2)  Issuance ofConvertible Securities.  In case theCorporation shall in any manner issue (whether directly or by assumption in amerger or otherwise) or sell any Convertible Securities, whether or not therights to exchange or convert thereunder are immediately exercisable, and theprice per share for which Common Stock is issuable upon such conversion orexchange (determined by dividing (i) the total amount received orreceivable by the Corporation as consideration for the issue or sale of suchConvertible Securities, plus the minimum aggregate amount of additionalconsideration, if any, payable to the Corporation upon the conversion orexchange thereof, by (ii) the total maximum number of shares of CommonStock issuable upon the conversion or exchange of all such ConvertibleSecurities) shall be less than the Series B Conversion Price in effectimmediately prior to the time of such issue or sale, then the totalmum numberof shares of Common Stock issuable upon conversion or exchange of all suchConvertible Securities shall be deemed to have been issued for such price pershare as of the date of the issue or sale of such Convertible Securities andthereafter shall be deemed to be outstanding, provided that (a) except asotherwise provided in subparagraph 4D(3) below, no adjustment of the Series BConversion Price shall be made upon the actual issue of such Common Stock uponconversion or exchange of such Convertible Securities, and (b) if any suchissue or sale of such Convertible Securities is made upon exercise of anyOption to purchase any such Convertible Securities for which adjustments of theSeries B Conversion Price have been or are to be made pursuant to otherprovisions of this subparagraph 4D, no further adjustment of the Series BConversion Price shall be made by reason of such issue or sale.

 

4D(3)  Change inOption Price or Conversion Rate. Upon the happening of any of the followingevents, namely, if (i) the purchase price provided for in any Optionreferred to in subparagraph 4D(1), (ii) the additional consideration, ifany, payable upon the conversion or exchange of any Convertible Securitiesreferred to in subparagraph 4D(1) or 4D(2) or subparagraph 4D(1) or4D(2) are convertible into or exchangeable for Common Stock shall changeat any time (in each case other than under or by reason of provisions designedto protect against dilution), then the Series B Conversion Price in effectat the time of such event shall, as required, forthwith be readjusted to such Series BConversion Price which would have been in effect at such time had such Optionsor Convertible Securities still outstanding provided for such changed purchaseprice, additional consideration or conversion rate, as the case may be, at thetime initially granted, issued or sold; and on the expiration of any suchOption or the termination of any such right to convert or exchange suchConvertible Securities, the Series B Conversion Price then in effecthereunder shall, as required, forthwith be increased to the Series BConversion Price which would have been in effect at the time of such expirationor termination had such Option or Convertible Securities, to the extentoutstanding immediately prior to such expiration or termination, never beenissued, and the Common Stock issuable thereunder shall no longer be deemed tobe outstanding.  If the purchase priceprovided for in any such Option referred to in subparagraph 4D(1) or therate at which any Convertible Securities referred to in subparagraph 4D(1) or4D(2) are convertible into or exchangeable for Common Stock shall bereduced at any time under or by reason of provisions with respect theretodesigned to protect against dilution, then, in case of the delivery of CommonStock upon the exercise of any such Option or upon conversion or exchange ofany such Convertible Securities, the Series B Conversion Price then ineffect hereunder shall, as required, forthwith be adjusted to such respectiveamount as would have been obtained had such Option or Convertible Securitiesnever been issued as to such Common Stock and had adjustments been made uponthe issuance of the shares of Common Stock delivered as aforesaid, but only ifas a result of such adjustment the Series B Conversion Price then ineffect hereunder is thereby reduced.

 

4D(4)  StockDividends.  In case the Corporation shalldeclare a dividend or make any other distribution upon any stock of theCorporation payable in Common Stock, Options or Convertible Securities (otherthan any such dividend payable solely in Common Stock, which shall be treatedas a subdivision of the Corporation’s shares of Common Stock into a greaternumber of shares pursuant to subparagraph 4E below), any Common Stock, Optionsor Convertible Securities, as

 

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

 

4D(5)  Considerationfor Stock.  In case any shares of CommonStock, Options or Convertible Securities shall be issued or sold for cash, theconsideration received therefor shall be deemed to be the amount received bythe Corporation therefor, without deduction therefrom of any expenses incurredor any underwriting commissions or concessions paid or allowed by theCorporation in connection therewith.  Incase any shares of Common Stock, Options or Convertible Securities shall beissued or sold for a consideration other than cash, the amount of theconsideration other than cash received by the Corporation shall be deemed to bethe fair value of such consideration as determined in good faith by the Boardof Directors of the Corporation as confirmed by the Corporation’s auditors,without deduction therefrom of any expenses incurred or any underwritingcommissions or concessions paid or allowed by the Corporation in connectiontherewith.  In case any Options shall beissued in connection with the issue and sale of other securities of theCorporation, together comprising one integral transaction in which no specificconsideration is allocated to such Options by the Corporation, such Optionsshall be deemed to have been issued without consideration, and the Series BConversion Price shall be reduced as if the Corporation had subdivided itsoutstanding shares of Common Stock into a greater number of shares, as providedin subparagraph 4E hereof.

 

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

 

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

 

4F.    Certain Issues of Common StockExcepted.  Anything herein to thecontrary notwithstanding, the Corporation shall not be required to make anyadjustment of the Series B Conversion Price upon the issuance of CommonStock upon (i) the conversion of outstanding shares of Series BPreferred Stock or (ii) the exercise of warrants to purchase Common Stockissued by the Company prior to the date of first issuance of Series BPreferred Stock.

 

4G.    Reorganization,Reclassification, Consolidation, Merger or Sale.  If any capital reorganization orreclassification of the capital stock of the Corporation or any consolidationor merger of the Corporation with another corporation, or the sale of all orsubstantially all of its assets to another corporation shall be effected insuch a way (including, without limitation, by way of consolidation or merger)that holders of Common Stock shall be entitled to receive stock, securities orassets with respect to or in exchange for Common Stock, then, as a condition ofsuch reorganization, reclassification, consolidation, merger or sale, lawfuland 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 madewhereby each holder of a share or shares of Series B Preferred Stock shallthereafter have the right to receive, upon the basis and upon the terms andconditions specified herein and in lieu of the shares of Common Stock of theCorporation immediately theretofore receivable upon the conversion of suchshares of Series B Preferred Stock, such shares of stock, securities orassets as may be issuable or payable with respect to or in exchange for anumber of outstanding shares of such Common Stock equal to the number of sharesof such stock immediately theretofore so receivable had such reorganization,reclassification, consolidation, merger or sale not taken place, and in anysuch case appropriate provision shall be made with respect to the rights andinterests of such holder to the end that the provisions hereof (including,without limitation, provisions for adjustment of the Series B ConversionPrice) shall thereafter be applicable, as nearly practicable, in relation toany shares of stock, securities or assets thereafter deliverable upon the exerciseof such conversion rights (including, if necessary to effect the adjustmentscontemplated herein, an immediate adjustment, by reason of such reorganization,reclassification, consolidation, merger or sale, of the Series BConversion Price to the value for the Common Stock reflected by the terms ofsuch reorganization, reclassification, consolidation, merger or sale if thevalue so reflected is less than the Series B Conversion Price in effectimmediately prior to such reorganization, reclassification, consolidation,merger or sale).  In the event of amerger or consolidation of the Corporation as a result of which a greater orlesser number of shares of common stock of the surviving corporation isissuable to holders of Common Stock of the Corporation outstanding immediatelyprior to such merger or consolidation, the Series B Conversion Price ineffect immediately prior to such merger or consolidation shall be adjusted inthe same manner as though there were a subdivision or combination of the outstandingshares of Common Stock of the Corporation. The Corporation will not effect any such consolidation or merger, or anysale of all or substantially all of its assets and properties, unless prior tothe consummation thereof the successor corporation (if other than theCorporation)

 

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

 

4H.  Conversion Upon Qualified IPO.  In the event that, at any time while any ofthe Series B Preferred Stock shall be outstanding, (i) theCorporation shall complete an underwritten public offering underwritten by asecurities firm of nationally recognized standing involving the sale by theCorporation of shares of Common Stock in which the aggregate net proceeds tothe Corporation are at least $20,000,000 (a “Qualified IPO”) and (b) theholders 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 therelated Liquidity Event Notice, to cause all outstanding shares of Series BPreferred Stock to be converted into Common Stock pursuant to this subparagraph4H (and such holders shall not have elected to have their shares of Series BPreferred Stock redeemed by the Corporation pursuant to subparagraph 2B), thenall outstanding shares of Series B Preferred Stock shall, automaticallyand without further action on the part of the holders of the Series BPreferred Stock, be converted into shares of Common Stock in accordance withthe terms of this paragraph 4 with the same effect as if the certificatesevidencing such shares had been surrendered for conversion, such conversion tobe effective simultaneously with the closing of such public offering, provided,however, that certificates evidencing the shares of Common Stock issuable uponsuch conversion shall not be issued except on surrender of the certificates forthe shares of the Series B Preferred Stock so converted.

 

4I.  Notice of Adjustment.  Upon any adjustment of the Series BConversion Price, then and in each such case the Corporation shall give writtennotice thereof, by first class mail, postage prepaid, addressed to each holderof shares of Series B Preferred Stock at the address of such holder asshown on the books of the Corporation, which notice shall state the Series BConversion Price resulting from such adjustment, setting forth in reasonabledetail the method of calculation and the facts upon which such calculation isbased.

 

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

 

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

 

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

 

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

 

(4)  there shall bea voluntary or involuntary dissolution, liquidation or winding up of theCorporation;

 

then, in any one or moreof said cases, the Corporation shall give, by first class mail, postageprepaid, addressed to each holder of any shares of Series B PreferredStock at the address of such holder as shown on the books of the Corporation, (a) atleast 45 days’ prior written notice of the date on which the books of theCorporation shall close or a record shall be taken for such dividend,distribution or subscription rights or for determining rights to vote inrespect of any such reorganization, reclassification, consolidation, merger,sale, dissolution, liquidation or winding up, and (b) in the case of anysuch reorganization, reclassification, consolidation, merger, sale,dissolution, liquidation or winding up, at least 45 days’ prior written noticeof the date when the same shall take place. Such notice in accordance with the foregoing clause (a) shall alsospecify, in the case of any such dividend, distribution or subscription rights,the date on which the holders of Common Stock shall be entitled thereto, andsuch notice in accordance with the foregoing clause (b) shall also specifythe date on which the holders of Common Stock shall be entitled to exchangetheir Common Stock for securities or other property deliverable upon suchreorganization, 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 andkeep available out of its authorized Common Stock or its treasury shares,solely for the purpose of issue upon the conversion of the Series BPreferred Stock as herein provided, such number of shares of Common Stock asmay then be issuable upon the conversion of all outstanding shares of Series BPreferred Stock.  The Corporationcovenants that all shares of Common Stock which shall be so issued shall beduly and validly issued and fully paid and nonassessable and free from alltaxes, liens and charges with respect to the issue thereof and, withoutlimiting the generality of the foregoing, the Corporation covenants that itwill from time to time take all such action as may be requisite to assure thatthe par value per share of the Common Stock is at all times equal to or lessthan the effective Series B Conversion Price.  The Corporation will take all such action asmay be necessary to assure that all such shares of Common Stock may be soissued without violation of any applicable law or regulation, or of

 

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any requirements of anynational securities exchange upon which the Common Stock of the Corporation maybe listed.  The Corporation will not takeany action which results in any adjustment of the Series B ConversionPrice f the total number of shares of Common Stock issued and issuable aftersuch action upon conversion of the Series B Preferred Stock would exceedthe total number of shares of Common Stock then authorized by the Corporation’sCertificate of Incorporation.

 

4L.  No Reissuance of Series B PreferredStock.  Shares of Series B PreferredStock which are converted into shares of Common Stock as provided herein shallnot be reissued.

 

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

 

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

 

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

 

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

 

6.   Restrictions.  At any time when shares of Preferred Stockare outstanding, except where the vote or written consent of the holders of agreater number of shares of Preferred Stock of the Corporation is required bylaw or the Certificate of Incorporation of the Corporation, and in addition toany other vote required by law, without the prior consent of the holders of atleast 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 forthat purpose, at which meeting the holders of the shares of such PreferredStock shall vote together as a class:

 

(1)  the Corporationwill not (i) create or authorize the creation of any additional class orseries of shares unless the same ranks junior to the Preferred Stock as to thepayment of dividends, redemption rights and the distribution of assets upon theliquidation, dissolution or winding up of the Corporation, (ii) increasethe authorized amount of the Preferred Stock or the authorized amount of anyadditional class or series of shares unless the same ranks junior to thePreferred Stock as to the payment of dividends, redemption rights and thedistribution of assets upon the liquidation, dissolution or winding up of theCorporation, (iii) create or authorize any obligation or security convertibleinto shares of Preferred Stock or into shares of any other class or seriesunless the same ranks junior to the Preferred Stock as to the payment ofdividends, redemption rights and the distribution of assets upon theliquidation, dissolution or winding up of the Corporation, whether any suchcreation or authorization or increase shall be by means of amendment of theCertificate of Incorporation, by a Certificate of Designations, or by merger,consolidation or otherwise, (iv) modify or amend any right, preference orterm of the Preferred Stock or (v) create or authorize any debt obligationor security of the Corporation convertible into (or which is issued or sold asa unit with a warrant or other right to subscribe for) any equity security ofthe Corporation (including, without limitation, Common Stock or equitysecurities junior to the Preferred Stock);

 

(2)  the Corporationwill not amend, alter or repeal the Corporation’s Certificate of Incorporationor By-laws in any manner, or file any directors’ resolutions pursuant to theGeneral Corporation Law of the State of Delaware containing any provision, ineither case, which adversely affects the respective preferences,qualifications, special or relative rights or privileges of the Preferred Stockor which in any manner adversely affects the Preferred Stock or the holdersthereof;

 

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

 

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

 

IN WITNESS WHEREOF, thisCertificate of Designations has been executed by the Corporation as of this31st day of March, 2004.

 
|   | BANCTEC, INC.                               |
|--------|---------------------------------------------|
|   |                                        |
|   | By                                          |
|   | / s /    Brian R. Stone |   |
|   | Brian R. Stone                              |
|   | Secretary                                   |

 

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