EXHIBIT 3.6
CERTIFICATE OF DESIGNATION
The undersigned officer of SAC Technologies, Inc., a Minnesota corporation
(the "Corporation" or "Company") does hereby certify that the following
resolution was adopted by the Board of Directors of the Corporation in
accordance with Minnesota statutes Chapter 302A.327 on November 26, 2001:
WHEREAS, the Articles of Incorporation of the Company presently authorize
the issuance of 5,000,000 shares of Preferred Stock, $.01 par value per share,
in one or more series upon terms and conditions that are to be designated by the
Board of Directors; and
WHEREAS, in order to accommodate a business purpose deemed proper by the
Board of Directors, the Board of Directors does hereby seek to provide for the
designation of a segment of the Company's Preferred Stock as "Series B 9%
Convertible Preferred Stock;" and
WHEREAS, the terms, conditions, voting rights, preferences, limitations and
special rights of the Series B 9% Convertible Preferred Stock in their entirety
are as provided herein.
NOW, THEREFORE, be it:
RESOLVED, that a series of the class of authorized Preferred Stock, $.01
par value per share, of the Company hereinafter designated "Series B 9%
Convertible Preferred Stock," be hereby created, and that the designation and
amount thereof and the voting powers, preferences and relative, participating
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series B 9%
Convertible Preferred Stock" (the "Series B Shares") and the number of shares
initially constituting such series shall be 50,000 which may be issued in whole
or fractional shares.
Section 2. Dividends and Distributions.
(a) The holders of Series B Shares shall be entitled to receive dividends
at a rate of nine percent (9%) per annum of the liquidation preference of $100
per share (the "Liquidation Preference"), which shall be fully cumulative, prior
and in preference to any declaration or payment of any dividend (payable other
than in shares of common stock, $.01 par value per share, of the Company (the
"Common Stock")) or other distribution on the Common Stock of the Company. If
the dividends on the Series B Shares cannot legally be paid in full, dividends
shall be paid, to the maximum permissible extent, to the holders of the Series B
Shares, PARRI PASSU. The dividends on the Series B Shares shall accrue from the
date of issuance of each share and
shall be payable semi-annually on June 15 and December 15 of each year (each a
"Dividend Date") commencing on December 15, 2001, except that if any such date
is a Saturday, Sunday or legal holiday (a "Non-Business Day") then such dividend
shall be payable on the next day that is not a Saturday, Sunday or legal holiday
on which banks in the State of Minnesota are permitted to be closed (a "Business
Day") to holders of record as they appear on the stock books of the Company on
the applicable record date, which shall be not more than 60 nor less than 10
days preceding the payment date for such dividends, as fixed by the Board of
Directors (the "Record Date"). The dividends on the Series B Shares shall be
payable only when, as and if declared by the Board of Directors out of funds
legally available therefor. The dividends shall, at the option of the
Corporation, either (1) be payable in cash; or (2) in shares of Common Stock
(the "Series B Payments-in-Kind") in accordance with Section 2 (b) below. In the
absence of an election by the Board of Directors within 10 days of each date on
which a dividend is declared (each a "Declaration Date") to pay dividends in
cash, the dividends shall be payable in additional shares of Common Stock. The
amount of dividends payable for any period that is shorter or longer than 30
days shall be computed on the basis of a 360-day year of twelve 30-day months.
All accrued but unpaid dividends shall accrue interest after each Dividend Date
at a rate of nine percent (9%) per annum (compounded on a semi-annual basis)
from each Dividend Date, computed on the basis of a 360-day year of twelve
30-day months.
(b) Series B Payments-in-Kind shall be payable as of the Dividend Date of
each period for which the election is made, except that if such date is a
Non-Business Day then such Series B Payment-in-Kind shall be payable as of the
next Business Day to holders of record as they appear on the stock books of the
Company on the applicable Record Date. Each Series B Payment-in-Kind shall be
equal in amount to that number of shares of Common Stock for which the dividend
is paid that is equal in number to the aggregate cash dividends payable with
respect to such Series B Shares on any such Declaration Date divided by the
Conversion Price. Certificates representing the Common Stock issuable in payment
of any Series B Payment-in-Kind shall be delivered to each holder entitled to
receive such Series B Payment-in-Kind (in appropriate denominations) on the
Dividend Date. If a Series B Payment-in-Kind is not made in compliance with the
terms hereof, the Corporation shall be obligated to pay the cash dividends under
the procedures in the previous paragraph.
(c) The holders of Series B Shares shall not be entitled to receive any
dividends or other distributions except as provided in this Certificate of
Designation of Series B Shares.
Section 3. Voting Rights.
Except as provided by applicable law, the holders of the Series B Shares
shall have no voting rights.
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Section 4. Liquidation, Dissolution, Winding Up or Certain Mergers or
Consolidations.
If the Company shall adopt a plan of liquidation or of dissolution, or
commence a voluntary case under the federal bankruptcy laws or any other
applicable state or federal bankruptcy, insolvency or similar law, or consent to
the entry of an order for relief in any involuntary case under such law or to
the appointment of a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Company or of any substantial part of
its property, or make an assignment for the benefit of its creditors, or admit
in writing its inability to pay its debts generally as they become due and on
account of such event the Company shall liquidate, dissolve or wind up, or upon
any other liquidation, dissolution or winding up of the Company, or, unless
approved by the holders of at least 50% of the outstanding Series B Shares,
engage in a merger, plan of reorganization or consolidation in which the entity
is not the surviving Company, then and in that event, no distribution shall be
made to the holders of shares of capital stock, unless, prior thereto, the
holders of the Series B Shares shall have first received an amount in cash or
equivalent value in securities or other consideration equal to the Liquidation
Preference thereof. If upon any liquidation, dissolution, winding up, merger,
plan of reorganization or consolidation, the amount so payable or distributable
does not equal or exceed the Liquidation Preference of the Series B Shares,
then, and in that event, the amount of cash so payable, and amount of securities
or other consideration so distributable, shall be shared ratably among the
holders of the Series B Shares. For the purposes hereof, the term "Liquidation
Preference" shall mean $100 per share with respect to each of the Series B
Shares, plus any and all accrued unpaid dividends thereon.
Section 5. Conversion.
(a) Right To Convert:
(i) Subject to the provisions for adjustment hereinafter set forth and the
limitation of the number of shares of Common Stock issuable upon conversion set
forth in Section 5(a)(ii) below, commencing upon issuance, each Series B Share
shall be convertible in the manner hereinafter set forth into fully paid and
nonassessable shares of Common Stock, at the option of the holder thereof, at
any time at the principal office of the Company or any transfer agent for the
Series B Shares, into the number of fully paid and nonassessable shares of
Common Stock which results from dividing the "Conversion Price" (as defined
below) into the Liquidation Preference. The "Conversion Price" shall be equal to
the lower of (1) $.75 and (2) 78% of the "Market Price" (as defined below) of
the Common Stock as of a "Conversion Date" (as defined below). Upon conversion,
all accrued or declared but unpaid dividends (including any interest accrued
thereon calculated as of the date of conversion) on the Series B Shares shall
either be paid in cash, to the extent permitted by applicable law or, at the
option of the Company in shares of Common Stock. The market price per share of
Common Stock (the "Market Price") shall be the average of the closing bid prices
per share of Common Stock during the five (5) trading days immediately preceding
a "Conversion Date, as such closing bid prices are reported on Bloomberg;
provided, however, if there is no closing bid price reported on any day during
such five (5) day period, in lieu of the closing bid price for such day, the
last sales price as reported on the
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Bloomberg for such day shall be utilized in such calculation and provided
further, if there is no closing bid or last sales price reported for any such
day, the fair market value of a share of Common Stock on such day as determined
in good faith by the Board of Directors of the Company, or in the event the
Common Stock is listed on NASDAQ or a stock exchange, the Market Price shall be
the average of the last bid prices per share of Common Stock during the five (5)
trading days immediately preceding a "Conversion Date" on NASDAQ or such
exchange, as reported by Bloomberg. The conversion date (the "Conversion Date")
shall be any date on which a notice of conversion executed by Holder setting
forth the number of Series B Shares being converted is received via facsimile or
hard copy by the Corporation.
(ii) Notwithstanding anything contained herein to the contrary, in no event
(except while there is outstanding a tender offer for any or all of the shares
of the Company's Common Stock) shall any holder of any Series B Shares be
entitled to convert Series B Shares, or shall the Company have the obligation to
issue shares upon such conversion or in payment of any Series B Payment-in-Kind,
to the extent that, after such conversion the sum of (A) the number of shares of
Common Stock beneficially owned by such holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Series B Shares or unexercised
portion of any warrants or other securities convertible into shares of Common
Stock of the Company beneficially owned by such holder), and (B) the number of
shares of Common Stock issuable upon the conversion of the Series B Shares with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by such holder and its affiliates of more than 4.99% of
the outstanding shares of Common Stock (after taking into account the shares to
be issued to such Holder upon such conversion). For purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (A) of such sentence.
(b) Adjustments to Conversion Price:
(i) The following definitions shall apply for purposes of this
Section:
(A) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(B) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities convertible into or exchangeable for
Common Stock.
(C) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or, pursuant to Section 5(b)(iii), deemed to be issued) by
the Company after the Series B Original Issue Date (as defined below), other
than shares of Common Stock issued or issuable:
(i) upon conversion of Series B Shares;
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(ii) in a transaction described in Section 5(b)(vi);
(iii) pursuant to a stock grant, option plan or purchase
plan, other employee stock incentive program or agreement approved by the Board
of Directors;
(iv) pursuant to the terms of any stock grant, option,
warrant, employment agreement or other written obligation, agreement or
commitment to which the Company was a party as of the Series B Original Issue
Date (as defined below) and which was disclosed in the Company's filings with
the Securities and Exchange Commission;
(v) by way of dividend or other distribution on shares of
Common Stock excluded from the definition of Additional Shares of Common Stock
by the foregoing clauses (i), (ii) (iii) or (iv); or
(vi) after October 1, 2001 to consultants or other persons
providing services to the Company so long as such issuance does not exceed
850,000 shares of Common Stock (or options or warrants to purchase same).
(D) "Series B Original Issue Date" shall mean the date on which
the first Series B Share was issued.
(ii) No Adjustment of Conversion Price: No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional Shares
of Common Stock unless the consideration per share for an Additional Share of
Common Stock issued or deemed to be issued by the Company is issued for
consideration less than the "Effective Conversion Price" in effect on the date
of such issuance. The effective conversion price (the "Effective Conversion
Price") on any date shall be equal to that number obtained by multiplying the
Conversion Price in effect on such date by .67.
(iii) Deemed Issue of Additional Shares of Common Stock:
(A) Options and Convertible Securities: In the event the Company
at any time or from time to time after the Series B Original Issue Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares of Common
Stock issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the exercise of such Options and conversion or
exchange of such Convertible Securities shall be deemed to be Additional Shares
of Common Stock issued as of the time of such issue or, in case such a record
date shall have been fixed, as of the close of business on such record date,
provided that Additional Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined pursuant to Section
5(b)(v) hereof) of such Additional Shares of Common Stock would be less than the
Effective Conversion Price in effect on the date of and immediately prior to
such issue, or such record date, as the case may be, and provided further that
in any such case in which Additional Shares of Common Stock are deemed to be
issued:
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(i) except as provided in Section 5(b)(iii)(A)(ii) hereof,
no further adjustment in the Conversion Price shall be made upon the subsequent
issue of Convertible Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible Securities;
(ii) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any change in the
consideration payable to the Company, or change in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof (other
than under or by reason of provisions designed to protect against dilution), the
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto) and any subsequent adjustments
based thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities; and
(iii) no readjustment pursuant to clause (ii) above shall
have the effect of increasing the Conversion Price to an amount which exceeds
the lower of (1) the Conversion Price on the original adjustment date or (2) the
Conversion Price that would have resulted from any issuance of Additional Shares
of Common Stock between the original adjustment date and such readjustment date.
(iv) Adjustment of Conversion Rate Upon Issuance of Additional Shares
of Common Stock: In the event the Company shall issue Additional Shares of
Common Stock without consideration or for a consideration per share less than
the Effective Conversion Price in effect on the date of and immediately prior to
such issue, then and in each such event the Conversion Price shall be reduced to
a price (calculated to the nearest cent) determined by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue (calculated
on a fully-diluted basis assuming the exercise or conversion of all then
exercisable or convertible options, warrants, purchase rights and other
convertible securities) plus the number of shares of Common Stock which the
aggregate consideration received by the Company for the total number of
Additional Shares of Common Stock so issued would purchase at the Effective
Conversion Price; and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue (calculated on a
fully-diluted basis assuming the exercise or conversion of all then exercisable
or convertible options, warrants, purchase rights and other convertible
securities) plus the number of such Additional Shares of Common Stock so issued.
(v) Determination of Consideration. For purposes of this Section, the
consideration received by the Company for the issuance of any Additional Shares
of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
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(i) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company;
(ii) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, as determined by
the Board of Directors in the good faith exercise of its reasonable business
judgment; and
(iii) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the Company
for consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (i) and (ii) above, as determined by
the Board of Directors in the good faith exercise of its reasonable business
judgment.
(B) Options and Convertible Securities. The consideration per share
received by the Company for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 5(b)(iii)(A), relating to Options and
Convertible Securities, shall be determined by dividing
(i) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(ii) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) Other Adjustments.
(A) Subdivisions, Combinations, or Consolidations of Common
Stock: In the event the outstanding shares of Common Stock shall be subdivided,
combined or consolidated, by stock split, stock dividend, combination or like
event, into a greater or lesser number of shares of Common Stock, the Conversion
Price in effect immediately prior to such subdivision, combination,
consolidation or stock dividend shall, concurrently with the effectiveness of
such subdivision, combination or consolidation, be proportionately adjusted.
(B) Reclassifications: In the case, at any time after the date
hereof, of any capital reorganization or any reclassification of the stock of
the Company (other than as a result of a stock dividend or subdivision, split-up
or combination of shares), or the consolidation or merger of the Company with or
into another person (other than a consolidation or merger (i) in
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which the Company is the continuing entity and which does not result in any
change in the Common Stock or (ii) which is treated as a liquidation pursuant to
Section 4 hereof), the Series B Shares shall, after such reorganization,
reclassification, consolidation or merger be convertible into the kind and
number of shares of stock or other securities or property of the Company or
otherwise to which such holder would have been entitled if immediately prior to
such reorganization, reclassification, consolidation or merger such holder had
converted its Series B Shares into Common Stock. The provisions of this Section
5(b)(vi) shall similarly apply to successive reorganizations, reclassifications,
consolidations or mergers.
(c) Fractional Shares. In lieu of any fractional shares to which the holder
of a Series B Share would otherwise be entitled upon conversion, the Company
shall pay cash equal to such fraction multiplied by the fair market value of one
share of Common Stock as determined by the Board of Directors in the good faith
exercise of its reasonable business judgment.
(d) Miscellaneous:
(i) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one hundredth (1/100) of a share, as the case may be.
(ii) The holders of at least 50% of the outstanding Series B Shares
shall have the right to challenge any determination by the Board of Directors of
fair market value pursuant to this Section 5, in which case such determination
of fair market value shall be made by an independent appraiser selected jointly
by the Board of Directors and the challenging parties, the cost of such
appraisal to be borne equally by the Company and the challenging parties.
(iii) No adjustment in the Conversion Price need be made if such
adjustment would result in a change in such Conversion Price of less than $0.01.
Any adjustment of less than $0.01 which is not made shall be carried forward and
shall be made at the time of and together with any subsequent adjustment which,
on a cumulative basis, amounts to an adjustment of $0.01 or more in the
Conversion Rate.
(e) No Impairment. The Company will not, through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 5 and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series B Shares against impairment.
(f) Reservation of Stock Issuable Upon Conversion. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the Series B
Shares, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series B Shares. If at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding Series B Shares,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to
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increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
Section 6. Reports as to Adjustments.
Whenever the Conversion Price or the type of securities, cash or other
property into which the Series B Shares may be converted is adjusted as provided
in Section 5 hereof, the Company shall promptly mail to the holders of record of
the outstanding Series B Shares at their respective addresses as the same shall
appear in the Company's stock records, a notice stating that the Conversion
Price has been adjusted and setting forth the new number of shares of Common
Stock (or describing the new stock, securities, cash or other property) into
which each Series B Share is convertible as a result of such adjustment, a brief
statement of the facts requiring such adjustment and the computation thereof and
when such adjustment became effective.
Section 7. Redemption.
(a) All or any portion of the Series B Shares may be redeemed upon payment
of $100 per Series B Share, plus accrued and unpaid dividends thereon (the
"Redemption Price"), at any time by the Company at its sole discretion upon
thirty (30) days' written notice to the holders of the Series B Shares provided
that: (i) the Company's shares of Common Stock shall be eligible for quotation
and trading on the OTC Electronic Bulletin Board, on a national securities
exchange, the NASDAQ National Market System or the NASDAQ SmallCap Market on the
"Redemption Date" (as hereinafter defined); and (ii) the shares of Common Stock
issuable upon conversion of the Series B Shares shall be subject to an effective
registration statement permitting their resale under the Securities Act of 1933,
as amended. In the event that the Company redeems less than all of the
outstanding Series B Shares it shall redeem such shares pro rata among all
holders of the Series B Shares.
(b) Any notice of redemption ("Redemption Notice") given by the Company
with respect to the Series B Shares shall be delivered by mail, first class
postage prepaid, to each holder of record (at the close of business on the
business day preceding the day on which notice is given) of the Series B Shares,
at the address last shown on the records of the Company for such holder or given
by the holder to the Company, for the purpose of notifying such holder of the
redemption to be effected. The Redemption Notice shall specify a date (the
"Redemption Date") not earlier than 30 days after the mailing of the Redemption
Notice on which the Series B Shares then outstanding shall be redeemed and the
place at which payment may be obtained, which shall be the principal offices of
the Company. The Redemption Notice shall call upon each holder of Series B
Shares to either (i) surrender to the Company, in the manner and at the place
designated, such holder's certificate or certificates representing the Series B
Shares to be redeemed or (ii) convert the Series B Shares into Common Stock
prior to the Redemption Date in accordance with the provisions of Section 5
above. If the Company elects to redeem shares pursuant to this Section 7 and
defaults or fails to perform its redemption obligations pursuant to this Section
7 in connection therewith, the holders of the Series B Shares shall then have
the
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absolute right to convert such Series B Shares into Common Stock in accordance
with the provisions of Section 5.
(d) On the Redemption Date, the Company shall pay by cash or wire transfer
of immediately available funds to the person whose name appears on the
certificate or certificates of the Series B Shares that (i) shall not have been
converted pursuant to Section 5 hereof and (ii) shall have been surrendered to
the Company in the manner and at the place designated in the Redemption Notice,
the Redemption Value, and thereupon each surrendered certificate shall be
canceled.
(e) If the funds of the Company legally available for redemption of the
Series B Shares are insufficient to redeem the total number of Series B Shares
outstanding on the Redemption Date, the Series B Shares shall be redeemed (on a
pro rata basis from the holders of the Series B Shares, from time to time), to
the extent the Company is legally permitted to do so, and the redemption
obligations of the Company hereunder will be a continuing obligation until the
Company's redemption of all of the Series B Shares.
(f) From and after the Redemption Date, unless there shall have been a
default in payment of the Redemption Value, all rights of the holders of the
Series B Shares (except the right to receive the Redemption Value subsequent to
the Redemption Date upon surrender of their certificate or certificates) shall
cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Company or be deemed to be outstanding for any
purpose whatsoever.
Section 8. Reacquired Shares.
Any Series B Shares converted, purchased or otherwise acquired by the
Company in any manner whatsoever shall be retired and canceled promptly after
the acquisition thereof, and, if necessary to provide for the lawful purchase of
such shares, the capital represented by such shares shall be reduced in
accordance with the Minnesota Business Company Act. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock,
$.01 par value, of the Company and may be reissued as part of another series of
Preferred Stock, $.01 par value, of the Company.
I certify that I am authorized to execute this statement and I further
certify that I understand that by signing this statement, I am subject to the
penalties of perjury as set forth in Section 609.48 as if I had signed this
statement under oath.
SAC TECHNOLOGIES, INC.
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Gary Wendt, Chief Financial Officer
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