EXHIBIT 3.4
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.239 on June 30, 1999:
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 A 9%
Convertible Preferred Stock;" and
WHEREAS, the terms, conditions, voting rights, preferences, limitations
and special rights of the Series A 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 A 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 A 9%
Convertible Preferred Stock " (the "Series A Shares") and the number of shares
initially constituting such series shall be 13,125 which may be issued in whole
or fractional shares.
Section 2. Dividends and Distributions.
(a) The holders of Series A 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 A Shares cannot legally be paid in
full, dividends shall be paid, to the maximum permissible extent, to the holders
of the Series A Shares, PARRI PASSU. The dividends on the Series A 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, 1999, 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 A
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 A 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 Dividend
Date to pay dividends in cash, the dividends shall be payable in 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 A 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 A 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 A Payment-in-Kind shall be
equal in amount to that number of shares of Common Stock obtained by dividing
the aggregate cash dividends payable with respect to the Series A Shares on any
such Dividend Date by the "Conversion Price" (as defined below) in effect on the
Dividend Date rounded to the closest whole share of Common Stock. Certificates
representing the shares of Common Stock issuable in payment of any Series A
Payment-in-Kind shall be delivered to each holder entitled to receive such
Series A Payment-in-Kind (in appropriate denominations) on the Dividend Date. If
a Series A 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 A Shares shall not be entitled to receive any
dividends or other distributions except as provided in this Certificate of
Designation of Series A Shares.
Section 3. Voting Rights.
Except as provided by applicable law, the holders of the Series A
Shares shall have no voting rights.
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
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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 engage in a
merger, plan of reorganization or consolidation in which the Company is not the
surviving entity, 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 A 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 A 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 A Shares. For the purposes hereof, the term "Liquidation Preference"
shall mean $100 per share with respect to each of the Series A 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 Section 5(a)(ii) below, commencing upon issuance, each
Series A 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 A 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) the "Initial Conversion Price" (as defined below) 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 Conversion Date (as defined below)) on the Series A Shares being converted
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 the
OTC Electronic Bulletin Board; 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 per share as reported on
the OTC Electronic Bulletin Board for such day shall be utilized in such
calculation and provided further, if there is no sale 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 closing 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 in the Wall Street Journal. The "Initial Conversion Price"
of the Series A Shares shall be equal to 110% of the closing bid price of the
Common Stock as reported on the OTC Electronic Bulletin Board on the trading day
prior to the "Series A Initial Issuance Date" (as defined below). The conversion
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date (the "Conversion Date") shall be any date on which a notice of conversion
executed by Holder setting forth the number of Series A Shares being converted
is received via facsimile or hard copy by the Corporation at its principal
executive offices.
(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 A Shares be
entitled to convert Series A Shares, or shall the Company have the obligation to
issue shares upon such conversion or make a Series A Payment-in-Kind, to the
extent that, after such conversion or payment 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 A 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 A
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 9.99% 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 A Original Issue Date (as defined below), other
than shares of Common Stock issued or issuable:
(i) upon conversion of Series A Shares;
(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;
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(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 A Original Issue
Date (as defined below) and which was disclosed in the Company's filings with
the Securities and Exchange Commission; or
(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).
(D) "Series A Original Issue Date" shall mean the date on which
the first Series A 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 A 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:
(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,
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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 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 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:
(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.
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(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 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 A 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 A
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 A Share would otherwise be entitled upon conversion, the
Company shall pay cash equal to such
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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 A
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 A 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 A 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 A 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
A Shares, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to 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 A 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 A 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
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(or describing the new stock, securities, cash or other property) into which
each Series A 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 A Shares may be redeemed upon
payment in cash or other immediately available funds of $100 per Series A Share,
plus accrued and unpaid dividends thereon through the "Redemption Date" (as
defined below) (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 A
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 defined below); and (ii) the shares of
Common Stock issuable upon conversion of the Series A 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 A Shares it shall redeem such shares pro rata among all
holders of the Series A Shares.
(b) Any notice of redemption ("Redemption Notice") given by the Company
with respect to the Series A 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 A 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 A Shares then outstanding shall be redeemed and the
place at which payment may be obtained. The Redemption Notice shall call upon
each holder of Series A 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 A Shares to be redeemed or (ii) convert the Series A
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 A
Shares shall then have the absolute right to convert such Series A Shares into
Common Stock in accordance with the provisions of Section 5.
(c) On the Redemption Date, the Company shall pay by cash or wire
transfer of immediately available funds to an escrow agent (the "Escrow Agent")
an amount equal to the aggregate Redemption Price for all Series A Shares
subject to such redemption. the Escrow Agent shall distribute to each person
whose name appears on the certificate or certificates of the Series A Shares
that (i) shall not have been converted pursuant to Section 5 hereof and (ii)
shall have been surrendered to the Escrow Agent in the manner and at the place
designated in the Redemption Notice, the Redemption Price, and thereupon each
surrendered certificate shall be canceled.
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(d) From and after the Redemption Date, unless there shall have been a
default in payment of the Redemption Price, all rights of the holders of the
Series A Shares subject to the Redemption Notice (except the right to receive
the Redemption Price 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 A 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 Corporation 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.
Section 9. Filing.
This Certificate of Designation shall be filed with the Secretary of
State of the State of Minnesota in accordance with the Minnesota Business
Corporation Act.
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.
/s/ Barry M. Wendt
------------------------------------------
Barry M. Wendt, Chief Executive Officer
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