INTEGRITY MUTUAL FUNDS, INC.
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED SHARES
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of Integrity Mutual Funds, Inc., a North
Dakota corporation (hereinafter called the "COMPANY"):
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors (hereinafter called the "BOARD OF DIRECTORS" or the "BOARD") of
the Company in accordance with the provisions of the Amended and Restated
Articles of Incorporation (the "CHARTER") of the Company, the Board of
Directors hereby creates a series of Preferred Shares, par value $0.0001 per
share (the "PREFERRED SHARES") of the Company and hereby states the
designation and number of shares, and fixes the relative rights, preferences
and limitations thereof as follows:
1. NAME AND DESIGNATION.
The distinctive name and serial designation of this series of Preferred
Shares is "Series A Convertible Preferred Shares" (the "SERIES A PREFERRED
SHARES").
2. NUMBER OF SHARES.
The Series A Preferred Shares shall consist of five million (5,000,000)
shares. The number of shares constituting such series may, unless prohibited
by the Articles of Incorporation or by applicable law of the State of North
Dakota, be increased or decreased from time to time by a resolution or
resolutions of the Board of Directors, provided, that no decrease shall
reduced the number of Series A Preferred Shares to a number less than the
number of shares then outstanding plus the number of shares issuable upon the
exercise of outstanding options, rights, or warrants, or upon the conversion
of any outstanding securities issued by the Company convertible into Series A
Preferred Shares. Series A Preferred Shares repurchased or redeemed by the
Company or surrendered for conversion shall be canceled and shall revert to
authorized but unissued shares of Preferred Shares, undesignated as to series,
subject to reissuance by the Company as shares of Preferred Shares of any one
or more series other than the Series A Preferred Shares.
3. DIVIDENDS.
(a) The holders of the Series A Preferred Shares shall be entitled to
receive out of any assets legally available therefor, cumulative dividends at
the rate of 6.0% per year (of the initial issue price of .50 per share), based
upon a 360 day year (twelve 30 day months), accrued monthly and payable
quarterly on the fifteenth day of the second month following the end of each
calendar quarter (Quarters ending March 30, June 30, September 30 and December
31) of each year in preference and priority to any payment of any dividend on
the common shares. Such dividends shall accrue on any given share from the day
of original issuance of such share and shall accrue from month to month
whether or not earned or declared. Dividends will be due and payable only if
and when declared by the Board of Directors. If at any time dividends on the
outstanding Series A Preferred Shares at the rate set forth above shall not
have been paid or declared and set apart for payment with respect to all
preceding periods, the amount of the deficiency shall be fully paid or declared
and set apart for payment, but without interest, before any distribution,
whether by way of dividend or otherwise, shall be declared or paid upon or set
apart for the common shares of the Company.
(b) Any dividend payable on a dividend payment date shall be paid in cash
and in United States dollars if the Company has sufficient profitability and
cash flow to pay a cash dividend or at the option of the Board of Directors may
be paid in the form of Series A Preferred Shares at an issue price of .50 per
share.
(c) Nothing contained herein shall be deemed to establish or require any
payment or other charges in excess of the maximum permitted by applicable law.
In the event that any payment required to be paid or other charges hereunder
exceed the maximum permitted by such law, any payments in excess of such
maximum shall be credited against amounts owed by the Company, the holder and
thus refunded to the Company.
4. LIQUIDATION PREFERENCE; REDEMPTION.
(a) In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, the holders of the Series A Preferred
Shares shall be entitled to receive, prior and in preference to any
distribution of any assets of the Company to the holders of the common shares,
the amount of $.50 per share plus any and all accrued but unpaid dividends
(the "Liquidation Preference").
(b) A consolidation or merger of the Company with or into any other
corporation or corporations, or a sale of all or substantially all of the
assets of the Company (other than a sale or transfer to a wholly owned
subsidiary of the Company), shall not be deemed a liquidation, dissolution
or winding up within the meaning of this Section 4.
(c) In the event of a change in control of the Company, the Company
shall have the right to redeem any or all of the shares of Series A
Preferred Shares after a sixty day notice upon payment in cash of the
Liquidation Preference to the holders thereof. Holders of the Series A
Preferred Shares shall have the right to convert the Series A Preferred
Shares to common shares at the rate of one share of common shares for each
share of preferred shares during the sixty day period.
(d) For the purposes hereof, a "Change of Control Transaction" means
the occurrence of any of: (i) a replacement of more than one-half of the
members of the Company's Board of Directors which is not approved by a
majority of those individuals who are members of the Board of Directors on
the date hereof (or by those individuals who are serving as members of the
Board of Directors on any date whose nomination to the Board of Directors
was approved by a majority of the members of the Board of Directors who are
members on the date hereof), (ii) the merger of the Company with or into
another entity that is not wholly owned by the Company, consolidation or
sale of all or substantially all of the assets of the Company in one or a
series of related transactions, or (iii) the execution by the Company of an
agreement to which the Company is a party or by which it is bound, providing
for any of the events set forth above in (i) or (ii).
(e) At any time after five years from issuance, the Company shall have
the right to redeem any or all of the shares of Series A Preferred Shares
after a sixty day notice upon payment in cash of the Liquidation Preference
to the holders thereof. Holders of the Series A Preferred Shares shall have
the right to convert the Series A Preferred Shares to common shares at the
rate of one share of common shares for each share of preferred shares during
the sixty day period.
5. CONVERSION TO COMMON SHARES.
(a) Series A Preferred Shares shall be convertible to the Company's
..0001 par value common shares at the rate of one share of .0001 par value
common shares for each share of Series A Preferred Shares at any time after
issuance at the option of the Holder.
(b) The Company has the option to require the Holders of all or any
part of the Series A Preferred Shares to convert to the Company's .0001 par
value common shares at the rate of one share of .0001 par value common shares
for each share of Series A Preferred Shares at any time after one year from
issuance, provided that the closing bid price of the Company's .0001 par
value common shares shall have been $1.00 or greater for the 60 days prior to
the Company's exercising of its option to require conversion of the Series A
Preferred Shares to the Company's .0001 par value common shares.
6. VOTING RIGHTS.
In the event, and only in the event, that a declared dividend is in arrears
for more than 60 days from the date of scheduled payment, the Series A
Preferred Shares shall have the right to vote together with the holders of
the Company's common shares, on a one vote per share basis (and not as a
separate class), on all matters presented to the holders of the common shares.
7. ATTORNEYS' FEES.
Any holder of Series A Preferred Shares shall be entitled to recover from
the Company the reasonable attorneys' fees and expenses incurred by such holder
in connection with enforcement by such holder of any obligation of the Company
hereunder.
8. ADDITIONAL RESTRICTIONS.
For as long as any shares of the Series A Preferred Shares are outstanding,
the Company will not amend the terms of the Series A Preferred Shares without
the consent of the holders of the Series A Preferred Shares.
9. REACQUIRED SHARES.
Any Series A Preferred Shares purchased or otherwise acquired by the Company
in any manner whatsoever shall constitute authorized but unissued Preferred
Shares and may be reissued as part of the new series of the Preferred Shares by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein, in the Articles of
Incorporation, or in any other Certificate of Designation, Preferences, and
Rights creating a series of Preferred Shares or as otherwise required by law.
10. CONSOLIDATION, MERGER, EXCHANGE, ETC.
In case the Company shall enter into any consolidation, merger, combination,
statutory share exchange, or other transaction in which the common shares is
exchanged for or changed into other shares or securities, money, and/or any
other property, then in any such case the Series A Preferred Shares shall at
the same time be similarly exchanged or changed into an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to one
times the aggregate amount of shares, securities, money, and/or any other
property (payable in kind), as the case may be, into which or for which each
share of common shares is changed or exchanged. In the event the Company shall
at any time after the consummation of the transactions contemplated by the
Transaction Agreement, declare or pay any dividend on common shares
payable in common shares, or effect a subdivision or combination or
consolidation of the outstanding common shares (by reclassification or
otherwise) into a greater or lesser number of shares of common shares, then
in each such case the amount set forth in the preceding sentence with respect
to the exchange or change of Series A Preferred Shares shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number
of shares of common shares outstanding immediately after such event, and the
denominator of which is the number of shares of common shares that were
outstanding immediately prior to such event.
11. RANK.
The Series A Preferred Shares shall rank junior in terms of dividend and
liquidation, dissolution, and winding up rights to all other series of the
Company's Preferred Shares hereafter issued that specifically provide that
they shall rank senior to the Series A Preferred Shares.
12. FRACTIONAL SHARES.
Series A Preferred Shares may be issued in fractions of a share that shall
entitle the holder, in proportion to such holder's fractional shares, to
receive dividends, participate in distributions, and to have the benefit of
all other rights of holders of Series A Preferred Shares.
13. NO ADVERSE ACTIONS.
The Company shall not in any manner, whether by amendment of the Certificate
of Incorporation (including, without limitation, any Certificate of
Designation), merger, reorganization, re-capitalization, consolidation, sales
of assets, sale of shares, tender offer, dissolution or otherwise, take any
action, or permit any action to be taken, solely or primarily for the purpose
of increasing the value of any class of shares of the Company if the effect of
such action is to reduce the value or security of the Series A Preferred
Shares.
* * * * *
IN WITNESS WHEREOF, Integrity Mutual Funds, Inc. has caused this certificate to
be signed by Robert Walstad, its Chief Executive Officer, and attested to by
Jackie Pickens Case, its Corporate Secretary, effective as of the 19 day of
December, 2003.
INTEGRITY MUTUAL FUNDS, INC.
By: /s/ Robert Walstad, Chief Executive Officer
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Robert Walstad, Chief Executive Officer
Attested:
/s/ Jackie Pickens Case
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Jackie Pickens Case, Corporate Secretary