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EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
HOTEL DISCOVERY, INC.
The undersigned hereby creates a corporation under Chapter 302A of the
Minnesota Statutes and adopts the following Articles of Incorporation.
ARTICLE 1
NAME
The name of the Corporation is HOTEL DISCOVERY, INC.
ARTICLE 2
REGISTERED OFFICE
The address of the registered office of the Corporation is 3300 Norwest
Center, 90 South Seventh Street, Minneapolis, Minnesota 55402.
ARTICLE 3
CAPITAL
A. The Corporation is authorized to issue one hundred million
(100,000,000) shares of capital stock, having a par value of
one cent ($.01) per share in the case of common stock, and
having a par value as determined by the Board of Directors in
the case of preferred stock, to be held, sold and paid for at
such times and in such manner as the Board of Directors may
from time to time determine in accordance with the laws of the
State of Minnesota.
B. In addition to any and all powers conferred upon the Board of
Directors by the laws of the State of Minnesota, the Board of
Directors shall have the authority to establish by resolution
more than one class or series of shares, either preferred or
common, and to fix the relative rights, restrictions and
preferences of any such different classes or series, and the
authority to issue shares of a class or series to another
class or series to effectuate share dividends, splits or
conversion of the Corporation's outstanding shares.
C. The Board of Directors shall also have the authority to issue
rights to convert any of the Corporation's securities into
shares of stock of any class or classes, the authority to
issue options to purchase or subscribe for shares of stock of
any class or classes, and the authority to issue share
purchase or subscription warrants or any other evidence of
such option rights which set forth the terms, provisions and
conditions thereof, including the price or prices at which
such shares may be
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subscribed for or purchased. Such options, warrants and
rights, may be transferable or nontransferable and separable
or inseparable from other securities of the Corporation. The
Board of Directors is authorized to fix the terms, provisions
and conditions of such options, warrants and rights, including
the conversion basis or bases and the option price or prices
at which shares may be subscribed for or purchased.
ARTICLE 4
SHAREHOLDER RIGHTS
A. No shareholder of the Corporation shall have any preemptive
rights.
B. No shareholder of the Corporation shall have any cumulative
voting rights.
ARTICLE 5
INCORPORATOR
The name and address of the incorporator, who is a natural person of
full age, is:
William M. Mower
3300 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402-4140
ARTICLE 6
WRITTEN ACTION BY LESS THAN ALL OF THE DIRECTORS
Any action required or permitted to be taken at a Board meeting, other
than an action requiring shareholder approval, may be taken by written action of
the Board of Directors if signed by the number of directors that would be
required to take the same action at a meeting at which all directors were
present.
ARTICLE 7
LIMITED LIABILITY OF DIRECTORS
To the fullest extent permitted by law, a director shall have no
personal liability to the Corporation or its shareholders for breach of
fiduciary duty as a director. Any amendment to or repeal of this Article 7 shall
not adversely affect any right or protection of a director of the Corporation
for or with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
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IN WITNESS WHEREOF, I have signed my name this 31st day of July, 1997.
/s/ William M. Mower
--------------------------------------
William M. Mower, Incorporator
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ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
HOTEL DISCOVERY, INC.
The undersigned President of Hotel Discovery, Inc., a Minnesota
corporation (the "Corporation"), hereby certifies that at a meeting of the
shareholders on May 21, 1998, the following resolution to amend its Articles of
Incorporation were adopted by the shareholders of the Corporation in accordance
with the applicable provisions of the Minnesota Business Corporation Act:
1. Article 1 of its Articles of Incorporation is amended to read
in its entirety as follows:
The name of the Corporation is Cafe Odyssey, Inc.
IN WITNESS WHEREOF the undersigned has hereunto set his hand this 22nd
day of May, 1998.
/s/ Ronald K. Fuller
-----------------------------
Ronald K. Fuller
President
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CERTIFICATE OF DESIGNATION
OF
SERIES A 8% CONVERTIBLE PREFERRED STOCK
OF
CAFE ODYSSEY, INC.
--------------------------------------------------
Pursuant to Section 302A.401 of the
Business Corporation Act of the State of Minnesota
--------------------------------------------------
Cafe Odyssey, Inc., a corporation organized and existing under
the Business Corporation Act of the State of Minnesota (the "CORPORATION"),
hereby certifies that the following resolutions were adopted by the Board of
Directors of the Corporation on May 12, 1999 pursuant to authority of the Board
of Directors as required by Section 302A.401, Subdivision 3 of the Business
Corporation Act of the State of Minnesota:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (the "BOARD OF DIRECTORS" or the
"BOARD") in accordance with the provisions of its Article of Incorporation, the
Board of Directors hereby authorizes a series of the Corporation's preferred
stock (the "PREFERRED STOCK"), and hereby states the designation and number of
shares, and fixes the relative rights, preferences, privileges, powers and
restrictions thereof as follows:
Series A 8% Convertible Preferred Stock:
ARTICLE 1
DEFINITIONS
The terms defined in this Article whenever used in this
Certificate of Designation have the following respective meanings:
(a) "ADDITIONAL CAPITAL SHARES" has the meaning set forth in
Section 6.1(c).
(b) "AFFILIATE" has the meaning ascribed to such term in Rule
12b-2 under the Securities Exchange Act of 1934, as amended.
(c) "BUSINESS DAY" means a day other than Saturday, Sunday or
any day on which banks located in the State of New York are authorized or
obligated to close.
(d) "CAPITAL SHARES" means the Common Shares and any other
shares of any other class or series of common stock, whether now or hereafter
authorized and however designated, which have the right to participate in the
distribution of earnings and assets (upon dissolution, liquidation or
winding-up) of the Corporation.
(e) "CLOSING DATE" means May 14, 1999.
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(f) "COMMON SHARES" or "COMMON STOCK" means shares of common
stock, par value $0.01 per share, of the Corporation.
(g) "COMMON STOCK ISSUED AT CONVERSION" when used with
reference to the securities issuable upon conversion of the Series A Preferred
Stock, means all Common Shares now or hereafter Outstanding and securities of
any other class or series into which the Series A Preferred Stock hereafter
shall have been changed or substituted, whether now or hereafter created and
however designated.
(h) "CONVERSION DATE" means any day on which all or any
portion of shares of the Series A Preferred Stock is converted in accordance
with the provisions hereof.
(i) "CONVERSION NOTICE" has the meaning set forth in Section
6.2.
(j) "CONVERSION PRICE" means on any date of determination the
applicable price for the conversion of shares of Series A Preferred Stock into
Common Shares on such day as set forth in Section 6.1.
(k) "CONVERSION RATIO" means on any date of determination the
applicable percentage of the Market Price for conversion of shares of Series A
Preferred Stock into Common Shares on such day as set forth in Section 6.1.
(l) "CORPORATION" means Cafe Odyssey, Inc., a Minnesota
corporation, and any successor or resulting corporation by way of merger,
consolidation, sale or exchange of all or substantially all of the Corporation's
assets, or otherwise.
(m) "CURRENT MARKET PRICE" means on any date of determination
the closing bid price of a Common Share on such day as reported on the Nasdaq
SmallCap Market ("NASDAQ"); provided, if such security bid is not listed or
admitted to trading on the Nasdaq, as reported on the principal national
security exchange or quotation system on which such security is quoted or listed
or admitted to trading, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the closing bid price of
such security on the over-the-counter market on the day in question as reported
by Bloomberg LP, or a similar generally accepted reporting service, as the case
may be.
(n) "HOLDER" means The Shaar Fund Ltd., any successor thereto,
or any Person or Persons to whom the Series A Preferred Stock is subsequently
transferred in accordance with the provisions hereof.
(o) "MARKET DISRUPTION EVENT" means any event that results in
a material suspension or limitation of trading of the Common Shares on Nasdaq.
(p) "MARKET PRICE" per Common Share means the arithmetic mean
of the closing bid prices of the Common Shares as reported on Nasdaq for five
Trading Days during any Valuation Period; provided, if such security bid is not
listed or admitted to trading on the Nasdaq, as reported on the principal
national security exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the closing bid
price of such
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security on the over-the-counter market on the day in question as reported by
Bloomberg LP, or a similar generally accepted reporting service, as the case may
be, for five Trading Days during any Valuation Period.
(q) "OUTSTANDING" when used with reference to Common Shares or
Capital Shares (collectively, "SHARES"), means, on any date of determination,
all issued and outstanding Shares, and includes all such Shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in such Shares; provided, however, that any such Shares directly or
indirectly owned or held by or for the account of the Corporation or any
Subsidiary of the Corporation shall not be deemed "OUTSTANDING" for purposes
hereof.
(r) "PERSON" means an individual, a corporation, a
partnership, an association, a limited liability company, an unincorporated
business organization, a trust or other entity or organization, and any
government or political subdivision or any agency or instrumentality thereof.
(s) "PROPOSED TRANSACTION" means the Corporation's proposed
acquisition of Popmail.com, Inc. and transactions directly related thereto.
(t) "REGISTRATION RIGHTS AGREEMENT" means that certain
Registration Rights Agreement dated a date even herewith between the Corporation
and The Shaar Fund Ltd.
(u) "RESTAURANT DIVESTITURE" means any divestiture, sale,
transfer, conveyance or spinoff of all or substantially all of the Corporation's
assets constituting its restaurants.
(v) "SEC" means the United States Securities and Exchange
Commission.
(w) "SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder, all as in effect
at the time.
(x) "SECURITIES PURCHASE AGREEMENT" means that certain
Securities Purchase Agreement dated a date even herewith between the Corporation
and The Shaar Fund Ltd.
(y) "SERIES A PREFERRED SHARES" or "SERIES A PREFERRED STOCK"
means the shares of Series A 8% Convertible Preferred Stock of the Corporation
or such other convertible Preferred Stock exchanged therefor.
(z) "STATED VALUE" has the meaning set forth in Article 2.
(aa) "SUBSIDIARY" means any entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly by the Corporation.
(bb) "TRADING DAY" means any day on which purchases and sales
of securities authorized for quotation on Nasdaq are reported thereon and on
which no Market Disruption Event has occurred.
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(cc) "VALUATION EVENT" has the meaning set forth in Section
6.1.
(dd) "VALUATION PERIOD" means the five Trading Day period
immediately preceding the Conversion Date.
All references to "CASH" or "$" herein means currency of the
United States of America.
ARTICLE 2
DESIGNATION AND AMOUNT
The designation of this series, which consists of 2,000 shares
of Preferred Stock, is Series A 8% Convertible Preferred Stock (the "SERIES A
PREFERRED STOCK"), with a par value of $0.01 per share, and the stated value
shall be $1,000 per share (the "STATED VALUE").
ARTICLE 3
RANK
The Series A Preferred Stock shall rank (i) prior to the
Common Stock; (ii) prior to any class or series of capital stock of the
Corporation hereafter created other than "PARI PASSU SECURITIES" (collectively,
with the Common Stock, "JUNIOR SECURITIES"); and (iii) pari passu with any class
or series of capital stock of the Corporation hereafter created specifically
ranking on parity with the Series A Preferred Stock ("PARI PASSU SECURITIES").
ARTICLE 4
DIVIDENDS
(a) (i) The Holder shall be entitled to receive, when, as and
if declared by the Board of Directors, out of funds legally available
for the payment of dividends, dividends (subject to Article 4(a)(ii)
hereof) at the rate of 8% per annum (computed on the basis of a 360-day
year) (the "DIVIDEND RATE") on the Liquidation Value (as defined below)
of each share of Series A Preferred Stock on and as of the most recent
Dividend Payment Due Date (as defined below) with respect to each
Dividend Period (as defined below). Dividends on the Series A Preferred
Stock shall be cumulative from the date of issue, whether or not
declared for any reason, including if such declaration is prohibited
under any outstanding indebtedness or borrowings of the Corporation or
any of its Subsidiaries, or any other contractual provision binding on
the Corporation or any of its Subsidiaries, and whether or not there
shall be funds legally available for the payment thereof.
(ii) Each dividend shall be payable in equal quarterly
amounts on each March 31, June 30, September 30 and December 31 of each
year (each, a "DIVIDEND PAYMENT DUE DATE"), commencing June 30, 1999,
to the holders of record of shares of the Series A Preferred Stock, as
they appear on the stock records of the Corporation at the close of
business on any record date, not more than 60 days or less than 10 days
preceding the payment dates thereof, as shall be fixed by the Board of
Directors. For the
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purposes hereof, "DIVIDEND PERIOD" means the quarterly period
commencing on and including the Issue Date (as defined below) or, if a
dividend has previously been paid, the day after the immediately
preceding Dividend Payment Due Date and ending on and including the
immediately subsequent Dividend Payment Due Date. Accrued and unpaid
dividends for any past Dividend Period may be declared and paid at any
time, without reference to any Dividend Payment Due Date, to holders of
record on such date, not more than 15 days preceding the payment date
thereof, as may be fixed by the Board of Directors.
(iii) At the option of the Corporation, the dividend
shall be paid in cash or through the issuance of duly and validly
authorized and issued, fully paid and nonassessable, freely tradeable
shares of the Common Stock valued at the Market Price. The Common Stock
to be issued in lieu of cash payments shall be registered for resale in
the Registration Statement (as defined in the Registration Rights
Agreement) to be filed by the Corporation to register the Common Stock
issuable upon conversion of the shares of Series A Preferred Stock and
exercise of the Warrants as set forth in the Registration Rights
Agreement. Notwithstanding the foregoing, until such Registration
Statement (as defined in the Registration Rights Agreement) has been
declared effective under the Securities Act by the SEC, payment of
dividends on the Series A Preferred Stock shall be in cash.
(b) Except as provided in Section 4(e) hereof, the Holder
shall not be entitled to any dividends in excess of the cumulative dividends, as
herein provided, on the Series A Preferred Stock. Except as provided in this
Article 4, no interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series A Preferred Stock that
may be in arrears.
(c) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on Pari Passu Securities for
any period unless full cumulative dividends required to be paid in cash have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Series A Preferred
Stock for all Dividend Periods terminating on or prior to the date of payment of
the dividend on such class or series of Pari Passu Securities. When dividends
are not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all dividends declared upon shares of the Series A Preferred Stock
and all dividends declared upon any other class or series of Pari Passu
Securities shall be declared ratably in proportion to the respective amounts of
dividends accumulated and unpaid on the Series A Preferred Stock and accumulated
and unpaid on such Pari Passu Securities.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for payment or
other distribution declared or made upon Junior Securities, nor shall any Junior
Securities be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan (including a stock option
plan) of the Corporation or any subsidiary), (all such dividends, distributions,
redemptions or purchases being hereinafter referred to as a "JUNIOR SECURITIES
DISTRIBUTION") for any
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consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation, directly or
indirectly, unless in each case (i) the full cumulative dividends required to be
paid in cash on all outstanding shares of the Series A Preferred Stock and any
other Pari Passu Securities shall have been paid or set apart for payment for
all past Dividend Periods with respect to the Series A Preferred Stock and all
past dividend periods with respect to such Pari Passu Securities, and (ii)
sufficient funds shall have been paid or set apart for the payment of the
dividend for the current Dividend Period with respect to the Series A Preferred
Stock and the current dividend period with respect to such Pari Passu
Securities.
(e) If at any time the Corporation shall declare or pay a
dividend on, or other distribution on, the Common Shares payable in Common
Shares (a "STOCK DIVIDEND"), the Board of Directors shall declare a dividend
(the "SERIES A STOCK DIVIDEND") on the aggregate Series A Preferred Shares then
outstanding of that number of Common Shares equal to the number of Common Shares
the Holder would have received had it converted all its then outstanding Series
A Preferred Shares, and exercised the Warrant in full for all the Common Shares
then underlying the Warrant, immediately prior to the Stock Dividend. The Series
A Stock Dividend shall be payable to the Holder concurrently with the payment of
the Stock Dividend to the holders of Common Shares, and the Common Shares issued
pursuant to the Series A Stock Dividend shall be duly and validly authorized and
issued, fully paid and nonassessable.
ARTICLE 5
LIQUIDATION PREFERENCE
(a) If the Corporation shall commence a voluntary case under
the Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation 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, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of 30 consecutive days and, on account of any such event, the Corporation
shall liquidate, dissolve or wind up, or if the Corporation shall otherwise
liquidate, dissolve or wind up (each such event being considered a "LIQUIDATION
EVENT"), no distribution shall be made to the holders of any shares of capital
stock of the Corporation upon liquidation, dissolution or winding-up unless
prior thereto, the holders of shares of Series A Preferred Stock, subject to
this Article 5, shall have received the Liquidation Preference (as defined in
Article 5(c)) with respect to each share. If upon the occurrence of a
Liquidation Event, the assets and funds available for distribution among the
holders of the Series A Preferred Stock and holders of Pari Passu Securities
shall be insufficient to permit the payment to such holders of the
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preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series A Preferred Stock
and the Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that the Liquidation Preference payable on each such
share bears to the aggregate Liquidation Preference payable on all such shares.
(b) At the option of each Holder, the sale, conveyance of
disposition of all or substantially all of the assets of the Corporation, the
effectuation by the Corporation of a transaction or series of related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, or the consolidation, merger or other business combination of the
Corporation with or into any other Person or Persons when the Corporation is not
the survivor shall either: (i) be deemed to be a liquidation, dissolution or
winding up of the Corporation pursuant to which the Corporation shall be
required to distribute, upon consummation of and as a condition to, such
transaction an amount equal to 120% (100% if the provisions of this Article 5(b)
are triggered by a Restaurant Divestiture) of the Liquidation Preference with
respect to each outstanding share of Series A Preferred Stock in accordance with
and subject to the terms of this Article 5 or (ii) be treated pursuant to
Article 5(c)(iii) hereof; provided, that all holders of Series A Preferred Stock
shall be deemed to elect the option set forth in clause (i) hereof if at least a
majority in interest of such holders elect such option; provided, further, that
the provisions of this Article 5(b) shall not apply to the Proposed Transaction.
(c) For purposes hereof, the "LIQUIDATION PREFERENCE" with
respect to a share of the Series A Preferred Stock shall mean an amount equal to
the sum of (i) the Stated Value thereof, plus (ii) an amount equal to 30% of
such Stated Value, plus (iii) the aggregate of all accrued and unpaid dividends
on such share of Series A Preferred Stock until the most recent Dividend Payment
Due Date; provided that, in the event of an actual liquidation, dissolution or
winding up of the Corporation, the amount referred to in clause (iii) above
shall be calculated by including accrued and unpaid dividends to the actual date
of such liquidation, dissolution or winding up, rather than the Dividend Payment
Due Date referred to above.
ARTICLE 6
CONVERSION OF PREFERRED STOCK SECTION
6.1 CONVERSION; CONVERSION PRICE
At the option of the Holder, the shares of Preferred Stock may
be converted, either in whole or in part, into Common Shares (calculated as to
each such conversion to the nearest 1/100th of a share), at any time, and from
time to time following the date of issuance of the Series A Preferred Stock (the
"ISSUE DATE") at a Conversion Price per share of Common Stock equal to 65% of
the Market Price. At the Corporation's option, the amount of accrued and unpaid
dividends as of the Conversion Date shall not be subject to conversion but
instead may be paid in cash as of the Conversion Date; if the Corporation elects
to convert the amount of accrued and unpaid dividends at the Conversion Date
into Common Stock, the Common Stock issued to the Holder shall be valued at the
applicable Conversion Price.
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The number of shares of Common Stock due upon conversion of
Series A Preferred Stock shall be (i) the number of shares of Series A Preferred
Stock to be converted, multiplied by (ii) the Stated Value and divided by (iii)
the applicable Conversion Price.
Within two Business Days of the occurrence of a Valuation
Event, the Corporation shall send notice (the "VALUATION EVENT NOTICE") of such
occurrence to the Holder. Notwithstanding anything to the contrary contained
herein, if a Valuation Event occurs during any Valuation Period, a new Valuation
Period shall begin on the Trading Day immediately following the occurrence of
such Valuation Event and end on the Conversion Date; provided that, if a
Valuation Event occurs on the fifth day of any Valuation Period, then the
Conversion Price shall be the Current Market Price of the Common Shares on such
day; and provided, further, that the Holder may, in its discretion, postpone
such Conversion Date to a Trading Day which is no more than five Trading Days
after the occurrence of the latest Valuation Event by delivering a notification
to the Corporation within two Business Days of the receipt of the Valuation
Event Notice. In the event that the Holder deems the Valuation Period to be
other than the five Trading Days immediately prior to the Conversion Date, the
Holder shall give written notice of such fact to the Corporation in the related
Conversion Notice at the time of conversion.
For purposes of this Section 6.1, a "VALUATION EVENT" shall
mean an event in which the Corporation at any time during a Valuation Period
takes any of the following actions:
(a) subdivides or combines its Capital Shares;
(b) makes any distribution on its Capital Shares;
(c) issues any additional Capital Shares (the "ADDITIONAL
CAPITAL SHARES"), otherwise than as provided in the foregoing Sections 6.1(a)
and 6.1(b) above, at a price per share less, or for other consideration lower,
than the Current Market Price in effect immediately prior to such issuances, or
without consideration, except for issuances under employee benefit plans
consistent with those presently in effect and issuances under presently
outstanding warrants, options or convertible securities;
(d) issues any warrants, options or other rights to subscribe
for or purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Current Market
Price in effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable or
exercisable for Additional Capital Shares and the consideration per share for
which Additional Capital Shares may at any time thereafter be issuable pursuant
to the terms of such convertible, exchangeable or exercisable securities shall
be less than the Current Market Price in effect immediately prior to such
issuance;
(f) makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a dividend in liquidation
or by way of return of capital or other than as a dividend payable out of
earnings or surplus legally available for the payment of dividends under
applicable law or any distribution to such holders made in respect of the sale
of
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all or substantially all of the Corporation's assets (other than under the
circumstances provided for in the foregoing Sections 6.1(a) through 6.1(e)); or
(g) takes any action affecting the number of Outstanding
Capital Shares, other than an action described in any of the foregoing Sections
6.1(a) through 6.1(f) hereof, inclusive, which in the opinion of the
Corporation's Board of Directors, determined in good faith, would have a
material adverse effect upon the rights of the Holder at the time of a
conversion of the Preferred Stock.
SECTION 6.2 EXERCISE OF CONVERSION PRIVILEGE
(a) Conversion of the Series A Preferred Stock may be
exercised, in whole or in part, by the Holder by telecopying an executed and
completed notice of conversion in the form annexed hereto as Annex I (the
"CONVERSION NOTICE") to the Corporation. Each date on which a Conversion Notice
is telecopied to the Corporation in accordance with the provisions of this
Section 6.2 shall constitute a Conversion Date. The Corporation shall convert
the Preferred Stock and issue the Common Stock Issued at Conversion, and all
voting and other rights associated with the beneficial ownership of the Common
Stock Issued at Conversion shall vest with the Holder, effective as of the
Conversion Date at the time specified in the Conversion Notice. The Conversion
Notice also shall state the name or names (with addresses) of the persons who
are to become the holders of the Common Stock Issued at Conversion in connection
with such conversion. The Holder shall deliver the shares of Series A Preferred
Stock to the Corporation by express courier within 15 days following the date on
which the telecopied Conversion Notice has been transmitted to the Corporation.
Upon surrender for conversion, the Preferred Stock shall be accompanied by a
proper assignment thereof to the Corporation or be endorsed in blank. As
promptly as practicable after the receipt of the Conversion Notice as aforesaid,
but in any event not more than five Business Days after the Corporation's
receipt of such Conversion Notice, the Corporation shall (i) issue the Common
Stock issued at Conversion in accordance with the provisions of this Article 6,
and (ii) cause to be mailed for delivery by overnight courier to the Holder (x)
a certificate or certificate(s) representing the number of Common Shares to
which the Holder is entitled by virtue of such conversion, (y) cash, as provided
in Section 6.3, in respect of any fraction of a Common Share issuable upon such
conversion and (z) cash in the amount of accrued and unpaid dividends as of the
Conversion Date. Such conversion shall be deemed to have been effected at the
time at which the Conversion Notice indicates so long as the Series A Preferred
Stock shall have been surrendered as aforesaid at such time, and at such time
the rights of the Holder of the Series A Preferred Stock, as such, shall cease
and the Person or Persons in whose name or names the Common Stock Issued at
Conversion shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby and all voting and
other rights associated with the beneficial ownership of such Common Shares
shall at such time vest with such Person or Persons. The Conversion Notice shall
constitute a contract between the Holder and the Corporation, whereby the Holder
shall be deemed to subscribe for the number of Common Shares which it will be
entitled to receive upon such conversion and, in payment and satisfaction of
such subscription (and for any cash adjustment to which it is entitled pursuant
to Section 6.4), to surrender the Series A Preferred Stock and to release the
Corporation from all liability thereon. No cash payment aggregating less than
$1.00 shall be required to be given unless specifically requested by the Holder.
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(b) If, at any time (i) the Corporation challenges, disputes
or denies the right of the Holder hereof to effect the conversion of the Series
A Preferred Stock into Common Shares or otherwise dishonors or rejects any
Conversion Notice delivered in accordance with this Section 6.2 or (ii) any
third party who is not and has never been an Affiliate of the Holder commences
any lawsuit or proceeding or otherwise asserts any claim before any court or
public or governmental authority which seeks to challenge, deny, enjoin, limit,
modify, delay or dispute the right of the Holder hereof to effect the conversion
of the Series A Preferred Stock into Common Shares, then the Holder shall have
the right, by written notice to the Corporation, to require the Corporation to
promptly redeem the Series A Preferred Stock for cash at a redemption price
equal to 135% of the Stated Value thereof together with all accrued and unpaid
dividends thereon (the "MANDATORY PURCHASE AMOUNT"). Under any of the
circumstances set forth above, the Corporation shall be responsible for the
payment of all costs and expenses of the Holder, including reasonable legal fees
and expenses, as and when incurred in disputing any such action or pursuing its
rights hereunder (in addition to any other rights of the Holder).
SECTION 6.3 FRACTIONAL SHARES
No fractional Common Shares or scrip representing fractional
Common Shares shall be issued upon conversion of the Series A Preferred Stock.
Instead of any fractional Common Shares which otherwise would be issuable upon
conversion of the Series A Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction.
No cash payment of less than $1.00 shall be required to be given unless
specifically requested by the Holder.
SECTION 6.4 RECLASSIFICATION, CONSOLIDATION, MERGER OR
MANDATORY SHARE EXCHANGE
At any time while the Series A Preferred Stock remains
outstanding and any shares thereof have not been converted, in case of any
reclassification or change of Outstanding Common Shares issuable upon conversion
of the Series A Preferred Stock (other than a change in par value, or from par
value to no par value per share, or from no par value per share to par value or
as a result of a subdivision or combination of outstanding securities issuable
upon conversion of the Series A Preferred Stock) or in case of any
consolidation, merger or mandatory share exchange of the Corporation with or
into another corporation (other than a merger or mandatory share exchange with
another corporation in which the Corporation is a continuing corporation and
which does not result in any reclassification or change, other than a change in
par value, or from par value to no par value per share, or from no par value per
share to par value, or as a result of a subdivision or combination of
Outstanding Common Shares upon conversion of the Series A Preferred Stock), or
in the case of any sale or transfer to another corporation of the property of
the Corporation as an entirety or substantially as an entirety, the Corporation,
or such successor, resulting or purchasing corporation, as the case may be,
shall, without benefit of any additional consideration therefor, execute a new
Preferred Stock providing that the Holder shall have the right to convert such
new Preferred Stock (upon terms and conditions not less favorable to the Holder
than those in effect pursuant to the Series A Preferred Stock) and to receive
upon such exercise, in lieu of each Common Share theretofore issuable upon
conversion of the Series A Preferred Stock, the kind and amount of shares of
stock, other securities, money or property receivable upon such
reclassification, change, consolidation,
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merger, mandatory share exchange, sale or transfer by the holder of one Common
Share issuable upon conversion of the Series A Preferred Stock had the Series A
Preferred Stock been converted immediately prior to such reclassification,
change, consolidation, merger, mandatory share exchange or sale or transfer. The
provisions of this Section 6.4 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, mandatory share exchanges
and sales and transfers.
SECTION 6.5 ADJUSTMENTS TO CONVERSION RATIO
For so long as any shares of the Series A Preferred Stock are
outstanding, if the Corporation: (i) issues and sells pursuant to an exemption
from registration under the Securities Act (A) Common Shares at a purchase price
on the date of issuance thereof that is lower than the Conversion Price, (B)
warrants or options with an exercise price representing a percentage of the
Current Market Price with an exercise price on the date of issuance of the
warrants or options that is lower than the agreed upon exercise price for the
Holder, except for employee stock option agreements or stock incentive
agreements of the Corporation, or (C) convertible, exchangeable or exercisable
securities with a right to exchange at lower than the Current Market Price on
the date of issuance or conversion, as applicable, of such convertible,
exchangeable or exercisable securities, except for stock option agreements or
stock incentive agreements; and (ii) grants the right to the purchaser(s)
thereof to demand that the Corporation register under the Securities Act such
Common Shares issued or the Common Shares for which such warrants or options may
be exercised or such convertible, exchangeable or exercisable securities may be
converted, exchanged or exercised, then the Conversion Ratio shall be reduced to
equal the lowest of any such lower rates.
SECTION 6.6 OPTIONAL REDEMPTION UNDER CERTAIN
CIRCUMSTANCES
At anytime after the date of issuance of the Series A
Preferred Stock until the Mandatory Conversion Date (as defined below), the
Corporation, upon notice delivered to the Holder as provided in Section 6.7, may
redeem, in cash, the Series A Preferred Stock (but only with respect to such
shares as to which the Holder has not theretofore furnished a Conversion Notice
in compliance with Section 6.2), at 135% of the Stated Value thereof (the
"OPTIONAL REDEMPTION PRICE"), together with all accrued and unpaid dividends
thereon to the date of redemption (the "REDEMPTION DATE"). Except as set forth
in this Section 6.6, the Corporation shall not have the right to prepay or
redeem the Series A Preferred Stock.
SECTION 6.7 NOTICE OF REDEMPTION
Notice of redemption pursuant to Section 6.6 shall be provided
by the Corporation to the Holder in writing (by registered mail or overnight
courier at the Holder's last address appearing in the Corporation's security
registry) not less than 10 nor more than 15 days prior to the Redemption Date,
which notice shall specify the Redemption Date and refer to Section 6.6
(including a statement of the Market Price per Common Share) and this Section
6.7.
SECTION 6.8 SURRENDER OF PREFERRED STOCK
Upon any redemption of the Series A Preferred Stock pursuant
to Sections 6.6 or 6.7, the Holder shall either deliver the Series A Preferred
Stock by hand to the Corporation at its
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principal executive offices or surrender the same to the Corporation at such
address by express courier. Payment of the optional Redemption Price specified
in Section 6.6 shall be made by the Corporation to the Holder against receipt of
the Series A Preferred Stock (as provided in this Section 6.8) by wire transfer
of immediately available funds to such account(s) as the Holder shall specify to
the Corporation. If payment of such redemption price is not made in full by the
Mandatory Redemption Date or the Redemption Date, as the case may be, the Holder
shall again have the right to convert the Series A Preferred Stock as provided
in Article 6 hereof.
SECTION 6.9 MANDATORY CONVERSION
On the fifth anniversary of the date of this Agreement (the
"MANDATORY CONVERSION DATE"), the Corporation shall convert all Series A
Preferred Stock outstanding at the Conversion Price.
SECTION 6.10 CERTAIN CONVERSION LIMITATIONS
(a) Notwithstanding anything herein to the contrary, the
Holder shall not have the right, and the Corporation shall not have the
obligation, to convert all or any portion of the Series A Preferred Stock (and
the Corporation shall not have the right to pay dividends on the Series A
Preferred Stock in shares of Common Stock) if and to the extent that the
issuance to the Holder of shares of Common Stock upon such conversion (or
payment of dividends) would result in the Holder being deemed the "beneficial
owner" of more than 5% of the then outstanding shares of Common Stock within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended, and
the rules promulgated thereunder. If any court of competent jurisdiction shall
determine that the foregoing limitation is ineffective to prevent a Holder from
being deemed the beneficial owner of more than 5% of the then outstanding shares
of Common Stock, then the Corporation shall redeem so many of such Holder's
shares (the "REDEMPTION SHARES") of Series A Preferred Stock as are necessary to
cause such Holder to be deemed the beneficial owner of not more than 5% of the
then outstanding shares of Common Stock. Upon such determination by a court of
competent jurisdiction, the Redemption Shares shall immediately and without
further action be deemed returned to the status of authorized but unissued
shares of Series A Preferred Stock, and the Holder shall have no interest in or
rights under such Redemption Shares. Any and all dividends paid on or prior to
the date of such determination shall be deemed dividends paid on the remaining
shares of Series A Preferred Stock held by the Holder. Such redemption shall be
for cash at a redemption price equal to the sum of (i) the Stated Value of the
Redemption Shares and (ii) any accrued and unpaid dividends to the date of such
redemption; provided, however, if the redemption is a result of the mandatory
conversion pursuant to Section 6.9, the Corporation may either (i) make such
redemption in cash at a redemption price equal to the sum of (x) 135% of the
Stated Value of such shares and (y) any accrued and unpaid dividends to the date
of such redemption or (ii) extend the Mandatory Conversion Date for a period of
one year.
(b) Unless the Corporation shall have obtained the approval of
its voting stockholders to such issuance in accordance with the rules of the
Nasdaq or such other stock market with which the Corporation shall be required
to comply, but only to the extent required thereby, the Corporation shall not
issue shares of Common Stock (i) upon conversion of any shares of Series A
Preferred Stock or (ii) as a dividend on the Series A Preferred Stock, if such
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issuance of Common Stock, when added to the number of shares of Common Stock
previously issued by the Corporation (i) upon conversion of shares of the Series
A Preferred Stock, (ii) upon exercise of the Warrants issued pursuant to the
terms of the Securities Purchase Agreement and (iii) in payment of dividends on
the Series A Preferred Stock, would equal or exceed 20% of the number of shares
of the Corporation's Common Stock which were issued and outstanding on the
Closing Date (the "MAXIMUM ISSUANCE AMOUNT"). In the event that a properly
executed Conversion Notice is received by the Corporation which would require
the Corporation to issue shares of Common Stock equal to or in excess of the
Maximum Issuance Amount, the Corporation shall honor such conversion request by
(i) converting the number of shares of Series A Preferred Stock stated in the
Conversion Notice not in excess of the Maximum Issuance Amount and (ii)
redeeming the number of shares of Series A Preferred Stock stated in the
Conversion Notice equal to or in excess of the Maximum Issuance Amount in cash
at a price equal to 125% of the Stated Value of the shares of Series A Preferred
Stock to be so redeemed, together with all accrued and unpaid dividends thereon.
In the event that the Corporation shall elect to pay a dividend in shares of
Common Stock which would require the Corporation to issue shares of Common Stock
equal to or in excess of the Maximum Issuance Amount, the Corporation shall pay
(i) a dividend in shares of Common Stock equal to one less than an amount which
would result in the Corporation issuing shares equal to the Maximum Issuance
Amount and (ii) the balance of the dividend in cash.
ARTICLE 7
VOTING RIGHTS
The holders of the Series A Preferred Stock have no voting
power, except as otherwise provided by the Business Corporation Act of the State
of Minnesota ("MBCA"), in this Article 7, and in Article 8 below.
Notwithstanding the above, the Corporation shall provide each
Holder of Series A Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
Holder, at least 30 days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such action is to be taken for
the purpose of such dividend, distribution, right or other event, and a brief
statement regarding, the amount and character of such dividend, distribution,
right or other event to the extent known at such time.
To the extent that under the MBCA the vote of the Holders of
the Series A Preferred Stock, voting separately as a class or series as
applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the Holders of at least a majority of the
outstanding shares of Series A Preferred Stock represented at a duly held
meeting at which a quorum is present or by written consent of a majority of the
outstanding shares of Series A Preferred Stock (except as otherwise may be
required under the MBCA) shall constitute
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the approval of such action by the class. To the extent that under the MBCA
holders of the Series A Preferred Stock are entitled to vote on a matter with
holders of Common Stock, voting together as one class, each share of Series A
Preferred Stock shall be entitled to a number of votes equal to the number of
shares of Common Stock into which it is then convertible using the record date
for the taking of such vote of shareholders as the date as of which the
Conversion Price is calculated. Holders of the Series A Preferred Stock shall be
entitled to notice of all shareholder meetings or written consents (and copies
of proxy materials and other information sent to shareholders) with respect to
which they would be entitled to vote, which notice would be provided pursuant to
the Corporation's bylaws and the MBCA.
ARTICLE 8
PROTECTIVE PROVISIONS
So long as shares of Series A Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval (by vote or
written consent, as provided by the MBCA) of the Holders of at least a majority
of the then outstanding shares of Series A Preferred Stock:
(a) alter or change the rights, preferences or privileges of
the Series A Preferred Stock;
(b) create any new class or series of capital stock having a
preference over the Series A Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation ("SENIOR SECURITIES")
or alter or change the rights, preferences or privileges of any Senior
Securities so as to affect adversely the Series A Preferred Stock, except in
connection with the Proposed Transaction;
(c) increase the authorized number of shares of Series A
Preferred Stock; or
(d) do any act or thing not authorized or contemplated by this
Certificate of Designation which would result in taxation of the holders of
shares of the Series A Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended).
In the event Holders of least a majority of the then
outstanding shares of Series A Preferred Stock agree to allow the Corporation to
alter or change the rights, preferences or privileges of the shares of Series
Preferred Stock, pursuant to subsection (a) above, so as to affect the Series A
Preferred Stock, then the Corporation will deliver notice of such approved
change to the Holders of the Series Preferred Stock that did not agree to such
alteration or change (the "DISSENTING HOLDERS") and Dissenting Holders shall
have the right for a period of 30 days to convert pursuant to the terms of this
Certificate of Designation as they exist prior to such alteration or change or
continue to hold their shares of Series A Preferred Stock.
If at any time the Corporation shall "spin-off" certain of its
assets or businesses by transferring, directly or indirectly, such assets or
businesses to a subsidiary of the Corporation ("SPINCO") and making a dividend
(the "SPIN-OFF DIVIDEND") to the Corporation's stockholders of the shares of
capital stock of Spinco, the Corporation shall make a dividend to each Holder
of,
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or cause Spinco to issue to each Holder, that number of shares of capital stock
of Spinco as such Holder would have received had it converted, immediately prior
to the Spin-off Dividend, each Preferred Share then held by such Holder into
Common Stock.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 LOSS, THEFT, DESTRUCTION OF PREFERRED STOCK
Upon receipt of evidence satisfactory to the Corporation of
the loss, theft, destruction or mutilation of shares of Series A Preferred Stock
and, in the case of any such loss, theft or destruction, upon receipt of
indemnity or security reasonably satisfactory to the Corporation, or, in the
case of any such mutilation, upon surrender and cancellation of the Series A
Preferred Stock, the Corporation shall make, issue and deliver, in lieu of such
lost, stolen, destroyed or mutilated shares of Series A Preferred Stock, new
shares of Series A Preferred Stock of like tenor. The Series A Preferred Stock
shall be held and owned upon the express condition that the provisions of this
Section 9.1 are exclusive with respect to the replacement of mutilated,
destroyed, lost or stolen shares of Series A Preferred Stock and shall preclude
any and all other rights and remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement of
negotiable instruments or other securities without the surrender thereof.
SECTION 9.2 WHO DEEMED ABSOLUTE OWNER
The Corporation may deem the Person in whose name the Series A
Preferred Stock shall be registered upon the registry books of the Corporation
to be, and may treat it as, the absolute owner of the Series A Preferred Stock
for the purpose of receiving payment of dividends on the Series A Preferred
Stock, for the conversion of the Series A Preferred Stock and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary. All such payments and such conversion shall be valid and effectual to
satisfy and discharge the liability upon the Series A Preferred Stock to the
extent of the sum or sums so paid or the conversion so made.
SECTION 9.3 NOTICE OF CERTAIN EVENTS
In the case of the occurrence of any event described in
Sections 6.1, 6.6 or 6.7 of this Certificate of Designation, the Corporation
shall cause to be mailed to the Holder of the Series A Preferred Stock at its
last address as it appears in the Corporation's security registry, at least 20
days prior to the applicable record, effective or expiration date hereinafter
specified (or, if such 20 days notice is not possible, at the earliest possible
date prior to any such record, effective or expiration date), a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, issuance or granting of rights, options or warrants, or if a
record is not to be taken, the date as of which the Holders of record of Series
A Preferred Stock to be entitled to such dividend, distribution, issuance or
granting of rights, options or warrants are to be determination or the date on
which such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective, and (y) the date as
of which it is expected that Holders of record of Series A Preferred Stock will
be entitled to
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exchange their shares for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale transfer, dissolution,
liquidation or winding-up.
SECTION 9.4 REGISTER
The Corporation shall keep at its principal office a register
in which the Corporation shall provide for the registration of the Series A
Preferred Stock. Upon any transfer of the Series A Preferred Stock in accordance
with the provisions hereof, the Corporation shall register such transfer on the
Series A Preferred Stock register.
The Corporation may deem the person in whose name the Series A
Preferred Stock shall be registered upon the registry books of the Corporation
to be, and may treat it as, the absolute owner of the Series A Preferred Stock
for the purpose of receiving payment of dividends on the Series A Preferred
Stock, for the conversion of the Series A Preferred Stock and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary. All such payments and such conversions shall be valid and effective to
satisfy and discharge the liability upon the Series A Preferred Stock to the
extent of the sum or sums so paid or the conversion or conversions so made.
SECTION 9.5 WITHHOLDING
To the extent required by applicable law, the Corporation may
withhold amounts for or on account of any taxes imposed or levied by or on
behalf of any taxing authority in the United States having jurisdiction over the
Corporation from any payments made pursuant to the Series A Preferred Stock.
SECTION 9.6 HEADINGS
The headings of the Articles and Sections of this Certificate
of Designation are inserted for convenience only and do not constitute a part of
this Certificate of Designation.
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IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation to be signed by its duly authorized officers on May
14, 1999.
CAFE ODYSSEY, INC.
By: /s/ Ronald K. Fuller
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Name: Ronald K. Fuller
Title: President
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ANNEX I
FORM OF CONVERSION NOTICE
TO: Cafe Odyssey, Inc.
4801 West 81st Street, Suite 112
Bloomington, MN 55437
The undersigned owner of this Series A 8% Convertible
Preferred Stock (the "SERIES A PREFERRED STOCK") issued by Cafe Odyssey, Inc.
(the "CORPORATION") hereby irrevocably exercises its option to convert
__________ shares of the Series A Preferred Stock into shares of the common
stock, par value $0.01 per share ("COMMON STOCK"), of the Corporation in
accordance with the terms of the Certificate of Designation. The undersigned
hereby instructs the Corporation to convert the number of shares of the Series A
Preferred Stock specified above into Shares of Common Stock Issued at Conversion
in accordance with the provisions of Article 6 of the Certificate of
Designation. The undersigned directs that the Common Stock issuable and
certificates therefor deliverable upon conversion, the Series A Preferred Stock
recertificated, if any, not being surrendered for conversion hereby, together
with any check in payment for fractional Common Stock, be issued in the name of
and delivered to the undersigned unless a different name has been indicated
below. All capitalized terms used and not defined herein have the respective
meanings assigned to them in the Certificate of Designation. So long as the
Series A Preferred Stock shall have been surrendered for conversion hereby, the
conversion pursuant hereto shall be deemed to have been effected at the date and
time specified below, and at such time the rights of the undersigned as a Holder
of the Series A Preferred Stock shall cease and the Person or Persons in whose
name or names the Common Stock Issued at Conversion shall be issuable shall be
deemed to have become the holder or holders of record of the Common Shares
represented thereby and all voting and other rights associated with the
beneficial ownership of such Common Shares shall at such time vest with such
Person or Persons.
Date and time:
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Signature
Fill in for registration of Series A Preferred Stock:
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Please print name and address (including zip code number)