EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SONIC FOUNDRY, INC.
The Amended and Restated Articles of Incorporation of Sonic Foundry, Inc.
set forth below have been duly approved by a majority of the entire board of
directors and by the affirmative vote of the holders of a majority of the issued
and outstanding capital stock of the Corporation. The Amended and Restated
Articles of Incorporation of Sonic Foundry, Inc. are amended and as so amended
are restated in their entirety by striking out Articles First through Fourteenth
and inserting in lieu thereof the following:
FIRST. The name of the Corporation is Sonic Foundry, Inc.
SECOND. The purpose of the Corporation is to engage in any lawful business
for which corporations may be organized under the Maryland General Corporation
Law.
THIRD. The address of the Corporation's registered office in the State of
Maryland is c/o The Corporation Trust Incorporated, 300 East Lombard Street,
Baltimore, Maryland 21202. The name of its registered agent at such address is
Corporation Trust Company.
FOURTH.
A. AUTHORIZED SHARES. The total number of shares of capital stock which
the Corporation has authority to issue is 35,000,000 shares, consisting of:
1. 20,000,000 shares of Common Stock, par value $.01 per share (the
"Common Stock");
2. 15,000,000 shares preference stock, par value $.01 per share, of which
10,000,000 shares have been designated as Series B 5% Cumulative Convertible
Preferred Stock (the "Series B Preferred Stock"), and of which 5,000,000 shares
have not been designated ("Preference Stock").
3. The par value of the shares of capital stock has not been changed.
B. COMMON STOCK
Subject to the prior rights of preference stock, such as holders of shares
of Series B Preferred Stock, holders of Common Stock have the right to dividends
from funds legally available, when, as and if declared by the Board of
Directors. Subject to the prior rights, if any, of holders of any shares of
preference stock (such as shares of Series B Preferred Stock) shares of Common
Stock are entitled to share ratably in all assets of the Company available for
distribution to holders of shares of Common Stock upon liquidation, dissolution,
or winding up of the affairs of the Company. Holders of Common Stock shall not
have pre-emptive
subscription or conversion rights. Holders of Common Stock shall not have
cumulative voting rights.
C. PREFERENCE STOCK
Preference Stock may be issued in series, and shares of each series will
have such rights and preference as are fixed by the Board in the resolutions
authorizing the issuance of the particular series. In designating any series of
preference stock, the Board may, without further action by the holders of
either Common Stock or preference stock, unless specifically provided by the
Articles of Incorporation for a particular series, fix the number of shares
constituting any series and fix the dividend rights, dividend rate, conversion
rights, voting rights (which may be greater or less than the voting rights of
the Common Stock or any outstanding series of preference stock), rights and
terms of redemption (including sinking fund provisions) and the liquidation
preferences of the series of preference stock. Any series of preference stock,
when and if issued, may have priority, greater or equal claims to dividends,
distributions upon liquidation of the Company or voting rights over the holders
of Common Stock.
D. SERIES B PREFERRED STOCK
A series of preferred stock of the Company, be and it hereby is created,
such series to be classified as its Series B 5% Cumulative Convertible Preferred
Stock (the "Preferred Shares"), to consist of 10,000,000 shares of the par value
of $.01 each, of which the preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, shall be as follows:
1. RANKING
The Series B 5% Cumulative Convertible Preferred Shares will, with respect
to dividend rights and rights of liquidation, dissolution and winding up, rank
senior to the common stock of the Company.
2. DIVIDENDS
a. Dividend Rate. Holders of the Preferred Shares will be entitled to
receive when, as and if declared by the Company, out of funds legally available
therefor (the "Legally Available Funds"), dividends at the annual rate of 5% per
Preferred Share, based upon the amount of $.01 per share (the "Liquidation
Value"). Such dividends will be payable semi-annually on the last day of
December and June in each year commencing December 31, 1996 or if any such day
is not a business day in the state of Wisconsin, then the next succeeding
business day in such State (the "Dividend Payment Dates"). Such dividends will
be paid to the holders of record at the close of business on the date specified
by the Board of Directors at the time such dividends are declared; provided,
however, that such record date will not be more than sixty (60) days prior to
the Dividend Payment Date upon which such dividends will be paid. Each of such
semi-annual dividends will be fully cumulative, to the extent not paid, and
shall
2
accrue (whether or not declared) on a daily basis from the date of original
issuance of such Preferred Shares, with additional cumulative dividends on any
accrued but unpaid dividend accruing daily (whether or not declared) and
compounding semi-annually at the rate of 5% per annum (the "Dividend Rate"),
from the first day of the semi-annual dividend period in which such accrued but
unpaid dividend first became payable.
b. Dividends Payable in Kind. Except as provided below, the Company may,
at its option, pay all or part of the dividends on the Preferred Shares by
issuing and delivering additional Preferred Shares to the holders hereof at the
Dividend Rate (valuing such additional Preferred Shares at the Liquidation
Value) provided, however, that if a holder of Preferred Shares notifies the
Secretary of the Company, not more than 60 days nor less than 30 days of a
Dividend Payment Date, of his election to receive either Preferred Shares or
cash in lieu of Preferred Shares, the Company will pay to such holder, at such
Dividend Payment Date, dividends in either Preferred Shares or cash in lieu of
additional Preferred Shares, at the holder's election. In computing the amount
of dividends accrued in respect of a fractional year, such amount shall be
computed on the basis of a 360-day year of twelve 30-day months and actual
number of days elapsed.
c. Reservation of Preferred Shares. Until the date upon which no
Preferred Shares are outstanding, the Company shall reserve and keep available
out of its authorized and unissued Preferred Shares, solely for the purpose of
paying dividends thereon pursuant to the preceding paragraph, such number of
Preferred Shares as shall form time to time be sufficient for such purpose. The
Board of Directors shall, from time to time, if necessary, propose to the
stockholders of the Company amendments to the Articles of Incorporation to
increase its authorized capital stock and take such other actions as may be
necessary to permit the issuance from time to time of Preferred Shares upon the
declaration of any dividend payable in additional Preferred Shares.
d. Fractional Preferred Shares. Fractional Preferred Shares shall be
issued to the extent necessary to make dividend payments in Preferred Shares.
Each fractional Preferred Share outstanding shall be entitled to a ratably
proportionate amount of all dividends accruing with respect to each outstanding
preferred Share and all of such dividends with respect to such outstanding
fractional shares shall be fully cumulative and shall accrue (whether or not
declared) and shall be payable in the same manner and at such times as provided
for in this paragraph B with respect to dividends on each outstanding Preferred
Share.
e. Insufficient Funds for Payment of Preferred Shares. All dividends paid
in respect of the Preferred Shares pursuant to this paragraph d shall be paid
pro rata to the holders entitled thereto. In the event that the Legally
Available Funds available for the payment of dividends shall be insufficient for
the payment of the entire amount of dividends payable at any Dividend Payment
Date, the amount of any available surplus shall be allocated for the payment of
dividends with respect to the Preferred Shares pro rata based upon the
Liquidation Value of the outstanding shares.
3
f. Restrictions on Payment of Dividends. So long as any Preferred Shares
are outstanding and the Company is in arrears in the payment of any dividends
thereon, no dividend will be paid or other distribution made on the Common
Shares (other than dividends paid or distributions made solely in additional
Common Shares), nor will the Company redeem, purchase or otherwise acquire, or
permit any subsidiary of the Company to purchase or otherwise acquire (or
declare, pay or set aside for payment money for a sinking fund or other similar
fund for such redemption, purchase, acquisition or retirement), any Common
Shares (including any warrants, rights, calls or options exercisable for or
convertible into any of such shares).
3. LIQUIDATION
a. General. In the event of any liquidation, dissolution or winding up of
the Company, then out of the assets of the Company before any distribution or
payment to the holders of the Common Shares, the holders of the Preferred Shares
will be entitled to be paid the Liquidation Value per share (or a pro rata
portion thereof with respect to fractional shares). In the event of any
liquidation, dissolution or winding up of the Company, the Company by resolution
of the Board of Directors will, to the extent of any Legally Available Funds
therefor, declare a dividend payable in cash on the Preferred Shares payable
before any distribution is made to any holders of Common Shares, in an amount
equal to the accrued and unpaid dividends, calculated at the Dividend Rate, on
the Preferred Shares up to and including the date of such liquidation,
dissolution or winding up and, if the Company does not have sufficient Legally
Available Funds to declare and pay all dividends in cash so accrued, an amount
payable in cash equal to any remaining accrued and unpaid dividends, calculated
at the Dividend Rate, will be added to the amount to be received by the holders
of the Preferred Shares for such Preferred Shares upon such liquidation,
dissolution or winding up. The holders of the Preferred Shares shall be
entitled to no other or further distribution in connection with such
liquidation, dissolution or winding up.
b. Insufficient Funds for Payment of Preferred Shares. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation available for distribution to the holders of Preferred Shares shall
be insufficient to permit payment in full to such holders the sums which such
holders are entitled to receive in such case, then all of the assets available
for distribution to the holders of the Preferred Shares shall be distributed
among and paid to such holders, ratably in proportion to the respective amounts
that would be payable to such holders if such assets were sufficient to permit
payment in full. The holders of the Preferred Shares shall be entitled to no
other or further distribution in connection with such liquidation, dissolution
or winding up.
4. CONVERSION RIGHTS.
a. General. Subject to and in compliance with the provisions of this
Section 4, any Preferred Shares may, at the option of the holder be converted,
into fully-paid and non-assessable Common Shares. The number of Common Shares
to which a holder of Preferred Shares shall be entitled upon conversion shall be
the product obtained by multiplying the
4
Applicable Conversion Rate (determined as provided in Paragraph 4b) by the
number of Preferred Shares being converted at any time.
b. Applicable Conversion Rate. The conversion rate in effect at any time
for the Preferred Shares (the "Applicable Conversion Rate"), except as adjusted
pursuant to Paragraph 4b, shall be .5.
c. Applicable Conversion Value. The applicable conversion value in
effect at any time for the Preferred Shares (the "Applicable Conversion Value")
shall be the liquidation value divided by the Applicable Conversion Rate. The
Applicable Conversion Value shall initially be $0.02 (i.e., the Liquidation
Value of $0.01 divided by the Applicable Conversion Rate of .5).
d. Adjustments to Applicable Conversion Rate.
(1) (a) Upon Extraordinary Common Stock Event. Upon the happening
of an Extraordinary Common Stock Event (as hereinafter defined), the
Applicable Conversion Value shall, simultaneously with the happening of
such Extraordinary Common Stock Event, be adjusted by multiplying the then
effective Applicable Conversion Rate by a fraction, the denominator of
which shall be the number of Common Shares outstanding immediately prior to
such Extraordinary Common Stock Event and the numerator of which shall be
the number of Common Shares outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall
thereafter be the Applicable Conversion Value. The applicable Conversion
Value, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive Extraordinary Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (i) the issue of
additional Common Shares as a dividend or other distribution on outstanding
Common Shares, (ii) a subdivision of outstanding Common Shares into a
greater number of Common Shares, or (iii) a combination of outstanding
Common Shares into a smaller number of Common Shares.
(1) (b) Definition of Current Market Price. "Current Market Price"
per Common Share means the closing price for the Common Shares on the date
specified herein as the determination date for purposes of such valuation.
The closing price on any given date shall be (i) the last sale price of
Common Shares, regular way, on such date or, if no such sale takes place on
such date, the average of the closing bid and asked prices thereof on such
date, in each case as officially reported on the principal national
securities exchange on which the same are then listed or admitted to
trading, or (ii) if Common Shares are not then listed or admitted to
trading on any national securities exchange, the last sale price for the
Common Shares, regular way, on such date or, if no such sale takes place on
such date, or sales of such shares are not reported, the average of the
5
closing bid and asked prices thereof on such date in the over-the-counter
market as shown on the National Association of Securities Dealers automated
quotation system, or, if Common Shares are not then quoted in such system,
as published by the National Quotation Bureau, Incorporated or any similar
successor organization, and in either case as reported by any member firm
of the New York Stock Exchange selected by the Company, or (iii) if no
Common Shares are then listed or admitted to trading on any national
securities exchange and if no sales prices or closing bid and asked prices
thereof are then so quoted or published in the over-the-counter market, the
Current Market Price of such shares on the date in question as determined
by more than two-thirds of the directors of the Corporation in good faith.
e. Dividends. In the event the Company shall make or issue, or shall fix
a record date for the determination of holders of Common Shares entitled to
receive a dividend or other distribution (other than a distribution in
liquidation or other distribution otherwise provided for herein) with respect to
the Common Shares payable in (i) securities of the Company other than Common
Shares or (ii) assets (excluding cash dividends or distributions), then and in
each such event provision shall be made so that the holders of Preferred Shares
shall thereupon receive the number of securities or such other assets of the
Company which they would have received had their Preferred Shares been converted
into Common Shares as the case may be, on the date of such event.
f. Capital Reorganization or Reclassification. If the Common Shares
issuable upon the conversion of the Preferred Shares shall be changed into the
same or different number of shares of any class or classes of stock, whether by
capital reorganization, recapitalization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
elsewhere in this Section 4 or the sale of all or substantially all of the
Company's assets to any other person), then and in each such event the holder of
each Preferred Share shall have the right thereafter to convert such share into
the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, recapitalization, reclassification or other
change by holders of the number of Common Shares into which such Preferred
Shares might have been converted immediately prior to such reorganization,
recapitalization, reclassification or change, all subject to further adjustment
as provided herein.
g. Capital Reorganization, Merger or Sale of Assets. If at any time or
from time to time there shall be a capital reorganization of the Common Shares
(other than a subdivision, combination, recapitalization, reclassification or
exchange or shares provided for elsewhere in this Section 4) or a merger or
consolidation of the Company with or into another company, or the sale of all or
substantially all of the Company's assets to any other person, then, as a part
of such reorganization, merger, or consolidation or sale, provision shall be
made so that the holders of Preferred Shares shall thereafter be entitled to
receive upon conversion of the Preferred Shares, the number of shares of stock
or other securities or property of the Company, or of the successor company
resulting from such merger, consolidation or sale, to which such holder would
have been entitled if such holder had converted its Preferred Shares immediately
6
prior to such capital reorganization, merger, consolidation, or sale. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Preferred Shares after the reorganization, merger, consolidation or sale to the
end that the provisions of this Section 4 (including adjustment of the
Applicable Conversion Rate then in effect and the number of shares issuable upon
conversion of the Preferred Shares) shall be applicable after that event in as
nearly equivalent a manner as may be practicable.
Each holder of Preferred Shares upon the occurrence of a capital
reorganization, merger or consolidation of the Company, or the sale of all or
substantially all its assets and properties, as such events are more fully set
forth in the first paragraph of this Section 4(g), shall have the option of
electing treatment of his Preferred Shares under either this Section 4(g) or
Section 3 hereof, notice of which election shall be submitted in writing to the
Company at its principal officers no later than fifteen (15) days before the
effective date of such event.
h. Accountant's Certificate as to Adjustments; Notice by Company. In
each case of an adjustment or readjustment of the Applicable Conversion Rate,
the Company at its expense will furnish each holder of Preferred Shares with a
certificate, prepared by (1) the Treasurer or chief financial officer of the
Company, or (2) if requested by the holders of at least a majority of the then
outstanding Preferred Shares, independent public accountants of recognized
national standing, in either case, showing such adjustment or readjustment, and
stating in detail the facts upon which such adjustment or readjustment is based.
i. Exercise of Conversion Privilege. To exercise its conversion
privilege, a holder of Preferred Shares shall surrender the certificate or
certificates representing the shares being converted to the Company at its
principal office, and shall give written notice to the Company at that office
that such holder elects to convert such shares. Such notice shall also state
the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Shares issuable upon such conversion shall be
issued. The certificate or certificates for Preferred Shares surrendered for
conversion shall be accompanied by proper assignment thereof to the Company or
in blank. The date when such written notice is received by the Company,
together with the certificate or certificates representing the Preferred Shares
being converted, shall be the "Conversion Date." As promptly as practicable
after the Conversion Date, the Company shall issue and shall deliver to the
holder of the shares of Preferred Shares being converted, or on its written
order, such certificate or certificates as it may request for the number of
whole Common Shares issuable upon the conversion of such Preferred Shares in
accordance with the provisions of this Section 4, cash in the amount of all
declared and unpaid dividends on such Preferred Shares, up to and including the
Conversion Date, and cash, as provided in Section 4(j), in respect of any
fraction of a Common Share issuable upon such conversion. Such conversion shall
be deemed to have been effected immediately prior to the close of business on
the Conversion Date, and at such time the rights of the holder as holder of the
converted Preferred Shares shall cease and the person or persons in whose name
or names any certificate or certificates for Common Shares shall be issuable
upon such conversion shall
7
be deemed to have become the holder or holders of record of the Common Shares
represented thereby.
j. Cash in Lieu of Fractional Shares. No fractional Common Shares or
scrip representing fractional shares shall be issued upon the conversion of
Preferred Shares. Instead of any fractional Common Shares which would otherwise
be issuable upon conversion of Preferred Shares, the Company shall pay to the
holder of the Preferred Shares which were converted a cash adjustment in respect
of such fractional shares in an amount equal to the same fraction of the Current
Market Price per Common Share at the close of business on the Conversion Date.
The determination as to whether or not any fractional shares are issuable shall
be based upon the aggregate number of Preferred Shares being converted at any
one time by any holder thereof, not upon each Preferred Share being converted.
k. Partial Conversion. In the event some but not all of the Preferred
Shares represented by a certificate or certificates surrendered by a holder are
converted, the Company shall execute and deliver to or on the order of the
holder, at the expense of the Company, a new certificate representing the number
of Preferred Shares which were not converted.
l. Reservation of Common Shares. The Company shall at all times reserve
and keep available out of its authorized but unissued Common Shares, solely for
the purpose of effecting the conversion of the Preferred Shares, such number of
Common Shares as shall from time to time be sufficient to effect the conversion
of all outstanding Preferred Shares (including any Preferred Shares represented
by any warrants, options, subscription or purchase rights for preferred Shares),
and if at any time the number of authorized but unissued Common Shares shall not
be sufficient to effect the conversion of all then outstanding Preferred Shares
(including any Preferred Shares represented by any warrants, options,
subscriptions or purchase rights for Preferred Shares), the Company shall take
such corporate action as may be necessary to increase its authorized but
unissued Common Shares to such number of shares as shall be sufficient for such
purpose.
m. No Reissuance of Preferred Shares. No Preferred Shares acquired by
the Company by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be cancelled, retired and eliminated from
the shares which the Company shall be authorized to issue. The Company shall
from time to time take such appropriate corporate action as may be necessary to
reduce the authorized number of Preferred Shares accordingly.
5. VOTING RIGHTS.
a. General. Holders of Preferred Shares are entitled to one vote for
each share held of record on each matter submitted to a vote of shareholders.
Holders are not entitled to cumulative votes in the election of directors and,
except as hereinafter provided, holders of Preferred Shares and holders of
Common Shares will vote together as a single class on all matters submitted to
stockholders for a vote.
8
b. Corporate Action. Except as expressly provided herein or as required
by law, so long as any of the Preferred Shares remain outstanding, the Company
shall not and shall not permit any of its Subsidiaries to, without the prior
written consent by the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the then outstanding Preferred Shares, voting as a separate class,
each Preferred Share to be entitled to one vote in each instance, create, incur,
assume or permit to exist any Debt, or create, authorize or issue any class or
series of preferred stock that ranks senior or pari passu to the Preferred
Shares as to dividends or upon liquidation, dissolution or winding up; provided,
however, that the prohibitions of this Section 5b shall not apply (i) to any
Debt, or any refinancing thereof (so long as refinancing does not materially
increase the obligation of the Company), or preferred stock issued or existing
as of the date of the filing of these Articles, (ii) so long as all or
substantially all of the proceeds of such new Debt or preferred stock shall be
invested in the working capital of, or otherwise used for the benefit of, the
Company or any of its Subsidiaries, or (iii) so long as all or substantially all
of the proceeds of such Debt or preferred stock are used to acquire any stock or
assets of, or in connection with a merger or consolidation with, any Designated
Person. Nothing in this Section 5b shall prohibit or limit the Company in
creating or organizing an Affiliate for any purpose, including, without
limitation, the acquisition of any Person not engaged in a business similar to
any business conducted by the Company or its Subsidiaries, so long as neither
the Company, nor any of its Subsidiaries shall be liable for the Debt or other
obligations of such Affiliate.
For purposes of this Section 5b, the terms set forth below shall have the
following meanings:
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations promulgated under the Securities Exchange Act
of 1934, as amended.
"Debt", with respect to the Company, means (a) all obligations for
borrowed money, (b) all obligations evidenced by bonds, debentures, notes
or other similar instruments, (c) all indebtedness of any Person secured by
a lien or encumbrance on all or substantially all of the assets or
properties of the Company, whether or not such indebtedness is assumed by
the Company, and (d) all indebtedness of any person guaranteed by the
Company.
"Designated Person" shall mean any Person conducting, as one of its
primary businesses, any business similar to any business conducted by the
Company or any of its Subsidiaries (other than the Company or any
Affiliate).
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization or a governmental
entity or any department or agency thereof.
9
"Subsidiary," when used in reference to any other Person, shall mean
any corporation of which outstanding securities having ordinary voting
power to elect a majority of the Board of Directors of such corporation are
owned directly or indirectly by such other Person.
c. Amendments to Charter. The Company shall not amend its Articles of
Incorporation without the approval, by vote or written consent, of the holders
of at least sixty-six and two-thirds percent 66-2/3% of the then outstanding
Preferred Shares, each Preferred Share to be entitled to one vote in each
instance, if such amendment would change any of the rights, preferences,
privileges of or limitations provided for herein for the benefit of any
Preferred Shares or materially adversely affect the rights of the holders of the
Preferred Shares. Without limiting the generality of the preceding sentence,
the Company will not amend its Articles of Incorporation without the approval by
the holders of at least sixty-six and two-thirds percent (66-2/3%) of the then
outstanding Preferred Shares, voting separately as a class, if such amendment
would:
(1) Reduce the amount payable to the holders of Preferred Shares upon
the voluntary or involuntary liquidation, dissolution or winding up of the
Company or adversely affect the dividend rights or redemption rights of the
holders of Preferred Shares; or
(2) Cancel or modify the conversion rights of the holders of
Preferred Shares, provided for herein.
6. NO DILUTION OR IMPAIRMENT.
The Company will not, by amendment of its Articles of Incorporation or
through any reorganization, 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 of the Preferred
Shares set forth herein, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of the
Preferred Shares against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase the par value of
any shares of stock receivable on the conversion of the Preferred Shares above
the amount payable therefor on such conversion, (b) will take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock on the conversion of
all Preferred Shares from time to time outstanding; (c) will not transfer all or
substantially all of its properties and assets to any other person (corporate or
otherwise), or consolidate with or merge into any other person or permit any
such person to consolidate with or merge into the Company (if the Company is not
the surviving person), unless such other person shall expressly assume in
writing and will be bound by all the terms of the Preferred Shares set forth
herein.
10
7. NOTICES OF RECORD DATE.
In the event of
1. any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
2. any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company, or any transfer of all or substantially all of the
assets of the Company to any other Company, or any other entity or person, or
3. any voluntary or involuntary dissolution, liquidation or winding up of
the Company,
then and in each such event the Company shall mail or cause to be mailed to
each holder of Preferred Shares, a notice specifying (a) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, (b) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective and (c) the time, if any, that is to
be fixed, as to when the holders of record of Common Shares (or other
securities) shall be entitled to exchange their Common Shares (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up. Such notice shall be mailed at
least twenty (20) days prior to the date specified in such notice on which such
action is to be taken.
FIFTH. The number of directors of the corporation shall hereinafter be
six (6) which may be changed from time to time by or pursuant to a resolution
passed by the Board. The Board of Directors shall be divided into five classes,
each as nearly equal in number as the then total member of directors
constituting the entire Board of Directors permits and with the term of office
of one class expiring each year. One class of directors shall be initially
elected for a term expiring at the annual meeting of stockholders to be held in
1998, another class shall be initially elected for a term expiring at the annual
meeting of stockholders to be held in 1999, another class shall be initially
elected for a term expiring at the annual meeting of stockholders to be held in
2000, another class shall be initially elected for a term expiring at the annual
meeting of stockholders to be held in 2001, and another class shall be initially
elected for a term expiring at the annual meeting of stockholders to be held in
2002. Any vacancy in the Board of Directors for any reason, shall be filled by
only the Board of Directors acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall hold
office until the next election of the class for which such directors have been
chosen and until their successors have been elected and qualified. No decrease
in the number of directors shall shorten the term of any incumbent director.
Subject to the foregoing, at each annual
11
meeting of stockholders, the successors to the class of directors whose term
shall then expire shall be elected to hold office for a term expiring at the
fifth succeeding annual meeting of stockholders. Notwithstanding the foregoing,
any director may be removed from office during any term by the affirmative vote
of the holders of shares constituting 66-2/3% of the voting power of the
outstanding shares of stock entitled to vote upon the election of directors of
the Corporation.
SIXTH. The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders.
The board of directors of the corporation is hereby empowered to
authorize the issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, or securities convertible into shares of
its stock of any class or classes, whether now or hereafter authorized.
No holder of shares of stock of any class shall be entitled as a
matter of right to subscribe for or purchase or receive any part of any new or
additional issue of shares of stock of any class or of securities convertible
into shares of stock of any class, whether now or hereafter authorized or
whether issued for money, for a consideration other than money or by way of
dividend.
SEVENTH.
a. APPROVAL OF CERTAIN ACTIONS. The affirmative vote of the holders
of shares constituting 66-2/3% of the voting power of the Corporation given in
person or by proxy at a meeting called for such purpose, shall be necessary to
approve the following actions:
1. any business combination (as defined in the General Corporation
Law of the State of Maryland) of the Corporation or any Subsidiary (as
hereinafter defined) (a) with any Interested Stockholder (as hereinafter
defined), (b) with any other corporation (whether or not itself an
Interested Stockholder) which is, or after such business combination would
be, an affiliate (as hereinafter defined) of an Interested Stockholder or
(c) in which in Interested Stockholder has an interest (except
proportionately as a stockholder of the Corporation);
2. any sale, lease, exchange, mortgage, pledge, transfer or any other
disposition (in one transaction or in a series of transactions) to or with
any Interested Stockholder or any Affiliate of any Interested Stockholder,
or in which an Interested Stockholder has an interest (except
proportionately as a stockholder of the Corporation) of all or
substantially all of the assets of the Corporation or any Subsidiary;
12
3. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or in a series of transactions) of all or
substantially all of the assets of an Interested Stockholder, an Affiliate
thereof, or an entity in which the Interested Stockholder has an interest,
to the Corporation or any Subsidiary;
4. the issuance, sale, exchange, disposition or other transfer by the
Corporation or any Subsidiary (in one transaction or in a series of
transactions) of any securities of the Corporation or any Subsidiary to any
Interested Stockholder or any Affiliate of any Interested Stockholder (and
other than by way of a pro rata distribution to all stockholders or a
reclassification, dividend or subdivision of such securities and other than
in connection with the exercise or conversion of securities exercisable for
or convertible into securities of the Corporation or a Subsidiary that have
been distributed pro rata to stockholders) in exchange for cash, securities
or other property (or a combination thereof) having an aggregate Fair
Market Value (as hereinafter defined) of one million dollars or more;
5. any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any other transaction
(whether or not with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class of equity or
convertible securities of, or otherwise increasing the voting power over,
the Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate of any Interested Stockholder.
6. any spinoff, splitoff or splitup of the Corporation in which the
Interested Stockholder has an interest (other than proportionately as a
stockholder); or
7. any agreement, contract, or other arrangement with an Interested
Stockholder (or in which the Interested Stockholder has an interest other
than proportionately as a stockholder) providing for any of the
transactions described in subsections 1 through 6 of this Article Seventh,
Section a;
The approval required in this Article Seventh, Section a, shall
be required unless all of the conditions in either subsection 1 or 2 of
Section b of this Article Seventh have been fulfilled. Such affirmative
vote shall be required notwithstanding the fact that no vote may be
required by law or that a lesser percentage may be specified by law or in
any arrangement with any national securities exchange or otherwise. For
purposes of this Section a "substantially all the assets" shall mean
assets having a book value of more than (i) 10% of the book value of the
assets of the entity in question, in the case of the Corporation or a
Subsidiary and (ii) 90% of the book value of the assets of the entity in
question in the case of any other entity.
13
b. EXCEPTIONS. The provisions of Section a of this Article Seventh
requiring a two-thirds vote of holders of the Corporation's outstanding voting
stock shall not be applicable to any particular Business Transaction (as
hereinafter defined) and such Business Transaction shall require only the
affirmative vote of the stockholders, if any, as is otherwise required by law if
all of the conditions specified in either of the following subsections 1 or 2
are met:
1. The Business Transaction shall have been approved expressly be
more than two-thirds of the directors of the Corporation; or
2. All of the following conditions have been met:
(a) The aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business Transaction of
consideration other than cash (including stock of the Corporation in the
case of a merger in which the Corporation is the survivor, or the stock of
a wholly owned subsidiary of the corporation pursuant to a reincorporation
of the Corporation in another domicile) to be received per share by holders
of Common Equity (other than the Interested Stockholder) in such Business
Transaction is at least equal to such Interested Stockholder's Highest
Purchase Price.
(b) "Highest Purchase Price" shall mean the highest amount of
consideration paid by the Interested Stockholder for a share of Common
Equity of the Corporation (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) at any time within two years prior to
the date such Interested Stockholder became an Interested Stockholder and
during any time while such Interested Stockholder was an Interested
Stockholder; provided, however, that the Highest Purchase Price shall be
appropriately adjusted to reflect the occurrence of any reclassification,
recapitalization, stock split, reverse stock split or other readjustment to
the number of outstanding shares of capital stock of the Corporation, or
the payment of a stock dividend thereon, between the last date upon which
such Interested Stockholder paid the Highest Purchase Price and the
effective date of the Business Transaction (or, in the case of a Business
Transaction in which a distribution is to be made to the stockholders of
the Corporation, the date of such distribution).
(c) The consideration to be received by holders of a particular
class of outstanding voting stock (including Common Stock) shall be in
cash or in the same form as the Interested Stockholder has previously paid
for shares of such class of voting stock. If the Interested Stockholder
has paid for shares of any class of voting stock with varying forms of
consideration, the form of consideration for such class of voting stock
shall be either cash or the form used to acquire the largest number of
shares of such class of voting stock previously acquired by it.
14
(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Transaction: (i)
except as approved by more than two-thirds of the directors of the
Corporation, there shall have been no failure to declare and pay at the
regular rate thereof any full semi-annual dividends, whether or not
cumulative, on any outstanding class of preference stock; (ii) there shall
have been (y) no reduction in the annual rate of dividends paid on Common
Equity (other than as necessary to reflect any subdivision of the common
Equity), except as approved by more than two-thirds of the directors of the
Corporation, and (z) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock
split), recapitalization, reorganization or similar transaction which has
the effect of reducing the number of outstanding Common Equity, unless the
failure so to increase such annual rate is approved by more than two-thirds
of the directors of the Corporation; and (iii) such Interested Stockholder
shall not have become the beneficial owner of any additional shares of
voting stock of the Corporation (A) except as part of the transaction which
results in such Interested Stockholder becoming an Interested Stockholder
or (B) as a result of a pro rata stock dividend or stock split.
(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have directly or
indirectly (i) received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances, guarantees,
pledges or other financial assistance or any tax credit or other tax
advantages provided by the Corporation or any Subsidiary, or otherwise have
engaged in a transaction with the Corporation outside the ordinary course
of business or (ii) caused any material change in the Corporation's
business or capital structure (including without limitation the issuance of
shares of capital stock of the Corporation to any third party) in any case
whether in anticipation of, or in connection with, such Business
Transaction or otherwise, unless approved by more than two-thirds of the
directors of the Corporation; and
(f) If the Corporation is at the time a reporting company, as
defined in the Securities Exchange Act of 1934 (the "Exchange Act"), a
proxy or information statement describing the proposed Business Transaction
and complying with the requirements of the Exchange Act, and the rules and
regulations thereunder (or any subsequent provisions replacing such Act,
rules or regulations) shall be mailed to the public stockholders of the
Corporation at least thirty (30) days prior to the consummation of such
Business Transaction (whether or not such proxy or information statement is
required to be mailed pursuant to such act or subsequent provision).
15
c. DEFINITIONS. For the purposes of this Article Seventh:
A "Person" shall mean any individual, group, partnership, association,
firm, corporation or other entity.
"Interested Stockholder" shall mean any Person (other than the
Corporation, any Subsidiary (as defined below), any employee stock ownership or
other employee benefit plan of the Corporation or any Subsidiary, or any trustee
of, or fiduciary with respect to, any such plan when acting in such capacity)
who or which (a) is the Beneficial Owner, directly or indirectly, of more than
ten percent (10%) of the voting power of the outstanding voting stock of the
Corporation; (b) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the Beneficial
Owner, directly or indirectly, of more than ten percent (10%) of the voting
power of the outstanding voting stock of the Corporation; or (c) is an Affiliate
of the Corporation and at any time within the two-year period immediately prior
to the date in question was the Beneficial Owner, directly or indirectly, of ten
percent (10%) or more of the voting power of the then outstanding voting stock
of the Corporation which was at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested Stockholder,
if such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering within the
meaning of the Securities Act of 1933, as amended. The calculation of the
percentage of beneficial ownership shall be made at the following three times,
any of which will suffice for purposes of determining that a Beneficial Owner is
an Interested Stockholder: (f) at the time the definitive agreement providing
for the Business Transaction (including any amendment thereof) was entered into,
(ii) at the time a resolution approving the Business Transaction was adopted by
the Board of Directors of the Corporation, or (iii) as of the record date of the
Corporation for the determination of stockholders entitled to notice of and to
vote on, or to consent to, the Business Transaction. Notwithstanding the
foregoing, a person shall not be deemed an "Interested Stockholder" if such
person would have been deemed an "Interested Stockholder", under clause (a) set
forth above, at any time prior to December 31, 1996.
A Person shall be a "Beneficial Owner" of any voting stock of the
Corporation (a) which such Person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; (b) which such
Person or any of its Affiliates or Associates has (i) the right to acquire
(whether such right is exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement or understanding; or upon the
exercise of conversion rights, exchange rights, warrants or other options, or
otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or
understanding; or (c) which are beneficially owned, directly or indirectly, by
an Person with which such Person or any of its Affiliates has any agreement,
arrangement or understanding for the purpose of holding, voting or disposing of
any shares of such stock.
16
For the purpose of determining whether a Person is an "Interested
Stockholder", the number of shares of voting stock of the Corporation deemed to
be outstanding shall include shares deemed owned through application of such
definition but shall not include any other shares of voting stock of the
Corporation which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
"Affiliates" or "Associates" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect from time to time. The term "Associate," used to
indicate a relationship with a specified person, shall also mean any person who
is a director or officer of such specified person or any of its parents or
subsidiaries (other than the Corporation or any Subsidiary).
"Subsidiary" shall mean any corporation of which at least a majority
of any class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
"Interested Stockholder" set forth above, the term "Subsidiary" shall mean only
a corporation of which at least a majority of each class of equity securities is
owned, directly or indirectly, by the Corporation.
"Fair Market Value" shall mean; in the case of stock, the highest
closing sale price during the thirty (30) day period immediately preceding the
date in question of a share of such stock on the National Association of
Securities dealers Automated Quotation System ("Nasdaq") or the Nasdaq National
Market System, or, if such stock is not quoted on Nasdaq, on the New York Stock
Exchange,or, if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Securities Exchange Act
of 1934, as amended, on which such stock is listed, or if such stock is not
listed on any such exchange, the highest closing bid quotation with respect to a
share of such stock during the thirty (30) day period immediately preceding the
date in question on the Nasdaq, or any system then in use, or if no such
quotations are available, the Fair Market Value of such property on the date in
question as determined by more than two-thirds of the directors of the
Corporation in good faith.
In the event of any Business Transaction in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
subsections (2)(a) and (b) of Section b shall include the Common Equity and/or
the shares of any other class of outstanding voting stock retained by the holder
of such shares.
"Business Transaction" shall mean any transaction which is referred to
in Section a.
"Voting power" shall be calculated by multiplying the number of voting
shares or other voting securities of the Corporation or the Subsidiary, as the
case may be, times the number of votes (or fractional votes) per such share or
security to which the holders of such shares or securities are entitled.
17
d. DETERMINATIONS BY DIRECTORS. More than two-thirds of the
directors of the Corporation shall have the power and duty to determine, for the
purpose of this Article, on the basis of information known to them after
reasonable inquiry, (1) whether a person is an Interested Stockholder; (2) the
number of shares of voting stock of the Corporation of which any Person is the
Beneficial Owner; (3) whether a Person is an Affiliate or an Associate of
another; (4) whether a Person has an agreement, arrangement or understanding
with another as to matters referred to herein; (5) whether the assets in a
Business Transaction are "substantially all the assets" of an entity; (6)
whether any Business Transaction is one in which an Interested Stockholder has
an interest; (7) whether an Interested Stockholder has received the benefits or
caused the changes referred to in Section b(2)(e); (8) whether the consideration
to be received for the issuance or transfer of securities by the Corporation or
any Subsidiary in any Business Transaction has an aggregate Fair Market Value of
one million dollars or more; and (9) such other matters with respect to which
determination is required under this Article Sixth.
e. FIDUCIARY DUTIES. Nothing contained in this Article Seventh
shall be construed to relieve any Interested Stockholder from any fiduciary
obligation imposed by law.
f. AMENDMENTS. To amend or repeal or adopt any provisions
inconsistent with Sections a through e of this Article Seventh, there shall be
required the affirmative vote of (i) the holders of not less than two-thirds of
the voting power of the Corporation or (ii) the stockholders of the Corporation
as required by law, if the amendment is approved by more than two-thirds of the
directors of the Corporation.
EIGHT. The Corporation is to have perpetual existence.
NINTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, alter, repeal
or amend from time to time any or all of the Bylaws of the Corporation. Without
limiting the power of the directors granted in this Article Ninth, the Bylaws of
the Corporation may be adopted, altered, repealed or amended by the affirmative
vote of holders of not less than two-thirds of the voting power of the
outstanding shares of stock entitled to vote on the election of directors.
TENTH. To the fullest extent permitted by the General Corporation Law of
Maryland, a director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Notwithstanding the foregoing, in the event that the
General Corporation Law of the State of Maryland is subsequently amended to
authorize corporate action further eliminating or limiting the personal
liability of the Corporation's directors to the Corporation or its stockholders,
then the liability of a director of the Corporation will be eliminated or
limited to the full extent permitted by the General Corporation Law of the State
of Maryland, as so amended.
18
ELEVENTH.
A. Each person who was or is made a party or is threatened to be made a
party to any threatened, pending or completed action, rule or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that he, or a person of whom he is the legal representative, is or was a
director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the General Corporation Law
of the State of Maryland.
B. The Corporation may purchase and maintain insurance, at its expense,
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under the General Corporation Law of the State of
Maryland.
TWELFTH. A special meeting of the stockholders of the Corporation may be
called at any time by the Board of Directors, or by the chairman of the board,
or by the vice chairman, or by the chief executive officer of the president of
the Corporation, or by the holders of not less than twenty-five percent (25%) of
the outstanding shares of stock entitled to vote on the election of directors.
THIRTEENTH. Except as otherwise provided for or fixed pursuant to the
provisions of Article 4 of these Articles of Incorporation relating to the
rights of holders of any series of Preferred Stock, no action that is required
or permitted to be taken by the stockholders of the Corporation at any annual or
special meeting of stockholders may be effected by written consent of
stockholders in lieu of a meeting of stockholders, unless the action to be
effected by written consent of stockholders and the taking of such action by
such written consent have expressly been approved in advance by the Board of
Directors of the Corporation.
FOURTEENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Articles of
Incorporation in the manner now or hereafter prescribed by statute; provided,
however, that any amendment, alteration, repeal or change of Articles 5, 6, 9,
12, 13 and 14 of this Amended and Restated Article of Incorporation, in addition
to any vote required therein, shall require the approval of the affirmative vote
of holders of not less than two-thirds of the voting power of the outstanding
shares of stock entitled to vote upon the election of directors; provided,
however, that if at the time of such vote any Interested Stockholder (as defined
in Article 7 above) exists, then such
19
alteration, amendment, change or repeal shall also require the affirmative vote
of at least a majority of the voting power of the outstanding shares of stock
entitled to vote upon the election of directors beneficially owned by persons
other than the Interested Stockholder or any Affiliate or Associate thereof
(each as defined in Article 7 above).
IN WITNESS WHEREOF, Sonic Foundry, Inc. has caused these Amended and
Restated Articles of Incorporation to be signed and acknowledged in its name and
on its behalf by its ________________ and witnessed by its _____________ on this
26th day of January, 1998, and they acknowledge the same to be the act of said
Company, and that to the best of their knowledge, information and belief, all
matters and facts stated herein are true in all material respects, and that this
statement is made under the penalties of perjury.
ATTEST: SONIC FOUNDRY, INC.
______________________________ By: _______________________________
20