EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
MINNESOTA AMERICAN, INC.
ARTICLE 1 - NAME
1.1) The name of the corporation shall be CorVu Corporation.
ARTICLE 2 - REGISTERED OFFICE
2.1) The registered office of the corporation is located at 3400 West 66th
Street, Edina, Minnesota 55435.
ARTICLE 3 - CAPITAL STOCK
3.1) Authorized Shares; Establishment of Classes and Series. The aggregate
number of shares the corporation has authority to issue shall be 100,000,000
shares, and which shall consist of 75,000,000 shares of Common Stock, par value
$0.01, 1,000,000 shares of Series A Convertible Preferred Stock, par value
$10.00, and 24,000,000 undesignated shares. The Board of Directors of the
corporation is authorized to establish from the undesignated shares, by
resolution adopted and filed in the manner provided by law, one or more classes
or series of shares, to designate each such class or series (which may include
but is not limited to designation as additional shares of Common or Series A
Convertible Preferred Stock), and to fix the relative rights and preferences of
each such class or series.
3.2) Issuance of Shares. The Board of Directors of the corporation is
authorized from time to time to accept subscriptions for, issue, sell and
deliver shares of any class or series of the corporation to such persons, at
such times and upon such terms and conditions as the Board shall determine,
establishing a price in money or other consideration, or a minimum price, or a
general formula or method by which the price will be determined.
3.3) Issuance of Rights to Purchase Shares. The Board of Directors is
further authorized from time to time to grant and issue rights to subscribe for,
purchase, exchange securities for, or convert securities into, shares of the
corporation of any class or series, and to fix the terms, provisions and
conditions of such rights, including the exchange or conversion basis or the
price at which such shares may be purchased or subscribed for.
3.4) Issuance of Shares to Holders of Another Class or Series. The Board
is further authorized to issue shares of one class or series to holders of that
class or series or to holders of another class or series to effectuate share
dividends or splits.
3.5) Rights, Preferences and Terms of Series A Preferred Stock. The shares
of Series A Convertible Preferred Stock (the "Series A Stock") shall earn
dividends and be convertible into Common Stock of the corporation on the terms,
and subject to the conditions, set forth in this Section 3.5.
(a) Voting Privileges. Except as otherwise required by the Minnesota
Business Corporation Act, each share of the Series A Stock shall have the right
to the same number of votes as the number of shares of Common Stock into which
each share of Series A Stock is convertible with respect to any matter submitted
to a vote of the shareholders of the corporation.
(b) Dividends. The holders of the shares of Series A Stock shall be
entitled to receive, when and as declared by the Board of Directors, yearly
dividends from the surplus or net profits of the corporation at a rate of 6.5%
per annum and no more, payable semi-annually on July 1 and January 1 with proper
adjustment for any dividend period which is less than a full six month period.
Such dividends shall be payable before any dividends shall be paid upon, or set
apart for, the Common Stock and shall be cumulative, so that if in any
semi-annual dividend period, dividends at the rate of 6.5% per annum shall not
have been paid upon or set apart for the Series A Stock, the deficiency (but
without interest) shall be fully paid or set apart for payment, before any
dividends shall be paid upon, or set apart for the Common Stock.
(c) Liquidation Preference. In the event of an involuntary or
voluntary liquidation or dissolution of the corporation at any time, the holders
of shares of Series A Stock shall be entitled to receive out of the assets of
the corporation an amount equal to $10.00 per share. In the event of either an
involuntary or a voluntary liquidation or dissolution of the corporation,
payment shall be made to the holders of Series A Stock in the amounts herein
fixed before any payment shall be made or any assets distributed to the holders
of Common Stock or any class of capital stock of the corporation ranking junior
to the Series A Stock with respect to payment upon dissolution or liquidation of
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the corporation. If, upon any liquidation or dissolution of the corporation, the
assets available for distribution shall be insufficient to pay the holders of
all outstanding shares of Series A Stock the full amounts to which they shall be
entitled, the holder of such shares shall be paid pro rata in any such
distribution.
(d) Redemption. The corporation may, to the extent that funds are
legally available therefor, redeem the Series A Stock on the following dates at
the following prices:
Redemption Date Redemption Price
May 20, 1994 - May 19, 1995 $10.50
May 20, 1995 - May 19, 1996 $10.80
May 20, 1996 - May 19, 1997 $11.10
May 20, 1997 - May 19, 1998 $11.40
on or after May 20, 1998 $11.70
In addition, the value of earned and unpaid dividends will be added to the
redemption price.
In the event of a redemption of less than all of the outstanding shares of
Series A Stock, redemptions as among the holders of such shares of Series A
Stock shall be on a pro rata basis.
The corporation shall give notice by mail of redemptions to the holders of
record of the shares of Series A Stock at least 20 days prior to the date of
redemption. The notice shall (i) specify the date of redemption and the number
of shares to be redeemed from each shareholder and (ii) be addressed to each
shareholder at the Shareholder's post office address as shown on the records of
the corporation. On or after the date fixed for redemption, each holder of
shares of Series A Stock called for redemption shall surrender the certificate
or certificates evidencing such shares to the corporation at the place
designated in such notice and shall thereupon be entitled to receive payment. If
less than all of the certificates are redeemed, the corporation shall issue a
new certificate for the unredeemed shares.
If the corporation deposits, on or prior to any dated fixed for redemption
of shares of Series A Stock, with any bank or trust company having capital and
surplus of at least $10,000,000, as a trust fund, a sufficient sum to redeem on
the date fixed for redemption thereof the shares then called for redemption,
with instructions and authority to such bank or trust company to pay the
redemption price on or after the date of such deposit, then notwithstanding that
any certificate for shares so called for redemption shall not have been
surrendered for cancellation, the shares so called for redemption shall no
longer be deemed to be outstanding and all rights with respect thereto shall
forthwith cease and terminate, except only the right of the holders thereof to
receive from such bank or trust company, at any time after the date of such
deposit, the sum so deposited, without interest, and the right to convert such
shares as provided in paragraph (e) below shall in all events expire on the
business day next preceding the date fixed by the Board of Directors as the date
of redemption. Any funds so deposited and unclaimed at the end of one year from
such redemption date shall be released or repaid to the corporation, after which
the holders of the shares so called for redemption shall be entitled to receive
payment of the redemption price only from the corporation.
All Series A Stock redeemed hereunder shall immediately upon the
redemption thereof be canceled and restored to the status of authorized but
unissued Series A Stock.
(e) Conversion Right. At the option of the holders thereof, the shares of
Series A Stock shall be convertible, at the office of the corporation (or at
such other office or offices, if any, as the Board of Directors may designate),
into fully paid and nonassessable shares of Common Stock. Each share of Series A
Stock shall be convertible into Common Stock at the rate of eight shares of
Common Stock for each share of Series A Stock (the "Conversion Ratio"). The
Conversion Ratio shall be subject to adjustment from time to time in certain
instances as hereinafter provided. In case of the call for redemption of any
shares of Series A Stock at any time prior to the date of issuance of shares of
Common Stock by the corporation upon conversion of shares of Series A Stock in
accordance with the provisions of this Section 3.5, such right of conversion
shall cease and terminate as to the shares designated for redemption as of the
date which is one business day prior to the date set for redemption as set forth
in the notice of redemption given in accordance with the provisions hereof,
unless default shall be made in the payment of the redemption price. The
following provisions shall govern such right of conversion:
(1) In order to convert shares of Series A Stock into shares of
Common Stock, the holder thereof shall surrender at any office
hereinabove mentioned the certificate or certificates therefor, duly
endorsed to the corporation or in blank, and give 10 days' prior
written notice to the corporation at such office that such holder
elects to convert such shares. Shares of Series A Stock shall be
deemed to have been converted immediately prior to the close of
business on the day of surrender of such shares for conversion as
herein provided, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Common
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Stock at such time. As promptly as practicable on or after the
conversion date, the corporation shall issue and deliver or cause to
be issued and delivered at such office a certificate or certificates
for the number of shares of Common Stock issuable upon such
conversion.
(2) In case the corporation shall at any time subdivide the
outstanding shares of its Common Stock, or shall issue a stock
dividend on its outstanding Common Stock, the Conversion Ratio in
effect immediately prior to such subdivision or the issuance of such
dividend shall be proportionately increased, and in case the
corporation shall at any time combine the outstanding shares of its
Common Stock, the Conversion Ratio in effect immediately prior to
such combination shall be proportionately decreased, effective at
the close of business on the date of such subdivision, dividend or
combination, as the case may be.
(3) If any capital reorganization or reclassification of the capital
stock of the corporation, or consolidation or merger of the
corporation with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be
effected in such a way that holders of Common Stock shall be
entitled to receive stock, securities or assets with respect to or
in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale,
lawful and adequate provision shall be made whereby the holders of
Series A Stock shall thereafter have the right to receive upon the
basis and upon the terms and conditions specified herein and in lieu
of the shares of the Common Stock immediately theretofore receivable
upon the conversion of Series A Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or
in exchange for a number of outstanding shares of such Common Stock
equal to the number of shares of such stock immediately theretofore
receivable upon the conversion of Series A Stock had such
reorganization, reclassification, consolidation, merger or sale not
taken place, plus all dividends unpaid and accumulated or accrued
thereon to the date of such reorganization, reclassification,
consolidation, merger or sale, and in any such case appropriate
provisions shall be made with respect to the rights and interests of
the holders of Series A Stock to the end that the provisions hereof
(including without limitation provisions for adjustments of the
Conversion Ratio) shall thereafter be applicable, as nearly as may
be in relation to any shares of stock, securities or assets
thereafter receivable upon conversion of Series A Stock. The
corporation shall not effect any such consolidation, merger or sale,
unless prior to the consummation thereof the successor corporation
(if other than the corporation) resulting from such consolidation or
merger or the corporation purchasing such assets shall assume by
written instrument executed and mailed to the holders appearing on
the books of the corporation, the obligation to deliver to such
holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to
receive.
(f) Definition of Common Stock. As used herein the term "Common Stock"
shall mean and include the corporation's presently authorized Common
Stock, par value $.01 per share, and shall also include any capital stock
of any class of the corporation hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or
winding up of the corporation; provided that the shares receivable
pursuant to conversion of shares of Series A Stock shall include shares
designated as Common Stock of the corporation as of the date of issuance
of such shares of Series A Stock, or, in case of any reclassification of
the outstanding shares thereof, the stock, securities or assets provided
for above.
(g) No Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion. Instead of any fraction of a share which would
otherwise be issuable, the corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction
multiplied by $10.00, the product of which shall be divided by the
Conversion Ratio.
(h) Notice of Noncash Dividends, Stock Purchase Rights, Capital
Reorganization and Dissolutions. In case:
(1) the corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend, or
any other distribution, payable otherwise than in cash; or
(2) the corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to subscribe for or purchase
any shares of stock of any class or to receive any other rights; or
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(3) of any capital reorganization of the corporation,
reclassification of the capital stock of the corporation (other than
a subdivision or combination of its outstanding shares of Common
Stock), consolidation or merger of the corporation with or into
another corporation or conveyance of all or substantially all of the
assets of the corporation to another corporation (in each case,
other than to a subsidiary of the corporation); or
(4) of the voluntary or involuntary dissolution, liquidation or
winding up of the corporation;
then, in any such case, the corporation shall cause to be mailed to the
holders of the Series A Stock at the address maintained in the register of
holders of Series A Stock by the corporation or its transfer agent, at
least ten days prior to the date hereinafter specified, a notice stating
the date on which (i) a record is to be taken for the purpose of such
dividend, distribution or rights, or (ii) such reclassification,
reorganization, consolidation, merger, conveyance, dissolution,
liquidation or winding up is to take place and the date, if any is to be
fixed, as of which holders Series A Stock of record shall be entitled to
exchange their shares of for securities or other property deliverable upon
such reclassification, reorganization, consolidation, merger conveyance,
dissolution, liquidation or winding up.
ARTICLE 4 - RIGHTS OF SHAREHOLDERS
4.1) No Preemptive Rights. No shares of any class or series of the
corporation shall entitle the holders to any preemptive rights to
subscribe for or purchase additional shares of that class or series or any
other class or series of the corporation now or hereafter authorized or
issued.
4.2) No Cumulative Voting Rights. There shall be no cumulative voting by
the shareholders of the corporation.
ARTICLE 5 - MERGER, EXCHANGE, SALE OF ASSETS AND DISSOLUTION
5.1) Where approval of shareholders is required by law, the affirmative
vote of the holders of at least a majority of the voting power of all
shares entitled to vote shall be required to authorize the corporation (i)
to merge into or with one or more other corporations, (ii) to exchange its
shares for shares of one or more other corporations, (iii) to sell, lease,
transfer or otherwise dispose of all or substantially all of its property
and assets, including its good will, or (iv) to commence voluntary
dissolution.
ARTICLE 6 - AMENDMENT OF ARTICLES OF INCORPORATION
6.1) After the issuance of shares by the corporation, any provision
contained in these Articles of Incorporation may be amended, altered,
changed or repealed by the affirmative vote of the holders of at least a
majority of the voting power of the shares present and entitled to vote at
a duly held meeting or such greater percentage as may be otherwise
prescribed by the laws of the State of Minnesota.
ARTICLE 7 - LIMITATION OF DIRECTOR LIABILITY
7.1) To the fullest extent permitted by Chapter 302A, Minnesota Statutes,
as the same exists or may hereafter be amended, a director of this
corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a
director.
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CERTIFICATE OF DESIGNATION
OF
RIGHTS AND PREFERENCES
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
CORVU CORPORATION
1. Designation. The series of Preferred Stock is hereby designated Series
B Convertible Preferred Stock (the "Series B Preferred Stock").
2. Authorized Shares. The number of authorized shares constituting the
Series B Preferred Stock shall be 600,000 shares of such series, with a par
value of $0.01 per share.
3. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation"), the holders of
the Series B Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock by reason of their ownership
thereof, an amount equal to $1.00 per share of Series B Preferred Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) (the "Series B Liquidation Value"). If, upon the occurrence of such a
Liquidation, the assets and funds thus distributed among the holders of the
Series B Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amount, then the entire assets and
funds of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Series B Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(b) After payment to the holders of the Series B Preferred Stock of the
amounts set forth in Section 3(a) above, the entire remaining assets and funds
of the Corporation legally available for distribution, if any, shall be
distributed among the holders of the Common Stock and the Series B Preferred
Stock in proportion to the shares of Common Stock then held by them and the
shares of Common Stock that they then have the right to acquire upon conversion
of the shares of Series B Preferred Stock then held by them.
(c) For purposes of this Section 3, (i) an acquisition of the Corporation
by means of merger or other form of corporate reorganization in which
outstanding shares of the Corporation are exchanged for securities or other
consideration issued, or caused to be issued, by another entity (other than a
mere reincorporation transaction) and in which the shareholders of the
Corporation immediately prior to such transaction do not own a majority of the
outstanding voting securities of the surviving or acquiring entity immediately
following such transaction; or (ii) a sale of all or substantially all of the
assets of the Corporation (collectively, a "Change of Control"), shall be
treated as a Liquidation and shall entitle the holders of Series B Preferred
Stock to receive at the closing of such transaction in cash, securities or other
property (valued as provided in Section 3(d)) below) amounts as specified in
Sections 3(a) and 3(b) above. The Corporation will provide each holder of shares
of Series B Preferred Stock with at least thirty (30) days' advance written
notice of the closing of a Change of Control.
(d) Whenever the distribution provided for in this Section 3 shall be
payable in securities or property other than cash, the amount of such
distribution shall be determined based upon the fair market value of such
securities or other property as determined in good faith by the Board of
Directors.
4. Voting Rights. Each holder of shares of the Series B Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such shares of Series B Preferred Stock could be converted and
shall have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any shareholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series B Preferred Stock held by each holder could
be converted) shall be rounded downwards to the nearest whole number. Each
holder of Common Stock shall be entitled to one (1) vote for each share of
Common Stock held.
5. Dividends. The holders of the shares of Series B Preferred Stock shall
be entitled to receive, when and as declared by the Board of Directors,
quarterly dividends of 1.5 (cent) per share, payable as of the first business
day of a calendar year quarter (the "Valuation Date") for the previous calendar
year quarter; the dividend payment of 1.5 (cent) shall be reduced accordingly if
the preceding dividend period was less than one entire calendar year quarter.
The dividends shall be payable in the sole discretion of the Board of Directors
(i) in cash out of legally available funds or (ii) in a fraction of one share of
Common Stock, the numerator of which shall be one and the denominator of which
shall be the Fair Market Value (as defined below) of one share of Common Stock
as of the Valuation Date divided by 1.5 (cent). Such dividends shall be payable
before any dividends shall be paid upon, or set apart for, the Common Stock and
shall be cumulative, so that if in any quarterly dividend period, dividends at
the rate of 1.5 (cent) per share shall not have been paid upon or set apart for
the Series B Preferred Stock, the deficiency (but without interest) shall be
fully paid or set apart for payment before any dividends shall be paid upon or
set apart for the Common Stock. For purposes of this Section 5, "Fair Market
Value" shall mean the following: (i) if the Common Stock is then listed on a
national stock exchange, the closing sale price of one share of Common Stock on
such exchange on the last trading day prior to the Valuation Date; (ii) if the
Common Stock is then quoted on The Nasdaq Stock Market, Inc. ("Nasdaq") or on
the OTC Bulletin Board, the closing sale price of one share of Common Stock on
Nasdaq or the OTC Bulletin Board on the last trading day prior to the Valuation
Date or, if no such closing sale price is available, the average of the high bid
and the low asked price quoted on Nasdaq or the OTC Bulletin Board on the last
trading day prior to the Valuation Date; or (iii) if the Common Stock is not
then listed on a national stock exchange or quoted on Nasdaq or the OTC Bulletin
Board, the fair market value of one share of Common Stock as of the Valuation
Date shall be determined in good faith by the Board of Directors of the Company.
6. Conversion. The holders of Series B Preferred Stock shall have the
following conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $1.00 by the Conversion Price (as
defined below) applicable to such share in effect on the date the certificate is
surrendered for conversion. The option of a holder of Series B Preferred Stock
to convert such holder's shares of Series B Preferred Stock into shares of
Common Stock shall terminate immediately prior to the closing of a Change of
Control referred to in Section 3(c) above; provided, that notice of such Change
of Control has been provided to such holder as provided herein. The price at
which shares of Common Stock shall be deliverable upon conversion of shares of
the Series B Preferred Stock (the "Conversion Price") shall initially be $0.30
per share of Common Stock. Such initial Conversion Price shall be adjusted as
hereinafter provided.
(b) Mechanics of Conversion. Before any holder of Series B Preferred Stock
shall be entitled to convert the same into shares of Common Stock, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for such stock, and shall
give written notice to the Corporation at such office that such holder elects to
convert the same and shall state therein the name or names in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
The Corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Series B Preferred Stock a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of surrender of the
shares of Series B Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date. If the conversion is in connection with an
underwritten offering of securities pursuant to the Securities Act or a Change
of Control, the conversion may, at the option of any holder tendering shares of
Series B Preferred Stock for conversion, be conditioned upon the closing of such
offering or Change of Control, in which event the person(s) entitled to receive
the Common Stock upon conversion of the Series B Preferred Stock shall not be
deemed to have converted such Series B Preferred Stock until immediately prior
to such closing.
(c) Adjustments to Conversion Prices for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that this Corporation
at any time or from time to time after the Original Issue Date shall declare or
pay, without consideration, any dividend on the Common Stock payable in Common
Stock or in any right to acquire Common Stock for no consideration, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or otherwise
than by payment of a dividend in Common Stock or in any right to acquire Common
Stock), or in the event the outstanding shares of Common Stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, then the Conversion Price for any series of Preferred
Stock in effect immediately prior to such event shall, concurrently with the
effectiveness of such event, be proportionately decreased or increased, as
appropriate. In the event that this Corporation shall declare or pay, without
consideration, any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration, then the Corporation shall be deemed to have
made a dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to acquire Common
Stock.
(d) Adjustments for Reclassification and Reorganization. If the Common
Stock issuable upon conversion of the Series B Preferred Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares provided for in Section 6(c) above
or a merger or other reorganization referred to in Section 6(b) above), the
Conversion Price then in effect shall, concurrently with the effectiveness of
such reorganization or reclassification, be proportionately adjusted so that the
Series B Preferred Stock shall be convertible into, in lieu of the number of
shares of Common Stock which the holders would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock equivalent
to the number of shares of Common Stock that would have been subject to receipt
by the holders upon conversion of the Series B Preferred Stock immediately
before that change.
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(e) No Impairment. The Corporation will not, by amendment of its Articles
of Incorporation or Certificate of Designations 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 to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 6 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series B Preferred Stock against impairment.
(f) Certificates as to Adjustments. Upon the occurrence of each adjustment
or readjustment of any Conversion Price, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Series B Preferred Stock a
certificate executed by the Corporation's President or Chief Financial Officer
setting forth (i) such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based; (ii) the Conversion
Price for such series of Preferred Stock at the time in effect; and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of the Series B Preferred
Stock.
(g) Notices of Record Date. In the event that the Corporation shall
propose at any time: (i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus; (ii)
to offer for subscription pro rata to the holders of any class or series of its
stock any additional shares of stock of any class or series or other rights;
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock; or (iv) to merge or
consolidate with or into any other corporation, or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up; then, in
connection with each such event, the Corporation shall send to the holders of
Series B Preferred Stock:
(i) at least thirty (30) days' prior written notice of the date on
which a record shall be taken for such dividend, distribution or subscription
rights (which notice shall specify the date on which the holders of Common Stock
shall be entitled thereto and shall describe the amount and nature of such
dividend, distribution or subscription rights) or for determining rights to
vote, if any, in respect of the matters referred to in (iii) and (iv) above; and
(ii) in the case of the matters referred to in (iii) and (iv) above, at
least thirty (30) days' prior written notice of the date when the closing of the
same shall take place (which notice shall specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon the occurrence of such event and shall
describe the amount and nature of such securities or other property).
(h) Issue Taxes. The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series B Preferred Stock pursuant hereto;
provided, however, that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in connection
with any such conversion.
(i) Reservation of Stock Issuable Upon Conversion. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series B Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series B
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain the
requisite shareholder approval of any necessary amendment to this Certificate of
Designations or the Corporation's Articles of Incorporation.
(j) Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series B Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series B Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors).
3
(k) Notices. Any notice required by the provisions of this Section 5 to be
given to the holders of shares of Series B Preferred Stock shall be deemed given
if deposited in the United States mail, with appropriate postage prepaid, or if
sent by facsimile or delivered personally by hand or nationally recognized
courier and addressed to each holder of record at such holder's address or
facsimile number appearing in the records of the Corporation.
(l) Unpaid Dividends. Any declared but unpaid dividends on shares of
Series B Preferred Stock that are converted into shares of Common Stock shall be
paid in cash on the date of such conversion.
7. Restrictions and Limitations. So long as shares of Series B Preferred
Stock remain outstanding, the Corporation shall not, without the vote or written
consent by the holders of a majority of the then-outstanding shares of the
Series B Preferred Stock, voting as a single class:
(a) Effect any sale, lease, assignment, transfer, or other conveyance of
all or substantially all of the assets of the Corporation or any of its
subsidiaries, or any consolidation or merger involving the Corporation or any of
its subsidiaries (other than one in which the holders of capital stock of the
Corporation immediately prior to such merger or consolidation continues to hold
in excess of 50% by voting power of the surviving or acquiring corporation);
(b) Alter or change the rights, preferences, privileges or powers of, or
the restrictions provided for the benefit of, the Series B Preferred Stock;
(c) Increase or decrease (other than by redemption or conversion) the
total number of authorized shares of Series B Preferred Stock;
(d) Authorize or issue, or obligate itself to issue, or otherwise create
(including by reclassification) any other equity security (including any
security convertible into or exercisable for any equity security) on a parity
with or senior to the Series B Preferred Stock as to dividend rights or
redemption rights or liquidation preferences; and
(e) Amend its Articles of Incorporation or Bylaws if such amendment would
alter or change the rights, preferences, privileges or powers of, or the
restrictions provided for the benefit of, the Series B Preferred.
8. No Reissuance of Series B Preferred Stock. No share or shares of Series
B Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares that the Corporation shall be
authorized to issue.
4
CORVU CORPORATION
STATEMENT OF DESIGNATION
OF
RIGHTS, PREFERENCES AND LIMITATIONS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
The undersigned, David C. Carlson, the Chief Financial Officer of CorVu
Corporation, a Minnesota corporation (the "Corporation"), hereby certifies that
the following resolutions establishing Series C Convertible Preferred Stock of
the Corporation pursuant to Minnesota Statutes Section 302A.401 were duly
adopted by the board of directors of the Corporation in its meeting on February
11, 2005 pursuant to Minnesota Statutes Section 302A.239:
"NOW, THEREFORE, RESOLVED, that the Board approves the designation
of 17,000 shares of its undesignated stock as Series C Convertible
Preferred Stock ("Series C Preferred Stock"), with a par value of $100.00
per share, that are convertible into 3,400,000 shares of Common Stock at a
conversion price of $0.50.
FURTHER RESOLVED, that 3,400,000 shares of Common Stock be reserved
for issuance upon conversion of the Series C Preferred Stock.
FURTHER RESOLVED, that the Board adopt the Certificate of
Designation of Rights and Preferences of Series C Preferred Stock of CorVu
Corporation, attached hereto as Exhibit A, and incorporated by reference
herein."
IN WITNESS WHEREOF, the undersigned has signed this statement on February
11, 2005.
/s/ David C. Carlson
--------------------
David C. Carlson, Chief Financial Officer
EXHIBIT A
CERTIFICATE OF DESIGNATION
OF
RIGHTS AND PREFERENCES
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
CORVU CORPORATION
1. Designation. The series of Preferred Stock is hereby designated Series
C Convertible Preferred Stock (the "SERIES C PREFERRED STOCK").
2. Authorized Shares. The number of authorized shares constituting the
Series C Preferred Stock shall be 17,000 shares of such series, with a par value
of $100.00 per share.
3. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary (a "LIQUIDATION"), the holders
of the Series C Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock or Series B Convertible Preferred
Stock, par value $.01 per share (the "SERIES B PREFERRED STOCK"), or any other
Preferred Stock by reason of their ownership thereof, an amount equal to $150.00
per share of Series C Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) (the "SERIES C LIQUIDATION
VALUE"). If, upon the occurrence of such a Liquidation, the assets and funds
thus distributed among the holders of the Series C Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series C Preferred Stock in proportion to the preferential amount each such
holder is otherwise entitled to receive.
(b) After payment to the holders of the Series C Preferred Stock of
the amounts set forth in Section 3(a) above, the holders of the Series B
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the remaining assets or surplus funds of the Corporation
to the holders of the Common Stock by reason of their ownership thereof, an
amount equal to $1.00 per share of Series B Preferred Stock (as adjusted for any
stock dividends, combinations or splits with respect to such shares) (the
"SERIES B LIQUIDATION VALUE"). If, upon the occurrence of such a Liquidation,
the assets and funds thus distributed among the holders of the Series B
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amount, then the entire remaining assets and
funds of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Series B Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(c) After payment to the holders of the Series C Preferred Stock of
the amounts set forth in Section 3(a) above and to the holders of the Series B
Preferred Stock of the amounts set forth in Section 3(b) above, the holders of
the Series A Convertible Preferred Stock (the "SERIES A PREFERRED STOCK") shall
be entitled to receive, prior and in preference to any distribution of any of
the remaining assets or surplus funds of the Corporation to the holders of the
Common Stock by reason of their ownership thereof, an amount equal to $10.00 per
share of Series A Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) (the "SERIES A LIQUIDATION
VALUE"). If, upon the occurrence of such a Liquidation, the assets and funds
thus distributed among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire remaining assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(d) After payment to the holders of the Series C Preferred Stock of
the amounts set forth in Section 3(a) above and to the holders of the Series B
Preferred Stock of the amounts set forth in Section 3(b) above and to the holder
of Series A Preferred Stock of the amounts set forth in Section 3(c) above, the
entire remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the Common
Stock, the Series C Preferred Stock and the Series B Preferrd Stock in
proportion to the shares of Common Stock then held by them and the shares of
Common Stock that they then have the right to acquire upon conversion of the
shares of Series C Preferred Stock or Series B Preferred Stock, respectively,
then held by them.
(d) For purposes of this Section 3, (i) an acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by another entity (other
than a mere reincorporation transaction) and in which the shareholders of the
Corporation immediately prior to such transaction do not own a majority of the
outstanding voting securities of the surviving or acquiring entity immediately
following such transaction; (ii) a sale of all or substantially all of the
assets of the Corporation; or (iii) the acquisition of at least fifty percent of
the shares of the Corporation providing voting power or an interest in the
Corporation by a single person or a group as defined in Rule 13d-1(b)(1)(J)
(each, a "CHANGE OF CONTROL"), shall be treated as a Liquidation and shall
entitle the holders of Series C Preferred Stock to receive at the closing of
such transaction in cash, securities or other property (valued as provided in
Section 3(e) below) amounts as specified in Section 3(a) above. The Corporation
will provide each holder of shares of Series C Preferred Stock with at least
thirty (30) days' advance written notice of the closing of a Change of Control.
6
(e) Whenever a distribution provided for in this Section 3 shall be
payable in securities or property other than cash, the amount of such
distribution shall be determined based upon the fair market value of such
securities or other property as unanimously determined in good faith by the
Board of Directors.
4. Voting Rights. Each holder of shares of the Series C Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such shares of Series C Preferred Stock could be converted and
shall have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any shareholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series C Preferred Stock held by each holder could
be converted) shall be rounded downwards to the nearest whole number. Each
holder of Common Stock shall be entitled to one (1) vote for each share of
Common Stock held.
5. Dividends.
(a) Payment of Dividend. The holders of the shares of Series C
Preferred Stock shall receive, on a quarterly basis, dividends at a rate of 6%
per annum per share during the first year of issuance, 9% per annum per share
during the second year of issuance and 12% per annum per share thereafter,
payable as of the first business day of a calendar year quarter (the "Valuation
Date") for the previous calendar year quarter; the dividend payment shall be
reduced accordingly if the preceding dividend period was less than one entire
calendar year quarter. The dividends shall be payable in cash out of legally
available funds. Such dividends shall be payable before any dividends shall be
paid upon, or set apart for, the Series B Preferred Stock, the Common Stock or
any other Preferred Stock and shall be cumulative, so that if in any quarterly
dividend period, dividends shall not have been paid upon or set apart for the
Series C Preferred Stock, the deficiency (but without interest) shall be fully
paid or set apart for payment before any dividends shall be paid upon or set
apart for the Series B Preferred Stock, Common Stock or any other Preferred
Stock.
(b) Failure to Pay Dividend Amounts. In the event the Corporation
fails to pay any holder of Series C Preferred Stock a dividend pursuant to
Section 5(a) above within fifteen (15) days from the end of the applicable
quarterly period, each holder of Series C Preferred Stock shall have the right
to notify the Corporation that such holder will require the Corporation to
convert the outstanding dividend amount into shares of Common Stock (the
"CONVERSION NOTICE"). If the Corporation fails to pay to such holder the
outstanding dividend amount within fifteen (15) days after the date of the
Conversion Notice, then the Corporation shall issue immediately to such holder,
in lieu of the outstanding dividend amount, the number of shares of Common Stock
of the Corporation equal to the quotient of the outstanding dividend amount
divided by the volume-weighted average closing price of the Common Stock of the
Corporation during the twenty-day period beginning on the day of the Conversion
Notice.
6. Conversion. The holders of Series C Preferred Stock shall have the
following conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each share of Series C Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the date
of issuance of such share into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing $100.00 by the Conversion
Price (as defined below) applicable to such share in effect on the date the
certificate is surrendered for conversion. The option of a holder of Series C
Preferred Stock to convert such holder's shares of Series C Preferred Stock into
shares of Common Stock shall terminate immediately prior to the closing of a
Change of Control referred to in Section 3(d) above; provided, that notice of
such Change of Control has been provided to such holder as provided herein. The
price at which shares of Common Stock shall be deliverable upon conversion of
shares of the Series C Preferred Stock (the "CONVERSION PRICE") shall initially
be $0.50 per share of Common Stock. Such initial Conversion Price shall be
adjusted as hereinafter provided.
(b) Mechanics of Conversion. Before any holder of Series C Preferred
Stock shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for such stock, and
shall give written notice to the Corporation at such office that such holder
elects to convert the same and shall state therein the name or names in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series C Preferred Stock a certificate
or certificates for the number of shares of Common Stock to which such holder
7
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of surrender of the
shares of Series C Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date. If the conversion is in connection with an
underwritten offering of securities pursuant to the Securities Act or a Change
of Control, the conversion may, at the option of any holder tendering shares of
Series C Preferred Stock for conversion, be conditioned upon the closing of such
offering or Change of Control, in which event the person(s) entitled to receive
the Common Stock upon conversion of the Series C Preferred Stock shall not be
deemed to have converted such Series C Preferred Stock until immediately prior
to such closing.
(c) Adjustments to Conversion Prices for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that the Corporation
at any time or from time to time after the February 11, 2005 (the "Issue Date")
shall declare or pay, without consideration, any dividend on the Common Stock
payable in Common Stock or in any right to acquire Common Stock for no
consideration, or shall effect a subdivision of the outstanding shares of Common
Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Conversion
Price for any series of Preferred Stock in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that this
Corporation shall declare or pay, without consideration, any dividend on the
Common Stock payable in any right to acquire Common Stock for no consideration,
then the Corporation shall be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Common Stock.
(d) Adjustments for Reclassification and Reorganization. If the
Common Stock issuable upon conversion of the Series C Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for in
Section 6(c) above or a merger or other reorganization referred to in Section
6(b) above), the Conversion Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Series C Preferred Stock shall be convertible into, in lieu
of the number of shares of Common Stock which the holders would otherwise have
been entitled to receive, a number of shares of such other class or classes of
stock equivalent to the number of shares of Common Stock that would have been
subject to receipt by the holders upon conversion of the Series C Preferred
Stock immediately before that change.
(e) Adjustments to Conversion Price.
(i) If, at any time or from time to time after the Issue Date,
the Corporation issues or sells, or is deemed by the express provisions of
this subsection 6(e)(i) to have issued or sold, Additional Shares of
Common Stock (as defined in subsection 6(e)(iv) below), other than as a
dividend or other distribution on any class of capital stock, and other
than a subdivision or combination of shares of Common Stock as provided in
subsection 6(c) or (d) above, for an Effective Price (as defined in
subsection 6(e)(iv) below) which shall be less than the per share purchase
price of any shares of Series C Preferred Stock previously sold on an
adjusted basis, the Conversion Price and the Common Stock issued upon
conversion shall, as applicable, be adjusted so that the Conversion Price
and the Common Stock issued upon conversion shall be adjusted to reflect
the lowest per-share sale price of any Additional Shares of Common Stock.
(ii) For the purpose of making any adjustment required under
this Section 6(e), the consideration received by the Corporation for any
issue or sale of securities shall (A) to the extent it consists of cash,
be computed at the net amount of cash received by the Corporation after
deduction of any underwriting or similar commissions, compensation or
concessions paid or allowed by the Corporation in connection with such
issue or sale but without deduction of any expenses payable by the
Corporation, (B) to the extent it consists of property other than cash, be
computed at the fair value of that property as determined in good faith by
the Board of Directors, and (C) if Additional Shares of Common Stock or
Common Stock Equivalents (as defined in subsection 6(e)(iii) below) are
issued or sold together with other stock or securities or other assets of
the Corporation for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined
in good faith by the Board of Directors to be allocable to such Additional
Shares of Common Stock or Common Stock Equivalents.
(iii) For the purpose of the adjustment required under this
Section 6(e), if the Corporation issues or sells any securities of the
Corporation or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at
any time convertible into or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock (collectively, "Common Stock
Equivalents") for the purchase of Additional Shares of Common Stock or
Common Stock Equivalents, and if the Effective Price of such Additional
Shares of Common Stock shall be less than the per share purchase price of
the Series C Preferred Stock previously sold on an adjusted basis, in each
case the Corporation shall be deemed to have issued at the time of the
issuance of such Common Stock Equivalents the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to
have received as consideration for the issuance of such shares an amount
equal to the total amount of the consideration, if any, received by the
Corporation for the issuance of such Common Stock Equivalents, plus the
minimum amounts of consideration, if any, payable to the Corporation
(other than by cancellation of liabilities or obligations evidenced by
such Common Stock Equivalents) upon the conversion thereof; provided that
if in the case of Common Stock Equivalents the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, the Corporation shall be deemed to have
received the minimum amounts of consideration without reference to such
clauses; provided further that if the minimum amount of consideration
payable to the Corporation upon the exercise or conversion of Common Stock
Equivalents is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the
Effective Price shall be recalculated using the figure to which such
minimum amount of consideration is reduced; provided further that if the
minimum amount of consideration payable to the Corporation upon the
exercise or conversion of such Common Stock Equivalents is subsequently
increased, the Effective Price shall be again recalculated using the
increased minimum amount of consideration payable to the Corporation upon
the exercise or conversion of such Common Stock Equivalents. No further
adjustment of the Conversion Price, as adjusted upon the issuance of such
Common Stock Equivalents, shall be made as a result of the actual issuance
of Additional Shares of Common Stock on the exercise of any such
conversion of any such Common Stock Equivalents. If any such conversion
privilege represented by any such Common Stock Equivalents shall expire
without having been exercised, the Conversion Price as adjusted upon the
issuance of such Common Stock Equivalents shall be readjusted to the
Conversion Price which would have been in effect had an adjustment been
made on the basis that the only Additional Shares of Common Stock so
issued were the Additional Shares of Common Stock, if any, actually issued
or sold on the exercise of such rights of conversion of such Common Stock
Equivalents, and such Additional Shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Corporation
upon such exercise, plus the consideration received for issuing or selling
the Common Stock Equivalents actually converted, plus the consideration,
if any, actually received by the Corporation (other than by cancellation
of liabilities or obligations evidenced by such Common Stock Equivalents)
on the conversion of such Common Stock Equivalents, provided that such
readjustment shall not apply to prior conversions of Series C Preferred
Stock.
8
(iv) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued by the Corporation or deemed to be issued pursuant
to this Section 6(e), whether or not subsequently reacquired or retired by
the Corporation; provided, that Additional Shares of Common Stock shall
not include or be deemed to include any of the following issuances (the
"Exempt Issuances") of securities: (a) shares of Common Stock or options
to employees, officers or directors of the Corporation pursuant to any
stock or option plan duly adopted by a majority of the non-employee
members of the Board of Directors or a majority of the members of a
committee of non-employee directors established for such purpose, (b)
securities upon the exercise of or conversion of any Common Stock
Equivalents, options or warrants issued and outstanding on December 20,
2004, provided that such securities have not been amended since the Issue
Date, (c) issuances in connection with mergers, acquisitions, joint
ventures or other transactions with an unrelated third party in a bona
fide transaction the purpose of which is not fundraising, (d) issuances at
fair market value to the Corporation's suppliers, consultants and other
providers of services and goods not to exceed $100,000 to any one person,
and not to exceed an aggregate of $250,000 in any fiscal year without the
unanimous prior written consent of the holders of the Series C Preferred
Stock, or (e) issuances of options to Justin MacIntosh at the then fair
market value in replacement of options held by him on the Issue Date upon
their expiration and issuances of shares of Common Stock upon exercise of
any such Replacement Options, provided, that such Replacement Options have
been issued in accordance with the Corporation's then existing stock
option plan and approved by a majority of the non-employee members of the
Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose.
(v) The "Effective Price" of Additional Shares of Common Stock
shall mean the quotient determined by dividing the total number of
Additional Shares of Common Stock issued or sold, or deemed to have been
issued or sold by the Corporation under this Section 6(e), into the
aggregate consideration received, or deemed to have been received by the
Corporation for such issue under this Section 6(e), for such Additional
Shares of Common Stock.
(f) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or Certificate of Designations 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 to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 6 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series C Preferred Stock against
impairment.
9
(g) Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of any Conversion Price, the Corporation at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series C
Preferred Stock a certificate executed by the Corporation's President or Chief
Financial Officer setting forth (i) such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based; (ii)
the Conversion Price for such series of Preferred Stock at the time in effect;
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of the Series C
Preferred Stock.
(h) Notices of Record Date. In the event that the Corporation shall
propose at any time: (i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus; (ii)
to offer for subscription pro rata to the holders of any class or series of its
stock any additional shares of stock of any class or series or other rights;
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock; or (iv) to merge or
consolidate with or into any other corporation, or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up; then, in
connection with each such event, the Corporation shall send to the holders of
Series C Preferred Stock:
(i) at least thirty (30) days' prior written notice of the
date on which a record shall be taken for such dividend, distribution or
subscription rights (which notice shall specify the date on which the holders of
Common Stock shall be entitled thereto and shall describe the amount and nature
of such dividend, distribution or subscription rights) or for determining rights
to vote, if any, in respect of the matters referred to in (iii) and (iv) above;
and
(ii) in the case of the matters referred to in (iii) and (iv)
above, at least thirty (30) days' prior written notice of the date when the
closing of the same shall take place (which notice shall specify the date on
which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon the occurrence of such
event and shall describe the amount and nature of such securities or other
property).
(h) Issue Taxes. The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series C Preferred Stock pursuant hereto;
provided, however, that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in connection
with any such conversion.
(i) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series C Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series C Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series C
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain the
requisite shareholder approval of any necessary amendment to this Certificate of
Designations or the Corporation's Articles of Incorporation.
(j) Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series C Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series C Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors).
(k) Notices. Any notice required by the provisions of this Section 6
to be given to the holders of shares of Series C Preferred Stock shall be deemed
given if deposited in the United States mail, with appropriate postage prepaid,
or if sent by facsimile or delivered personally by hand or nationally recognized
courier and addressed to each holder of record at such holder's address or
facsimile number appearing in the records of the Corporation.
7. Redemption.
(a) Right to Redeem. The Corporation may, to the extent that funds
are legally available therefor, redeem the Series C Preferred Stock any time, in
its sole discretion, upon ten (10) days' prior written notice to the holders of
Series C Preferred Stock, at a price of $100 per share. In addition, the value
of earned and unpaid dividends will be added to the redemption price.
10
(b) Obligation to Redeem. The Corporation shall be obligated to use
one hundred percent (100%) of any proceeds that the Corporation receives for the
issuance of shares of Common Stock or Preferred Stock or of any debt security to
redeem shares of Series C Preferred Stock at a price of $100 per share, plus the
value of earned and unpaid dividends; provided, that the Corporation shall not
be obligated to use any proceeds received in connection with any Exempt
Issuances. In addition, upon any event of default under that certain Secured
Promissory Note issued to ComVest Investment Partners II LLC, the Corporation
shall be obligated to redeem all of the then-outstanding shares of Series C
Preferred Stock at a price of $100 per share, plus the value of earned and
unpaid dividends.
(c) Pro-rata Redemption. In the event of a redemption of less than
all of the outstanding shares of Series C Preferred Stock, redemptions as among
the holders of such shares of Series C Preferred Stock shall be on a pro rata
basis.
(d) Mechanics of Redemption. The Corporation shall give notice by
mail of redemptions to the holders of record of the shares of Series C Preferred
Stock at least ten (10) business days prior to the date of redemption. The
notice shall (i) specify the date of redemption and the number of shares to be
redeemed from each shareholder and (ii) be addressed to each holder at the
holder's post office address as shown on the records of the Corporation. On or
after the date fixed for redemption, each holder of shares of Series C Preferred
Stock called for redemption shall surrender the certificate or certificates
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment. If less than all of the
certificates are redeemed, the Corporation shall issue a new certificate for the
unredeemed shares.
(e) Failure to Pay Redemption Amounts. If the Corporation fails to
pay the applicable redemption amount pursuant to Section 7(b) above within five
(5) business days of written notice that such amount is due and payable, then,
in addition to all other available remedies, each holder of Series C Preferred
Stock shall have the right at any time, so long as the mandatory redemption
event continues, to require the Corporation, upon written notice, to immediately
issue, in lieu of the mandatory redemption amount payable in accordance with
Section 7(b), such number of shares of Common Stock of the Corporation equal to
such applicable redemption amount divided by lesser of (i) Conversion Price then
in effect and (ii) the closing price of the Common Stock of the Corporation on
the date of such notice from such holder of Series C Preferred Stock.
8. Restrictions and Limitations. So long as shares of Series C Preferred
Stock remain outstanding, the Corporation shall not, without the vote or written
consent by the holders of a majority of the then-outstanding shares of the
Series C Preferred Stock, voting as a single class:
(a) Effect any sale, lease, assignment, transfer, or other
conveyance of all or substantially all of the assets of the Corporation or any
of its subsidiaries, or any consolidation or merger involving the Corporation or
any of its subsidiaries (other than one in which the holders of capital stock of
the Corporation immediately prior to such merger or consolidation continues to
hold in excess of 50% by voting power of the surviving or acquiring
corporation);
(b) Alter or change the rights, preferences, privileges or powers
of, or the restrictions provided for the benefit of, the Series C Preferred
Stock;
(c) Increase or decrease (other than by redemption or conversion)
the total number of authorized shares of Series C Preferred Stock;
(d) Authorize or issue, or obligate itself to issue, or otherwise
create (including by reclassification) any other equity security (including any
security convertible into or exercisable for any equity security) on a parity
with or senior to the Series C Preferred Stock as to liquidation preferences,
voting rights, dividend rights or redemption rights; and
(e) Amend its Articles of Incorporation or Bylaws if such amendment
would alter or change the rights, preferences, privileges or powers of, or the
restrictions provided for the benefit of, the Series C Preferred.
9. No Reissuance of Series C Preferred Stock. No share or shares of Series
C Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled and restored to the shares that the Corporation shall be authorized to
issue.
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