Articles of Incorporation - University Group Inc.
ARTICLES OF INCORPORATION
OF
UNIVERSITY GROUP, INC
To form a Minnesota business corporation under and pursuant to the
Minnesota Business Corporation Act, the following Articles of Incorporation are
adopted:
ARTICLE 1. NAME
The name of the Corporation is University Group, Inc.
ARTICLE 2. REGISTERED OFFICE
The address of the registered office of the corporation is
Interchange North Building, Suite 500, 300 South Highway 169, St. Louis Park,
Minnesota 55426.
ARTICLE 3. AUTHORIZED SHARES
The aggregate number of authorized common shares of the Corporation
is five (5) million, of par value of $.10 per share.
ARTICLE 4. INCORPORATOR
The name and address of the incorporator, who is a natural person of
full age, are:
William R Hibbs, Esq.
c/o Dorsey & Whitney
2200 First Bank Place East
Minneapolis, Minnesota 55402
ARTICLE 5. CUMULATIVE VOTING
There shall be no cumulative voting by shareholders of the
Corporation.
ARTICLE 6. PREEMPTIVE RIGHTS
The shareholders of the Corporation shall not have any preemptive
rights to subscribe for or acquire securities or rights to purchase securities
of any class, kind, or series of the Corporation.
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ARTICLE 7. DIRECTOR LIABILITY
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, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its shareholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Sections 302A.559 or 80A.23 of the Minnesota
Statutes; (iv) for any transaction from which the director derived an improper
personal benefit; or (v) for any act or omission occurring prior to the date
when this Article 7 became effective.
If the Minnesota Business Corporation Act is hereafter amended to
authorize any further limitation of the liability of a director, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Minnesota Business Corporation Act, as amended.
Any repeal or modification of the foregoing provisions of the
Article 7 by the shareholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
IN WITNESS WHEREOF, the undersigned, Incorporator for the
Corporation, has executed this document on this 27th day of December, 1991.
/s/ William R. Hibbs
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William R. Hibbs, Esq.
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
On this 27th day of December, 1991, before me, a Notary Public
within and for said county, personally appeared William R. Hibbs, Esq., to me
known to be the person described in and who executed the foregoing instrument.
(Notarial Seal) /s/ Darlene R. Spangler
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Notary Public
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EXHIBIT 3.1
AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION OF
UNIVERSITY GROUP, INC
This Amendment and Restatement has been adopted pursuant to Chapter 302A of the
Minnesota Statutes, the Minnesota Business Corporation Act, and supersedes the
original Articles.
ARTICLE I. NAME
The name of the Corporation is Learn Net, Inc.
ARTICLE II. REGISTERED OFFICE
The address of the registered office of the Corporation is 1400
Northland Plaza, 3800 West 80th Street, Minneapolis, Minnesota 55431.
ARTICLE III. AUTHORIZED SHARES
Section 1. Shares and Classes Authorized
(A) Authorized Capital Stock. The aggregate number of shares which the
Corporation has the authority to issue is twenty-three million (23,000,000)
shares, ten million (10,000,000) of which shall be designated common shares,
$.10 par value (the "Common Shares"), and three million (3,000,000) of which
shall be designated Class A convertible preferred shares, $1.00 par value (the
"Class A Preferred Shares"). The Common Shares and the Class A Preferred Shares
are herein sometimes referred to collectively as "Capital Stock."
(B) Additional Preferred Shares. Additionally, the Board of Directors of
the Corporation is hereby authorized to cause to be issued from time to time, by
resolution or resolutions adopted by such Board, an additional ten million
(10,000,000) preferred shares. The Board is authorized to cause such preferred
shares to be issued in one or more classes and/or series, to establish the
designation and number of shares of each such class or series, and to fix the
relative rights and preferences of the shares of each such class or series, all
to the full extent permitted by Minnesota Statutes, Section 302A.401, or any
successor provision. Without limiting the generality of the foregoing, the Board
of Directors is authorized to provide that shares of a class or series of
preferred stock:
(1) are entitled to cumulative, partially cumulative or
noncumulative dividends or other distributions in payable in cash, capital
stock or indebtedness of the Corporation or other property, at such times
and in such amounts as are set forth in the Board resolutions establishing
such class or series or as are determined in a manner specified in such
resolutions;
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(2) are entitled to a preference with respect to payment of
dividends over one or more other classes and/or series of capital stock of
the Corporation;
(3) are entitled to a preference with respect to any distribution of
assets of the Corporation upon its liquidation, dissolution or winding up
over one or more other classes and/or series of capital stock of the
Corporation in such amount as is set forth in the Board resolutions
establishing such class or series or as is determined in a manner
specified in such resolutions;
(4) are redeemable or exchangeable at the option of the Corporation
and/or on a mandatory basis for cash, capital stock or indebtedness of the
Corporation or other property, at such times or upon the occurrence of
such events, and at such prices, as are set forth in the Board resolutions
establishing such class or series or as are determined in a manner
specified in such resolutions;
(5) are entitled to the benefits of such sinking fund, if any, as is
required to be established by the Corporation for the redemption and/or
purchase of such shares by the Board resolutions establishing such class
or series;
(6) are convertible at the option of the holders thereof into shares
of any other class or series of capital stock of the Corporation, at such
times or upon the occurrence of such events, and upon such terms, as are
set forth in the Board resolutions establishing such class or series or as
are determined in a manner specified in such resolutions;
(7) are exchangeable at the option of the holders thereof for cash,
capital stock or indebtedness of the Corporation or other property, at
such times or upon the occurrence of such events, and at such prices, as
are set forth in the Board resolutions establishing such class or series
or as are determined in a manner specified in such resolutions;
(8) are entitled to such voting rights, if any, as are specified in
the Board resolutions establishing such class or series (including,
without limiting the generality of the foregoing, the right to elect one
or more directors voting alone as a single class or series or together
with one or more other classes and/or series of preferred stock, if so
specified by such Board resolutions) at all times or upon the occurrence
of specified events; and
(9) are subject to restrictions on the issuance of additional shares
of preferred stock of such class or series or of any other class or
series, or on the reissuance of shares of preferred stock of such class or
series or of any other
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class or series, or on increases or decreases in the number of authorized
shares of preferred stock of such class or series or of any other class or
series.
Without limiting the generality of the foregoing authorizations, any of the
rights and preferences of a class or series of preferred stock may be made
dependent upon facts ascertainable outside the Board resolutions establishing
such class or series, and may incorporate by reference some or all of the terms
of any agreements, contracts or other arrangements entered into by the
Corporation in connection with the issuance of such class or series, all to the
full extent permitted by Minnesota Statutes. Unless otherwise specified in the
Board resolutions establishing a class or series of preferred stock, holders of
a class or series of preferred stock shall not be entitled to cumulate their
votes in any election of directors in which they are entitled to vote and shall
not be entitled to any preemptive rights to acquire shares of any class or
series of capital stock of the Corporation.
Section 2. Description of the Capital Stock.
The rights, preferences, privileges and restrictions granted to or imposed
upon the respective classes or series of shares or the holders thereof are as
follows:
(A) Voting Rights.
Each holder of Common Shares shall have one vote on all matters submitted
to the shareholders for each Common Share standing in the name of such holder on
the books of this Corporation. Each holder of Class A Preferred Shares shall
have one vote on all matters submitted to the shareholders for each Common Share
which such holder of Class A Preferred Shares would be entitled to receive upon
the conversion of his Class A Preferred Shares pursuant to the provisions of
Section 2(C)(3). No holder of any shares of Capital Stock shall have any
cumulative voting rights.
(B) Preemptive Rights.
No holders of shares of any class of Capital Stock shall be entitled, as a
matter of right, to subscribe for, purchase or receive any part of any stock of
this Corporation of any class whatsoever, or of securities convertible into or
exchangeable for any stock of any class whatsoever, whether now or hereafter
authorized and whether issued for cash or other consideration or by way of
dividend.
(C) Class A Preferred Shares.
(1) Dividends. Dividends shall be payable on Class A Preferred
Shares out of funds legally available for the declaration of dividends, only if
and when declared by this Corporation's Board of Directors. However, in no event
shall any dividend be paid on any Common Shares unless equal or greater
dividends are paid on the Class A Preferred Shares. Class A Preferred Shares
shall be counted on an
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as-if-converted basis in determining whether dividends paid on the Class A
Preferred Shares are equal to or greater than the dividends paid on the Common
Shares.
(2) Liquidation Right and Preference. In the event of the
liquidation, dissolution or winding up of this Corporation, whether voluntary or
involuntary, the holders of Class A Preferred Shares shall be entitled to
receive in cash, out of the assets of this Corporation, an amount equal to the
par value of each outstanding Preferred Share (that is, $1.00 per share), plus
all accumulated but unpaid dividends, before any payment shall be made or any
assets distributed to the holders of Common Shares or any other class of shares
of this Corporation ranking junior to the Class A Preferred Shares. If, upon any
liquidation, dissolution or winding up of this Corporation, the assets of this
Corporation are insufficient to pay the amounts described in the preceding
sentence, the holders of such Class A Preferred Shares shall share pro rata in
any such distribution in proportion to the full amounts to which they would
otherwise be respectively entitled Following such payment to the holders of
Class A Preferred Shares upon such liquidation, dissolution or winding up of
this Corporation, the holders of Common Shares shall then be entitled, to the
exclusion of the holders of Class A Preferred Shares, to receive in cash or in
kind, all remaining assets of this Corporation, if any.
The merger or consolidation of this Corporation into or with another
corporation or the merger or consolidation of any other corporation into or with
this Corporation (in which consolidation or merger the shareholders of this
Corporation receive any distributions of cash or securities or other property as
a result of such consolidation or merger), or the sale, transfer or other
disposition of all or substantially all of the assets of this Corporation, shall
be deemed to be a liquidation or dissolution of this Corporation for purposes of
this Section 2(C)(2).
(3) Conversion Rights.
(a) Optional Conversion. At the option of the holder thereof, all
Class A Preferred Shares then held by such holder shall be convertible
into Common Shares of this Corporation in accordance with the provisions
and subject to the adjustments provided for in Section 2(C)(3)(b);
provided, however, that each Class A Preferred Share called for redemption
by this Corporation shall cease to be convertible on and after the
redemption date if provision shall have been made for its payment. In
order to exercise the conversion privilege, a holder of Class A Preferred
Shares shall surrender the certificate or certificates evidencing all
Class A Preferred Shares then held by such holder to this Corporation at
its principal office, duly endorsed to this Corporation and accompanied by
written notice to this Corporation that the holder elects to convert all
of such shares. Class A Preferred Shares converted at the option of the
holder shall be deemed to have been converted on the day of surrender of
the certificate representing such shares for conversion in accordance with
the foregoing provisions, and at such time the rights of the
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holder of such Class A Preferred Shares shall cease and such holder shall
be treated for all purposes as the record holder of Common Shares issuable
upon conversion. As promptly as practicable on or after the conversion
date, this Corporation shall issue and mail or deliver to such holder a
certificate or certificates for the number of Common Shares issuable upon
conversion, computed to the nearest one hundredth of a full share, and a
certificate or certificates for the balance of Class A Preferred Shares
surrendered, if any, not so converted into Common Shares.
(b) Conversion Price and Adjustments. The number of Common Shares
issuable in exchange for each Class A Preferred Share upon either optional
or automatic conversion shall be equal to One Dollar ($1.00) divided by
the conversion price then in effect for Class A Preferred Shares (the
"Class A Conversion Price"). The Class A Conversion Price shall initially
be One Dollar ($1.00), but such Class A Conversion Price shall be subject
to adjustment from time to time, as provided in the following sentence. In
case this corporation shall at any time subdivide or split its outstanding
Common Shares into a greater number of shares or declare any dividend
payable in Common Shares, the Class A Conversion Price in effect
immediately prior to such subdivision, split or dividend shall be
proportionately decreased, and conversely, in case the outstanding Common
Shares of this Corporation shall be combined into a smaller number of
shares, the Class A Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(c) Rights to Preconversion Distributions. The holders of Class A
Preferred Shares shall have the following rights to certain properties
received by the holders of Common Shares:
(i) in case this Corporation shall declare a dividend or
distribution upon Common Shares payable other than in cash out of
earnings or surplus or other than in Common Shares, then thereafter
each holder of Class A Preferred Shares upon the conversion thereof
will be entitled to receive the number of Common Shares into which
such Class A Preferred Shares shall be converted, and, in addition
and without payment therefor, the property which such holder would
have received as a dividend if continuously since the record date
for any such dividend or distribution such holder (A) had been the
record holder of the number of Common Shares then received, and (B)
had retained all dividends or distributions in stock or securities
payable in respect of such Common Shares or in respect of any stock
or securities paid as dividends or distributions and originating
directly or indirectly from such Common Shares.
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(ii) Subject to the provisions of Section 2(C)(2) regarding
liquidation rights, if any capital reorganization or
reclassification of the Capital Stock of this Corporation, or
consolidation or merger of this 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 Shares shall be entitled to receive stock, securities or
assets with respect to or in exchange for Common Shares, then, as a
condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby
the holders of Class A Preferred Shares shall thereafter have the
right to receive, in lieu of Common Shares of this Corporation
immediately theretofore receivable upon the conversion of such Class
A Preferred Shares, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number
of outstanding Common Shares equal to the number of Common Shares
immediately theretofore receivable upon the conversion or such Class
A Preferred Shares had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and
interests of the holders of the Class A Preferred Shares to the end
that the provisions hereof (including without limitation provisions
for adjustments of the Class A Conversion Price and of the number of
shares receivable upon the conversion of such Class A Preferred
Shares) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter
receivable upon the conversion of such Class A Preferred Shares.
This Corporation shall not effect any such reorganization,
reclassification consolidation, merger or sale, unless prior to the
consummation thereof the surviving corporation (if other than this
Corporation), the corporation resulting from such consolidation or
the corporation purchasing such assets shall assume by written
instrument executed and mailed to the registered holders of the
Class A Preferred Shares at the last address of such holders
appearing on the books of the Corporation, the obligation to deliver
to such holders such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holders may be
entitled to receive.
(d) Notice of Certain Events. In case any time:
(i) this Corporation shall pay any dividend payable in stock
upon Common Shares or make any distribution (other than regular cash
dividends) to the holders of Common Shares; or
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(ii) this Corporation shall offer for subscription pro rata
to the holders of Common Shares any additional shares of stock of
any class or other rights; or
(iii) there shall be any capital reorganization,
reclassification of the capital stock of this Corporation, or
consolidation or merger of this Corporation with, or sale of all or
substantially all of its assets, to another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of this Corporation;
then, in any one or more of said cases, this Corporation shall give
written notice, by first-class mail, postage prepaid, addressed to the
holders of Class A Preferred Shares at the addresses of such holders as
shown on the books of this Corporation, of the date on which (A) the books
of this Corporation shall close or a record shall be taken for such
dividend, distribution or subscription rights, or (B) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also
specify the date as of which the holders of Common Shares of record shall
participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as
the case may be. Such written notice shall be given at least thirty (30)
days prior to the action in question and not less than thirty (30) days
prior to the record date or the date on which this Corporation's transfer
books are dosed in respect thereto.
(4) Redemption Rights.
(a) This corporation shall at any time have the conditional
right, but not the obligation, to purchase and redeem all, but not
less than all, of the then outstanding Class A Preferred Shares at
the redemption price, plus all accrued but unpaid dividends, if the
exercise of such conditional redemption option is approved by all of
the members of this Corporation's Board of Directors. The
"redemption price" of all Class A Preferred Shares shall be the par
value of such Class A Preferred Shares. Within thirty (30) days
after the meeting of the Board of Directors at which the exercise of
such conditional redemption right was approved by the requisite
number of members of the Board, the Corporation shall deliver notice
of exercise to all holders of Class A Preferred Shares subject to
redemption. Thereafter, each holder of Class A Preferred Shares
subject to redemption shall have a period of ninety (90) days in
which to convert his Class A Preferred
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Shares into Common Shares pursuant to the provisions of Section
2(C)(3). If the holder of Class A Preferred Shares subject to
redemption does not convert his Class A Preferred Shares into Common
Shares within such ninety (90) day period, the Class A Preferred
Shares shall thereafter be redeemed pursuant to the provisions of
this Section 2(C)(4).
(b) This Corporation shall complete the redemption of all
Class A Preferred Shares outstanding on the date of expiration of
the ninety (90) day notice period described in part (a) of this
Section 2(C)(4) by (i) notifying the holders of such outstanding
Class A Preferred Shares of the date on which the shares will be
redeemed, and (ii) depositing in trust with a bank or trust company
located in the United States of America and having capital, surplus
and undivided profits of at least Five Million Dollars ($5,000,000),
within ten (10) days after the expiration of the ninety (90) day
notice period described in part (a) of this Section 2(C)(4), an
amount in cash out of moneys legally available therefor sufficient
to redeem such Class A Preferred Shares at the redemption prices
specified in this Section 2(C)(4), with instructions and authority
to such bank or trust company to pay the redemption price on or
after the date fixed for redemption, upon surrender by such holders
of the certificates evidencing the shares being redeemed, which
certificates shall be properly endorsed in blank. If the
certificates evidencing such shares are not surrendered, the
dividends with respect to such shares shall cease to accrue after
the date fixed for redemption and all rights with respect to such
shares shall forthwith after such date cease and terminate, except
only the right of the holders to receive the redemption price
without interest upon surrender of their certificates therefor. Any
moneys deposited by this Corporation pursuant to this paragraph and
unclaimed at the end of one year after the date fixed for redemption
shall be repaid to this Corporation upon its request expressed in a
resolution of its Board of Directors, and thereafter the holders of
shares so called for redemption shall be entitled to receive payment
of the redemption price only from this Corporation. All Class A
Preferred Shares which are in any manner redeemed or acquired by
this Corporation shall be retired and canceled and none of such
shares shall be reissued.
ARTICLE 4. DIRECTOR LIABILITY
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, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its shareholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Sections
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302A.559 or 80A.23 of the Minnesota Statutes; (iv) for any transaction from
which the director derived an improper personal benefit; or (v) for any act or
omission occurring prior to the date when this Article 4 became effective.
If the Minnesota Business Corporation Act is hereafter amended to
authorize any further limitation of the liability of a director, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Minnesota Business Corporation Act, as amended.
Any repeal or modification of the foregoing provisions of the Article 4 by
the shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
IN WITNESS WHEREOF, the undersigned, Incorporator of the Corporation, has
executed this document on this 11th day of February, 1993.
/s/ William R. Hibbs
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William R. Hibbs, Esq.
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EXHIBIT 3.1
AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION OF
LEARN-NET, INC.
This Amendment and Restatement has bean adopted pursuant to Chapter 302A
of the Minnesota Statutes, the Minnesota Business Corporation Act, and
supersedes the original Articles.
ARTICLE I. NAME
The name of the Corporation is Learning Ventures, Inc.
ARTICLE II REGISTERED OFFICE
The address of the registered office of the Corporation is 1400 Northland
Plaza, 3800 West 80th Street, Minneapolis, Minnesota 55431.
ARTICLE III. AUTHORIZED SHARES
Section 1. Shares and Classes Authorized.
(A) Authorized Capital Stock. The aggregate number of shares which the
Corporation has the authority to issue is twenty-three million (23,000,000)
shares, ten million (10,000,000) of which shall be designated common shares,
$.10 par value (the "Common Shares"), and three million (3,000,000) of which
shall be designated Class A convertible preferred shares, $1.00 par value (the
"Class A Preferred Shares"). The Common Shares and the Class A Preferred Shares
are herein sometimes referred to collectively as "Capital Stock." Additionally,
the Board of Directors of the corporation is hereby authorized to cause to be
issued from time to time, by resolution or resolutions adopted by such Board, an
additional ten million (10,000,000) preferred shares (the "Open Term Preferred
Shares").
(B) Open Term Preferred Shares. The Board is authorized to cause the
Open Term Preferred Shares to be issued in one or more classes and/or series, to
establish the designation and number of shares of each such class or series, and
to fix the relative rights and preferences of the shares of each such class or
series, all to the full extent permitted by Minnesota Statutes, Section
302A.401, or any successor provision. Without limiting the generality of the
foregoing, the Board of Directors is authorized to provide that shares of a
class or series of preferred stock:
(1) are entitled to cumulative, partially cumulative or
noncumulative dividends or other distributions in payable in cash, capital
stock or indebtedness of the corporation or other property, at such times
and in such amounts as are set forth in the Board resolutions establishing
such class or series or as are determined in a manner specified in such
resolutions;
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(2) are entitled to a preference with respect to payment of
dividends over one or more other classes and/or series of capital stock of
the Corporation;
(3) are entitled to a preference with respect to any distribution of
assets of the Corporation upon its liquidation, dissolution or winding up
over one or more other classes and/or series of capital stock of the
Corporation in such amount as is set forth in the Board resolutions
establishing such class or series or as is determined in a manner
specified in such resolutions;
(4) are redeemable or exchangeable at the option of the Corporation
and/or on a mandatory basis for cash, capital stock or indebtedness of the
Corporation or other property, at such times or upon the occurrence of
such events, and at such prices, as are set forth in the Board resolutions
establishing such class or series or as are determined in a manner
specified in such resolutions;
(5) are entitled to the benefits of such sinking fund, if any, as is
required to be established by the Corporation for the redemption and/or
purchase of such shares by the Board resolutions establishing such class
or series;
(6) are convertible at the option of the holders thereof into shares
of any other class or series of capital stock of the Corporation, at such
times or upon the occurrence of such events, and upon such terms, as are
set forth in the Board resolutions establishing such class or series or as
are determined in a manner specified in such resolutions;
(7) are exchangeable at the option of the holders thereof for cash,
capital stock or indebtedness of the Corporation or other property, at
such times or upon the occurrence of such events, and at such prices, as
are set forth in the Board resolutions establishing such class or series
or as are determined in a manner specified in such resolutions;
(8) are entitled to such voting rights, if any, as are specified in
the Board resolutions establishing such class or series (including,
without limiting the generality of the foregoing, the right to elect one
or more directors voting alone as a single class or series or together
with one or more other classes and/or series of preferred stock, if so
specified by such Board resolutions) at all times or upon the occurrence
of specified events; and
(9) are subject to restrictions on the issuance of additional shares
of preferred stock of such class or series or of any other class or
series, or on the reissuance of shares of preferred stock of such class or
series or of any other
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class or series, or on increases or decreases in the number of authorized
shares of preferred stock of such class or series or of any other class or
series.
Without limiting the generality of the foregoing authorizations, any of the
rights and preferences of a class or series of preferred stock may be made
dependent upon facts ascertainable outside the Board resolutions establishing
such class or series, and may incorporate by reference some or all of the terms
of any agreements, contracts or other arrangements entered into by the
Corporation in connection with the issuance of such class or series, all to the
full extent permitted by Minnesota Statutes. Unless otherwise specified in the
Board resolutions establishing a class or series of preferred stock, holders of
a class or series of preferred stock shall not be entitled to cumulate their
votes in any election of directors in which they are entitled to vote and shall
not be entitled to any preemptive rights to acquire shares of any class or
series of capital stock of the Corporation.
Section 2. Description of the Capital Stock.
The rights, preferences, privileges and restrictions granted to or imposed
upon the respective classes or series of shares or the holders thereof are as
follows:
(A) Voting Rights.
Each holder of Common Shares shall have one vote on all matters submitted
to the shareholders for each Common Share standing in the name of such holder on
the books of this Corporation. Each holder of Class A Preferred Shares shall
have one vote on all matters submitted to the shareholders for each Common Share
which such holder of Class A Preferred Shares would be entitled to receive upon
the conversion of his Class A Preferred Shares pursuant to the provisions of
Section 2(C)(3). No holder of any shares of Capital Stock shall have any
cumulative voting rights.
(B) Preemptive Rights.
No holders of shares of any class of Capital Stock shall be entitled, as a
matter of right, to subscribe for, purchase or receive any part of any stock of
this Corporation of any class whatsoever, or of securities convertible into or
exchangeable for any stock of any class whatsoever, whether now or hereafter
authorized and whether issued for cash or other consideration or by way of
dividend.
(C) Class A Preferred Shares.
(1) Dividends. Dividends shall be payable on Class A Preferred Shares
out of funds legally available for the declaration of dividends, only if and
when declared by this Corporation's Board of Directors. However, in no event
shall any dividend be paid on any Common Shares unless equal or greater
dividends are paid an the Class A Preferred Shares. Class A Preferred Shares
shall be counted on an as-if-converted
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basis in determining whether dividends paid on the Class A Preferred Shares are
equal to or greater than the dividends paid on the Common Shares.
(2) Liquidation Right and Preference. In the event of the liquidation,
dissolution or winding up of this Corporation, whether voluntary or involuntary,
the holders of Class A Preferred Shares shall be entitled to receive in cash,
out of the assets of this Corporation, an amount equal to the par value of each
outstanding Preferred Share (that is, $1.00 per share), plus all accumulated but
unpaid dividends, before any payment shall be made or any assets distributed to
the holders of Common Shares or any other class of shares of this Corporation
ranking junior to the Class A Preferred Shares. If, upon any liquidation,
dissolution or winding up of this Corporation, the assets of this Corporation
are insufficient to pay the amounts described in the preceding sentence, the
holders of such Class A Preferred Shares shall share pro rata in any such
distribution in proportion to the full amounts to which they would otherwise be
respectively entitled. Following such payment to the holders of Class A
Preferred Shares upon such liquidation, dissolution or winding up of this
Corporation, the holders of Common Shares shall then be entitled, to the
exclusion of the holders of Class A Preferred Shares, to receive in cash or in
kind, all remaining assets of this Corporation, if any.
The merger or consolidation of this Corporation into or with another
corporation or the merger or consolidation of any other corporation into or with
this corporation (in which consolidation or merger the shareholders of this
Corporation receive any distributions of cash or securities or other property as
a result of such consolidation or merger), or the sale, transfer or other
disposition of all or substantially all of the assets of this Corporation, shall
be deemed to be a liquidation or dissolution of this Corporation for purposes of
this Section 2(C)(2).
(3) Conversion Rights.
(a) Optional Conversion. At the option of the holder thereof, all Class
A Preferred Shares then held by such holder shall be convertible into Common
Shares of this Corporation in accordance with the provisions and subject to the
adjustments provided for in Section 2(C)(3)(c); provided, however, that each
Class A Preferred Share called for redemption by this Corporation shall cease to
be convertible on and after the redemption date if provision shall have been
made for its payment. In order to exercise the conversion privilege, a holder of
Class A Preferred Shares shall surrender the certificate or certificates
evidencing all Class A Preferred Shares then held by such holder to this
Corporation at its principal office, duly endorsed to this Corporation and
accompanied by written notice to this Corporation that the holder elects to
convert all of such shares. Class A Preferred Shares converted at the option of
the holder shall be deemed to have been converted on the day of surrender of the
certificate representing such shares for conversion in accordance with the
foregoing provisions, and at such time the rights of the holder of such Class A
Preferred Shares shall cease and such holder shall be treated for all purposes
as the record holder of
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<PAGE>
Common Shares issuable upon conversion. As promptly as practicable on or after
the conversion date, this Corporation shall issue and mail or deliver to such
holder a certificate or certificates for the number of Common Shares issuable
upon conversion, computed to the nearest one hundredth of a full share, and a
certificate or certificates for the balance of Class A Preferred Shares
surrendered, if any, not so converted into Common Shares.
(b) Automatic Conversion. The Class A Preferred Shares shall be
automatically converted into Common Shares, upon the election of this
Corporation and delivery of written notice of such election to the holders of
the Class A Preferred Shares (which election and notice may be delivered within
ninety (90) days before or after the automatic conversion event described below
without affecting the effective time of such automatic conversion), if this
Corporation closes the issuance and sale of Common Shares in one or more
underwritten public offerings, pursuant to an effective registration statement
under the Securities Act of 1933, as amended, in which the gross proceeds
received by this Corporation equal or exceed Ten Million Dollars ($10,000,000).
(c) Conversion Price and Adjustments. The number of Common Shares
issuable in exchange for each Class A Preferred Share upon either optional or
automatic conversion shall be equal to One Dollar ($1.00) divided by the
conversion price then in effect for Class A Preferred Shares (the "Class A
Conversion Price"). The Class A Conversion Price shall initially be One Dollar
($1.00), but such Class A Conversion Price shall be subject to adjustment from
time to time, as provided in the following sentence. In case this Corporation
shall at any time subdivide or split its outstanding Common Shares into a
greater number of shares or declare any dividend payable in Common Shares, the
Class A Conversion Price in effect immediately prior to such subdivision, split
or dividend shall be proportionately decreased, and conversely, in case the
outstanding Common Shares of this Corporation shall be combined into a smaller
number of shares, the Class A Conversion Price in effect immediately prior to
such combination shall be proportionately increased.
(d) Rights to Preconversion Distributions. The holders of Class A
Preferred Shares shall have the following rights to certain properties received
by the holders of Common Shares:
(i) In case this Corporation shall declare a dividend or
distribution upon Common Shares payable other than in cash out of earnings
or surplus or other than in Common Shares, then thereafter each holder of
Class A Preferred Shares upon the conversion thereof will be entitled to
receive the number of Common Shares into which such Class A Preferred
Shares shall be converted, and, in addition and without payment therefor,
the property which such holder would have received as a dividend if
continuously since the record date for any such dividend or distribution
such holder (A) had been the record holder of the number of Common Shares
then received, and (B) had retained all
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<PAGE>
dividends or distributions in stock or securities payable in respect of
such Common Shares or in respect of any stock or securities paid as
dividends or distributions, and originating directly or indirectly from
such Common Shares.
(ii) Subject to the provisions of Section 2(C)(2) regarding
liquidation rights, if any capital reorganization or reclassification of
the Capital Stock of this Corporation, or consolidation or merger of this
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 Shares shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Shares,
then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provision shall be made
whereby the holders of Class A Preferred Shares shall thereafter have the
right to receive, in lieu of Common Shares of this Corporation immediately
theretofore receivable upon the conversion of such Class A Preferred
Shares, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding Common
Shares equal to the number of Common Shares immediately theretofore
receivable upon the conversion or such Class A Preferred Shares had such
reorganization, reclassification, consolidation, merger or sale not taken
place, and in any such case appropriate provision shall be made with
respect to the rights and interests of the holders of the Class A
Preferred Shares to the end that the provisions hereof (including without
limitation provisions for adjustments of the Class A Conversion Price and
of the number of shares receivable upon the conversion of such Class A
Preferred Shares) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter
receivable upon the conversion of such Class A Preferred Shares. This
Corporation shall not effect any such reorganization, reclassification
consolidation, merger or sale, unless prior to the consummation thereof
the surviving corporation (if other than this Corporation), the
corporation resulting from such consolidation or the corporation
purchasing such assets shall assume by written instrument executed and
mailed to the registered holders of the Class A Preferred Shares at the
last address of such holders appearing on the books of the Corporation,
the obligation to deliver to such holders such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holders
may be entitled to receive.
(e) Notice of Certain Events. In case any time:
(i) this Corporation shall pay any dividend payable in stock upon
Common Shares or make any distribution (other than regular cash dividends)
to the holders of Common Shares; or
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<PAGE>
(ii) this Corporation shall offer for subscription pro rata to the
holders of Common Shares any additional shares of stock of any class or
other rights; or
(iii) there shall be any capital reorganization, reclassification of
the capital stock of this corporation, or consolidation or merger of this
Corporation with, or sale of all or substantially all of its assets, to
another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of this Corporation;
then, in any one or more of said cases, this Corporation shall give written
notice, by first-class mail, postage prepaid, addressed to the holders of Class
A Preferred Shares at the addresses of such holders as shown on the books of
this Corporation, of the date on which (A) the books of this Corporation shall
close or a record shall be taken for such dividend, distribution or subscription
rights, or (B) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of Common
Shares of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their Common Shares for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Such written notice shall be given at least
thirty (30) days prior to the action in question and not less than thirty (30)
days prior to the record date or the date on which this Corporation's transfer
books are closed in respect thereto.
(4) Redemption Rights.
(a) At any time after February 24, 2000, the Corporation shall
have the conditional right, but not the obligation, to purchase and redeem
all, but not less than all, of the then outstanding Class A Preferred
Shares at the redemption price, plus all accrued but unpaid dividends, if
the exercise of such conditional redemption option is approved by all of
the members of this Corporation's Board of Directors. The "redemption
price" of all Class A Preferred Shares shall be the par value of such
Class A Preferred Shares. Within thirty (30) days after the meeting of the
Board of Directors at which the exercise of such conditional redemption
right was approved by the requisite number of members of the Board, the
Corporation shall deliver notice of exercise to all holders of Class A
Preferred Shares subject to redemption. Thereafter, each holder of Class A
Preferred Shares subject to redemption shall have a period of ninety (90)
days in which to convert his Class A Preferred Shares into Common Shares
pursuant to the provisions of Section 2(C)(3). If the holder of Class A
Preferred Shares subject to redemption does not convert his Class A
Preferred Shares into Common Shares within such
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<PAGE>
ninety (90) day period, the Class A Preferred Shares shall thereafter be
redeemed pursuant to the provisions of this Section 2(C)(4).
(b) This Corporation shall complete the redemption of all Class A
Preferred Shares outstanding on the date of expiration of the ninety (90)
day notice period described in part (a) of this Section 2(C)(4) by (i)
notifying the holders of such outstanding Class A Preferred Shares of the
date on which the shares will be redeemed, and (ii) depositing in trust
with a bank or trust company located in the United States of America and
having capital, surplus and undivided profits of at least Five Million
Dollars ($5,000,000), within ten (10) days after the expiration of the
ninety (90) day notice period described in part (a) of this Section
2(C)(4), an amount in cash out of moneys legally available therefor
sufficient to redeem such Class A Preferred Shares at the redemption
prices specified in this Section 2(C)(4), with instructions and authority
to such bank or trust company to pay the redemption price on or after the
date fixed for redemption, upon surrender by such holders of the
certificates evidencing the shares being redeemed, which certificates
shall be properly endorsed in blank. If the certificates evidencing such
shares are not surrendered, the dividends with respect to such shares
shall cease to accrue after the date fixed for redemption and all rights
with respect to such shares shall forthwith after such date cease and
terminate, except only the right of the holders to receive the redemption
price without interest upon surrender of their certificates therefor. Any
moneys deposited by this Corporation pursuant to this paragraph and
unclaimed at the end of one year after the date fixed for redemption shall
be repaid to this Corporation upon its request expressed in a resolution
of its Board of Directors, and thereafter the holders of shares so called
for redemption shall be entitled to receive payment of the redemption
price only from this Corporation. All Class A Preferred Shares which are
in any manner redeemed or acquired by this Corporation shall be retired
and canceled and none of such shares shall be reissued.
ARTICLE 4. DIRECTOR LIABILITY
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, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its shareholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Sections 302A.559 or 80A.23 of the Minnesota
Statutes; (iv) for any transaction from which the director derived an improper
personal benefit; or (v) for any act or omission occurring prior to the date
when this Article 4 became effective.
If the Minnesota Business Corporation Act is hereafter amended to
authorize any further limitation of the liability of a director, then the
liability of a director of the
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<PAGE>
Corporation shall be eliminated or limited to the fullest extent permitted
by the Minnesota Business Corporation Act, as amended.
Any repeal or modification of the foregoing provisions of the Article 4 by
the shareholders of the corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
IN WITNESS WHEREOF, the undersigned, Incorporator of the Corporation, has
executed this document on this 22nd day of February, 1993.
/s/ William R. Hibbs
---------------------------
William R. Hibbs, Esq.
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<PAGE>
EXHIBIT 3.1
MINNESOTA SECRETARY OF STATE
AMENDMENT OF ARTICLES OF INCORPORATION
BEFORE COMPLETING THIS FORM, PLEASE READ INSTRUCTIONS LISTED BELOW.
CORPORATE NAME:(List the name of the company prior to any desired name change)
Learning Ventures, Inc.
This amendment Is effective on the day it Is filed with the Secretary of State,
unless you indicate another date, no later than 30 days after filing with the
Secretary of State. November 15, 1993
The following amendment(s) of articles regulating the above corporation were
adopted: (Insert full text of newly amended article(s) indicating which
article(s) is (are) being amended or added.) If the full text of the amendment
will not fit in the space provided, attach additional numbered pages. (Total
number of pages including this form______ .)
ARTICLE 2
The address of the registered office of the corporation is
121 South 8th Street, Suite 730, Minneapolis, Minnesota 55402.
This amendment has been approved pursuant to Minnesota Statutes chapter 302A or
317A. I certify that I am authorized to execute this amendment and I further
certify that I understand that by signing this amendment, I am subject to the
penalties of perjury as set forth in section 609.48 as if I had signed this
amendment under oath.
/s/ Marie Hubonette, Asst. Corp. Secretary
-------------------------------------------
(Signature of Authorized Person)
<PAGE>
EXHIBIT 3.1
MINNESOTA SECRETARY OF STATE
AMENDMENT OF ARTICLES OF INCORPORATION
BEFORE COMPLETING THIS FORM, PLEASE READ INSTRUCTIONS LISTED BELOW.
CORPORATE NAME:(List the name of the company prior to any desired name change)
Learning Ventures, Inc.
This amendment Is effective on the day it Is filed with the Secretary of State,
unless you indicate another date, no later than 30 days after filing with the
Secretary of State.__________________
The following amendment(s) of articles regulating the above corporation were
adopted: (Insert full text of newly amended article(s) indicating which
article(s) is (are) being amended or added.) If the full text of the amendment
will not fit in the space provided, attach additional numbered pages. (Total
number of pages including this form _________ .)
ARTICLE______
See attached Certificate of Designation of Class B Convertible
Preferred Stock of Learning Ventures, Inc. pursuant to
Article IIIB of the Restated Articles of Incorporation.
This amendment has been approved pursuant to Minnesota Statutes chapter 302A or
317A. I certify that I am authorized to execute this amendment and I further
certify that I understand that by signing this amendment, I am subject to the
penalties of perjury as set forth in section 609.48 as if I had signed this
amendment under oath.
/s/ Paul F. Clifford
--------------------------
Paul Clifford, Secretary
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF DESIGNATION
OF
CLASS B CONVERTIBLE PREFERRED STOCK
OF
LEARNING VENTURES, INC
I, Paul F. Clifford, the Secretary of Learning Ventures, Inc., a Minnesota
corporation (the "Corporation"), do hereby certify that by a written action of
the Board of Directors of the Corporation dated as of October 25, 1994, the
following resolutions effecting the creation of a series of preferred stock
designated as "Class B Convertible Preferred Stock" were duly approved by the
Board of Directors of the Corporation and that such resolutions have not been
subsequently modified or rescinded
RESOLVED, that the Corporation shall create a class of shares of
preferred stock designated as "Class B Convertible Preferred Shares" and
will reserve One Hundred Eighty Thousand (180,000) of the Corporation's
authorized but unissued shares of preferred stock for issuance under such
class.
FURTHER RESOLVED, that the Class B Convertible Preferred Shares
shall be entitled to the relative rights and preferences described in the
attached Exhibit A.
I further certify that the document attached hereto and marked
Exhibit A and entitled "Learning Ventures, Inc. Certificate of Designation for
Class B Convertible Preferred Stock" is a true and correct copy of the document
referred to in the foregoing resolutions.
IN WITNESS WHEREOF, I have executed this certificate as of this 25th
day of October, 1994.
/s/ Paul F. Clifford
---------------------------
Paul F. Clifford, Secretary
<PAGE>
EXHIBIT 3.1
EXHIBIT A
LEARNING VENTURES, INC
CERTIFICATE OF DESIGNATION
FOR
CLASS B CONVERTIBLE PREFERRED STOCK
1. Designation; Number of Shares; Par Value. A class of shares of
preferred stock of Learning Ventures, Inc. (the "Corporation") shall be
designated as Class B Convertible Preferred Stock (the "Class B Preferred
Shares"). The number of shares constituting the Class B Preferred Shares shall
be One Hundred Eighty Thousand (180,000) shares. The "Class B Preferred Shares
shall have a par value of $2.50 per share.
2. Voting Rights. On all matters submitted to the shareholders, each
holder of Class B Preferred Shares shall have one vote for each share of common
stock of the Corporation which such holder of Class B Preferred Shares would be
entitled to receive upon the conversion of such holder's Class B Preferred
Shares pursuant to the provisions of Section 6. No holder of any Class B
Preferred Shares shall have any cumulative voting rights.
3. No Preemptive Rights. Holders of Class B Preferred Shares shall not
be entitled, as a matter of right, to subscribe for, purchase or receive any
part of any stock of the Corporation of any class whatsoever, or of securities
convertible into or exchangeable for any stock of any class whatsoever, whether
now or hereafter authorized and whether issued for cash or other consideration
or by way of dividend.
4. Dividends. The Class B Preferred Shares shall rank equal to the
Class A convertible preferred stock of the Corporation (the "Class A Preferred
Shares") and senior to the common stock of the Corporation (the "Common Shares")
with respect to the payment of dividends. Dividends shall be payable on Class B
Preferred Shares out of funds legally available for the declaration of dividends
only if and when declared by the Corporation's Board of Directors. However, in
no event shall any dividend be paid on any Common Shares or any other class of
shares of the Corporation ranking equal to or junior to the Class B Preferred
Shares unless equal or greater dividends are paid on the Class B Preferred
Shares. All shares of stock of the Corporation shall be counted on an
as-if-converted-to-Common-Shares basis in determining whether dividends paid on
the Class B Preferred Shares are equal to or greater than the dividends paid on
any other shares.
5. Liquidation Right and Preference. In the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the
<PAGE>
holders of Class B Preferred Shares shall be entitled to receive in cash, out of
the assets of the Corporation, an amount equal to the par value of each
outstanding Class B Preferred Share (i.e., $2.50 per share), plus all
accumulated but unpaid dividends, before any payment shall be made or any assets
distributed to the holders of Common Shares or any other class of shares of the
Corporation ranking junior to the Class B Preferred Shares. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation are insufficient to pay the amounts described in the preceding
sentence, the holders of Class B Preferred Shares and any other class of shares
of the Corporation ranking equal to the Class B Preferred Shares shall share pro
rata in any such distribution in proportion to the full amounts to which they
would otherwise be respectively entitled. Following such payment to the holders
of Class B Preferred Shares and any other class of shares of the Corporation
ranking equal to the Class B Preferred Shares upon such liquidation, dissolution
or winding up of the Corporation, the holders of Common Shares and any other
class of shares of the Corporation ranking junior to the Class B Preferred
Shares shall then be entitled, to the exclusion of the holders of Class B
Preferred Shares, to receive in cash or in kind, all remaining assets of the
Corporation, if any.
The merger or consolidation of the Corporation into or with another
corporation or the merger or consolidation of any other corporation into or with
the Corporation (in which consolidation or merger the shareholders of the
Corporation receive any distributions of cash or securities or other property as
a result of such consolidation or merger), or the sale, transfer or other
disposition of all or substantially all of the assets of the Corporation, shall
be deemed to be a liquidation or dissolution of the Corporation for purposes of
this Section 5.
6. Conversion into Common Shares.
(a) Optional Conversion. At the option of the holder thereof, all
Class B Preferred Shares then held by such holder shall be convertible
into Common Shares of the Corporation in accordance with the provisions
and subject to the adjustments provided for in Section 6(c); provided,
however, that each Class B Preferred Share called for redemption by the
Corporation shall cease to be convertible on and after the redemption date
if provision shall have been made for its payment. In order to exercise
the conversion privilege, a holder of Class B Preferred Shares shall
surrender the certificate or certificates evidencing all Class B Preferred
Shares then held by such holder to the Corporation at its principal
office, duly endorsed to the Corporation and accompanied by written notice
to the Corporation that the holder elects to convert all of such shares.
Class B Preferred Shares converted at the option of the holder shall be
deemed to have been converted on the day of surrender of the certificate
representing such shares for conversion in accordance with the foregoing
provisions, and at such time the rights of the holder of such Class B
Preferred Shares shall cease and such holder shall be treated for all
purposes as the record holder of Common Shares issuable upon conversion.
As promptly
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<PAGE>
as practicable on or after the conversion date, the Corporation shall
issue and mail or deliver to such holder a certificate or certificates for
the number of Common Shares issuable upon conversion, computed to the
nearest one hundredth of a full share.
(b) Automatic Conversion. The Class B Preferred Shares shall be
automatically converted into Common Shares, upon the election of the
Corporation and delivery of written notice of such election to the holders
of the Class B Preferred Shares (which election and notice shall be
delivered within ninety (90) days before or after the automatic conversion
event described below without affecting the effective time of such
automatic conversion), if the Corporation closes the issuance and sale of
Common Shares in one or more underwritten public offerings, pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, in which the gross proceeds received by the Corporation equal or
exceed Ten Million Dollars ($10,000,000).
(c) Conversion Price and Adjustments. The number of Common Shares
issuable in exchange for each Class B Preferred Share upon either optional
or automatic conversion shall be equal to One Dollar ($1.00) divided by
the conversion price then in effect for Class B Preferred Shares (the
"Class B Conversion Price"). The Class B Conversion Price shall initially
be One Dollar ($1.00), but such Class B Conversion Price shall be subject
to adjustment from time to time, as provided in the following sentence. In
case the Corporation shall at any time subdivide or split its outstanding
Common Shares into a greater number of shares or declare any dividend
payable in Common Shares, the Class B Conversion Price in effect
immediately prior to such subdivision, split or dividend shall be
proportionately decreased, and conversely, in case the outstanding Common
Shares of the Corporation shall be combined into a smaller number of
shares, the Class B Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(d) Rights to Preconversion Distributions. The holders of Class B
Preferred Shares shall have the following rights to certain properties
received by the holders of Common Shares:
(i) In case the Corporation shall declare a dividend or
distribution upon Common Shares payable other than in cash out of
earnings or surplus or other than in Common Shares, then thereafter
each holder of Class B Preferred Shares upon the conversion thereof
will be entitled to receive the number of Common Shares into which
such Class B Preferred Shares shall be converted, and, in addition
and without payment therefor, the property which such holder would
have received as a dividend if continuously since the record date
for any
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<PAGE>
such dividend or distribution such holder (A) had been the record
holder of the number of Common Shares then received, and (B) had
retained all dividends or distributions in stock or securities
payable in respect of such Common Shares or in respect of any stock
or securities paid as dividends or distributions and originating
directly or indirectly from such Common Shares.
(ii) Subject to the provisions of Section 5 regarding
liquidation rights, 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
Shares shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Shares, then, as a condition of
such reorganization, reclassification, consolidation, merger or
sale, lawful and adequate provision shall be made whereby the
holders of Class B Preferred Shares shall thereafter have the right
to receive, in lieu of Common Shares of the Corporation immediately
theretofore receivable upon the conversion of such Class B Preferred
Shares, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of
outstanding Common Shares equal to the number of Common Shares
immediately theretofore receivable upon the conversion or such Class
B Preferred Shares had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and
interests of the holders of the Class B Preferred Shares to the end
that the provisions hereof (including without limitation provisions
for adjustments of the Class B Conversion Price and of the number of
shares receivable upon the conversion of such Class B Preferred
Shares) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter
receivable upon the conversion of such Class B Preferred Shares. The
Corporation shall not effect any such reorganization,
reclassification consolidation, merger or sale, unless prior to the
consummation thereof the surviving corporation (if other than the
Corporation), the corporation resulting from such consolidation or
the corporation purchasing such assets shall assume by written
instrument executed and mailed to the registered holders of the
Class B Preferred Shares at the last address of such holders
appearing on the books of the Corporation, the obligation to deliver
to such holders such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holders may be
entitled to receive.
(e) Notice of Certain Events. In case any time:
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<PAGE>
(i) the Corporation shall pay any dividend payable in stock
upon Common Shares or make any distribution (other than regular cash
dividends) to the holders of Common Shares; or
(ii) the Corporation shall offer for subscription pro rata to
the holders of Common Shares any additional shares of stock of any
class or other rights; or
(iii) there shall be any capital reorganization,,
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with or sale of all or
substantially all of its assets, to another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give written
notice, by first-class mail, postage prepaid, addressed to the holders of
Class B Preferred Shares at the addresses of such holders as shown on the
books of the Corporation, of the date on which (A) the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (B) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice also shall
specify the date as of which the holders of Common Shares of record shall
participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as
the case may be. Such written notice shall be given at least thirty (30)
days prior to the action in question and not less than thirty (30) days
prior to the record date or the date on which the Corporation's transfer
books are dosed in respect thereto.
7. Conversion Into Preferred Shares.
If the Corporation issues, between October 25, 1994 and December 31, 1995,
any shares of preferred stock, each share of which is convertible into one
Common Share, other than Class A Preferred Shares or Class B Preferred Shares
(such stock hereinafter referred to as the "Class C Preferred Shares"), then the
Class B Preferred Shares shall be convertible into Class C Preferred Shares at
the option of the holder thereof or the Corporation, as provided in this Section
7.
(a) Holder's Conversion Option. If the par value of the Class C
Preferred Shares is less than $2.50 per share, then all Class B Preferred
Shares shall be convertible into Class C Preferred Shares at the option of
the holder of such Class B Preferred Shares. This conversion option shall
be exercisable for
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<PAGE>
a period of 90 days following the closing of the first sale of Class C
Preferred Shares which occurs prior to December 31, 1995, and shall expire
at the end of such 90-day period; provided, however, that each Class B
Preferred Share called for redemption by the Corporation pursuant to
Section 8 shall cease to be convertible on and after the redemption date
if provision shall have been made for its payment. In order to exercise
the conversion privilege, a holder of Class B Preferred Shares shall
surrender the certificate or certificates evidencing all Class B Preferred
Shares then held by such holder to the Corporation at its principal
office, duly endorsed to the Corporation and accompanied by written notice
to the Corporation that the holder elects to convert all of such shares.
Class B Preferred Shares converted at the option of the holder shall be
deemed to have been converted on the day of surrender of the certificate
representing such shares in accordance with the foregoing provisions, and
at such time the rights of the holder of such Class B Preferred Shares
shall cease and such holder shall be treated for all purposes as the
record holder of the Class C Preferred Shares issuable upon such
conversion. As promptly as practicable on or after the conversion date,
the Corporation shall issue and mail or deliver to such holder a
certificate or certificates for the number of Class C Preferred Shares
issuable upon such conversion, computed to the nearest one hundredth of a
full share.
(b) Corporation's Conversion Option. If the par value of the Class
C Preferred Shares is greater than or equal to $2.50 per share, then all
Class B Preferred Shares shall be convertible into Class C Preferred
Shares at the option of the Corporation. This conversion option shall be
exercisable for a period of 90 days following the closing of the first
sale of Class C Preferred Shares which occurs prior to December 31,1995,
and shall expire at the end of such 90-day period. In order to exercise
the conversion privilege, the Corporation shall send written notice of
such exercise to all holders of Class B Preferred Shares by first class
mail, postage prepaid, addressed to such holders at the addresses shown on
the books of the Corporation. As promptly as practicable following receipt
of such conversion notice, a holder of Class B Preferred Shares shall
surrender the certificate or certificates evidencing all Class B Preferred
Shares then held by such holder to the Corporation at its principal
office, duly endorsed to the Corporation. Class B Preferred Shares
converted at the option of the Corporation shall be deemed to have been
converted on the day the Corporation mails notice of its exercise of the
conversion option, and at such time the rights of a holder of Class B
Preferred Shares shall cease and such holder shall be treated for all
purposes as the record holder of the Class C Preferred Shares issuable
upon such conversion. As promptly as practicable after receipt of the
share certificates representing the converted Class B Preferred Shares,
the Corporation shall issue and mail or deliver to each holder a
certificate or certificates for the number of Class C Preferred Shares
issuable upon conversion, computed to the nearest one hundredth of a full
share.
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<PAGE>
(c) Conversion Price. The number of Class C Preferred Shares
issuable in exchange for each Class B Preferred Share upon either the
holder's or the Corporation's exercise of its conversion option shall be
equal to the par value of one Class B Preferred Share (i.e. $2.50) divided
by the par value of one Class C Preferred Share.
(d) Termination of Conversion Rights. If the Corporation does not
complete a sale of Class C Preferred Shares on or before December 31,
1995, the conversion rights provided in this Section 7 shall terminate and
shall be of no further force or effect.
8. Redemption Rights:
(a) At any time after February 24, 2000, the Corporation shall
have the conditional right, but not the obligation, to purchase and redeem
all, but not less than all, of the then outstanding Class B Preferred
Shares at the redemption price, plus all accrued but unpaid dividends, if
the exercise of such conditional redemption option is approved by all of
the members of the Corporation's Board of Directors. The "redemption
price" of the Class B Preferred Shares shall be the par value of such
Class B Preferred Shares. Within thirty (30) days after the meeting of the
Board of Directors at which the exercise of such conditional redemption
right was approved by all members of the Board, the Corporation shall
deliver notice of redemption to all holders of Class B Preferred Shares.
Thereafter, each holder of Class B Preferred Shares subject to redemption
shall have a period of ninety (90) days in which to convert such holder's
Class B Preferred Shares into Common Shares pursuant to the provisions of
Section 6. If a holder of Class B Preferred Shares subject to redemption
does not convert such holder's Class B Preferred Shares into Common Shares
within such ninety (90) day period, the Class B Preferred Shares shall
thereafter be redeemed pursuant to the provisions of this Section 8(b).
(b) The Corporation shall complete the redemption of all Class B
Preferred Shares outstanding on the date of expiration of the ninety (90)
day notice period described in part (a) of this Section 8 by (i) notifying
the holders of such outstanding Class B Preferred Shares of the date on
which the shares will he redeemed, and (ii) depositing in trust with a
bank or trust company located in the United States of America and having
capital, surplus and undivided profits of at least Five Million Dollars
($5,000,000), within ten (10) days after the expiration of the ninety (90)
day notice period described in part (a) of this Section 8, an amount in
cash out of moneys legally available therefor sufficient to redeem such
Class B Preferred Shares at the redemption price specified in this Section
8, with instructions and authority to such bank or trust company to pay
the redemption price on or after the date fixed for
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<PAGE>
redemption, upon surrender by such holders of the certificates evidencing
the shares being redeemed, which certificates shall be properly endorsed
in blank. If the certificates evidencing such shares are not surrendered,
the dividends with respect to such shares shall cease to accrue after the
date fixed for redemption and all rights with respect to such shares shall
forthwith after such date cease and terminate, except only the right of
the holders to receive the redemption price without interest upon
surrender of their certificates therefor. Any moneys deposited by the
Corporation pursuant to this paragraph and unclaimed at the end of one
year after the date fixed for redemption shall be repaid to the
Corporation upon its request expressed in a resolution of its Board of
Directors, and thereafter the holders of shares so called for redemption
shall be entitled to receive payment of the redemption price only from the
Corporation. All Class B Preferred Shares which are in any manner redeemed
or acquired by the Corporation shall be retired and canceled and none of
such shares shall be reissued.
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<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
LEARNING VENTURES, INC.
Adopted Pursuant to Minn. Stat. Ch. 302A
Pursuant to the unanimous resolution of the directors and shareholders of
the corporation dated December 27, 1995, adopted pursuant to the authority
granted under Minn. Stat. Sections. 302A.239 and 302A.441, the Articles of
Incorporation of the corporation are hereby amended as follows:
Article I of the Articles of Incorporation be and the same is hereby
amended by deleting the whole thereof and inserting in its place the following:
ARTICLE I
The name of this corporation shall be Learning Ventures International,
Inc.
IN TESTIMONY WHEREOF, I have hereunto set my hand this 9th day of May,
1996.
/s/ Paul F. Clifford
---------------------------
Secretary
Learning Ventures
International, Inc.
<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
LEARNING VENTURES INTERNATIONAL, INC.
Learning Ventures International, Inc., a Minnesota corporation, hereby
adopts and files with the Secretary of State these Articles of Amendment
pursuant to Section 302A.139 of the Minnesota Business Corporation Act.
1. The rights and preferences of the Corporation's Class B Convertible
Preferred Shares shall be amended, and an additional One Million
(1,000,000) of the Corporation's authorized but unissued shares of
preferred stock shall be reserved for issuance under such class,
resulting in a total of One Million One Hundred Eighty Thousand
(1,180,000) shares of preferred stock being reserved for issuance
under such class, all as set forth in the Amended and Restated
Certificate of Designation for Class B Convertible Preferred Stock
attached hereto as Exhibit A.
2. There is hereby created a new class of preferred stock of the
Corporation which shall be designated as Class C Preferred Shares,
and Fifty-Five Thousand (55,000) of the Corporation's authorized but
unissued shares of preferred stock shall be reserved for issuance
under such class, all as set forth in the Certificate of Designation
for Class C Preferred Stock attached hereto as Exhibit B.
3. The remaining provisions of the Articles of Incorporation shall
remain unchanged.
4. These Articles of Amendment have been approved and adopted by the
directors and shareholders of Learning Ventures International, Inc.
as required by the Minnesota Business Corporation Act
Date: September 29, 1997 LEARNING VENTURES
INTERNATIONAL, INC.
By /s/ Stephen Shank
-----------------------
Its President
<PAGE>
EXHIBIT 3.1
EXHIBIT A
LEARNING VENTURES INTERNATIONAL, INC.
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION
FOR
CLASS B CONVERTIBLE PREFERRED STOCK
1. Designation; Number of Shares; Par Value. A class of shares of
preferred stock of Learning Ventures International, Inc. (the "Corporation")
shall be designated as Class B Convertible Preferred Stock (the "Class B
Preferred Shares"). The number of shares constituting the Class B Preferred
Shares shall be One Million One Hundred Eighty Thousand (1,180,000) shares. The
Class B Preferred Shares shall have a par value of $2.50 per share.
2. Voting Rights. On all matters submitted to the shareholders, each
holder of Class B Preferred Shares shall have one vote for each share of common
stock of the Corporation which such holder of Class B Preferred Shares would be
entitled to receive upon the conversion of such holder's Class B Preferred
Shares pursuant to the provisions of Section 6. No holder of any Class B
Preferred Shares shall have any cumulative voting rights.
3. No Preemptive Rights . Holders of Class B Preferred Shares shall not
be entitled, as a matter of right, to subscribe for, purchase or receive any
part of any stock of the Corporation of any class whatsoever, or of securities
convertible into or exchangeable for any stock of any class whatsoever, whether
now or hereafter authorized and whether issued for cash or other consideration
or by way of dividend.
4. Dividends. The Class B Preferred Shares shall rank senior to the
Class A convertible preferred stock of the Corporation (the "Class A Preferred
Shares") and senior to the common stock of the Corporation (the "Common Shares")
with respect to the payment of dividends. Dividends shall be payable on Class B
Preferred Shares out of funds legally available for the declaration of dividends
only if and when declared by the Corporation's Board of Directors. However, in
no event shall any dividend be paid on any Class A Preferred Shares, Common
Shares or any other class of shares of the Corporation ranking equal to or
junior to the Class B Preferred Shares unless equal or greater dividends are
paid on the Class B Preferred Shares. All shares of stock of the Corporation
shall be counted on an as-if-converted-to-Common-Shares basis in determining
whether dividends paid on the Class B Preferred Shares are equal to or greater
than the dividends paid on any other shares.
<PAGE>
5. Liquidation Right and Preference. The Class B Preferred Shares shall
rank senior to the Class A Preferred Shares and senior to the Common Shares with
respect to the liquidation of the Corporation. In the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Class B Preferred Shares shall be entitled to receive in cash,
out of the assets of the Corporation, an amount equal to the par value of each
outstanding Class B Preferred Share (i.e., $2.50 per share), plus all
accumulated but unpaid dividends, before any payment shall be made or any assets
distributed to the holders of Class A Preferred Shares, Common Shares or any
other class of shares of the Corporation ranking junior to the Class B Preferred
Shares. If, upon any liquidation, dissolution or winding up of the Corporation,
the assets of the Corporation are insufficient to pay the amounts described in
the preceding sentence, the holders of Class B Preferred Shares and any other
class of shares of the Corporation ranking equal to the Class B Preferred Shares
shall share pro rata in any such distribution in proportion to the full amounts
to which they would otherwise be respectively entitled. Following such payment
to the holders of Class B Preferred Shares and any other class of shares of the
Corporation ranking equal to the Class B Preferred Shares upon such liquidation,
dissolution or winding up of the Corporation, the holders of Class A Preferred
Shares, Common Shares and any other class of shares of the Corporation ranking
junior to the Class B Preferred Shares shall then be entitled, to the exclusion
of the holders of Class B Preferred Shares, to receive in cash or in kind, all
remaining assets of the Corporation, if any.
The merger or consolidation of the Corporation into or with another
corporation or the merger or consolidation of any other corporation into or with
the Corporation (in which consolidation or merger the shareholders of the
Corporation receive any distributions of cash or securities or other property as
a result of such consolidation or merger), or the sale, transfer or other
disposition of all or substantially all of the assets of the Corporation, shall
be deemed to be a liquidation or dissolution of the Corporation for purposes of
this Section 5.
6. Conversion into Common Shares.
(a) Optional Conversion. At the option of the holder thereof, all
Class B Preferred Shares then held by such holder shall be convertible
into Common Shares of the Corporation in accordance with the provisions
and subject to the adjustments provided for in Section 6(c); provided,
however, that each Class B Preferred Share called for redemption by the
Corporation shall cease to be convertible on and after the redemption date
if provision shall have been made for its payment. In order to exercise
the conversion privilege, a holder of Class B Preferred Shares shall
surrender the certificate or certificates evidencing all Class B Preferred
Shares then held by such holder to the Corporation at its principal
office, duly endorsed to the Corporation and accompanied by written notice
to the Corporation that the holder elects to convert all of such shares.
Class B Preferred Shares converted at the option of
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<PAGE>
the holder shall be deemed to have been converted on the day of surrender
of the certificate representing such shares for conversion in accordance
with the foregoing provisions, and at such time the rights of the holder
of such Class B Preferred Shares shall cease and such holder shall be
treated for all purposes as the record holder of Common Shares issuable
upon conversion. As promptly as practicable on or after the conversion
date, the Corporation shall issue and mail or deliver to such holder a
certificate or certificates for the number of Common Shares issuable upon
conversion, computed to the nearest one hundredth of a full share.
(b) Automatic Conversion. The Class B Preferred Shares shall be
automatically converted into Common Shares, upon the election of the
Corporation and delivery of written notice of such election to the holders
of the Class B Preferred Shares (which election and notice shall be
delivered within ninety (90) days before or after the automatic conversion
event described below without affecting the effective time of such
automatic conversion), if the Corporation closes the issuance and sale of
Common Shares in one or more underwritten public offerings, pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, in which the gross proceeds received by the Corporation equal or
exceed Ten Million Dollars ($10,000,000).
(c) Conversion Price and Adjustments. The number of Common Shares
issuable in exchange for each Class B Preferred Share upon either optional
or automatic conversion shall be equal to One Dollar ($1.00) divided by
the conversion price then in effect for Class B Preferred Shares (the
"Class B Conversion Price"). The Class B Conversion Price shall initially
be One Dollar ($1.00), but such Class B Conversion Price shall be subject
to adjustment from time to time, as provided in the following sentence. In
case the Corporation shall at any time subdivide or split its outstanding
Common Shares into a greater number of shares or declare any dividend
payable in Common Shares, the Class B Conversion Price in effect
immediately prior to such subdivision, split or dividend shall be
proportionately decreased, and conversely, in case the outstanding Common
Shares of the Corporation shall be combined into a smaller number of
shares, the Class B Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(d) Rights to Preconversion Distributions. The holders of Class B
Preferred Shares shall have the following rights to certain properties
received by the holders of Common Shares:
(i) In case the Corporation shall declare a dividend or
distribution upon Common Shares payable other than in cash out of
earnings or surplus or other than in Common Shares, then thereafter
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<PAGE>
each holder of Class B Preferred Shares upon the conversion thereof
will be entitled to receive the number of Common Shares into which
such Class B Preferred Shares shall be converted, and, in addition
and without payment therefor, the property which such holder would
have received as a dividend if continuously since the record date
for any such dividend or distribution such holder (A) had been the
record holder of the number of Common Shares then received, and (B)
had retained all dividends or distributions in stock or securities
payable in respect of such Common Shares or in respect of any, stock
or securities paid as dividends or distributions and originating
directly or indirectly from such Common Shares.
(ii) Subject to the provisions of Section 5 regarding
liquidation rights, 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
Shares shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Shares, then, as a condition of
such reorganization, reclassification, consolidation, merger or
sale, lawful and adequate provision shall be made whereby the
holders of Class B Preferred Shares shall thereafter have the right
to receive, in lieu of Common Shares of the Corporation immediately
theretofore receivable upon the conversion of such Class B Preferred
Shares, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of
outstanding common shares equal to the number of Common Shares
immediately theretofore receivable upon the conversion or such Class
B Preferred Shares had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and
interests of the holders of the Class B Preferred Shares to the end
that the provisions hereof (including without limitation provisions
for adjustments of the Class B Conversion Price and of the number of
shares receivable upon the conversion of such Class B Preferred
Shares) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter
receivable upon the conversion of such Class B Preferred Shares. The
Corporation shall not effect any such reorganization,
reclassification consolidation, merger or sale, unless prior to the
consummation thereof the surviving corporation (if other than the
Corporation), the corporation resulting from such consolidation or
the corporation purchasing such assets shall assume by written
instrument executed and mailed to the registered holders of the
Class B Preferred Shares at the last address of such holders
appearing on the books of the Corporation, the obligation to
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<PAGE>
deliver to such holders such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holders may be
entitled to receive.
(e) Notice of Certain Events. In case any time:
(i) the Corporation shall pay any dividend payable in stock
upon Common Shares or make any distribution (other than regular cash
dividends) to the holders of Common Shares; or
(ii) the Corporation shall offer for subscription pro rata to
the holders of Common Shares any additional shares of stock of any
class or other rights; or
(iii) there shall be any capital reorganization,
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets, to another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give written
notice, by first-class mail, postage prepaid, addressed to the holders of
Class B Preferred Shares at the addresses of such holders as shown on the
books of the Corporation, of the date on which (A) the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (B) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice also shall
specify the date as of which the holders of Common Shares of record shall
participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as
the case may be. Such written notice shall be given at least thirty (30)
days prior to the action in question and not less than thirty (30) days
prior to the record date or the date on which the Corporation's transfer
books are closed in respect thereto.
7. Redemption Rights.
(a) At any time after February 24, 2000, the Corporation shall
have the conditional right, but not the obligation, to purchase and redeem
all, but not less than all, of the then outstanding Class B Preferred
Shares at the redemption price, plus all accrued but unpaid dividends, if
the exercise of such
-5-
<PAGE>
conditional redemption option is approved by all of the members of the
Corporation's Board of Directors. The "redemption price" of the Class B
Preferred Shares shall be the par value of such Class B Preferred Shares.
Within thirty (30) days after the meeting of the Board of Directors at
which the exercise of such conditional redemption right was approved by
all members of the Board, the Corporation shall deliver notice of
redemption to all holders of Class B Preferred Shares. Thereafter, each
holder of Class B Preferred Shares subject to redemption shall have a
period of ninety (90) days in which to convert such holder's Class B
Preferred Shares into Common Shares pursuant to the provisions of Section
6. If a holder of Class B Preferred Shares subject to redemption does not
convert such holder's Class B Preferred Shares into Common Shares within
such ninety (90) day period, the Class B Preferred Shares shall thereafter
be redeemed pursuant to the provisions of this Section 7(b).
(b) The Corporation shall complete the redemption of all Class B
Preferred Shares outstanding on the date of expiration of the ninety (90)
day notice period described in part (a) of this Section 7 by (i) notifying
the holders of such outstanding Class B Preferred Shares of the date on
which the shares will be redeemed, and (ii) depositing in trust with a
bank or trust company located in the United States of America and having
capital, surplus and undivided profits of at least Five Million Dollars
($5,000,000), within ten (10) days after the expiration of the ninety (90)
day notice period described in part (a) of this Section 7, an amount in
cash out of moneys legally available therefor sufficient to redeem such
Class B Preferred Shares at the redemption price specified in this Section
7, with instructions and authority to such bank or trust company to pay
the redemption price on or after the date fixed for redemption, upon
surrender by such holders of the certificates evidencing the shares being
redeemed, which certificates shall be properly endorsed in blank. If the
certificates evidencing such shares are not surrendered, the dividends
with respect to such shares shall cease to accrue after the date fixed for
redemption and all rights with respect to such shares shall forthwith
after such date cease and terminate, except only the right of the holders
to receive the redemption price without interest upon surrender of their
certificates therefor. Any moneys deposited by the Corporation pursuant to
this paragraph and unclaimed at the end of one year after the date fixed
for redemption shall be repaid to the Corporation upon its request
expressed in a resolution of its Board of Directors, and thereafter the
holders of shares so called for redemption shall be entitled to receive
payment of the redemption price only from the Corporation. All Class B
Preferred Shares which are in any manner redeemed or acquired by the
Corporation shall be retired and canceled and none of such shares shall be
reissued.
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<PAGE>
EXHIBIT 3.1
EXHIBIT B
LEARNING VENTURES INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION
FOR
CLASS C PREFERRED STOCK
1. Designation; Number of Shares; Par Value. A class of shares of
preferred stock of Learning Ventures International, Inc. (the "Corporation")
shall be designated as Class C Preferred Stock (the "Class C Preferred Shares").
The number of shares constituting the Class C Preferred Shares shall be
Fifty-Five Thousand (55,000) shares. The Class C Preferred Shares shall have a
par value of $0.01 per share.
2. Voting Rights. Holders of Class C Preferred Shares shall not be
entitled to vote in the election of directors or on any other matters submitted
for vote to the shareholders of the Corporation; provided, however, that each
holder of Class C Preferred Shares shall have one vote for each Class C
Preferred Share on any proposal to change the rights or preferences of the Class
C Preferred Shares.
3. No Preemptive Rights. Holders of Class C Preferred Shares shall not
be entitled, as a matter of right, to subscribe for, purchase or receive any
part of any stock of the Corporation of any class whatsoever, or of securities
convertible into or exchangeable for any stock of any class whatsoever, whether
now or hereafter authorized and whether issued for cash or other consideration
or by way of dividend.
4. No Dividends. The Class C Preferred Shares shall not be entitled to
any dividends.
5. Liquidation Right and Preference. The Class C Preferred Shares shall
rank equal to the Class B convertible preferred stock of the Corporation (the
"Class B Preferred Shares"), and senior to the Class A convertible preferred
stock of the Corporation (the "Class A Preferred Shares") and the common stock
of the Corporation (the "Common Shares") with respect to the liquidation of the
Corporation. In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of Class C Preferred
Shares shall be entitled to receive in cash, out of the assets of the
Corporation, an amount equal to Three Dollars ($3.00) for each outstanding Class
C Preferred Share after payment is made to the holders of any class of shares of
the Corporation ranking senior to the Class C Preferred Shares, and before any
payment shall be made or any assets distributed to the holders of Class A
Preferred Shares, Common Shares or any other class of shares of the Corporation
ranking junior to the Class C Preferred
<PAGE>
Shares. If, upon any liquidation, dissolution or winding up of the Corporation,
the assets of the Corporation are insufficient to pay the amounts described in
the preceding sentence, the holders of Class C Preferred Shares, Class B
Preferred Shares and any other class of shares of the Corporation ranking equal
to the Class C Preferred Shares shall share pro rata in any such distribution in
proportion to the full amounts to which they would otherwise be respectively
entitled. Following such payment to the holders of Class C Preferred Shares,
Class B Preferred Shares and any other class of shares of the Corporation
ranking equal to the Class C Preferred Shares upon such liquidation, dissolution
or winding up of the Corporation, the holders of Class A Preferred Shares,
Common Shares and any other class of shares of the Corporation ranking junior to
the Class C Preferred Shares shall then be entitled, to the exclusion of the
holders of Class C Preferred Shares, to receive in cash or in kind, all
remaining assets of the Corporation, if any.
The merger or consolidation of the Corporation into or with another
corporation or the merger or consolidation of any other corporation into or with
the Corporation (in which consolidation or merger the shareholders of the
Corporation receive any distributions of cash or securities or other property as
a result of such consolidation or merger), or the sale, transfer or other
disposition of all or substantially all of the assets of the Corporation, shall
be deemed to be a liquidation or dissolution of the Corporation for purposes of
this Section 5.
6. Designation of Additional Series. The Corporation shall have the
power to issue additional series of preferred stock which rank equal to or
senior to the Class C Preferred Shares with respect to the payment of dividends
and payment upon the liquidation of the Corporation, and to increase the number
of authorized shares of any such series, without the vote or consent of the
holders of the Class C Preferred Shares.
7. Redemption.
(a) At any time and from time to time, the Corporation shall have
the right to purchase and redeem all or any portion of the then
outstanding Class C Preferred Shares at the redemption price of Three
Dollars ($3.00) for each outstanding Class C Preferred Share. If the
Corporation purchases and redeems less than all of the then outstanding
Class C Preferred Shares, such purchase and redemption shall be pro rata
from each holder of Class C Preferred Shares, based on the number of Class
C Preferred Shares then held by each.
(b) The Corporation shall purchase and redeem all of the then
outstanding Class C Preferred Shares at the redemption price of Three
Dollars ($3.00) for each outstanding Class C Preferred Share upon the
earlier of (i) June 1, 2001, (ii) the completion by the Corporation of any
single financing from the sale of Common Shares which results in net
proceeds to the Corporation (determined by deducting selling commissions
and all other costs
-2-
<PAGE>
and expenses of the financing) of not less than Six Million Dollars
($6,000,000), (iii) the consolidation or merger of the Corporation with
another corporation (other than a wholly-owned subsidiary of the
Corporation) if the Corporation is not the surviving corporation, or (iv)
the sale of substantially all of the assets of the Corporation. Any
redemption required pursuant to item (i) above shall occur on or before
June 1, 2001, and any redemption required pursuant to item (ii), (iii) or
(iv) above shall occur within thirty (30) days after the event triggering
the redemption.
(c) The Corporation shall complete the redemption of Class C
Preferred Shares as described in part (a) or (b) of this Section 7 by (i)
notifying the holders of such outstanding Class C Preferred Shares of the
date on which the shares will be redeemed, and (ii) depositing in trust
with a bank or trust company located in the United States of America and
having capital, surplus and undivided profits of at least Five Million
Dollars ($5,000,000), within ten (10) days after the date of such notice,
an amount in cash out of funds legally available therefor sufficient to
redeem such Class C Preferred Shares called for redemption at the
redemption price specified in this Section 7, with instructions and
authority to such bank or trust company to pay the redemption price on or
after the date fixed for redemption, upon surrender by such holders of the
certificates evidencing the shares being redeemed, which certificates
shall be properly endorsed in blank. If the certificates evidencing such
shares are not surrendered, all rights with respect to such shares shall
forthwith after such date cease and terminate, except only the right of
the holders to receive the redemption price without interest upon
surrender of their certificates therefor. Any funds deposited by the
Corporation pursuant to this paragraph and unclaimed at the end of one
year after the date fixed for redemption shall be repaid to the
corporation upon its request expressed in a resolution of its Board of
Directors, and thereafter the holders of shares so called for redemption
shall be entitled to receive payment of the redemption price only from the
Corporation. All Class C Preferred Shares which are in any manner redeemed
or acquired by the Corporation shall be retired and canceled and none of
such shares shall be reissued.
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<PAGE>
EXHIBIT 3.1
CERTIFICATE OF DESIGNATION
OF
CLASS D CONVERTIBLE PREFERRED STOCK
OF
LEARNING VENTURES INTERNATIONAL, INC.
I, Paul F. Clifford, the Secretary of Learning Ventures International,
Inc., a Minnesota corporation (the "Corporation"), do hereby certify that at a
meeting of the Board of Directors of the Corporation held on June 16, 1998, the
following resolutions effecting the creation of a series of preferred stock
designated as "Class D Convertible Preferred Stock" were duly approved by the
Board of Directors of the Corporation and that such resolutions have not been
subsequently modified or rescinded
RESOLVED, that the Corporation shall create a class of shares of
preferred stock designated as "Class D Convertible Preferred Stock" and
will reserve One Million Twenty Two Thousand Two Hundred Twenty Two
(1,022,222) of the Corporation's authorized but unissued shares of
preferred stock for issuance under such class.
FURTHER RESOLVED, that shares of the Class D Convertible Preferred
Stock shall be entitled to the relative rights and preferences described
in the attached Exhibit A.
I further certify that the document attached hereto and marked
Exhibit A and entitled "Learning Ventures International, Inc. Certificate of
Designation for Class D Convertible Preferred Stock" is a true and correct copy
of the document referred to in the foregoing resolutions.
IN WITNESS WHEREOF, I have executed this certificate as of this 16th
day of June, 1998.
s/s Paul F. Clifford
----------------------------
Paul F. Clifford, Secretary
<PAGE>
EXHIBIT 3.1
EXHIBIT A
LEARNING VENTURES INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION
FOR CLASS D CONVERTIBLE PREFERRED STOCK
1. Designation; Number of Shares; Par Value. A class of shares of
preferred stock of Learning Ventures International, Inc. (the "Corporation")
shall be designated as Class D Convertible Preferred Stock (the "Class D
Preferred Shares"). The number of shares constituting the Class D Preferred
Shares shall be One Million Twenty Two Thousand Two Hundred Twenty Two
(1,022,222) shares. The Class D Preferred Shares shall have a par value of $4.50
per share.
2. Voting Rights. On all matters submitted to the shareholders, each
holder of Class D Preferred Shares shall have one vote for each share of common
stock of the Corporation which such holder of Class D Preferred Shares would be
entitled to receive upon the conversion of such holder's Class D Preferred
Shares pursuant to the provisions of Section 6. No holder of any Class D
Preferred Shares shall have any cumulative voting rights.
3. No Preemptive Rights. Holders of Class D Preferred Shares shall not
be entitled, as a matter of right, to subscribe for, purchase or receive any
part of any stock of the Corporation of any class whatsoever, or of securities
convertible into or exchangeable for any stock of any class whatsoever, whether
now or hereafter authorized and whether issued for cash or other consideration
or by way of dividend.
4. Dividends. The Class D Preferred Shares shall rank equal to the
Class B convertible preferred stock of the Corporation (the "Class B Preferred
Shares"), senior to the Class A convertible preferred stock of the Corporation
(the "Class A Preferred Shares"), senior to the Class C preferred stock of the
Corporation (the "Class C Preferred Shares") and senior to the common stock of
the Corporation (the "Common Shares") with respect to payment of dividends.
Dividends shall be payable on Class D Preferred Shares out of funds legally
available for the declaration of dividends only if and when declared by the
Corporation's Board of Directors. However, in no event shall any dividend be
paid on any Class B Preferred Shares, Class A Preferred Shares, Class C
Preferred Shares, Common Shares or any other class of shares of the Corporation
ranking equal to or junior to the Class D Preferred Shares unless equal or
greater dividends are paid on the Class D Preferred Shares. All shares of stock
of the Corporation shall be counted on an as-if-converted-to-Common-Shares basis
in determining whether dividends paid on the Class D Preferred Shares are equal
to or greater than the dividends paid on any other shares.
<PAGE>
5. Liquidation Right and Preference. The Class D Preferred Shares shall
rank equal to the Class B Preferred Shares, equal to the Class C Preferred
Shares, senior to the Class A Preferred Shares and senior to the Common Shares
with respect to the liquidation of the Corporation. In the event of the
liquidation, dissolution or winding up or the Corporation, whether voluntary or
involuntary, the holders of the Class D Preferred Shares shall be entitled to
receive in cash, out of the assets of the Corporation, an amount equal to the
par value of each outstanding Class D Preferred Share (i.e., $4.50 per share),
plus all accumulated but unpaid dividends, before any payment shall be made or
any assets distributed to the holders of Class A Preferred Series, Common Shares
or any other class of shares of the Corporation ranking junior to the Class D
Preferred Shares. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation are insufficient to pay the amounts
described in the preceding sentence, the holders of the Class D Preferred
Shares, Class B Preferred Shares, Class C Preferred Shares and any other class
of shares of the Corporation ranking equal to the Class D Preferred Shares shall
share pro rata in any such distribution in proportion to the full amounts to
which they would otherwise be respectively entitled. Following such payment to
the holders of Class D Preferred Shares, Class B Preferred Shares, Class C
Preferred Shares and any other class of shares of the Corporation ranking equal
to the Class D Preferred Shares upon such liquidation, dissolution or winding up
of the Corporation, the holders of the Class A Preferred Shares, Common Shares
and any other class of shares of the Corporation ranking junior to the Class D
Preferred Shares shall then be entitled, to the exclusion of the holders of
Class D Preferred Shares, to receive in cash or in kind, all remaining assets of
the Corporation, if any.
The merger or consolidation of the Corporation into or with another
corporation or the merger or consolidation of any other corporation into or with
the Corporation (in which consolidation or merger the shareholders of the
Corporation receive any distributions of cash or securities or other property as
a result of such consolidation or merger), or the sale, transfer or other
disposition of all or substantially all of the assets of the Corporation, shall
be deemed to be a liquidation or dissolution of the Corporation for purposes of
this Section 5.
6. Conversion into Common Shares.
(a) Optional Conversion. At the option of the holder thereof, all
Class D Preferred Shares then held by such holder shall be convertible
into Common Shares of the Corporation in accordance with the provisions
and subject to the adjustments provided for in Section 6(c). In order to
exercise the conversion privilege, a holder of Class D Preferred Shares
shall surrender the certificate or certificates evidencing all Class D
Preferred Shares then held by such holder to the Corporation at its
principal office, duly endorsed to the Corporation and accompanied by
written notice to the Corporation that the holder elects to convert all of
such shares. Class D Preferred Shares converted at the option of the
holder shall be deemed to have been converted on the day of surrender of
the certificate representing such shares for conversion in accordance with
the foregoing provisions, and at such time the rights of the holder of
such Class D Preferred Shares shall cease and such holder shall be treated
for all purposes as the record holder of Common Shares issuable upon
conversion. As
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<PAGE>
promptly as practicable on or after the conversion date, the Corporation
shall issue and mail or deliver to such holder a certificate or
certificates for the number of Common Shares issuable upon conversion,
computed to the nearest one hundredth of a full share.
(b) Automatic Conversion. The Class D Preferred Shares shall be
automatically converted into Common Shares, (i) upon the election of the
holders of a majority of the outstanding Class D Preferred Shares to
convert their Class D Preferred Shares into Common Shares; or (ii) upon
the election of the Corporation and delivery of written notice of such
election to the holders of the Class D Preferred Shares (which election
and notice shall be delivered within ninety (90) days before or after the
automatic conversion event described below without affecting the effective
time of such automatic conversion), if the Corporation closes the issuance
and sale of Common Shares in one or more underwritten public offerings,
pursuant to an effective registration statement under the Securities Act
of 1933, as amended, in which the gross proceeds received by the
Corporation and/or selling shareholders, if any, equal or exceed Twenty
Million Dollars ($20,000,000) at an average price per Common Share of at
least $5.40.
(c) Conversion Price and Adjustments. The number of Common Shares
issuable in exchange for each Class D Preferred Share upon either optional
or automatic conversion shall be equal to Four Dollars and Fifty Cents
($4.50) divided by the conversion price then in effect for Class D
Preferred Shares (the "Class D Conversion Price"). The Class D Conversion
Price shall initially be Four Dollars and Fifty Cents ($4.50), but such
Class D Conversion Price shall be subject to adjustment from time to time,
as hereinafter provided:
(i) In case the Corporation shall at any time subdivide or
split its outstanding Common Shares into a greater number of shares
or declare any dividend payable in Common Shares, the Class D
Conversion Price in effect immediately prior to such subdivision,
split or dividend shall be proportionately decreased, and
conversely, in case the outstanding Common Shares of the Corporation
shall be combined into a smaller number of shares, the Class D
Conversion Price in effect immediately prior to such combination
shall be proportionately increased.
(ii) If and whenever the Corporation shall issue or sell any
Common Shares for a consideration per share less than the Class D
Conversion Price then in effect (other than options issued and
issuable under the Corporation's 1993 Stock Option Plan dated
February 24, 1993, as amended through September 29, 1997 (the
"Plan"), and shares issued and issuable upon exercise of such
options; options for the issuance of up to five hundred thousand
(500,000) additional shares issuable under any future amendment to
the Plan or successor plan and shares issuable upon exercise of such
options; options, warrants and rights to purchase shares outstanding
or which the Corporation
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<PAGE>
has agreed to issue in writing prior to June 16, 1998 and shares
issuable upon the exercise or conversion thereof; and dividends
payable in Common Shares), or shall issue any options, warrants or
other rights for the purchase of such shares at a consideration per
share of less than the Class D Conversion Price then in effect, the
Class D Conversion Price in effect immediately prior to such
issuance or sale shall be adjusted and shall be equal to (A) the
Class D Conversion Price then in effect, multiplied by (B) a
fraction, the numerator of which shall be an amount equal to the sum
of (1) the number of Common Shares outstanding immediately prior to
such issuance or sale multiplied by the Class D Conversion Price
then in effect, and (2) the total consideration payable to this
Corporation upon such issuance or sale of such shares and such
purchase rights and upon the exercise of such purchase rights, and
the denominator of which shall be the amount determined by
multiplying (aa) the number of Common Shares outstanding immediately
after such issuance or sale plus the number of the Common Shares
issuable upon the exercise of any purchase rights thus issued, by
(bb) the Class D Conversion Price then in effect. If any options,
warrants or other purchase rights that are taken into account in any
such adjustment of the Class D Conversion Price subsequently expire
without exercise, the Class D Conversion Price shall be recomputed
by deleting such options, warrants or other purchase rights. If the
Class D Conversion Price is adjusted as the result of the issuance
of any options, warrants or other purchase rights, no further
adjustment of the Class D Conversion Price shall be made at the time
of the exercise of such options, warrants or other purchase rights.
(iii) The anti-dilution provisions of this section 6(c) may be
waived by the affirmative vote of the holders (acting together as a
class) of at least ninety percent (90%) of the then outstanding
Class D Preferred Shares.
(d) Notice of Class D Conversion Price Adjustment. Upon any
adjustment of the Class D Conversion Price, then and in each such case the
Corporation shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the registered holders of Class D Preferred
Shares at the addresses of such holders as shown on the books of this
Corporation, which notice shall state the Class D Conversion Price
resulting from such adjustment and the increase or decrease, if any, in
the number of shares receivable at such price upon the Conversion of Class
D Preferred Shares, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(e) Rights to Preconversion Distributions. The holders of Class D
Preferred Shares shall have the following rights to certain properties
received by the holders of Common Shares:
(i) In case the Corporation shall declare a dividend or
distribution upon Common Shares payable other than in cash out of
earnings or surplus or
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<PAGE>
other than in Common Shares, then thereafter each holder of Class D
Preferred Shares upon the conversion thereof will be entitled to
receive the number of Common Shares into which such Class D
Preferred Shares shall be converted, and, in addition and without
payment therefor, the property which such holder would have received
as a dividend if continuously since the record date for any such
dividend or distribution such holder (A) had been the record holder
of the number of Common Shares then received, and (B) had retained
all dividends or distributions in stock or securities payable in
respect of such Common Shares or in respect of any stock or
securities paid as dividends or distributions and originating
directly or indirectly from such Common Shares.
(ii) Subject to the provisions of Section 5 regarding
liquidation rights, 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
Shares shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Shares, then, as a condition of
such reorganization, reclassification, consolidation, merger or
sale, lawful and adequate provision shall be made whereby the
holders of Class D Preferred Shares shall thereafter have the right
to receive, in lieu of Common Shares of the Corporation immediately
theretofore receivable upon the conversion of such Class D Preferred
Shares, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of
outstanding Common Shares equal to the number of Common Shares
immediately theretofore receivable upon the conversion of such Class
D Preferred Shares had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and
interests of the holders of the Class D Preferred Shares to the end
that the provisions hereof (including without limitation provisions
for adjustments of the Class D Conversion Price and of the number of
shares receivable upon the conversion of such Class D Preferred
Shares) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter
receivable upon the conversion of such Class D Preferred Shares. The
Corporation shall not effect any such reorganization,
reclassification, consolidation, merger or sale, unless prior to the
consummation thereof the surviving corporation (if other than the
Corporation), the corporation resulting from such consolidation or
the corporation purchasing such assets shall assume by written
instrument executed and mailed to the registered holders of the
Class D Preferred Shares at the last address of such holders
appearing on the books of the Corporation, the obligation to deliver
to such holders such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holders may be
entitled to receive.
-5-
<PAGE>
(f) Notice of Certain Events. In case any time:
(i) the Corporation shall pay any dividend payable in stock
upon Common Shares or make any distribution (other than regular cash
dividends) to the holders of Common Shares; or
(ii) the Corporation shall offer for subscription pro rata to
the holders of Common Shares any additional shares of stock of any
class or other rights; or
(iii) there shall be any capital reorganization,
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets, to another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give written
notice, by first-class mail, postage prepaid, addressed to the holders of
Class D Preferred Shares at the addresses of such holders as shown on the
books of the Corporation, of the date on which (A) the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (B) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice also shall
specify the date as of which the holders of Common Shares of record shall
participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as
the case may be. Such written notice shall be given at least thirty (30)
days prior to the action in question and not less than thirty (30) days
prior to the record date or the date on which the Corporation's transfer
books are closed in respect thereto.
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<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
LEARNING VENTURES INTERNATIONAL, INC.
Learning Ventures International, Inc., a Minnesota corporation,
hereby adopts and files with the Secretary of State these Articles of Amendment
pursuant to Section 302A.139 of the Minnesota Business Corporation Act.
1. The name of the corporation is Learning Ventures International, Inc.
2. Article I of the Articles of Incorporation of Learning Ventures
International, Inc. is hereby amended and restated in its entirety to read
as follows:
ARTICLE I. NAME
The name of the corporation is Capella Education Company.
3. The other provisions of the Articles of Incorporation shall remain
unchanged.
4. This amendment shall be effective June 1, 1999.
5. This amendment has been approved and adopted by the directors and
shareholders of Learning Ventures International, Inc. as required by the
Minnesota Business Corporation Act.
Date: May 28, 1999 LEARNING VENTURES
INTERNATIONAL, INC.
By /s/ Paul F. Clifford
-----------------------
Its Secretary
<PAGE>
EXHIBIT 3.1
CAPELLA EDUCATION COMPANY
STATEMENT OF DESIGNATION
OF
RIGHTS, PREFERENCES AND LIMITATIONS
OF
SERIES E CONVERTIBLE PREFERRED STOCK
The undersigned, Stephen G. Shank, the Chief Executive Officer of Capella
Education Company, a Minnesota corporation (the "Corporation"), does hereby
certify that the following resolutions establishing Series E Convertible
Preferred Stock of the Corporation, pursuant to Minnesota Statutes, Section
302A.401, were duly adopted on May 10, 2000 by a Stock Committee of the board of
Directors of the Corporation duly authorized by the directors of the
Corporation:
RESOLVED, there is hereby established a new class of Series E
Convertible Preferred Stock of this Company with the rights, preferences
and privileges as set forth in the Certificate of Designation attached
hereto as Exhibit A to these resolutions (the "Certificate of
Designation");
RESOLVED, that the appropriate officers of this Company are
authorized and directed to make, execute and file with the Minnesota
Secretary of State in the method required by law, the Certificate of
Designation, and to take all other actions they may deem necessary or
advisable to effect adoption of the Certificate of Designation; and
RESOLVED, that the officers of the Company, and each of them, be and
hereby are authorized and directed, for and on behalf of the Company, to
execute such documents and take such other action as they, and each of
them, deem necessary, desirable and in the best interest of the Company to
complete the transactions contemplated by the foregoing resolutions.
[remainder of page intentionally blank]
<PAGE>
IN WITNESS WHEREOF, I have subscribed my name this 10th day of May, 2000.
/s/ Stephen G. Shank
-----------------------------------------
Stephen G. Shank,
President and Chief Executive Officer
Capella Education Company
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<PAGE>
EXHIBIT A
CAPELLA EDUCATION COMPANY
CERTIFICATE OF DESIGNATION
FOR CLASS E CONVERTIBLE PREFERRED STOCK
1. DESIGNATION; NUMBER OF SHARES; PAR VALUE.
A class of shares of preferred stock of Capella Education Company
(the "Corporation") shall be designated as Class E Convertible Preferred Stock
(the "Class E Preferred Stock"). The number of shares constituting the Class E
Preferred Stock shall be Two Million Five Hundred Ninety-Six Thousand Four
Hundred Ninety-One (2,596,491) shares. The Class E Preferred Stock shall have a
par value of $.01 per share.
2. VOTING RIGHTS.
(a) GENERAL. On all matters submitted to the shareholders, each
holder of Class E Preferred Stock shall have one vote for each share of common
stock of the Corporation (the "Common Stock") which such holder of Class E
Preferred Stock would be entitled to receive upon the conversion of such
holder's Class E Preferred Stock pursuant to the provisions hereof. Except as
otherwise provided herein, and except as otherwise required by agreement or law,
the shares of capital stock of the Corporation shall vote as a single class on
all matters submitted to the shareholders. No holder of any Class E Preferred
Stock shall have any cumulative voting rights.
(b) ADDITIONAL CLASS VOTES BY CLASS E STOCK. Without the affirmative
vote of the holders of a majority of the Class E Preferred Stock at the time
outstanding at a meeting of the holders of Class E Preferred Stock called for
such purpose or written consent of the holders (acting together as a class) of a
majority of the Class E Preferred Stock at the time outstanding, the Corporation
shall not:
(1) create, authorize or issue any shares of capital stock ranking
senior to or having a priority over the Class E Preferred Stock as to the
payment or distribution of dividends or of assets upon the liquidation,
dissolution or winding up, voluntary or involuntary, of the Corporation;
or
(2) amend, alter, modify or repeal any provision of the Articles of
Incorporation of the Corporation so as to alter the rights and preferences
of the Class E Preferred Stock; or
(3) redeem, repurchase or acquire (or make any payment into, or set
aside, a sinking fund for such purposes) any of the Corporation's capital
stock, except any such redemption, repurchase or acquisition which is:
<PAGE>
(i) pursuant to mandatory redemption obligations set forth
herein or in the Articles of Incorporation (including any
certificate of designation) as of the date of filing of this
Certificate of Designation;
(ii) Common Stock issued under employee benefit plans of the
Corporation;
(iii) made pursuant to a repurchase agreement approved by the
Board of Directors; or
(4) effect any acquisition of the Corporation by another entity by
means of any transaction or series of related transactions with the
Corporation (including, without limitation any merger, consolidation or
recapitalization), which results in 50% or more of the voting capital
stock of the Corporation being acquired by persons who were not
shareholders of the Corporation prior to such transaction or series of
transactions, unless such acquisition provides for the exchange or payment
of consideration in respect of each share of Class E Preferred Stock, or
the shares of Common Stock or other securities into which a share of Class
E Preferred Stock is then convertible, having a value equal to or greater
than $42.75 (subject to appropriate adjustments for stock dividends, stock
splits, combinations and similar recapitalization affecting the Class E
Preferred Stock) (a "Qualified Amount"); or
(5) effect any sale or other disposition of all or substantially all
of the assets of the Corporation, unless such sale, if followed by an
immediate liquidation, would result in distributable proceeds in respect
of each share of Class E Preferred Stock, or the shares of Common Stock or
other securities into which a share of Class E Preferred Stock is then
convertible, in a Qualified Amount; or
(6) effect the liquidation or dissolution of the Company, unless
such liquidation or dissolution would result in distributable proceeds in
respect of each share of Class E Preferred Stock, or the shares of Common
Stock or other securities into which a share of Class E Preferred Stock is
then convertible, in a Qualified Amount.
(c) VALUATION OF NON-CASH CONSIDERATION. In connection with any
transaction set forth in Section 2(b) above involving the receipt of
consideration or proceeds in a form other than cash, the fair market value of
such non-cash consideration or proceeds shall be utilized in determining whether
such transaction must be approved by the holders of Class E Preferred Stock
pursuant to Section 2(b). The fair market value of any non-cash consideration
will be determined as follows:
(i) the fair market value of stock and other securities that
are publicly traded shall be the average of the last closing market
price of such stock or securities on each of the ten trading days
ending five business days
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<PAGE>
prior to the execution by the Company of a definitive agreement, or
adoption by the Board of Directors of the Company of any plan,
relating to such transaction (the "Time of Determination");
(ii) the fair market value of stock and other equity
securities that are not publicly traded and the value of all other
non-cash consideration, other than consideration of the nature
described in clause (iii) below, shall be the fair market value
thereof at the Time of Determination as mutually agreed by the
Company and a director designated to serve on the Board of Directors
by a holder of Class E Preferred Stock (a "Class E Director"), or if
the Company and a Class E Director are unable to reach an agreement
within five business days of receipt of written notice from the
Company of such transaction by the Class E Director, as determined
by an investment banking firm or other person experienced in valuing
such stock, equity securities or other non-cash consideration
mutually acceptable to a Class E Director and the Company, or if
they are unable to agree, or there exists no such Class E Director,
then a nationally recognized investment banking firm selected in
good faith by the Board of Directors of the Company; or
(iii) the value of any promissory note or other debt
instrument that is not publicly traded and the value of any and all
deferred installments of the consideration and any other deferral of
payments included in the total consideration shall be deemed to be
the face amount of the promissory notes or other debt instruments or
the total amount of payments that are deferred with respect to
deferred obligations that are not evidenced by promissory notes or
other debt instruments.
A security is "publicly traded" if such security is part of a class of
securities that is listed on the New York or American stock exchanges (or on a
foreign stock exchange of comparable depth and liquidity) or is traded on the
NASDAQ Stock Market.
(d) MEETINGS. A proper officer of the Corporation may, and upon the
written request of the holders of record of at least twenty-five percent (25%)
of the shares of Class E Preferred Stock then outstanding addressed to the
Secretary of the Corporation shall, call a special meeting of the holders of
Class E Preferred Stock, for the purpose of holding a class vote pursuant to
Section 2(b). If such meeting shall not be called by a proper officer of the
Corporation within twenty (20) days after personal service of said written
request upon the Secretary of the Corporation, or within twenty (20) days after
mailing the same within the United States by certified mail, addressed to the
Secretary of the Corporation at its principal executive offices, then the
holders of record of at least twenty-five percent (25%) of the outstanding
shares of Class E Preferred Stock may designate in writing one of their number
to call such meeting at the expense of the Corporation, and such meeting may be
called by the person so designated upon the notice required for the annual
meeting of stockholders of the Corporation and shall be held at the place for
holding the annual meetings of stockholders.
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<PAGE>
3. NO PREEMPTIVE RIGHTS.
Holders of Class E Preferred Stock shall not be entitled, as a
matter of right, to subscribe for, purchase or receive any part of any stock of
the Corporation of any class whatsoever, or of securities convertible into or
exchangeable for, or otherwise creating a right to acquire, any stock of any
class whatsoever, whether now or hereafter authorized and whether issued for
cash or other consideration or by way of dividend. Nothing herein shall limit
the power of the Corporation to grant any of the foregoing rights to persons by
contract or otherwise.
4. DIVIDENDS.
In the event any dividend or distribution is declared or made with
respect to outstanding shares of any class of capital stock, a comparable
dividend or distribution must be simultaneously declared or made with respect to
the outstanding shares of Class E Preferred Stock. In the event any dividend or
distribution is declared or made with respect to the Common Stock or any class
of capital stock convertible or exchangeable into Common Stock of the
Corporation, each holder of shares of Class E Preferred Stock (and any other
holder of capital stock so convertible or exchangeable and entitled to payment
of such dividend or distribution) shall be paid such comparable dividend or
receive such comparable distribution on the basis of the number of shares of
Common Stock into which such holder's shares of capital stock are then
convertible on the date established as the record date with respect to such
dividend or distribution. In case any portion of the dividend or distribution
declared or made by the Corporation shall be in a form other than cash, the fair
market value of such non-cash portion, as determined in good faith by the Board
of Directors of the Company, shall be utilized in determining the comparable
dividend or distribution to be declared or made with respect to the outstanding
shares of Class E Preferred Stock.
5. LIQUIDATION RIGHT AND PREFERENCE.
In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation Event"), the
holders of the Class E Preferred Stock shall be entitled to receive, in respect
of each share of Class E Preferred Stock, the greater of (i) the amount of
$14.25 (subject to appropriate adjustment for any stock dividends, combinations
or splits with respect to such share), plus the aggregate amount of all declared
but unpaid dividends on such share of Class E Preferred Stock (the "Class E
Preference Amount") or (ii) the aggregate amount that would be payable in the
Liquidation Event in respect of the share or shares of Common Stock into which
such share of Class E Preferred Stock would be convertible if all of the holders
were to convert their shares of Class E Preferred Stock into shares of Common
Stock immediately prior to the Liquidation Event, and the Class E Preference
Amount was not paid in preference to any class of Junior Stock, as hereafter
provided.
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<PAGE>
Upon occurrence of a Liquidation Event, the holders of then
outstanding shares of Class B Convertible Preferred Stock ("Class B Preferred
Stock"), Class C Preferred Stock, Class D Convertible Preferred Stock ("Class D
Preferred Stock"), Class E Preferred Stock and any other class of capital stock
hereafter established ranking on a parity in such Liquidation Event with the
Class B Preferred Stock, Class C, Class D Preferred Stock and Class E Preferred
Stock (collectively, "Parity Stock") shall be entitled to be paid as to each
share of such Parity Stock, prior and in preference to any distribution of any
of the assets of the Corporation to the holders of Class A Convertible Preferred
Stock ("Class A Preferred Stock"), Common Stock or any other class or series of
capital stock hereafter established ranking junior in a Liquidation Event to the
Parity Stock (collectively, "Junior Stock"), and after distribution of any of
the assets of the Corporation, to the extent of the liquidation preference
applicable thereto, to the holders of any class or series of capital stock
hereafter established ranking senior in a Liquidation Event to the Parity Stock
(collectively "Senior Stock"), out of assets available for distribution, an
amount, plus the aggregate amount of all declared but unpaid dividends on such
shares, equal to $2.50 per share in the case of the Class B Preferred Stock (the
"Class B Preference Amount"), $3.00 per share in the case of the Class C
Preferred Stock (the "Class C Preference Amount"), $4.50 per share in the case
of the Class D Preferred Stock (the "Class D Preference Amount") (subject, in
each case, to appropriate adjustment for any stock dividends, combinations or
splits with respect to each share), the Class E Preference Amount in the case of
the Class E Preferred Stock, and, in the case of any other Parity Stock, such
amount as shall be specified in the applicable Certificate of Designation (the
"Parity Preference Amount", and, together with the Class B Preference Amount,
Class C Preference Amount, Class D Preference Amount and Class E Preference
Amount, collectively, the "Parity Preference Amounts").
If, upon any Liquidation Event, the remaining assets of the
Corporation available for distribution to the holders of Parity Stock are
insufficient to pay the holders of Parity Stock their full Parity Preference
Amounts to which they are entitled, the holders of Parity Stock shall share pro
rata in any such distribution in proportion to the full Parity Preference
Amounts to which they would otherwise be respectively entitled.
Following such payment of Parity Preference Amounts to the holders
of Parity Stock, and payment to the holders of any Senior Stock of any
preferential amount to which they are entitled, the holders of the Junior Stock
shall then be entitled, to the exclusion of the holders of Parity Stock or
Senior Stock, to receive in cash or in kind, all remaining assets of the
Corporation, if any, in accordance with their relative priorities in a
Liquidation Event.
6. CONVERSION INTO COMMON STOCK.
(a) OPTIONAL CONVERSION. At the option of the holder thereof, any or
all Class E Preferred Stock then held by such holder shall be convertible into
Common Stock of the Corporation in accordance with the provisions and subject to
the adjustments provided for in Section 6(c). In order to exercise the
conversion privilege, a holder of Class E Preferred Stock shall surrender the
certificate or certificates duly endorsed to the Corporation evidencing the
shares of Class E Preferred Stock each holder wishes to convert to the
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Corporation at its principal office and accompanied by written notice to the
Corporation that the holder elects to convert all of such shares. Any shares of
Class E Preferred Stock converted at the option of the holder shall be deemed to
have been converted on the day of surrender of the certificate representing such
shares for conversion in accordance with the foregoing provisions, and at such
time the rights of the holder of such Class E Preferred Stock with respect to
such shares shall cease and such holder shall be treated as the record holder of
the number of shares of Common Stock issuable upon conversion. As promptly as
practicable on or after the conversion date, the Corporation shall issue and
mail or deliver to such holder (i) a certificate or certificates for the number
of Common Stock issuable upon conversion, computed to the nearest one hundredth
of a full share, (ii) any cash adjustment required pursuant to Section 6(f), and
(iii) in the event of a conversion in part, a certificate or certificates for
the whole number of shares of Class E Preferred Stock not being so converted.
(b) AUTOMATIC CONVERSION. The Class E Preferred Stock shall
automatically be converted into Common Stock of the Corporation, without any act
by the Corporation or the holders of the Class E Preferred Stock, concurrently
with the closing of the first public offering by the Corporation of shares of
Common Stock of the Corporation registered under the Securities Act of 1933, as
amended, in which (1) the aggregate gross public offering price of the
securities sold for cash by the Corporation in the offering is at least $30.0
million, or such lower amount as may be approved by the holders of a majority of
the shares of Class E Preferred Stock then outstanding, and (2) the public
offering price per share of Common Stock is at least $28.50 (as adjusted from
time to time to reflect stock splits, dividends, recapitalizations, combinations
or the like), or such lower amount as may be approved by the holders of a
majority of the shares of Class E Preferred Stock then outstanding. Each holder
of a share of Class E Preferred Stock so converted shall be entitled to receive
the full number of shares of Common Stock into which such share of Class E
Preferred Stock held by such holder could be converted if such holder had
exercised its conversion right at the time of closing of such public offering.
Upon such conversion, each holder of a share of Class E Preferred Stock shall
immediately surrender such share in exchange for (i) appropriate stock
certificates representing a share or shares of Common Stock of the Corporation,
and (ii) any cash adjustment required pursuant to Section 6(f).
(c) CONVERSION PRICE AND ADJUSTMENTS. The number of shares of Common
Stock issuable in exchange for each share of Class E Preferred Stock upon either
optional or automatic conversion shall be equal to $14.25 divided by the
conversion price then in effect for Class E Preferred Stock (the "Class E
Conversion Price"). The Class E Conversion Price shall initially be $14.25, but
such Class E Conversion Price shall be subject to adjustment from time to time,
as hereinafter provided:
(i) In case the Corporation shall at any time (A) declare a
dividend or make a distribution on Common Stock payable in Common Stock
(other than dividends or distributions payable to holders of the Series E
Preferred Stock including dividends paid as contemplated by Section 4),
(B) subdivide or split the outstanding Common Stock, (C) combine or
reclassify the outstanding Common Stock into a
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smaller number of shares, (D) issue any shares of its capital stock in a
reclassification of Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Corporation is the
continuing corporation), or (E) consolidate with, or merge with or into,
any other person, the Class E Conversion Price in effect (and, where
appropriate, the securities into which the Class E Preferred Stock are
then convertible) at the time of the record date for such dividend or
distribution or on the effective date of such subdivision, split,
combination, consolidation, merger or reclassification shall be adjusted
so that the conversion of the Class E Preferred Stock after such time
shall entitle the holder to receive the aggregate number of shares of
Common Stock or other securities of the Corporation (or other securities
into which such shares of Common Stock have been converted, exchanged,
combined, consolidated, merged or reclassified pursuant to clause
6(c)(i)(C), 6(c)(i)(D) or 6(c)(i)(E) above) which, if the Class E
Preferred Stock had been converted immediately prior to such time, such
holder would have owned upon such conversion and been entitled to receive
by virtue of such dividend, distribution, subdivision, split, combination,
consolidation, merger or reclassification. Such adjustment shall be made
successively whenever an event listed above shall occur.
(ii) If and whenever the Corporation shall issue or sell any
Common Stock for a consideration per share less than the Class E
Conversion Price then in effect, or shall issue any options, warrants or
other rights for the purchase of such shares at a consideration per share
of less than the Class E Conversion Price then in effect (other than
securities subject to Section 6(c)(i) hereof; options issued as of April
20, 2000 under existing stock option plans of the Corporation, and 730,729
shares issuable upon exercise of such options; options for the issuance of
up to 533,137 additional shares under any existing stock option plan of
the Corporation and shares issuable upon exercise of such options;
warrants to purchase 198,960 shares outstanding as of April 20, 2000,
warrants to purchase 135,088 shares to be issued in connection with the
issuance of the Class E Preferred Stock and shares issuable upon the
exercise thereof; 2,810,000 shares of Class A Preferred Stock, 460,000
shares of Class B Preferred Stock, 1,022,222 shares of Class D Preferred
Stock and shares issuable upon conversion thereof; shares issued to the
employee stock ownership plan of the Corporation, provided such
contribution is approved by the compensation committee of the Board of
Directors of the Corporation and does not exceed that number of shares the
fair market value of which is three percent (3%) of annual compensation
(as measured by applicable benefit plan rules) (any of the foregoing share
amounts shall be subject to appropriate adjustment from time to time to
reflect stock splits, dividends, recapitalizations, combinations or the
like)), the Class E Conversion Price in effect immediately prior to such
issuance or sale shall be reduced to an amount determined by multiplying
(A) the Class E Conversion Price then in effect, and (B) a fraction, the
numerator of which shall be an amount equal to the sum of (1) the number
of shares of Common Stock outstanding immediately prior to such issuance
or sale multiplied by the Class E Conversion Price then in effect, and (2)
the total consideration payable to this Corporation upon such issuance or
sale of such shares and such purchase rights and upon the exercise of such
purchase rights, and the
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denominator of which shall be the amount determined by multiplying (aa)
the number of shares of Common Stock outstanding immediately after such
issuance or sale plus the number of shares of Common Stock issuable upon
the exercise of any purchase rights thus issued, by (bb) the Class E
Conversion Price then in effect. In case any portion of the consideration
to be received by the Corporation shall be in a form other than cash, the
fair market value of such non-cash consideration, as determined in good
faith by the Board of Directors of the Company, shall be utilized in the
foregoing computation.
For purposes of this Section 6(c), "Common Stock outstanding" shall
include, in addition to Common Stock issued and outstanding, those shares
of Common Stock issuable upon conversion of outstanding shares of
Preferred Stock and Common Stock issuable upon the exercise, exchange or
conversion of any other outstanding right to acquire Common Stock.
If any options, warrants or other purchase rights that are taken into
account in any such adjustment of the Class E Conversion Price
subsequently expire without exercise, the Class E Conversion Price shall
be recomputed by deleting such expired options, warrants or other purchase
rights. If the Class E Conversion Price is adjusted as the result of the
issuance of any options, warrants or other purchase rights, no further
adjustment of the Class E Conversion Price shall be made at the time of
the exercise of such options, warrants or other purchase rights.
(iii) In case the Corporation shall fix a record date for the
issuance on a pro rata basis of rights, options or warrants to the holders
of its Common Stock or other securities entitling such holders to
subscribe for or purchase shares of Common Stock (or securities
convertible into or exercisable or exchangeable for shares of Common
Stock) at a price per share of Common Stock (or having a conversion,
exercise or exchange price per share of Common Stock, in the case of a
security convertible into, or exercisable or exchangeable for, shares of
Common Stock) less than the Class E Conversion Price on such record date,
the maximum number of shares of Common Stock issuable upon exercise of
such rights, options or warrants (or conversion of such convertible
securities) shall be deemed to have been issued and outstanding as of such
record date and the Class E Conversion Price shall be adjusted pursuant to
Section 6(c)(ii) hereof, as though such maximum number of shares of Common
Stock had been so issued for an aggregate consideration payable by the
holders of such rights, options, warrants or other securities prior to
their receipt of such shares of Common Stock. In case any portion of such
consideration shall be in a form other than cash, the fair market value of
such non-cash consideration shall be determined as set forth in Section
6(c)(ii) hereof. Such adjustment shall be made successively whenever such
record date is fixed; and in the event that such rights, options or
warrants are not so issued or expire in whole or in part unexercised, or
in the event of a change in the number of shares of Common Stock to which
the holders of such rights, options or warrants are entitled (other than
pursuant to adjustment provisions therein comparable to those contained in
this Section 6(c)), the Class E
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Conversion Price shall again be adjusted as follows: (A) in the event that
all of such rights, options or warrants expire unexercised, the Class E
Conversion Price shall be the Class E Conversion Price that would then be
in effect if such record date had not been fixed; (B) in the event that
less than all of such rights, options or warrants expire unexercised, the
Class E Conversion Price shall be adjusted pursuant to Section 6(c)(ii) to
reflect the maximum number of shares of Common Stock issuable upon
exercise of such rights, options or warrants that remain outstanding
(without taking into effect shares of Common Stock issuable upon exercise
of rights, options or warrants that have lapsed or expired); and (C) in
the event of a change in the number of shares of Common Stock to which the
holders of such rights, options or warrants are entitled (other than
pursuant to adjustment provisions therein comparable to those contained in
this Section 6(c)), the Class E Conversion Price shall be adjusted to
reflect the Class E Conversion Price which would then be in effect if such
holder had initially been entitled to such changed number of shares of
Common Stock. Notwithstanding anything herein to the contrary, no further
adjustment to the Class E Conversion Price shall be made upon the issuance
or sale of Common Stock upon the exercise of any rights, options or
warrants to subscribe for or purchase Common Stock, if any adjustment in
the Class E Conversion Price was made or required to be made upon the
record date for the issuance or sale of such rights, options or warrants
under this Section 6(c)(iii). Notwithstanding anything herein to the
contrary, no adjustment in the Class E Conversion Price shall be made
under this Section 6(c)(iii) to the extent the holders of Class E
Preferred Stock participate in any such distribution in accordance with
Section 4 hereof.
(iv) The anti-dilution provisions of this Section 6(c) may be
waived by the affirmative vote of the holders (acting together as a class)
of a majority of the then outstanding Class E Preferred Stock.
(d) NOTICE OF CLASS E CONVERSION PRICE ADJUSTMENT. Upon any
adjustment of the Class E Conversion Price, then and in each such case the
Corporation shall give written notice thereof, by first-class mail, postage
prepaid, addressed to the registered holders of Class E Preferred Stock at the
addresses of such holders as shown on the books of this Corporation, which
notice shall state the Class E Conversion Price resulting from such adjustment
and the increase or decrease, if any, in the number of shares receivable at such
price upon the conversion of Class E Preferred Stock, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(e) NOTICE OF CERTAIN EVENTS. In case any time:
(i) the Corporation shall pay any dividend payable in stock
upon Common Stock or make any distribution (other than regular cash
dividends) to the holders of Common Stock; or
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(ii) the Corporation shall offer for subscription pro rata to
the holders of Common Stock any additional shares of stock of any class or
other rights; or
(iii) there shall be any capital reorganization,
reclassification of the capital stock of the Corporation, or consolidation
or merger of the Corporation with, or sale of all or substantially all of
its assets to another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give written
notice, by first-class mail, postage prepaid, addressed to the holders of Class
E Preferred Stock at the addresses of such holders as shown on the books of the
Corporation, of the date on which (A) the books of the Corporation shall close
or a record shall be taken for such dividend, distribution or subscription
rights, or (B) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case may
be. Such notice also shall specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be. Such written notice shall be given at least thirty (30) days prior to
the action in question and not less than thirty (30) days prior to the record
date or the date on which the Corporation's transfer books are closed in respect
thereto.
(f) FRACTIONAL SHARES. In connection with the conversion of any
shares of Class E Preferred Stock, no fractions of shares of Common Stock shall
be required to be issued to the holder of such shares of Class E Preferred
Stock, but in lieu thereof the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount equal to such fractional
interest multiplied by the Conversion Price per share of Common Stock on the
business day next preceding the business day on which such shares of Class E
Preferred Stock are deemed to have been converted.
(g) RESERVATION OF SHARES.
(i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such number of
its authorized but unissued shares of Common Stock as shall be required
for the purpose of effecting conversions of the Class E Preferred Stock.
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the Class E
Preferred Stock, the Corporation shall comply with all applicable federal
and state laws and regulations which require action to be taken by the
Corporation.
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(h) TRANSFER TAXES. The Corporation will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on conversion of the Class E Preferred Stock
pursuant hereto; provided that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the holder of
the Class E Preferred Stock to be converted and no such issue or delivery shall
be made unless and until the person requesting such issue or delivery has paid
to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
7. OPTIONAL REDEMPTION AT THE ELECTION OF THE HOLDERS OF CLASS E
PREFERRED STOCK.
(a) ELECTION.
(i) At any time and from time to time after the seventh
anniversary of the original issue date of the shares of Class E Preferred
Stock, the holders of the then outstanding shares of the Class E Preferred
Stock shall have the option, exercisable by the holders of not less than
25% (in the aggregate) of the then outstanding shares of the Class E
Preferred Stock, voting as a single class, by giving a written notice to
the Corporation (the "Redemption Notice"), to require the Corporation to
redeem any or all of the shares of such Class E Preferred Stock of such
holders then outstanding. Upon the affirmative vote by the holders of a
majority of the outstanding shares of Class E Preferred Stock, the holders
of all outstanding shares of Class E Preferred Stock will be required to
have such shares redeemed (a "Mandatory Redemption").
(ii) Within five (5) days after receiving the Redemption
Notice, the Corporation shall send a copy of such notice to all other
holders of record of the Class E Preferred Stock. Such other holders may
elect to participate in the Redemption Notice by notifying the Corporation
in writing within ten (10) days after receiving a copy of the Redemption
Notice from the Corporation. Upon receipt of such Redemption Notice, the
Board shall within thirty (30) days specify a date on which the redemption
of such shares provided herein will take place (the "Redemption Date"),
which shall be no less than forty-five (45) days and no more than ninety
(90) days after receipt of the Redemption Notice.
(iii) The Corporation shall have no obligation to honor more
than two (2) redemption requests of the holders of shares of Class E
Preferred Stock.
(b) REDEMPTION PRICE. The redemption price for each share of the
Class E Preferred Stock (the "Redemption Price") shall be $14.25 (subject to
adjustment from time to time to reflect stock splits, dividends,
recapitalizations, combinations or the like), plus an amount equal to all
declared but unpaid dividends, if any, payable with respect to such share.
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(c) NOTIFICATION. At least fifteen (15) days prior to the Redemption
Date, the Corporation shall mail written notice by first class mail, postage
prepaid, to each holder of record of the Class E Preferred Stock who sought
redemption, at its address last shown on the records of the Corporation,
notifying such holder of such redemption, specifying the Redemption Date, the
Redemption Price and the date on which such holder's conversion rights as to
such shares terminate and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, his, or its certificate
or certificates representing the shares to be redeemed (such notice, the
"Closing Notice").
(d) SURRENDER AND PAYMENT. On or prior to the Redemption Date, each
holder of shares of Class E Preferred Stock to be redeemed shall surrender its
certificate or certificates representing such shares to the Corporation, in the
manner and at the place designated in the Closing Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. The Redemption Price due to each
holder shall be payable, from any source of funds legally available therefor, by
delivery on the Redemption Date of a certified or bank cashier's check in an
amount equal to the aggregate Redemption Price due to such holder. From and
after the date a holder of shares of the Class E Preferred Stock has received
payment in full by receipt of cash, all rights of such holder with respect to
such Class E Preferred Stock so redeemed shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
(e) INSUFFICIENT FUNDS. If, on any Redemption Date, funds of the
Corporation legally available therefor shall be insufficient to redeem all of
the shares of Class E Preferred Stock required to be redeemed, funds to the
extent legally available shall be used to redeem the maximum possible number of
such shares ratably on the basis of the relative value of such shares based on
the Redemption Prices of such shares on such date if the funds of the
Corporation legally available therefore had been sufficient to redeem all shares
required to be redeemed on such date. Thereafter, the Corporation shall use its
best efforts to obtain sufficient funds to redeem the balance of such shares.
When additional funds of the Corporation become legally available for the
redemption of the balance of such shares, such additional funds will be used to
redeem at the Redemption Price (together with interest at the annual rate of 9%)
the balance of the shares which the Corporation was therefore obligated to
redeem, ratably on the basis set forth in the preceding sentence.
Notwithstanding anything herein to the contrary, if the Redemption Price is not
paid when due, all powers, preferences, rights, qualifications, limitations and
restrictions (including, without limitation, dividend rights, conversion rights,
and liquidation preferences, and voting rights) with respect to shares
surrendered for redemption, but not actually redeemed, shall continue until the
Redemption Price is paid in full.
(f) REISSUE. Any shares of Class E Preferred Stock redeemed pursuant
to this Section 7 shall permanently be retired, shall no longer be deemed
outstanding and shall not under any circumstances be reissued as Class E
Preferred Stock, but shall instead have
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the status of authorized Open Term Preferred Stock, as defined in the
Corporation's Restated Articles of Incorporation.
8. OPTIONAL REDEMPTION AT THE ELECTION OF THE CORPORATION.
(a) ELECTION. At any time and from time to time after the seventh
anniversary of the original issue date of the shares of Class E Preferred Stock,
to the extent the Corporation shall have funds legally available for such
payment, and subject to the rights of the holders pursuant to Section 6 hereof,
the Corporation shall have the right to purchase and redeem all or any portion
of the then outstanding shares of Class E Preferred Stock. The Board of
Directors shall specify a Redemption Date, which shall be not less than thirty
(30) days nor more than sixty (60) days from the date the Corporation shall mail
a Closing Notice to the holders of Class E Preferred Stock.
(b) REDEMPTION PRICE. The redemption price for each share of Class E
Preferred Stock redeemed pursuant to this Section 8 shall be the Redemption
Price, plus an amount equal to all declared but unpaid dividends, if any,
payable with respect to such share.
(c) SURRENDER AND PAYMENT. On or prior to the Redemption Date, each
holder of shares of Class E Preferred Stock to be redeemed shall surrender its
certificate or certificate representing such shares to the Corporation, in the
manner and at the place designated in the Closing Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. The Redemption Price due to each
holder shall be payable, from any source of funds legally available therefor, by
delivery on the Redemption Date of a certified or bank cashier's check in an
amount equal to the aggregate Redemption Price due to such holder. From and
after the date a holder of shares of the Class E Preferred Stock has received
payment in full by receipt of cash, all rights of such holder with respect to
such Class E Preferred Stock so redeemed shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
(d) PARTIAL REDEMPTION. In the event of a redemption of less than
all of the outstanding shares of Class E Preferred Stock pursuant to the first
paragraph of this Section 8, redemption as among the holders of such shares of
Class E Preferred Stock shall be on a pro rata basis.
(e) REISSUE. Any shares of Class E Preferred Stock redeemed pursuant
to this Section 8 shall permanently be retired, shall no longer be deemed
outstanding and shall not under any circumstances be reissued as Class E
Preferred Stock, but shall instead have the status of authorized Open Term
Preferred Stock, as defined in the Corporation's Restated Articles of
Incorporation.
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STATEMENT OF CANCELLATION
OF
CAPELLA EDUCATION COMPANY
The undersigned officer of Capella Education Company (the "Corporation")
hereby certifies that:
1. The name of the Corporation is Capella Education Company.
2. The Corporation has repurchased and canceled 54,929 Shares of Class C
Preferred Stock of the Corporation.
2. There are currently no shares of Class C Preferred Stock outstanding.
3. The 54,929 shares formerly designated as Class C Preferred Stock shall
be canceled and not subject to reissue.
4. After giving effect to the cancellation, the Company shall be
authorized to issue shares in the amount and class as follows:
10,000,000 Common Stock
3,000,000 Class A Convertible Preferred Stock
1,180,000 Class B Convertible Preferred Stock
71 Class C Preferred Stock
1,022,222 Class D Convertible Preferred Stock
2,596,491 Class E Convertible Preferred Stock
5,146,287 Preferred Stock (undesignated as to class or series)
IN WITNESS WHEREOF, the undersigned has executed this statement of
cancellation this 6th day of June, 2001.
CAPELLA EDUCATION COMPANY
By: /s/ Paul F. Clifford
--------------------------------------
Its: Corporate Secretary
<PAGE>
ARTICLES OF AMENDMENT
OF
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CAPELLA EDUCATION COMPANY
The undersigned, Paul F. Clifford, Secretary of Capella Education Company,
a Minnesota corporation, (the "Corporation"), hereby certifies that:
(i) The name of the Corporation is Capella Education Company.
(ii) Article 3 Section 1 (A) of the Corporation's Amended and Restated
Articles of Incorporation has been amended to read in its entirety as follows:
"(A) Authorized Capital Stock. The aggregate number of shares which
the Corporation has the authority to issue is twenty-eight million
(28,000,000) shares, fifteen million (15,000,000) of which shall be
designated common shares, $.10 par value (the "Common Shares") and three
million (3,000,000) of which shall be designated Class A convertible
preferred shares, $1.00 par value (the "Class A Preferred Shares"). The
Common Shares and the Class A Preferred Shares are herein sometimes
referred to collectively as "Capital Stock." Additionally, the Board of
Directors of the Corporation is hereby authorized to cause to be issued
from time to time, by resolution or resolutions adopted by such Board, an
additional ten million (10,000,000) preferred shares (the "Open Term
Preferred Shares")."
(iii) The foregoing amendment has been adopted pursuant to Chapter 302A of
the Minnesota Statutes.
IN WITNESS WHEREOF, I have subscribed my name this 6th day of July, 2001.
/s/ Paul F. Clifford
--------------------------------
Paul F. Clifford, Secretary
<PAGE>
STATEMENT OF CANCELLATION
OF THE STATEMENT FIXING THE RIGHTS AND PREFERENCES
OF THE CLASS C PREFERRED STOCK
OF
CAPELLA EDUCATION COMPANY
The undersigned officer of Capella Education Company (the "Company")
hereby certifies that:
1. The name of the Company is Capella Education Company.
2. The Company's Board of Directors has directed that the statement fixing
the rights and preferences of the Company's Class C Preferred Stock be canceled
pursuant to Section 302A.133 of the Minnesota Statutes.
3. There are currently no shares of Class C Preferred Stock outstanding.
4. The 71 shares formerly designated as Class C Preferred Stock shall have
the status of authorized but unissued, undesignated preferred shares.
5. After giving effect to the cancellation, the Company shall be
authorized to issue shares in the amount and class as follows:
15,000,000 Common Stock
3,000,000 Class A Convertible Preferred Stock
1,180,000 Class B Convertible Preferred Stock
1,022,222 Class D Convertible Preferred Stock
2,596,491 Class E Convertible Preferred Stock
5,146,358 preferred shares (undesignated as to class or series)
IN WITNESS WHEREOF, the undersigned has executed this statement of
cancellation this 22nd day of January, 2002.
CAPELLA EDUCATION COMPANY
By: /s/ Paul Schroeder
--------------------------------
Its: SVP & CFO
<PAGE>
CAPELLA EDUCATION COMPANY
STATEMENT OF DESIGNATION
OF
RIGHTS, PREFERENCES AND LIMITATIONS
OF
CLASS F CONVERTIBLE PREFERRED STOCK
The undersigned, Paul Schroeder, the Senior Vice President of Capella
Education Company, a Minnesota corporation (the "Corporation"), hereby certifies
that the following resolutions establishing Class F Convertible Preferred Stock
of the Corporation pursuant to Minnesota Statutes, Section 302A.401 were duly
adopted by the directors of the Corporation on January 31, 2002:
RESOLVED, that (i) the form of the Certificate of Designation for
the Class F Convertible Preferred Stock (the "Certificate of Designation")
attached hereto as Exhibit B is hereby authorized and approved; (ii) there
is hereby established a new Class F Convertible Preferred Stock of this
Company with the rights, preferences and privileges as set forth in the
Certificate of Designation; (iii) the appropriate officers of this Company
are authorized and directed to make, execute and file with the Minnesota
Secretary of State in the method required by law, the Certificate of
Designation, in substantially the form approved hereby, with such changes,
deletions and insertions as any of such officers shall approve, the
execution and filing of the Certificate of Designation by any of the
officers of the Company being conclusive evidence of such approval, and
(iv) each of the officers of the Company is hereby authorized to take all
other actions they may deem necessary or advisable to effect adoption of
the Certificate of Designation.
RESOLVED FURTHER, that the officers of the Company, and each of
them, are authorized for and on behalf of the Company, to execute and
deliver such other instruments or documents and to take such other actions
as they, or any of them, may deem necessary or advisable to carry out the
purposes of the foregoing resolutions.
[remainder of page intentionally blank]
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IN WITNESS WHEREOF, I have subscribed my name this 7th day of February,
2002.
/s/ Paul Schroeder
------------------------------------
Paul Schroeder,
Senior Vice President
Capella Education Company
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EXHIBIT B
CAPELLA EDUCATION COMPANY
CERTIFICATE OF DESIGNATION
FOR CLASS F CONVERTIBLE PREFERRED STOCK
1. DESIGNATION; NUMBER OF SHARES; PAR VALUE.
A class of shares of preferred stock of Capella Education Company
(the "Corporation") shall be designated as Class F Convertible Preferred Stock
(the "Class F Preferred Stock"). The number of shares constituting the Class F
Preferred Stock shall be 1,425,457. The Class F Preferred Stock shall have a par
value of $.01 per share.
2. VOTING RIGHTS.
(a) GENERAL. On all matters submitted to the shareholders, each
holder of Class F Preferred Stock shall have one vote for each share of common
stock of the Corporation (the "Common Stock") which such holder of Class F
Preferred Stock would be entitled to receive upon the conversion of such
holder's Class F Preferred Stock pursuant to the provisions hereof. Except as
otherwise provided herein, and except as otherwise required by agreement or law,
the shares of capital stock of the Corporation shall vote as a single class on
all matters submitted to the shareholders. No holder of any Class F Preferred
Stock shall have any cumulative voting rights.
(b) ADDITIONAL CLASS VOTES BY CLASS F STOCK. Without the affirmative
vote of the holders of a majority of the Class F Preferred Stock at the time
outstanding at a meeting of the holders of Class F Preferred Stock called for
such purpose or written consent of the holders (acting together as a class) of a
majority of the Class F Preferred Stock at the time outstanding, the Corporation
shall not:
(1) create, authorize, issue or reclassify any outstanding shares of
capital stock into any shares of capital stock ranking senior to or on
parity with the Class F Preferred Stock as to the payment or distribution
of dividends or of assets upon the liquidation, dissolution or winding up,
voluntary or involuntary, of the Corporation; or
(2) amend, alter, modify or repeal any provision of the Articles of
Incorporation of the Corporation so as to alter the rights and preferences
of the Class F Preferred Stock; or
(3) redeem, repurchase or acquire (or make any payment into, or set
aside, a sinking fund for such purposes), or declare or pay any dividend
or make any other
<PAGE>
distribution on, any of the Corporation's capital stock, except any such
redemption, repurchase, acquisition, dividend or distribution which is:
(i) pursuant to mandatory redemption obligations set forth
herein or in the Articles of Incorporation (including any
certificate of designation) as of the date of filing of this
Certificate of Designation;
(ii) Common Stock issued under employee benefit plans of the
Corporation;
(iii) made pursuant to a repurchase agreement approved by at
least 66 2/3% of the members of the Board of Directors; or
(iv) a dividend pro rata to all holders of the class or series
of securities upon which such dividend is declared in shares of
Common Stock or capital stock of the Corporation that ranks junior
to the Class F Preferred Stock as to the payment or distribution of
dividends and of assets upon the liquidation, dissolution or winding
up, voluntary or involuntary, of the Corporation.
(4) effect any acquisition of the Corporation by another entity by
means of any transaction or series of related transactions with the
Corporation (including, without limitation any merger, consolidation or
recapitalization), which results in 50% or more of the voting capital
stock of the Corporation being acquired by persons who were not
shareholders of the Corporation prior to such transaction or series of
transactions, unless such acquisition provides for the exchange or payment
of consideration in respect of each share of Class F Preferred Stock, or
the shares of Common Stock or other securities into which a share of Class
F Preferred Stock is then convertible, having a value equal to or greater
than $42.75 (subject to appropriate adjustments for stock dividends, stock
splits, combinations and recapitalizations and similar events affecting
the Class F Preferred Stock) (a "Qualified Amount"); or
(5) effect any sale or other disposition of all or substantially all
of the assets of the Corporation, unless such sale, if followed by an
immediate liquidation, would result in distributable proceeds in respect
of each share of Class F Preferred Stock, or the shares of Common Stock or
other securities into which a share of Class F Preferred Stock is then
convertible, in a Qualified Amount; or
(6) effect the liquidation or dissolution of the Corporation, unless
such liquidation or dissolution would result in distributable proceeds in
respect of each share of Class F Preferred Stock, or the shares of Common
Stock or other securities into which a share of Class F Preferred Stock is
then convertible, in a Qualified Amount.
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<PAGE>
(c) VALUATION OF NON-CASH CONSIDERATION. In connection with any
transaction set forth in Section 2(b) above involving the receipt of
consideration or proceeds in a form other than cash, the fair market value of
such non-cash consideration or proceeds shall be utilized in determining whether
such transaction must be approved by the holders of Class F Preferred Stock
pursuant to Section 2(b). The fair market value of any non-cash consideration
will be determined as follows:
(i) the fair market value of stock and other securities that
are publicly traded shall be the average of the last closing market
price of such stock or securities on each of the ten trading days
ending five business days prior to the execution by the Corporation
of a definitive agreement, or adoption by the Board of Directors of
the Corporation of any plan, relating to such transaction (the "Time
of Determination");
(ii) the fair market value of stock and other equity
securities that are not publicly traded and the value of all other
non-cash consideration, other than consideration of the nature
described in clause (iii) below, shall be the fair market value
thereof at the Time of Determination as mutually agreed by the
Corporation and a director designated to serve on the Board of
Directors by the holders of Class F Preferred Stock (a "Class F
Director"), or if the Corporation and a Class F Director are unable
to reach an agreement within five business days of receipt of
written notice from the Corporation of such transaction by the Class
F Director, as determined by an investment banking firm or other
person experienced in valuing such stock, equity securities or other
non-cash consideration mutually acceptable to a Class F Director and
the Corporation, or if they are unable to agree, or there exists no
such Class F Director, then a nationally recognized investment
banking firm selected in good faith by the Board of Directors of the
Corporation; or
(iii) the value of any promissory note or other debt
instrument that is not publicly traded and the value of any and all
deferred installments of the consideration and any other deferral of
payments included in the total consideration shall be deemed to be
the face amount of the promissory notes or other debt instruments or
the total amount of payments that are deferred with respect to
deferred obligations that are not evidenced by promissory notes or
other debt instruments.
A security is "publicly traded" if such security is part of a class of
securities that is listed on the New York or American stock exchanges (or on a
foreign stock exchange of comparable depth and liquidity) or is traded on the
NASDAQ Stock Market.
(d) MEETINGS. A proper officer of the Corporation may, and upon the
written request of the holders of record of at least twenty-five percent (25%)
of the shares of Class F Preferred Stock then outstanding addressed to the
Secretary of the Corporation shall, call a special meeting of the holders of
Class F Preferred Stock, for the purpose of holding a
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<PAGE>
class vote pursuant to Section 2(b). If such meeting shall not be called by a
proper officer of the Corporation within twenty (20) days after personal service
of said written request upon the Secretary of the Corporation, or within twenty
(20) days after mailing the same within the United States by certified mail,
addressed to the Secretary of the Corporation at its principal executive
offices, then the holders of record of at least twenty-five percent (25%) of the
outstanding shares of Class F Preferred Stock may designate in writing their own
representative to call such meeting at the expense of the Corporation, and such
meeting may be called by the person so designated upon the notice required for
the annual meeting of stockholders of the Corporation and shall be held at the
place for holding the annual meetings of stockholders.
3. NO PREEMPTIVE RIGHTS.
Holders of Class F Preferred Stock shall not be entitled, as a
matter of right, to subscribe for, purchase or receive any part of any stock of
the Corporation of any class whatsoever, or of securities convertible into or
exchangeable for, or otherwise creating a right to acquire, any stock of any
class whatsoever, whether now or hereafter authorized and whether issued for
cash or other consideration or by way of dividend. Nothing herein shall limit
the power of the Corporation to grant any of the foregoing rights to persons by
contract or otherwise.
4. DIVIDENDS.
Subject to the affirmative voting requirement of Section 2(b)(3) of
this Certificate of Designation, in the event any dividend or distribution is
declared or made with respect to outstanding shares of any class of capital
stock, a comparable dividend or distribution must be simultaneously declared or
made with respect to the outstanding shares of Class F Preferred Stock. Subject
to the affirmative voting requirement of Section 2(b)(3) of this Certificate of
Designation, in the event any dividend or distribution is declared or made with
respect to the Common Stock or any class of capital stock convertible or
exchangeable into Common Stock of the Corporation, each holder of shares of
Class F Preferred Stock (and any other holder of capital stock so convertible or
exchangeable and entitled to payment of such dividend or distribution) shall be
paid such comparable dividend or receive such comparable distribution on the
basis of the number of shares of Common Stock into which such holder's shares of
capital stock are then convertible on the date established as the record date
with respect to such dividend or distribution. In case any portion of the
dividend or distribution declared or made by the Corporation shall be in a form
other than cash, the fair market value of such non-cash portion, as determined
in good faith by the Board of Directors of the Corporation, shall be utilized in
determining the comparable dividend or distribution to be declared or made with
respect to the outstanding shares of Class F Preferred Stock.
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<PAGE>
5. LIQUIDATION RIGHT AND PREFERENCE.
In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation Event"), the
holders of the Class F Preferred Stock shall be entitled to receive, in respect
of each share of Class F Preferred Stock, the greater of (i) the amount of
$23.42 (subject to appropriate adjustment for any stock dividends, combinations
or splits with respect to such share), plus the aggregate amount of all declared
but unpaid dividends on such share of Class F Preferred Stock (the "Class F
Preference Amount") or (ii) the aggregate amount that would be payable in the
Liquidation Event in respect of the share or shares of Common Stock into which
such share of Class F Preferred Stock would be convertible if all of the holders
were to convert their shares of Class F Preferred Stock into shares of Common
Stock immediately prior to the Liquidation Event, and the Class F Preference
Amount was not paid in preference to any class of Junior Stock, as hereafter
provided.
Upon occurrence of a Liquidation Event, the holders of then
outstanding shares of Class B Convertible Preferred Stock ("Class B Preferred
Stock"), Class D Preferred Stock ("Class D Preferred Stock"), Class E
Convertible Preferred Stock ("Class E Preferred Stock"), Class F Preferred Stock
and any other class of capital stock hereafter established ranking on a parity
in such Liquidation Event with the Class B Preferred Stock, Class D Preferred
Stock, Class E Preferred Stock and Class F Preferred Stock (collectively,
"Parity Stock") shall be entitled to be paid as to each share of such Parity
Stock, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Class A Convertible Preferred Stock ("Class A
Preferred Stock"), Common Stock or any other class or series of capital stock
hereafter established ranking junior in a Liquidation Event to the Parity Stock
(collectively, "Junior Stock"), and after distribution of any of the assets of
the Corporation, to the extent of the liquidation preference applicable thereto,
to the holders of any class or series of capital stock hereafter established
ranking senior in a Liquidation Event to the Parity Stock (collectively "Senior
Stock"), out of assets available for distribution, an amount, plus the aggregate
amount of all declared but unpaid dividends on such shares, equal to $2.50 per
share in the case of the Class B Preferred Stock (the "Class B Preference
Amount"), $4.50 per share in the case of the Class D Preferred Stock (the "Class
D Preference Amount"), $14.25 per share in the case of the Class E Preferred
Stock (the "Class E Preference Amount") (subject, in each case, to appropriate
adjustment for any stock dividends, combinations or splits with respect to each
share), the Class F Preference Amount in the case of the Class F Preferred
Stock, and, in the case of any other Parity Stock, such amount as shall be
specified in the applicable Certificate of Designation (the "Parity Preference
Amount", and, together with the Class B Preference Amount, Class D Preference
Amount, Class E Preference Amount and Class F Preference Amount, collectively,
the "Parity Preference Amounts").
If, upon any Liquidation Event, the remaining assets of the
Corporation available for distribution to the holders of Parity Stock are
insufficient to pay the holders of Parity Stock their full Parity Preference
Amounts to which they are entitled, the holders of
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<PAGE>
Parity Stock shall share pro rata in any such distribution in proportion to the
full Parity Preference Amounts to which they would otherwise be respectively
entitled.
Following such payment of Parity Preference Amounts to the holders
of Parity Stock, and payment to the holders of any Senior Stock of any
preferential amount to which they are entitled, the holders of the Junior Stock
shall then be entitled, to the exclusion of the holders of Parity Stock or
Senior Stock, to receive in cash or in kind, all remaining assets of the
Corporation, if any, in accordance with their relative priorities in a
Liquidation Event.
The merger or consolidation of the Corporation into or with another
corporation or the merger or consolidation of any other corporation into or with
the Corporation (in which consolidation or merger the shareholders of the
Corporation receive any distributions of cash or securities or other property as
a result of such consolidation or merger), or the sale, transfer or other
disposition of all or substantially all of the assets of the Corporation, shall
be deemed to be a Liquidation Event for purposes of this Section 5.
6. CONVERSION INTO COMMON STOCK.
(a) OPTIONAL CONVERSION. At the option of the holder thereof, at any
time and from time to time any or all Class F Preferred Stock then held by such
holder shall be convertible into Common Stock of the Corporation in accordance
with the provisions and subject to the adjustments provided for in Section 6(c).
In order to exercise the conversion privilege, a holder of Class F Preferred
Stock shall surrender the certificate or certificates duly endorsed to the
Corporation evidencing the shares of Class F Preferred Stock each holder wishes
to convert to the Corporation at its principal office and accompanied by written
notice to the Corporation that the holder elects to convert all of such shares.
Any shares of Class F Preferred Stock converted at the option of the holder
shall be deemed to have been converted on the day of surrender of the
certificate representing such shares for conversion in accordance with the
foregoing provisions, and at such time the rights of the holder of such Class F
Preferred Stock with respect to such shares shall cease and such holder shall be
treated as the record holder of the number of shares of Common Stock issuable
upon conversion. As promptly as practicable on or after the conversion date, the
Corporation shall issue and mail or deliver to such holder (i) a certificate or
certificates for the number of shares of Common Stock issuable upon conversion,
rounding down to the nearest full share, (ii) any cash adjustment required
pursuant to Section 6(f), and (iii) in the event of a conversion in part, a
certificate or certificates for the whole number of shares of Class F Preferred
Stock not being so converted.
(b) AUTOMATIC CONVERSION. The Class F Preferred Stock shall
automatically be converted into Common Stock of the Corporation, without any act
by the Corporation or the holders of the Class F Preferred Stock, concurrently
(i) with the closing of the first public offering by the Corporation of shares
of Common Stock of the Corporation registered under the Securities Act of 1933,
as amended, in which (1) the aggregate gross proceeds received by the
Corporation in the offering are at least $30.0 million, and (2) the public
offering price per share of Common Stock is at least $28.50 (as adjusted from
time to
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<PAGE>
time to reflect stock splits, dividends, recapitalizations, combinations or the
like), or (ii) upon the affirmative vote or written consent of the holders of a
majority of the outstanding shares of Class F Preferred Stock then outstanding;
provided, however, if any other class or series of preferred stock of the
Corporation would remain outstanding after the conversion of the Class F
Preferred Stock, the affirmative vote or written consent of holders of 60% of
the outstanding shares of Class F Preferred Stock shall be required for
automatic conversion pursuant to this clause (ii). In the case of a conversion
pursuant to clause (i), each holder of a share of Class F Preferred Stock so
converted shall be entitled to receive the full number of shares of Common Stock
into which such share of Class F Preferred Stock held by such holder could be
converted if such holder had exercised its conversion right at the time of
closing of such public offering. Upon any conversion pursuant to this Section
6(b), each holder of a share of Class F Preferred Stock shall immediately
surrender such share in exchange for (i) appropriate stock certificates
representing a share or shares of Common Stock of the Corporation, and (ii) any
cash adjustment required pursuant to Section 6(f).
(c) CONVERSION PRICE AND ADJUSTMENTS. The number of shares of Common
Stock issuable in exchange for each share of Class F Preferred Stock upon either
optional or automatic conversion shall be computed to the nearest hundredth of a
share and shall be equal to $11.71 divided by the conversion price then in
effect for Class F Preferred Stock (the "Class F Conversion Price"). The Class F
Conversion Price shall initially be $11.71, but such Class F Conversion Price
shall be subject to adjustment from time to time, as hereinafter provided:
(i) In case the Corporation shall at any time (A) declare a
dividend or make a distribution on Common Stock payable in Common Stock
(other than dividends or distributions payable to holders of the Series F
Preferred Stock including dividends paid as contemplated by Section 4),
(B) subdivide or split the outstanding Common Stock, (C) combine or
reclassify the outstanding Common Stock into a smaller number of shares,
(D) issue any shares of its capital stock in a reclassification of Common
Stock (including any such reclassification in connection with a
consolidation or merger in which the Corporation is the continuing
corporation), or (E) consolidate with, or merge with or into, any other
person, the Class F Conversion Price in effect (and, where appropriate,
the securities into which the Class F Preferred Stock are then
convertible) at the time of the record date for such dividend or
distribution or on the effective date of such subdivision, split,
combination, consolidation, merger or reclassification shall be adjusted
so that the conversion of the Class F Preferred Stock after such time
shall entitle the holder to receive the aggregate number of shares of
Common Stock or other securities of the Corporation (or other securities
into which such shares of Common Stock have been converted, exchanged,
combined, consolidated, merged or reclassified pursuant to clause
6(c)(i)(C), 6(c)(i)(D) or 6(c)(i)(E) above) which, if the Class F
Preferred Stock had been converted immediately prior to such time, such
holder would have owned upon such conversion and been entitled to receive
by virtue of such dividend, distribution, subdivision, split, combination,
consolidation, merger or reclassification. Such adjustment shall be made
successively whenever an event listed above shall occur.
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<PAGE>
(ii) If, at any time after the first anniversary of the
original issue date of the shares of Class F Preferred Stock, the
Corporation shall issue or sell any Common Stock for a consideration per
share less than the Class F Conversion Price then in effect, or shall
issue any options, warrants or other rights for the purchase of such
shares at a consideration per share of less than the Class F Conversion
Price then in effect (other than securities subject to Section 6(c)(i)
hereof; options issued as of January 31, 2002 under existing stock option
plans of the Corporation, and 1,184,290 shares issuable upon exercise of
such options; options for the issuance of up to 706,492 additional shares
under any existing stock option plan of the Corporation and shares
issuable upon exercise of such options; warrants to purchase 334,048
shares outstanding as of January 31, 2002; 2,810,000 shares of Class A
Preferred Stock and shares issued upon conversion thereof; 460,000 shares
of Class B Preferred Stock and shares issued upon conversion thereof;
1,022,222 shares of Class D Preferred Stock and shares issued upon
conversion thereof; 2,596,491 shares of Class E Preferred Stock and shares
issuable upon conversion thereof; shares issued to the employee stock
ownership plan of the Corporation, provided such contribution is approved
by the compensation committee of the Board of Directors of the Corporation
and does not exceed that number of shares the fair market value of which
is three percent (3%) of annual compensation (as measured by applicable
benefit plan rules) (any of the foregoing share amounts shall be subject
to appropriate adjustment from time to time to reflect stock splits,
dividends, recapitalizations, combinations or the like) (all of the
foregoing are collectively referred to as the "Exempt Securities")), the
Class F Conversion Price in effect immediately prior to such issuance or
sale shall be reduced to an amount determined by multiplying (A) the Class
F Conversion Price then in effect, and (B) a fraction, the numerator of
which shall be an amount equal to the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Class F Conversion Price then in effect, and (2) the
total consideration payable to this Corporation upon such issuance or sale
of such shares and such purchase rights and upon the exercise of such
purchase rights, and the denominator of which shall be the amount
determined by multiplying (aa) the number of shares of Common Stock
outstanding immediately after such issuance or sale plus the number of
shares of Common Stock issuable upon the exercise of any purchase rights
thus issued, by (bb) the Class F Conversion Price then in effect. In case
any portion of the consideration to be received by the Corporation shall
be in a form other than cash, the fair market value of such non-cash
consideration, as determined in good faith by the Board of Directors of
the Corporation, shall be utilized in the foregoing computation.
For purposes of this Section 6(c), "Common Stock outstanding" shall
include, in addition to Common Stock issued and outstanding, those shares
of Common Stock issuable upon conversion of outstanding shares of
Preferred Stock and Common Stock issuable upon the exercise, exchange or
conversion of any other outstanding right to acquire Common Stock.
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<PAGE>
If any options, warrants or other purchase rights that are taken into
account in any such adjustment of the Class F Conversion Price
subsequently expire without exercise, the Class F Conversion Price shall
be recomputed by deleting such expired options, warrants or other purchase
rights. If the Class F Conversion Price is adjusted as the result of the
issuance of any options, warrants or other purchase rights, no further
adjustment of the Class F Conversion Price shall be made at the time of
the exercise of such options, warrants or other purchase rights.
(iii) If, on or prior to the first anniversary of the original
issue date of the shares of Class F Preferred Stock, the Corporation shall
issue or sell any Common Stock (other than Exempt Securities) for a
consideration per share less than the Class F Conversion Price then in
effect, or shall issue any options, warrants or other rights for the
purchase of such shares (other than Exempt Securities) at a consideration
per share of less than the Class F Conversion Price then in effect, the
Class F Conversion Price shall be reduced to an amount equal to the per
share consideration payable to the Corporation in such sale or issuance.
In case any portion of the consideration to be received by the Corporation
shall be in a form other than cash, the fair market value of such non-cash
consideration, as determined in good faith by the Board of Directors of
the Corporation, shall be utilized to determine the consideration per
share.
If any options, warrants or other purchase rights that are taken into
account in any such adjustment of the Class F Conversion Price
subsequently expire without exercise, the Class F Conversion Price shall
be readjusted as if such options, warrants or other purchase rights had
not been issued. If the Class F Conversion Price is adjusted as the result
of the issuance of any options, warrants or other purchase rights, no
further adjustment of the Class F Conversion Price shall be made at the
time of the exercise of such options, warrants or other purchase rights.
(iv) In case the Corporation shall fix a record date for the
issuance on a pro rata basis of rights, options or warrants to the holders
of its Common Stock or other securities entitling such holders to
subscribe for or purchase shares of Common Stock (or securities
convertible into or exercisable or exchangeable for shares of Common
Stock) at a price per share of Common Stock (or having a conversion,
exercise or exchange price per share of Common Stock, in the case of a
security convertible into, or exercisable or exchangeable for, shares of
Common Stock) less than the Class F Conversion Price on such record date,
the maximum number of shares of Common Stock issuable upon exercise of
such rights, options or warrants (or conversion of such convertible
securities) shall be deemed to have been issued and outstanding as of such
record date and the Class F Conversion Price shall be adjusted pursuant to
Section 6(c)(ii) or Section 6(c)(iii), as the case may be, as though such
maximum number of shares of Common Stock had been so issued for an
aggregate consideration payable by the holders of such rights, options,
warrants or other securities prior to their receipt of such shares of
Common Stock. In case any portion of such consideration shall be in a form
other than cash, the fair market value
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of such non-cash consideration shall be determined as set forth in Section
6(c)(ii) hereof. Such adjustment shall be made successively whenever such
record date is fixed; and in the event that such rights, options or
warrants are not so issued or expire in whole or in part unexercised, or
in the event of a change in the number of shares of Common Stock to which
the holders of such rights, options or warrants are entitled (other than
pursuant to adjustment provisions therein comparable to those contained in
this Section 6(c)), the Class F Conversion Price shall again be adjusted
as follows: (A) in the event that all of such rights, options or warrants
expire unexercised, the Class F Conversion Price shall be the Class F
Conversion Price that would then be in effect if such record date had not
been fixed; (B) in the event that less than all of such rights, options or
warrants expire unexercised, the Class F Conversion Price shall be
adjusted pursuant to Section 6(c)(ii) or Section 6(c)(iii), as the case
may be, to reflect the maximum number of shares of Common Stock issuable
upon exercise of such rights, options or warrants that remain outstanding
(without taking into effect shares of Common Stock issuable upon exercise
of rights, options or warrants that have lapsed or expired); and (C) in
the event of a change in the number of shares of Common Stock to which the
holders of such rights, options or warrants are entitled (other than
pursuant to adjustment provisions therein comparable to those contained in
this Section 6(c)), the Class F Conversion Price shall be adjusted to
reflect the Class F Conversion Price which would then be in effect if such
holder had initially been entitled to such changed number of shares of
Common Stock. Notwithstanding anything herein to the contrary, no further
adjustment to the Class F Conversion Price shall be made upon the issuance
or sale of Common Stock upon the exercise of any rights, options or
warrants to subscribe for or purchase Common Stock, if any adjustment in
the Class F Conversion Price was made or required to be made upon the
record date for the issuance or sale of such rights, options or warrants
under this Section 6(c)(iv). Notwithstanding anything herein to the
contrary, no adjustment in the Class F Conversion Price shall be made
under this Section 6(c)(iv) to the extent the holders of Class F Preferred
Stock participate in any such distribution in accordance with Section 4
hereof.
(iv) The anti-dilution provisions of this Section 6(c) may be
waived by the affirmative vote of the holders (acting together as a class)
of 67% or more of the then outstanding Class F Preferred Stock.
(d) NOTICE OF CLASS F CONVERSION PRICE ADJUSTMENT. Upon any
adjustment of the Class F Conversion Price, then and in each such case the
Corporation shall give written notice thereof, by first-class mail, postage
prepaid, addressed to the registered holders of Class F Preferred Stock at the
addresses of such holders as shown on the books of this Corporation, which
notice shall state the Class F Conversion Price resulting from such adjustment
and the increase or decrease, if any, in the number of shares receivable at such
price upon the conversion of Class F Preferred Stock, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
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(e) NOTICE OF CERTAIN EVENTS. In case any time:
(i) the Corporation shall pay any dividend payable in stock
upon Common Stock or make any distribution (other than regular cash
dividends) to the holders of Common Stock; or
(ii) the Corporation shall offer for subscription pro rata to
the holders of Common Stock any additional shares of stock of any class or
other rights; or
(iii) there shall be any capital reorganization,
reclassification of the capital stock of the Corporation, or consolidation
or merger of the Corporation with, or sale of all or substantially all of
its assets to another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give written
notice, by first-class mail, postage prepaid, addressed to the holders of Class
F Preferred Stock at the addresses of such holders as shown on the books of the
Corporation, of the date on which (A) the books of the Corporation shall close
or a record shall be taken for such dividend, distribution or subscription
rights, or (B) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case may
be. Such notice also shall specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be. Such written notice shall be given at least thirty (30) days prior to
the action in question and not less than thirty (30) days prior to the record
date or the date on which the Corporation's transfer books are closed in respect
thereto.
(f) FRACTIONAL SHARES. In connection with the conversion of any
shares of Class F Preferred Stock, no fractions of shares of Common Stock shall
be issued to the holder of such shares of Class F Preferred Stock, but in lieu
thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Class F Conversion Price per share of Common Stock on the business day next
preceding the business day on which such shares of Class F Preferred Stock are
deemed to have been converted.
(g) RESERVATION OF SHARES.
(i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such number of
its authorized but unissued shares of Common Stock as shall be required
for the purpose of effecting conversions of the Class F Preferred Stock.
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(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the Class F
Preferred Stock, the Corporation shall comply with all applicable federal
and state laws and regulations which require action to be taken by the
Corporation.
(h) TRANSFER TAXES. The Corporation will pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on conversion of the Class F
Preferred Stock pursuant hereto; provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock in a name other than that of
the holder of the Class F Preferred Stock to be converted and no such issue or
delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
7. OPTIONAL REDEMPTION AT THE ELECTION OF THE HOLDERS OF CLASS F
PREFERRED STOCK.
(a) ELECTION.
(i) At any time after the seventh anniversary of the
original issue date of the shares of Class F Preferred Stock, upon the
affirmative vote or written consent of the holders of a majority of the
outstanding shares of Class F Preferred Stock, the Corporation shall be
required to redeem all of the outstanding shares of Class F Preferred
Stock and the holders of all outstanding shares of Class F Preferred Stock
shall be required to have such shares redeemed (a "Mandatory Redemption").
The holders of Class F Preferred Stock shall deliver to the Corporation
written notice of such affirmative vote or written consent (the
"Redemption Notice").
(ii) Within five business days after receiving the Redemption
Notice, the Corporation shall send a copy of such Redemption Notice to all
other holders of record of the Class F Preferred Stock. Upon receipt of
the Redemption Notice, the Board shall within thirty (30) days specify a
date on which the redemption of such shares provided herein shall take
place (the "Redemption Date"), which shall be no less than forty-five (45)
days and no more than ninety (90) days after receipt of the Redemption
Notice.
(b) OPTIONAL REDEMPTION PRICE. The redemption price for each share
of the Class F Preferred Stock shall be an amount equal to $11.71 (subject to
adjustment from time to time to reflect stock splits, dividends,
recapitalizations, combinations or the like) plus an amount equal to all
declared but unpaid dividends, if any, payable with respect to such share (the
"Optional Redemption Price").
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(c) NOTIFICATION. At least fifteen (15) days prior to the
Redemption Date, the Corporation shall mail written notice by first class mail,
postage prepaid, to each holder of record of the Class F Preferred Stock, at its
address last shown on the records of the Corporation, notifying such holder of
such redemption, specifying the Redemption Date, the Optional Redemption Price
and the date on which such holder's conversion rights as to such shares
terminate and calling upon such holder to surrender to the Corporation, in the
manner and at the place designated, his, or its certificate or certificates
representing the shares to be redeemed (such notice, the "Closing Notice").
(d) SURRENDER AND PAYMENT. On or prior to the Redemption Date,
each holder of shares of Class F Preferred Stock shall surrender its certificate
or certificates representing such shares to the Corporation, in the manner and
at the place designated in the Closing Notice, and thereupon the Optional
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. The Optional Redemption Price
due to each holder shall be payable, from any source of funds legally available
therefor, by delivery on the Redemption Date of a certified or bank cashier's
check in an amount equal to the aggregate Optional Redemption Price due to such
holder. From and after the date a holder of shares of the Class F Preferred
Stock has received payment in full by receipt of cash, all rights of such holder
with respect to such Class F Preferred Stock so redeemed shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever.
(e) INSUFFICIENT FUNDS. If, on any Redemption Date, funds of the
Corporation legally available therefor shall be insufficient to redeem all of
the shares of Class F Preferred Stock required to be redeemed, funds to the
extent legally available shall be used to redeem the maximum possible number of
such shares ratably on the basis of the relative value of such shares based on
the Optional Redemption Prices of such shares on such date if the funds of the
Corporation legally available therefore had been sufficient to redeem all shares
required to be redeemed on such date. Thereafter, the Corporation shall use its
best efforts to obtain sufficient funds to redeem the balance of such shares.
When additional funds of the Corporation become legally available for the
redemption of the balance of such shares, such additional funds will be used to
redeem at the Optional Redemption Price (together with interest at the annual
rate of 9%) the balance of the shares which the Corporation was therefore
obligated to redeem, ratably on the basis set forth in the preceding sentence.
Notwithstanding anything herein to the contrary, if the Optional Redemption
Price is not paid when due, all powers, preferences, rights, qualifications,
limitations and restrictions (including, without limitation, dividend rights,
conversion rights, and liquidation preferences, and voting rights) with respect
to shares surrendered for redemption, but not actually redeemed, shall continue
until the Optional Redemption Price is paid in full.
(f) REISSUE. Any shares of Class F Preferred Stock redeemed
pursuant to this Section 7 shall permanently be retired, shall no longer be
deemed outstanding and shall not under any circumstances be reissued as Class F
Preferred Stock, but shall instead have
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the status of authorized Open Term Preferred Stock, as defined in the
Corporation's Restated Articles of Incorporation.
8. OPTIONAL REDEMPTION AT THE ELECTION OF THE CORPORATION.
(a) ELECTION. At any time and from time to time after the seventh
anniversary of the original issue date of the shares of Class F Preferred Stock,
to the extent the Corporation shall have funds legally available for such
payment, and subject to the rights of the holders pursuant to Section 6 hereof,
the Corporation shall have the right to purchase and redeem all or any portion
of the then outstanding shares of Class F Preferred Stock. The Board of
Directors shall specify a Redemption Date, which shall be not less than thirty
(30) days nor more than sixty (60) days from the date the Corporation shall mail
a Closing Notice to the holders of Class F Preferred Stock.
(b) MANDATORY REDEMPTION PRICE. The redemption price for each
share of the Class F Preferred Stock shall be an amount equal to $23.42 (subject
to adjustment from time to time to reflect stock splits, dividends,
recapitalizations, combinations or the like) plus an amount equal to all
declared but unpaid dividends, if any, payable with respect to such share (the
"Mandatory Redemption Price").
(c) SURRENDER AND PAYMENT. On or prior to the Redemption Date,
each holder of shares of Class F Preferred Stock to be redeemed shall surrender
its certificate or certificate representing such shares to the Corporation, in
the manner and at the place designated in the Closing Notice, and thereupon the
Mandatory Redemption Price of such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be canceled. The Mandatory
Redemption Price due to each holder shall be payable, from any source of funds
legally available therefor, by delivery on the Redemption Date of a certified or
bank cashier's check in an amount equal to the aggregate Mandatory Redemption
Price due to such holder. From and after the date a holder of shares of the
Class F Preferred Stock has received payment in full by receipt of cash, all
rights of such holder with respect to such Class F Preferred Stock so redeemed
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.
(d) PARTIAL REDEMPTION. In the event of a redemption of less than
all of the outstanding shares of Class F Preferred Stock pursuant to the first
paragraph of this Section 8, redemption as among the holders of such shares of
Class F Preferred Stock shall be on a pro rata basis.
(e) REISSUE. Any shares of Class F Preferred Stock redeemed
pursuant to this Section 8 shall permanently be retired, shall no longer be
deemed outstanding and shall not under any circumstances be reissued as Class F
Preferred Stock, but shall instead have the status of authorized Open Term
Preferred Stock, as defined in the Corporation's Restated Articles of
Incorporation.
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<PAGE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
CAPELLA EDUCATION COMPANY
The undersigned, being the Secretary of Capella Education Company, a
Minnesota corporation (the "Company"), hereby certifies that:
(i) The name of the Company is Capella Education Company.
(ii) The Company's Certificate of Designation for Class E
Convertible Preferred Stock is amended and restated as shown in
Exhibit A.
(iii) The foregoing amendments have been adopted pursuant to Chapter
302A of the Minnesota Statutes.
IN WITNESS WHEREOF, I have subscribed my name this ____ day of January,
2003.
/s/ Paul Clifford
------------------------------
Secretary
Capella Education Company
<PAGE>
CAPELLA EDUCATION COMPANY
AMENDED AND RESTATED CERTIFICATE OF DESIGNATION
FOR CLASS E CONVERTIBLE PREFERRED STOCK
1. DESIGNATION; NUMBER OF SHARES; PAR VALUE.
A class of shares of preferred stock of Capella Education Company
(the "Corporation") shall be designated as Class E Convertible Preferred Stock
(the "Class E Preferred Stock"). The number of shares constituting the Class E
Preferred Stock shall be Two Million Five Hundred Ninety-Six Thousand Four
Hundred Ninety-One (2,596,491) shares. The Class E Preferred Stock shall have a
par value of $.01 per share.
2. VOTING RIGHTS.
(a) GENERAL. On all matters submitted to the shareholders, each
holder of Class E Preferred Stock shall have one vote for each share of common
stock of the Corporation (the "Common Stock") which such holder of Class E
Preferred Stock would be entitled to receive upon the conversion of such
holder's Class E Preferred Stock pursuant to the provisions hereof. Except as
otherwise provided herein, and except as otherwise required by agreement or law,
the shares of capital stock of the Corporation shall vote as a single class on
all matters submitted to the shareholders. No holder of any Class E Preferred
Stock shall have any cumulative voting rights.
(b) ADDITIONAL CLASS VOTES BY CLASS E STOCK. Without the
affirmative vote of the holders of a majority of the Class E Preferred Stock at
the time outstanding at a meeting of the holders of Class E Preferred Stock
called for such purpose or written consent of the holders (acting together as a
class) of a majority of the Class E Preferred Stock at the time outstanding, the
Corporation shall not:
(1) create, authorize or issue any shares of capital stock ranking
senior to or having a priority over the Class E Preferred Stock as to the
payment or distribution of dividends or of assets upon the liquidation,
dissolution or winding up, voluntary or involuntary, of the Corporation;
or
(2) amend, alter, modify or repeal any provision of the Articles
of Incorporation of the Corporation so as to alter the rights and
preferences of the Class E Preferred Stock; or
(3) redeem, repurchase or acquire (or make any payment into, or
set aside, a sinking fund for such purposes) any of the Corporation's
capital stock, except any such redemption, repurchase or acquisition which
is:
<PAGE>
(i) pursuant to mandatory redemption obligations set forth
herein or in the Articles of Incorporation (including any certificate of
designation) as of the date of filing of this Certificate of Designation;
(ii) Common Stock issued under employee benefit plans of the
Corporation;
(iii) made pursuant to a repurchase agreement between the
Corporation and any of its employees, officers or directors approved by
the Board of Directors; or
(4) effect any acquisition of the Corporation by another entity by
means of any transaction or series of related transactions with the
Corporation (including, without limitation any merger, consolidation or
recapitalization), which results in 50% or more of the voting capital
stock of the Corporation being acquired, by exchange, cancellation or
otherwise, by persons who were not shareholders of the Corporation prior
to such transaction or series of transactions, unless such acquisition
provides for the exchange or payment of consideration in respect of each
share of Class E Preferred Stock, or the shares of Common Stock or other
securities into which each such share of Class E Preferred Stock is then
convertible, having a value equal to or greater than $28.50 (subject to
appropriate adjustments for stock dividends, stock splits, combinations
and similar recapitalization affecting the Class E Preferred Stock) (a
"Qualified Amount"); or
(5) effect any sale or other disposition of all or substantially all
of the assets of the Corporation, unless such sale, if followed by an
immediate liquidation, would result in distributable proceeds in respect
of each share of Class E Preferred Stock, or the shares of Common Stock or
other securities into which each such share of Class E Preferred Stock is
then convertible, in a Qualified Amount; or
(6) effect the liquidation or dissolution of the Company, unless
such liquidation or dissolution would result in distributable proceeds in
respect of each share of Class E Preferred Stock, or the shares of Common
Stock or other securities into which each such share of Class E Preferred
Stock is then convertible, in a Qualified Amount.
(c) VALUATION OF NON-CASH CONSIDERATION. In connection with any
transaction set forth in Section 2(b) above involving the receipt of
consideration or proceeds in a form other than cash, the fair market value of
such non-cash consideration or proceeds shall be utilized in determining whether
such transaction must be approved by the holders of Class E Preferred Stock
pursuant to Section 2(b). The fair market value of any non-cash consideration
will be determined as follows:
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(i) the fair market value of stock and other securities that
are publicly traded shall be the average of the last closing market
price of such stock or securities on each of the ten trading days
ending five business days prior to the execution by the Company of a
definitive agreement, or adoption by the Board of Directors of the
Company of any plan, relating to such transaction (the "Time of
Determination");
(ii) the fair market value of stock and other equity
securities that are not publicly traded and the value of all other
non-cash consideration, other than consideration of the nature
described in clause (iii) below, shall be the fair market value
thereof at the Time of Determination as mutually agreed by the
Company and a director designated to serve on the Board of Directors
by a holder of Class E Preferred Stock (a "Class E Director"), or if
the Company and a Class E Director are unable to reach an agreement
within five business days of receipt of written notice from the
Company of such transaction by the Class E Director, as determined
by an investment banking firm or other person experienced in valuing
such stock, equity securities or other non-cash consideration
mutually acceptable to a Class E Director and the Company, or if
they are unable to agree, or there exists no such Class E Director,
then a nationally recognized investment banking firm selected in
good faith by the Board of Directors of the Company; or
(iii) the value of any promissory note or other debt
instrument that is not publicly traded and the value of any and all
deferred installments of the consideration and any other deferral of
payments included in the total consideration shall be deemed to be
the face amount of the promissory notes or other debt instruments or
the total amount of payments that are deferred with respect to
deferred obligations that are not evidenced by promissory notes or
other debt instruments.
A security is "publicly traded" if such security is part of a class of
securities that is listed on the New York or American stock exchanges (or on a
foreign stock exchange of comparable depth and liquidity) or is traded on the
NASDAQ Stock Market.
(d) MEETINGS. A proper officer of the Corporation may, and upon the
written request of the holders of record of at least twenty-five percent (25%)
of the shares of Class E Preferred Stock then outstanding addressed to the
Secretary of the Corporation shall, call a special meeting of the holders of
Class E Preferred Stock, for the purpose of holding a class vote pursuant to
Section 2(b). If such meeting shall not be called by a proper officer of the
Corporation within twenty (20) days after personal service of said written
request upon the Secretary of the Corporation, or within twenty (20) days after
mailing the same within the United States by certified mail, addressed to the
Secretary of the Corporation at its principal executive offices, then the
holders of record of at least twenty-five percent (25%) of the outstanding
shares of Class E Preferred Stock may designate in writing one of their number
to call such meeting at the expense of the Corporation, and such meeting may be
called by
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<PAGE>
the person so designated upon the notice required for the annual meeting of
stockholders of the Corporation and shall be held at the place for holding the
annual meetings of stockholders.
3. NO PREEMPTIVE RIGHTS.
Holders of Class E Preferred Stock shall not be entitled, as a
matter of right, to subscribe for, purchase or receive any part of any stock of
the Corporation of any class whatsoever, or of securities convertible into or
exchangeable for, or otherwise creating a right to acquire, any stock of any
class whatsoever, whether now or hereafter authorized and whether issued for
cash or other consideration or by way of dividend. Nothing herein shall limit
the power of the Corporation to grant any of the foregoing rights to persons by
contract or otherwise.
4. DIVIDENDS.
In the event any dividend or distribution is declared or made with
respect to outstanding shares of any class of capital stock, a comparable
dividend or distribution must be simultaneously declared or made with respect to
the outstanding shares of Class E Preferred Stock. In the event any dividend or
distribution is declared or made with respect to the Common Stock or any class
of capital stock convertible or exchangeable into Common Stock of the
Corporation, each holder of shares of Class E Preferred Stock (and any other
holder of capital stock so convertible or exchangeable and entitled to payment
of such dividend or distribution) shall be paid such comparable dividend or
receive such comparable distribution on the basis of the number of shares of
Common Stock into which such holder's shares of capital stock are then
convertible on the date established as the record date with respect to such
dividend or distribution. In case any portion of the dividend or distribution
declared or made by the Corporation shall be in a form other than cash, the fair
market value of such non-cash portion, as determined in good faith by the Board
of Directors of the Company, shall be utilized in determining the comparable
dividend or distribution to be declared or made with respect to the outstanding
shares of Class E Preferred Stock.
5. LIQUIDATION RIGHT AND PREFERENCE.
In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation Event"), the
holders of the Class E Preferred Stock shall be entitled to receive, in respect
of each share of Class E Preferred Stock, the greater of (i) the amount of
$14.25 (subject to appropriate adjustment for any stock dividends, combinations
or splits with respect to such share), plus the aggregate amount of all declared
but unpaid dividends on such share of Class E Preferred Stock (the "Class E
Preference Amount") or (ii) the aggregate amount that would be payable in the
Liquidation Event in respect of the share or shares of Common Stock into which
such share of Class E Preferred Stock would be convertible if all of the holders
were to convert their shares of Class E Preferred Stock into shares of Common
Stock immediately prior to the
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<PAGE>
Liquidation Event, and the Class E Preference Amount was not paid in preference
to any class of Junior Stock, as hereafter provided.
Upon occurrence of a Liquidation Event, the holders of then
outstanding shares of Class B Convertible Preferred Stock ("Class B Preferred
Stock"), Class C Preferred Stock, Class D Convertible Preferred Stock ("Class D
Preferred Stock"), Class E Preferred Stock and any other class of capital stock
hereafter established ranking on a parity in such Liquidation Event with the
Class B Preferred Stock, Class C, Class D Preferred Stock and Class E Preferred
Stock (collectively, "Parity Stock") shall be entitled to be paid as to each
share of such Parity Stock, prior and in preference to any distribution of any
of the assets of the Corporation to the holders of Class A Convertible Preferred
Stock ("Class A Preferred Stock"), Common Stock or any other class or series of
capital stock hereafter established ranking junior in a Liquidation Event to the
Parity Stock (collectively, "Junior Stock"), and after distribution of any of
the assets of the Corporation, to the extent of the liquidation preference
applicable thereto, to the holders of any class or series of capital stock
hereafter established ranking senior in a Liquidation Event to the Parity Stock
(collectively "Senior Stock"), out of assets available for distribution, an
amount, plus the aggregate amount of all declared but unpaid dividends on each
such share, equal to $2.50 per share in the case of the Class B Preferred Stock
(the "Class B Preference Amount"), $3.00 per share in the case of the Class C
Preferred Stock (the "Class C Preference Amount"), $4.50 per share in the case
of the Class D Preferred Stock (the "Class D Preference Amount") (subject, in
each case, to appropriate adjustment for any stock dividends, combinations or
splits with respect to each share), the Class E Preference Amount in the case of
the Class E Preferred Stock, and, in the case of any other Parity Stock, such
amount as shall be specified in the applicable Certificate of Designation (the
"Parity Preference Amount", and, together with the Class B Preference Amount,
Class C Preference Amount, Class D Preference Amount and Class E Preference
Amount, collectively, the "Parity Preference Amounts").
If, upon any Liquidation Event, the remaining assets of the
Corporation available for distribution to the holders of Parity Stock are
insufficient to pay the holders of Parity Stock their full Parity Preference
Amounts to which they are entitled, the holders of Parity Stock shall share pro
rata in any such distribution in proportion to the full Parity Preference
Amounts to which they would otherwise be respectively entitled.
Following such payment of Parity Preference Amounts to the holders
of Parity Stock, and payment to the holders of any Senior Stock of any
preferential amount to which they are entitled, the holders of the Junior Stock
shall then be entitled, to the exclusion of the holders of Parity Stock or
Senior Stock, to receive in cash or in kind, all remaining assets of the
Corporation, if any, in accordance with their relative priorities in a
Liquidation Event.
6. CONVERSION INTO COMMON STOCK.
(a) OPTIONAL CONVERSION. At the option of the holder thereof, any
or all Class E Preferred Stock then held by such holder shall be convertible
into Common Stock of
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<PAGE>
the Corporation in accordance with the provisions and subject to the adjustments
provided for in Section 6(c). In order to exercise the conversion privilege, a
holder of Class E Preferred Stock shall surrender the certificate or
certificates duly endorsed to the Corporation evidencing the shares of Class E
Preferred Stock each holder wishes to convert to the Corporation at its
principal office and accompanied by written notice to the Corporation that the
holder elects to convert all of such shares. Any shares of Class E Preferred
Stock converted at the option of the holder shall be deemed to have been
converted on the day of surrender of the certificate representing such shares
for conversion in accordance with the foregoing provisions, and at such time the
rights of the holder of such Class E Preferred Stock with respect to such shares
shall cease and such holder shall be treated as the record holder of the number
of shares of Common Stock issuable upon conversion. As promptly as practicable
on or after the conversion date, the Corporation shall issue and mail or deliver
to such holder (i) a certificate or certificates for the number of Common Stock
issuable upon conversion, computed to the nearest one hundredth of a full share,
(ii) any cash adjustment required pursuant to Section 6(f), and (iii) in the
event of a conversion in part, a certificate or certificates for the whole
number of shares of Class E Preferred Stock not being so converted.
(b) AUTOMATIC CONVERSION. The Class E Preferred Stock shall
automatically be converted into Common Stock of the Corporation, without any act
by the Corporation or the holders of the Class E Preferred Stock, concurrently
with the closing of the first public offering by the Corporation of shares of
Common Stock of the Corporation registered under the Securities Act of 1933, as
amended, in which (1) the aggregate gross public offering price of the
securities sold for cash by the Corporation in the offering is at least $30.0
million, or such lower amount as may be approved by the holders of a majority of
the shares of Class E Preferred Stock then outstanding, and (2) the public
offering price per share of Common Stock is at least $28.50 (as adjusted from
time to time to reflect stock splits, dividends, recapitalizations, combinations
or the like), or such lower amount as may be approved by the holders of a
majority of the shares of Class E Preferred Stock then outstanding. Each holder
of a share of Class E Preferred Stock so converted shall be entitled to receive
the full number of shares of Common Stock into which such share of Class E
Preferred Stock held by such holder could be converted if such holder had
exercised its conversion right at the time of closing of such public offering.
Upon such conversion, each holder of a share of Class E Preferred Stock shall
immediately surrender such share in exchange for (i) appropriate stock
certificates representing a share or shares of Common Stock of the Corporation,
and (ii) any cash adjustment required pursuant to Section 6(f).
(c) CONVERSION PRICE AND ADJUSTMENTS. The number of shares of
Common Stock issuable in exchange for each share of Class E Preferred Stock upon
either optional or automatic conversion shall be equal to $14.25 divided by the
conversion price then in effect for Class E Preferred Stock (the "Class E
Conversion Price"). The Class E Conversion Price shall initially be $14.25, but
such Class E Conversion Price shall be subject to adjustment from time to time,
as hereinafter provided:
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<PAGE>
(i) In case the Corporation shall at any time (A) declare a dividend
or make a distribution on Common Stock payable in Common Stock (other than
dividends or distributions payable to holders of the Series E Preferred
Stock including dividends paid as contemplated by Section 4), (B)
subdivide or split the outstanding Common Stock, (C) combine or reclassify
the outstanding Common Stock into a smaller number of shares, (D) issue
any shares of its capital stock in a reclassification of Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing corporation), or (E)
consolidate with, or merge with or into, any other person, the Class E
Conversion Price in effect (and, where appropriate, the securities into
which the Class E Preferred Stock are then convertible) at the time of the
record date for such dividend or distribution or on the effective date of
such subdivision, split, combination, consolidation, merger or
reclassification shall be adjusted so that the conversion of the Class E
Preferred Stock after such time shall entitle the holder to receive the
aggregate number of shares of Common Stock or other securities of the
Corporation (or other securities into which such shares of Common Stock
have been converted, exchanged, combined, consolidated, merged or
reclassified pursuant to clause 6(c)(i)(C), 6(c)(i)(D) or 6(c)(i)(E)
above) which, if the Class E Preferred Stock had been converted
immediately prior to such time, such holder would have owned upon such
conversion and been entitled to receive by virtue of such dividend,
distribution, subdivision, split, combination, consolidation, merger or
reclassification. Such adjustment shall be made successively whenever an
event listed above shall occur.
(ii) If and whenever the Corporation shall issue or sell any Common
Stock for a consideration per share less than the Class E Conversion Price
then in effect, or shall issue or sell any options, warrants or other
rights (including, without limitation, securities convertible into or
exercisable for Common Stock) for the purchase of such shares at a
consideration per share of less than the Class E Conversion Price then in
effect (other than securities subject to Section 6(c)(i) hereof; options
issued as of April 20, 2000 under existing stock option plans of the
Corporation, and 730,729 shares issuable upon exercise of such options;
options for the issuance of up to 533,137 additional shares under any
existing stock option plan of the Corporation and shares issuable upon
exercise of such options; warrants to purchase 198,960 shares outstanding
as of April 20, 2000, warrants to purchase 135,088 shares to be issued in
connection with the issuance of the Class E Preferred Stock and shares
issuable upon the exercise thereof; 2,810,000 shares of Class A Preferred
Stock, 460,000 shares of Class B Preferred Stock, 1,022,222 shares of
Class D Preferred Stock and shares issuable upon conversion thereof;
shares issued to the employee stock ownership plan of the Corporation,
provided such contribution is approved by the compensation committee of
the Board of Directors of the Corporation and does not exceed that number
of shares the fair market value of which is three percent (3%) of annual
compensation (as measured by applicable benefit plan rules) (any of the
foregoing share amounts shall be subject to appropriate adjustment from
time to time to reflect stock splits, dividends, recapitalizations,
combinations or the like)), the Class E Conversion Price in effect
immediately prior to such issuance
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or sale shall be reduced to an amount determined by multiplying (A) the
Class E Conversion Price then in effect, and (B) a fraction, the numerator
of which shall be an amount equal to the sum of (1) the number of shares
of Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Class E Conversion Price then in effect, and (2) the
total consideration payable to this Corporation upon such issuance or sale
of such shares and such purchase rights and upon the exercise or
conversion of such purchase or acquisition rights, and the denominator of
which shall be the amount determined by multiplying (aa) the number of
shares of Common Stock outstanding immediately after such issuance or sale
plus the number of shares of Common Stock issuable upon the exercise or
conversion of any purchase or acquisition rights thus issued, by (bb) the
Class E Conversion Price then in effect. In case any portion of the
consideration to be received by the Corporation shall be in a form other
than cash, the fair market value of such non-cash consideration, as
determined in good faith by the Board of Directors of the Company, shall
be utilized in the foregoing computation.
For purposes of this Section 6(c), "Common Stock outstanding" shall
include, in addition to Common Stock issued and outstanding, those shares
of Common Stock issuable upon conversion of outstanding shares of
Preferred Stock and Common Stock issuable upon the exercise, exchange or
conversion of any other outstanding right to acquire Common Stock.
If any options, warrants or other purchase rights that are taken into
account in any such adjustment of the Class E Conversion Price
subsequently expire without exercise, the Class E Conversion Price shall
be recomputed by deleting such expired options, warrants or other purchase
rights. If the Class E Conversion Price is adjusted as the result of the
issuance of any options, warrants or other purchase or acquisition rights,
no further adjustment of the Class E Conversion Price shall be made at the
time of the exercise of such options, warrants or other purchase rights or
acquisition rights or the conversion of such purchase or acquisition
rights.
(iii) In case the Corporation shall fix a record date for the
issuance on a pro rata basis of rights, options or warrants to the holders
of its Common Stock or other securities entitling such holders to
subscribe for or purchase shares of Common Stock (or securities
convertible into or exercisable or exchangeable for shares of Common
Stock) at a price per share of Common Stock (or having a conversion,
exercise or exchange price per share of Common Stock, in the case of a
security convertible into, or exercisable or exchangeable for, shares of
Common Stock) less than the Class E Conversion Price on such record date,
the maximum number of shares of Common Stock issuable upon exercise of
such rights, options or warrants (or conversion of such convertible
securities) shall be deemed to have been issued and outstanding as of such
record date and the Class E Conversion Price shall be adjusted pursuant to
Section 6(c)(ii) hereof, as though such maximum number of shares of Common
Stock had been so issued for an aggregate consideration payable by the
holders of such rights, options, warrants or other securities prior to
their receipt
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of such shares of Common Stock. In case any portion of such consideration
shall be in a form other than cash, the fair market value of such non-cash
consideration shall be determined as set forth in Section 6(c)(ii) hereof.
Such adjustment shall be made successively whenever such record date is
fixed; and in the event that such rights, options or warrants are not so
issued or expire in whole or in part unexercised, or in the event of a
change in the number of shares of Common Stock to which the holders of
such rights, options or warrants are entitled (other than pursuant to
adjustment provisions therein comparable to those contained in this
Section 6(c)), the Class E Conversion Price shall again be adjusted as
follows: (A) in the event that all of such rights, options or warrants
expire unexercised, the Class E Conversion Price shall be the Class E
Conversion Price that would then be in effect if such record date had not
been fixed; (B) in the event that less than all of such rights, options or
warrants expire unexercised, the Class E Conversion Price shall be
adjusted pursuant to Section 6(c)(ii) to reflect the maximum number of
shares of Common Stock issuable upon exercise of such rights, options or
warrants that remain outstanding (without taking into effect shares of
Common Stock issuable upon exercise of rights, options or warrants that
have lapsed or expired); and (C) in the event of a change in the number of
shares of Common Stock to which the holders of such rights, options or
warrants are entitled (other than pursuant to adjustment provisions
therein comparable to those contained in this Section 6(c)), the Class E
Conversion Price shall be adjusted to reflect the Class E Conversion Price
which would then be in effect if such holder had initially been entitled
to such changed number of shares of Common Stock. Notwithstanding anything
herein to the contrary, no further adjustment to the Class E Conversion
Price shall be made upon the issuance or sale of Common Stock upon the
exercise of any rights, options or warrants to subscribe for or purchase
Common Stock, if any adjustment in the Class E Conversion Price was made
or required to be made upon the record date for the issuance or sale of
such rights, options or warrants under this Section 6(c)(iii).
Notwithstanding anything herein to the contrary, no adjustment in the
Class E Conversion Price shall be made under this Section 6(c)(iii) to the
extent the holders of Class E Preferred Stock participate in any such
distribution in accordance with Section 4 hereof.
(iv) The anti-dilution provisions of this Section 6(c) may be
waived by the affirmative vote of the holders (acting together as a class)
of a majority of the then outstanding Class E Preferred Stock.
(d) NOTICE OF CLASS E CONVERSION PRICE ADJUSTMENT. Upon any
adjustment of the Class E Conversion Price, then and in each such case the
Corporation shall give written notice thereof, by first-class mail, postage
prepaid, addressed to the registered holders of Class E Preferred Stock at the
addresses of such holders as shown on the books of this Corporation, which
notice shall state the Class E Conversion Price resulting from such adjustment
and the increase or decrease, if any, in the number of shares receivable at such
price upon the conversion of Class E Preferred Stock, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
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<PAGE>
(e) NOTICE OF CERTAIN EVENTS. In case any time:
(i) the Corporation shall pay any dividend payable in stock
upon Common Stock or make any distribution (other than regular cash
dividends) to the holders of Common Stock; or
(ii) the Corporation shall offer for subscription pro rata to
the holders of Common Stock any additional shares of stock of any class or
other rights; or
(iii) there shall be any capital reorganization,
reclassification of the capital stock of the Corporation, or consolidation
or merger of the Corporation with, or sale of all or substantially all of
its assets to another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give written
notice, by first-class mail, postage prepaid, addressed to the holders of Class
E Preferred Stock at the addresses of such holders as shown on the books of the
Corporation, of the date on which (A) the books of the Corporation shall close
or a record shall be taken for such dividend, distribution or subscription
rights, or (B) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case may
be. Such notice also shall specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be. Such written notice shall be given at least thirty (30) days prior to
the action in question and not less than thirty (30) days prior to the record
date or the date on which the Corporation's transfer books are closed in respect
thereto.
(f) FRACTIONAL SHARES. In connection with the conversion of any
shares of Class E Preferred Stock, no fractions of shares of Common Stock shall
be required to be issued to the holder of such shares of Class E Preferred
Stock, but in lieu thereof the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount equal to such fractional
interest multiplied by the Conversion Price per share of Common Stock on the
business day next preceding the business day on which such shares of Class E
Preferred Stock are deemed to have been converted.
(g) RESERVATION OF SHARES.
(i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such number of
its authorized but unissued shares of Common Stock as shall be required
for the purpose of effecting conversions of the Class E Preferred Stock.
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<PAGE>
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the Class E
Preferred Stock, the Corporation shall comply with all applicable federal
and state laws and regulations which require action to be taken by the
Corporation.
(h) TRANSFER TAXES. The Corporation will pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on conversion of the Class E
Preferred Stock pursuant hereto; provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock in a name other than that of
the holder of the Class E Preferred Stock to be converted and no such issue or
delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
7. OPTIONAL REDEMPTION AT THE ELECTION OF THE HOLDERS OF CLASS E
PREFERRED STOCK.
(a) ELECTION.
(i) At any time and from time to time after the seventh
anniversary of the original issue date of the shares of Class E Preferred
Stock, the holders of the then outstanding shares of the Class E Preferred
Stock shall have the option, exercisable by the holders of not less than
25% (in the aggregate) of the then outstanding shares of the Class E
Preferred Stock, voting as a single class, by giving a written notice to
the Corporation (the "Redemption Notice"), to require the Corporation to
redeem any or all of the shares of such Class E Preferred Stock of such
holders then outstanding. Upon the affirmative vote by the holders of a
majority of the outstanding shares of Class E Preferred Stock, the holders
of all outstanding shares of Class E Preferred Stock will be required to
have such shares redeemed (a "Mandatory Redemption").
(ii) Within five (5) days after receiving the Redemption
Notice, the Corporation shall send a copy of such notice to all other
holders of record of the Class E Preferred Stock. Such other holders may
elect to participate in the Redemption Notice by notifying the Corporation
in writing within ten (10) days after receiving a copy of the Redemption
Notice from the Corporation. Upon receipt of such Redemption Notice, the
Board shall within thirty (30) days specify a date on which the redemption
of such shares provided herein will take place (the "Redemption Date"),
which shall be no less than forty-five (45) days and no more than ninety
(90) days after receipt of the Redemption Notice.
(iii) The Corporation shall have no obligation to honor more
than two (2) redemption requests of the holders of shares of Class E
Preferred Stock.
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(b) REDEMPTION PRICE. The redemption price for each share of the
Class E Preferred Stock (the "Redemption Price") shall be $14.25 (subject to
appropriate adjustment from time to time to reflect stock splits, dividends,
recapitalizations, combinations or the like), plus an amount equal to all
declared but unpaid dividends, if any, payable with respect to such share.
(c) NOTIFICATION. At least fifteen (15) days prior to the
Redemption Date, the Corporation shall mail written notice by first class mail,
postage prepaid, to each holder of record of the Class E Preferred Stock who
sought redemption, at its address last shown on the records of the Corporation,
notifying such holder of such redemption, specifying the Redemption Date, the
Redemption Price and the date on which such holder's conversion rights as to
such shares terminate and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, his, or its certificate
or certificates representing the shares to be redeemed (such notice, the
"Closing Notice").
(d) SURRENDER AND PAYMENT. On or prior to the Redemption Date,
each holder of shares of Class E Preferred Stock to be redeemed shall surrender
its certificate or certificates representing such shares to the Corporation, in
the manner and at the place designated in the Closing Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. The Redemption Price due to each
holder shall be payable, from any source of funds legally available therefor, by
delivery on the Redemption Date of a certified or bank cashier's check in an
amount equal to the aggregate Redemption Price due to such holder. From and
after the date a holder of shares of the Class E Preferred Stock has received
payment in full by receipt of cash, all rights of such holder with respect to
such Class E Preferred Stock so redeemed shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
(e) INSUFFICIENT FUNDS. If, on any Redemption Date, funds of the
Corporation legally available therefor shall be insufficient to redeem all of
the shares of Class E Preferred Stock required to be redeemed, funds to the
extent legally available shall be used to redeem the maximum possible number of
such shares ratably on the basis of the relative value of such shares based on
the Redemption Prices of such shares on such date if the funds of the
Corporation legally available therefore had been sufficient to redeem all shares
required to be redeemed on such date. Thereafter, the Corporation shall use its
best efforts to obtain sufficient funds to redeem the balance of such shares.
When additional funds of the Corporation become legally available for the
redemption of the balance of such shares, such additional funds will be used to
redeem at the Redemption Price (together with interest at the annual rate of 9%)
the balance of the shares which the Corporation was therefore obligated to
redeem, ratably on the basis set forth in the preceding sentence.
Notwithstanding anything herein to the contrary, if the Redemption Price is not
paid when due, all powers, preferences, rights, qualifications, limitations and
restrictions (including, without limitation, dividend rights, conversion rights,
and liquidation preferences, and voting
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<PAGE>
rights) with respect to shares surrendered for redemption, but not actually
redeemed, shall continue until the Redemption Price is paid in full.
(f) REISSUE. Any shares of Class E Preferred Stock redeemed
pursuant to this Section 7 shall permanently be retired, shall no longer be
deemed outstanding and shall not under any circumstances be reissued as Class E
Preferred Stock, but shall instead have the status of authorized Open Term
Preferred Stock, as defined in the Corporation's Restated Articles of
Incorporation.
8. OPTIONAL REDEMPTION AT THE ELECTION OF THE CORPORATION.
(a) ELECTION. At any time and from time to time after the seventh
anniversary of the original issue date of the shares of Class E Preferred Stock,
to the extent the Corporation shall have funds legally available for such
payment, and subject to the rights of the holders pursuant to Section 6 hereof,
the Corporation shall have the right to purchase and redeem all or any portion
of the then outstanding shares of Class E Preferred Stock. The Board of
Directors shall specify a Redemption Date, which shall be not less than thirty
(30) days nor more than sixty (60) days from the date the Corporation shall mail
a Closing Notice to the holders of Class E Preferred Stock.
(b) REDEMPTION PRICE. The redemption price for each share of Class
E Preferred Stock redeemed pursuant to this Section 8 shall be the Redemption
Price, plus an amount equal to all declared but unpaid dividends, if any,
payable with respect to such share.
(c) SURRENDER AND PAYMENT. On or prior to the Redemption Date,
each holder of shares of Class E Preferred Stock to be redeemed shall surrender
its certificate or certificate representing such shares to the Corporation, in
the manner and at the place designated in the Closing Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. The Redemption Price due to each
holder shall be payable, from any source of funds legally available therefor, by
delivery on the Redemption Date of a certified or bank cashier's check in an
amount equal to the aggregate Redemption Price due to such holder. From and
after the date a holder of shares of the Class E Preferred Stock has received
payment in full by receipt of cash, all rights of such holder with respect to
such Class E Preferred Stock so redeemed shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
(d) PARTIAL REDEMPTION. In the event of a redemption of less than
all of the outstanding shares of Class E Preferred Stock pursuant to the first
paragraph of this Section 8, redemption as among the holders of such shares of
Class E Preferred Stock shall be on a pro rata basis.
(e) REISSUE. Any shares of Class E Preferred Stock redeemed
pursuant to this Section 8 shall permanently be retired, shall no longer be
deemed outstanding and shall
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<PAGE>
not under any circumstances be reissued as Class E Preferred Stock, but shall
instead have the status of authorized Open Term Preferred Stock, as defined in
the Corporation's Restated Articles of Incorporation.
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<PAGE>
CAPELLA EDUCATION COMPANY
STATEMENT OF DESIGNATION
OF
RIGHTS, PREFERENCES AND LIMITATIONS
OF
CLASS G CONVERTIBLE PREFERRED STOCK
The undersigned, Paul Clifford, the Secretary of Capella Education
Company, a Minnesota corporation (the "Corporation"), hereby certifies that the
following resolutions establishing Class G Convertible Preferred Stock of the
Corporation pursuant to Minnesota Statutes, Section 302A.401 were duly adopted
by the directors of the Corporation on January 15, 2003:
RESOLVED FURTHER, that (i) the form of the Certificate of
Designation for the Class G Convertible Preferred Stock (the "Class G
Certificate") attached hereto as Exhibit C is hereby authorized and
approved; (ii) there is hereby established a new Class G Convertible
Preferred Stock of this Company with the rights, preferences and
privileges as set forth in the Class G Certificate; (iii) the appropriate
officers of this Company are authorized and directed to make, execute and
file with the Minnesota Secretary of State in the method required by law,
the Class G Certificate, in substantially the form approved hereby, with
such changes, deletions and insertions as any of such officers shall
approve, the execution and filing of the Class G Certificate by any of the
officers of the Company being conclusive evidence of such approval, and
(iv) each of the officers of the Company is hereby authorized to take all
other actions they may deem necessary or advisable to effect adoption of
the Class G Certificate.
RESOLVED FURTHER, that the officers of the Company, and each of
them, are authorized for and on behalf of the Company, to execute and
deliver such other instruments or documents and to take such other actions
as they, or any of them, may deem necessary or advisable to carry out the
purposes of the foregoing resolutions.
[remainder of page intentionally blank]
<PAGE>
IN WITNESS WHEREOF, I have subscribed my name this ____ day of January,
2003.
/s/ Paul Clifford
-----------------------------------------
Paul Clifford,
Secretary
Capella Education Company
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<PAGE>
CAPELLA EDUCATION COMPANY
CERTIFICATE OF DESIGNATION
FOR CLASS G CONVERTIBLE PREFERRED STOCK
1. DESIGNATION; NUMBER OF SHARES; PAR VALUE.
A class of shares of preferred stock of Capella Education Company
(the "Corporation") shall be designated as Class G Convertible Preferred Stock
(the "Class G Preferred Stock"). The number of shares constituting the Class G
Preferred Stock shall be 2,184,550. The Class G Preferred Stock shall have a par
value of $.01 per share.
2. VOTING RIGHTS.
(a) GENERAL. On all matters submitted to the shareholders, each
holder of Class G Preferred Stock shall have one vote for each share of common
stock of the Corporation (the "Common Stock") which such holder of Class G
Preferred Stock would be entitled to receive upon the conversion of such
holder's Class G Preferred Stock pursuant to the provisions hereof. Except as
otherwise provided herein, and except as otherwise required by agreement or law,
the shares of capital stock of the Corporation shall vote as a single class on
all matters submitted to the shareholders. No holder of any Class G Preferred
Stock shall have any cumulative voting rights.
(b) ADDITIONAL CLASS VOTES BY CLASS G STOCK. Without the
affirmative vote of the holders of 66 2/3% of the Class G Preferred Stock at the
time outstanding at a meeting of the holders of Class G Preferred Stock called
for such purpose or written consent of the holders (acting together as a class)
of 66 2/3% of the Class G Preferred Stock at the time outstanding, the
Corporation shall not:
(1) create, authorize, issue or reclassify any outstanding shares
of capital stock into any shares of capital stock ranking senior to or on
parity with the Class G Preferred Stock as to the payment or distribution
of dividends or of assets upon the liquidation, dissolution or winding up,
voluntary or involuntary, of the Corporation; or
(2) amend, alter, modify or repeal any provision of the Articles
of Incorporation of the Corporation so as to alter the rights and
preferences of the Class G Preferred Stock; or
(3) redeem, repurchase or acquire (or make any payment into, or
set aside, a sinking fund for such purposes), or declare or pay any
dividend or make any other
<PAGE>
distribution on, any of the Corporation's capital stock, except any such
redemption, repurchase, acquisition, dividend or distribution which is:
(i) pursuant to mandatory redemption obligations set forth
herein or in the Articles of Incorporation (including any
certificate of designation) as of the date of filing of this
Certificate of Designation;
(ii) Common Stock issued under employee benefit plans of the
Corporation;
(iii) made pursuant to a repurchase agreement between the
Corporation and any of its employees, officers or directors approved
by at least 66 2/3% of the members of the Board of Directors; or
(iv) a dividend pro rata to all holders of the class or
series of securities upon which such dividend is declared in shares
of Common Stock or capital stock of the Corporation that ranks
junior to the Class G Preferred Stock as to the payment or
distribution of dividends and of assets upon the liquidation,
dissolution or winding up, voluntary or involuntary, of the
Corporation.
(4) effect any acquisition of the Corporation by another entity by
means of any transaction or series of related transactions with the
Corporation (including, without limitation any merger, consolidation or
recapitalization), which results in 50% or more of the voting capital
stock of the Corporation being acquired, by exchange, cancellation or
otherwise, by persons who were not shareholders of the Corporation prior
to such transaction or series of transactions, unless such acquisition
provides for the exchange or payment of consideration in respect of each
share of Class G Preferred Stock, or the shares of Common Stock or other
securities into which each such share of Class G Preferred Stock is then
convertible, having a value equal to or greater than $28.50 (subject to
appropriate adjustments for stock dividends, stock splits, combinations
and recapitalizations and similar events affecting the Class G Preferred
Stock) (a "Qualified Amount"); or
(5) effect any sale or other disposition of all or substantially all
of the assets of the Corporation, unless such sale, if followed by an
immediate liquidation, would result in distributable proceeds in respect
of each share of Class G Preferred Stock, or the shares of Common Stock or
other securities into which each such share of Class G Preferred Stock is
then convertible, in a Qualified Amount; or
(6) effect the liquidation or dissolution of the Corporation,
unless such liquidation or dissolution would result in distributable
proceeds in respect of each share of Class G Preferred Stock, or the
shares of Common Stock or other securities into which each such share of
Class G Preferred Stock is then convertible, in a Qualified Amount.
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<PAGE>
(c) VALUATION OF NON-CASH CONSIDERATION. In connection with any
transaction set forth in Section 2(b) above involving the receipt of
consideration or proceeds in a form other than cash, the fair market value of
such non-cash consideration or proceeds shall be utilized in determining whether
such transaction must be approved by the holders of Class G Preferred Stock
pursuant to Section 2(b). The fair market value of any non-cash consideration
will be determined as follows:
(i) the fair market value of stock and other securities that
are publicly traded shall be the average of the last closing market
price of such stock or securities on each of the ten trading days
ending five business days prior to the execution by the Corporation
of a definitive agreement, or adoption by the Board of Directors of
the Corporation of any plan, relating to such transaction (the "Time
of Determination");
(ii) the fair market value of stock and other equity
securities that are not publicly traded and the value of all other
non-cash consideration, other than consideration of the nature
described in clause (iii) below, shall be the fair market value
thereof at the Time of Determination as mutually agreed by the
Corporation and a director designated to serve on the Board of
Directors by the holders of Class G Preferred Stock (a "Class G
Director"), or if the Corporation and a Class G Director are unable
to reach an agreement within five business days of receipt of
written notice from the Corporation of such transaction by the Class
G Director, as determined by an investment banking firm or other
person experienced in valuing such stock, equity securities or other
non-cash consideration mutually acceptable to a Class G Director and
the Corporation, or if they are unable to agree, or there exists no
such Class G Director, then a nationally recognized investment
banking firm selected in good faith by the Board of Directors of the
Corporation; or
(iii) the value of any promissory note or other debt
instrument that is not publicly traded and the value of any and all
deferred installments of the consideration and any other deferral of
payments included in the total consideration shall be deemed to be
the face amount of the promissory notes or other debt instruments or
the total amount of payments that are deferred with respect to
deferred obligations that are not evidenced by promissory notes or
other debt instruments.
A security is "publicly traded" if such security is part of a class of
securities that is listed on the New York or American stock exchanges (or on a
foreign stock exchange of comparable depth and liquidity) or is traded on the
NASDAQ Stock Market.
(d) MEETINGS. A proper officer of the Corporation may, and upon
the written request of the holders of record of at least twenty-five percent
(25%) of the shares of Class G Preferred Stock then outstanding addressed to the
Secretary of the Corporation shall,
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<PAGE>
call a special meeting of the holders of Class G Preferred Stock, for the
purpose of holding a class vote pursuant to Section 2(b). If such meeting shall
not be called by a proper officer of the Corporation within twenty (20) days
after personal service of said written request upon the Secretary of the
Corporation, or within twenty (20) days after mailing the same within the United
States by certified mail, addressed to the Secretary of the Corporation at its
principal executive offices, then the holders of record of at least twenty-five
percent (25%) of the outstanding shares of Class G Preferred Stock may designate
in writing their own representative to call such meeting at the expense of the
Corporation, and such meeting may be called by the person so designated upon the
notice required for the annual meeting of stockholders of the Corporation and
shall be held at the place for holding the annual meetings of stockholders.
3. NO PREEMPTIVE RIGHTS.
Holders of Class G Preferred Stock shall not be entitled, as a
matter of right, to subscribe for, purchase or receive any part of any stock of
the Corporation of any class whatsoever, or of securities convertible into or
exchangeable for, or otherwise creating a right to acquire, any stock of any
class whatsoever, whether now or hereafter authorized and whether issued for
cash or other consideration or by way of dividend. Nothing herein shall limit
the power of the Corporation to grant any of the foregoing rights to persons by
contract or otherwise.
4. DIVIDENDS.
Subject to the affirmative voting requirement of Section 2(b)(3) of
this Certificate of Designation, in the event any dividend or distribution is
declared or made with respect to outstanding shares of any class of capital
stock, a comparable dividend or distribution must be simultaneously declared or
made with respect to the outstanding shares of Class G Preferred Stock. Subject
to the affirmative voting requirement of Section 2(b)(3) of this Certificate of
Designation, in the event any dividend or distribution is declared or made with
respect to the Common Stock or any class of capital stock convertible or
exchangeable into Common Stock of the Corporation, each holder of shares of
Class G Preferred Stock (and any other holder of capital stock so convertible or
exchangeable and entitled to payment of such dividend or distribution) shall be
paid such comparable dividend or receive such comparable distribution on the
basis of the number of shares of Common Stock into which such holder's shares of
capital stock are then convertible on the date established as the record date
with respect to such dividend or distribution. In case any portion of the
dividend or distribution declared or made by the Corporation shall be in a form
other than cash, the fair market value of such non-cash portion, as determined
in good faith by the Board of Directors of the Corporation, shall be utilized in
determining the comparable dividend or distribution to be declared or made with
respect to the outstanding shares of Class G Preferred Stock.
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<PAGE>
5. LIQUIDATION RIGHT AND PREFERENCE.
In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation Event"), the
holders of the Class G Preferred Stock shall be entitled to receive, in respect
of each share of Class G Preferred Stock , the greater of (i) the amount of
$22.24 (subject to appropriate adjustment for any stock dividends, combinations
or splits with respect to such share), plus the aggregate amount of all declared
but unpaid dividends on such share of Class G Preferred Stock (the "Class G
Preference Amount") or (ii) the aggregate amount that would be payable in the
Liquidation Event in respect of the share or shares of Common Stock into which
such share of Class G Preferred Stock would be convertible if all of the holders
were to convert their shares of Class G Preferred Stock into shares of Common
Stock immediately prior to the Liquidation Event, and the Class G Preference
Amount was not paid in preference to any class of Junior Stock, as hereafter
provided.
Upon occurrence of a Liquidation Event, the holders of then
outstanding shares of Class B Convertible Preferred Stock ("Class B Preferred
Stock"), Class D Preferred Stock ("Class D Preferred Stock"), Class E
Convertible Preferred Stock ("Class E Preferred Stock"), Class G Preferred Stock
and any other class of capital stock hereafter established ranking on a parity
in such Liquidation Event with the Class B Preferred Stock, Class D Preferred
Stock, Class E Preferred Stock and Class G Preferred Stock (collectively,
"Parity Stock") shall be entitled to be paid as to each share of such Parity
Stock, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Class A Convertible Preferred Stock ("Class A
Preferred Stock"), Common Stock or any other class or series of capital stock
hereafter established ranking junior in a Liquidation Event to the Parity Stock
(collectively, "Junior Stock"), and after distribution of any of the assets of
the Corporation, to the extent of the liquidation preference applicable thereto,
to the holders of any class or series of capital stock hereafter established
ranking senior in a Liquidation Event to the Parity Stock (collectively "Senior
Stock"), out of assets available for distribution, an amount, plus the aggregate
amount of all declared but unpaid dividends on each such share, equal to $2.50
per share in the case of the Class B Preferred Stock (the "Class B Preference
Amount"), $4.50 per share in the case of the Class D Preferred Stock (the "Class
D Preference Amount"), $14.25 per share in the case of the Class E Preferred
Stock (the "Class E Preference Amount") (subject, in each case, to appropriate
adjustment for any stock dividends, combinations or splits with respect to each
share), the Class G Preference Amount in the case of the Class G Preferred
Stock, and, in the case of any other Parity Stock, such amount as shall be
specified in the applicable Certificate of Designation (the "Parity Preference
Amount", and, together with the Class B Preference Amount, Class D Preference
Amount, Class E Preference Amount and Class G Preference Amount, collectively,
the "Parity Preference Amounts").
If, upon any Liquidation Event, the remaining assets of the
Corporation available for distribution to the holders of Parity Stock are
insufficient to pay the holders of Parity Stock their full Parity Preference
Amounts to which they are entitled, the holders of
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Parity Stock shall share pro rata in any such distribution in proportion to the
full Parity Preference Amounts to which they would otherwise be respectively
entitled.
Following such payment of Parity Preference Amounts to the holders
of Parity Stock, and payment to the holders of any Senior Stock of any
preferential amount to which they are entitled, the holders of the Junior Stock
shall then be entitled, to the exclusion of the holders of Parity Stock or
Senior Stock, to receive in cash or in kind, all remaining assets of the
Corporation, if any, in accordance with their relative priorities in a
Liquidation Event.
The merger or consolidation of the Corporation into or with another
corporation, the merger or consolidation of any other corporation into or with
the Corporation or a plan of exchange between the Corporation and any other
corporation (in which consolidation, merger or plan of exchange the shareholders
of the Corporation receive any distributions of cash or securities or other
property as a result of such consolidation, merger or plan of exchange), or the
sale, transfer or other disposition of all or substantially all of the assets of
the Corporation, shall be deemed to be a Liquidation Event for purposes of this
Section 5.
6. CONVERSION INTO COMMON STOCK.
(a) OPTIONAL CONVERSION. At the option of the holder thereof, at
any time and from time to time any or all Class G Preferred Stock then held by
such holder shall be convertible into Common Stock of the Corporation in
accordance with the provisions and subject to the adjustments provided for in
Section 6(c). In order to exercise the conversion privilege, a holder of Class G
Preferred Stock shall surrender the certificate or certificates duly endorsed to
the Corporation evidencing the shares of Class G Preferred Stock each holder
wishes to convert to the Corporation at its principal office and accompanied by
written notice to the Corporation that the holder elects to convert all of such
shares. Any shares of Class G Preferred Stock converted at the option of the
holder shall be deemed to have been converted on the day of surrender of the
certificate representing such shares for conversion in accordance with the
foregoing provisions, and at such time the rights of the holder of such Class G
Preferred Stock with respect to such shares shall cease and such holder shall be
treated as the record holder of the number of shares of Common Stock issuable
upon conversion. As promptly as practicable on or after the conversion date, the
Corporation shall issue and mail or deliver to such holder (i) a certificate or
certificates for the number of shares of Common Stock issuable upon conversion,
rounding down to the nearest full share, (ii) any cash adjustment required
pursuant to Section 6(f), and (iii) in the event of a conversion in part, a
certificate or certificates for the whole number of shares of Class G Preferred
Stock not being so converted.
(b) AUTOMATIC CONVERSION. The Class G Preferred Stock shall
automatically be converted into Common Stock of the Corporation, without any act
by the Corporation or the holders of the Class G Preferred Stock, concurrently
(i) with the closing of the first public offering by the Corporation of shares
of Common Stock of the Corporation registered under the Securities Act of 1933,
as amended, in which (1) the aggregate gross
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proceeds received by the Corporation in the offering are at least $30.0 million,
and (2) the public offering price per share of Common Stock is at least $28.50
(as adjusted from time to time to reflect stock splits, dividends,
recapitalizations, combinations or the like), or (ii) upon the affirmative vote
or written consent of the holders of 66 2/3% of the outstanding shares of Class
G Preferred Stock then outstanding; provided, however, if any other class or
series of preferred stock of the Corporation would remain outstanding after the
conversion of the Class G Preferred Stock, the affirmative vote or written
consent of holders of 70% of the outstanding shares of Class G Preferred Stock
shall be required for automatic conversion pursuant to this clause (ii). In the
case of a conversion pursuant to clause (i), each holder of a share of Class G
Preferred Stock so converted shall be entitled to receive the full number of
shares of Common Stock into which such share of Class G Preferred Stock held by
such holder could be converted if such holder had exercised its conversion right
at the time of closing of such public offering. Upon any conversion pursuant to
this Section 6(b), each holder of a share of Class G Preferred Stock shall
immediately surrender such share in exchange for (i) appropriate stock
certificates representing a share or shares of Common Stock of the Corporation,
and (ii) any cash adjustment required pursuant to Section 6(f).
(c) CONVERSION PRICE AND ADJUSTMENTS. The number of shares of
Common Stock issuable in exchange for each share of Class G Preferred Stock upon
either optional or automatic conversion shall be computed to the nearest
hundredth of a share and shall be equal to $11.12 divided by the conversion
price then in effect for Class G Preferred Stock (the "Class G Conversion
Price"). The Class G Conversion Price shall initially be $11.12, but such Class
G Conversion Price shall be subject to adjustment from time to time, as
hereinafter provided:
(i) In case the Corporation shall at any time (A) declare a
dividend or make a distribution on Common Stock payable in Common Stock
(other than dividends or distributions payable to holders of the Class G
Preferred Stock including dividends paid as contemplated by Section 4),
(B) subdivide or split the outstanding Common Stock, (C) combine or
reclassify the outstanding Common Stock into a smaller number of shares,
(D) issue any shares of its capital stock in a reclassification of Common
Stock (including any such reclassification in connection with a
consolidation or merger in which the Corporation is the continuing
corporation) (other than an event treated under Section 5 as a Liquidation
Event), or (E) consolidate with, or merge with or into, any other person
(other than an event treated under Section 5 as a Liquidation Event), the
Class G Conversion Price in effect (and, where appropriate, the securities
into which the Class G Preferred Stock are then convertible) at the time
of the record date for such dividend or distribution or on the effective
date of such subdivision, split, combination, consolidation, merger or
reclassification shall be adjusted so that the conversion of the Class G
Preferred Stock after such time shall entitle the holder to receive the
aggregate number of shares of Common Stock or other securities of the
Corporation (or other securities into which such shares of Common Stock
have been converted, exchanged, combined, consolidated, merged or
reclassified pursuant to clause 6(c)(i)(C), 6(c)(i)(D) or 6(c)(i)(E)
above) which, if the Class G Preferred Stock had been converted
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immediately prior to such time, such holder would have owned upon such
conversion and been entitled to receive by virtue of such dividend,
distribution, subdivision, split, combination, consolidation, merger or
reclassification. Such adjustment shall be made successively whenever an
event listed above shall occur.
(ii) If, at any time after February 21, 2003, the Corporation
shall issue or sell any Common Stock for a consideration per share less
than the Class G Conversion Price then in effect or shall issue or sell
any options, warrants or other rights (including, without limitation,
securities convertible into or exercisable for Common Stock) for the
purchase of such shares at a consideration per share of less than the
Class G Conversion Price then in effect (other than securities subject to
Section 6(c)(i) hereof; options issued as of January 31, 2002 under
existing stock option plans of the Corporation, and 1,184,290 shares
issuable upon exercise of such options; options for the issuance of up to
706,492 additional shares under any existing stock option plan of the
Corporation and shares issuable upon exercise of such options; warrants to
purchase 334,048 shares outstanding as of January 31, 2002; 2,810,000
shares of Class A Preferred Stock and shares issued upon conversion
thereof; 460,000 shares of Class B Preferred Stock and shares issued upon
conversion thereof; 1,022,222 shares of Class D Preferred Stock and shares
issued upon conversion thereof; 2,596,491 shares of Class E Preferred
Stock and shares issuable upon conversion thereof; shares issued to the
employee stock ownership plan of the Corporation, provided such
contribution is approved by the compensation committee of the Board of
Directors of the Corporation and does not exceed that number of shares the
fair market value of which is three percent (3%) of annual compensation
(as measured by applicable benefit plan rules) (any of the foregoing share
amounts shall be subject to appropriate adjustment from time to time to
reflect stock splits, dividends, recapitalizations, combinations or the
like) (all of the foregoing are collectively referred to as the "Exempt
Securities")), the Class G Conversion Price in effect immediately prior to
such issuance or sale shall be reduced to an amount determined by
multiplying (A) the Class G Conversion Price then in effect, and (B) a
fraction, the numerator of which shall be an amount equal to the sum of
(1) the number of shares of Common Stock outstanding immediately prior to
such issuance or sale multiplied by the Class G Conversion Price then in
effect, and (2) the total consideration payable to this Corporation upon
such issuance or sale of such shares and such purchase rights and upon the
exercise or conversion of such purchase or acquisition rights, and the
denominator of which shall be the amount determined by multiplying (aa)
the number of shares of Common Stock outstanding immediately after such
issuance or sale plus the number of shares of Common Stock issuable upon
the exercise or conversion of any purchase or acquisition rights thus
issued, by (bb) the Class G Conversion Price then in effect. In case any
portion of the consideration to be received by the Corporation shall be in
a form other than cash, the fair market value of such non-cash
consideration, as determined in good faith by the Board of Directors of
the Corporation, shall be utilized in the foregoing computation.
For purposes of this Section 6(c), "Common Stock outstanding" shall
include, in addition to Common Stock issued and outstanding, those shares
of Common Stock issuable upon conversion of outstanding shares of
Preferred Stock and Common
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Stock issuable upon the exercise, exchange or conversion of any other
outstanding right to acquire Common Stock.
If any options, warrants or other purchase rights that are taken into
account in any such adjustment of the Class G Conversion Price
subsequently expire without exercise, the Class G Conversion Price shall
be recomputed by deleting such expired options, warrants or other purchase
rights. If the Class G Conversion Price is adjusted as the result of the
issuance of any options, warrants or other purchase or acquisition rights,
no further adjustment of the Class G Conversion Price shall be made at the
time of the exercise of such options, warrants or other purchase or
acquisition rights or the conversion of such purchase or acquisition
rights.
(iii) If, on or prior to February 21, 2003, the Corporation
shall issue or sell any Common Stock (other than Exempt Securities) for a
consideration per share less than the Class G Conversion Price then in
effect, or shall issue or sell any options, warrants or other rights
(including, without limitation, securities convertible into or exercisable
for Common Stock) for the purchase or acquisition of such shares (other
than Exempt Securities) at a consideration per share of less than the
Class G Conversion Price then in effect, the Class G Conversion Price
shall be reduced to an amount equal to the per share consideration payable
to the Corporation in such sale or issuance. The consideration per share
payable to the Corporation in a sale or issuance of options, warrants or
other rights for the purchase or acquisition of shares of Common Stock
shall be determined by dividing: (A) the total amount, if any, received or
receivable by the Corporation as consideration for the sale of issue of
such options, warrants or other rights, plus the minimum aggregate amount
of additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the Corporation
upon the exercise of such options, warrants or other rights or conversion
or exercise of such other rights, by (B) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such options, warrants or other
rights or conversion or exercise of such other rights. In case any portion
of the consideration to be received by the Corporation shall be in a form
other than cash, the fair market value of such non-cash consideration, as
determined in good faith by the Board of Directors of the Corporation,
shall be utilized to determine the consideration per share.
If any options, warrants or other purchase rights that are taken into
account in any such adjustment of the Class G Conversion Price
subsequently expire without exercise, the Class G Conversion Price shall
be readjusted as if such options, warrants or other purchase rights had
not been issued. If the Class G Conversion Price is adjusted as the result
of the issuance of any options, warrants or other purchase rights, no
further adjustment of the Class G Conversion Price shall be made at the
time of the exercise of such options, warrants or other purchase rights.
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(iv) In case the Corporation shall fix a record date for the
issuance on a pro rata basis of rights, options or warrants to the holders
of its Common Stock or other securities entitling such holders to
subscribe for or purchase shares of Common Stock (or securities
convertible into or exercisable or exchangeable for shares of Common
Stock) at a price per share of Common Stock (or having a conversion,
exercise or exchange price per share of Common Stock, in the case of a
security convertible into, or exercisable or exchangeable for, shares of
Common Stock) less than the Class G Conversion Price on such record date,
the maximum number of shares of Common Stock issuable upon exercise of
such rights, options or warrants (or conversion of such convertible
securities) shall be deemed to have been issued and outstanding as of such
record date and the Class G Conversion Price shall be adjusted pursuant to
Section 6(c)(ii) or Section 6(c)(iii), as the case may be, as though such
maximum number of shares of Common Stock had been so issued for an
aggregate consideration payable by the holders of such rights, options,
warrants or other securities prior to their receipt of such shares of
Common Stock. In case any portion of such consideration shall be in a form
other than cash, the fair market value of such non-cash consideration
shall be determined as set forth in Section 6(c)(ii) hereof. Such
adjustment shall be made successively whenever such record date is fixed;
and in the event that such rights, options or warrants are not so issued
or expire in whole or in part unexercised, or in the event of a change in
the number of shares of Common Stock to which the holders of such rights,
options or warrants are entitled (other than pursuant to adjustment
provisions therein comparable to those contained in this Section 6(c)),
the Class G Conversion Price shall again be adjusted as follows: (A) in
the event that all of such rights, options or warrants expire unexercised,
the Class G Conversion Price shall be the Class G Conversion Price that
would then be in effect if such record date had not been fixed; (B) in the
event that less than all of such rights, options or warrants expire
unexercised, the Class G Conversion Price shall be adjusted pursuant to
Section 6(c)(ii) or Section 6(c)(iii), as the case may be, to reflect the
maximum number of shares of Common Stock issuable upon exercise of such
rights, options or warrants that remain outstanding (without taking into
effect shares of Common Stock issuable upon exercise of rights, options or
warrants that have lapsed or expired); and (C) in the event of a change in
the number of shares of Common Stock to which the holders of such rights,
options or warrants are entitled (other than pursuant to adjustment
provisions therein comparable to those contained in this Section 6(c)),
the Class G Conversion Price shall be adjusted to reflect the Class G
Conversion Price which would then be in effect if such holder had
initially been entitled to such changed number of shares of Common Stock.
Notwithstanding anything herein to the contrary, no further adjustment to
the Class G Conversion Price shall be made upon the issuance or sale of
Common Stock upon the exercise of any rights, options or warrants to
subscribe for or purchase Common Stock, if any adjustment in the Class G
Conversion Price was made or required to be made upon the record date for
the issuance or sale of such rights, options or warrants under this
Section 6(c)(iv). Notwithstanding anything herein to the contrary, no
adjustment in the Class G Conversion Price shall be made under this
Section 6(c)(iv) to the extent
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the holders of Class G Preferred Stock participate in any such
distribution in accordance with Section 4 hereof.
(v) The anti-dilution provisions of this Section 6(c) may be
waived by the affirmative vote of the holders (acting together as a class)
of 67% or more of the then outstanding Class G Preferred Stock.
(d) NOTICE OF CLASS G CONVERSION PRICE ADJUSTMENT. Upon any
adjustment of the Class G Conversion Price, then and in each such case the
Corporation shall give written notice thereof, by first-class mail, postage
prepaid, addressed to the registered holders of Class G Preferred Stock at the
addresses of such holders as shown on the books of this Corporation, which
notice shall state the Class G Conversion Price resulting from such adjustment
and the increase or decrease, if any, in the number of shares receivable at such
price upon the conversion of Class G Preferred Stock, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(e) NOTICE OF CERTAIN EVENTS. In case any time:
(i) the Corporation shall pay any dividend payable in stock
upon Common Stock or make any distribution (other than regular cash
dividends) to the holders of Common Stock; or
(ii) the Corporation shall offer for subscription pro rata to
the holders of Common Stock any additional shares of stock of any class or
other rights; or
(iii) there shall be any capital reorganization,
reclassification of the capital stock of the Corporation, or consolidation
or merger of the Corporation with, or sale of all or substantially all of
its assets to another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give written
notice, by first-class mail, postage prepaid, addressed to the holders of Class
G Preferred Stock at the addresses of such holders as shown on the books of the
Corporation, of the date on which (A) the books of the Corporation shall close
or a record shall be taken for such dividend, distribution or subscription
rights, or (B) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case may
be. Such notice also shall specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be. Such written notice shall be given at least thirty (30) days prior to
the action in question and not less than thirty (30) days
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prior to the record date or the date on which the Corporation's transfer books
are closed in respect thereto.
(f) FRACTIONAL SHARES. In connection with the conversion of any
shares of Class G Preferred Stock, no fractions of shares of Common Stock shall
be issued to the holder of such shares of Class G Preferred Stock, but in lieu
thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Class G Conversion Price per share of Common Stock on the business day next
preceding the business day on which such shares of Class G Preferred Stock are
deemed to have been converted.
(g) RESERVATION OF SHARES.
(i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such number of
its authorized but unissued shares of Common Stock as shall be required
for the purpose of effecting conversions of the Class G Preferred Stock.
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the Class G
Preferred Stock, the Corporation shall comply with all applicable federal
and state laws and regulations which require action to be taken by the
Corporation.
(h) TRANSFER TAXES. The Corporation will pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on conversion of the Class G
Preferred Stock pursuant hereto; provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock in a name other than that of
the holder of the Class G Preferred Stock to be converted and no such issue or
delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
7. OPTIONAL REDEMPTION AT THE ELECTION OF THE HOLDERS OF CLASS G
PREFERRED STOCK.
(a) ELECTION.
(i) At any time after February 21, 2009, upon the
affirmative vote or written consent of the holders of 66 2/3% of the
outstanding shares of Class G Preferred Stock, the Corporation shall be
required to redeem all of the outstanding shares of Class G Preferred
Stock and the holders of all outstanding shares of Class G Preferred Stock
shall be required to have such shares redeemed (a "Mandatory Redemption").
The holders of Class G Preferred Stock shall deliver to the
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Corporation written notice of such affirmative vote or written consent
(the "Redemption Notice").
(ii) Within five business days after receiving the Redemption
Notice, the Corporation shall send a copy of such Redemption Notice to all
other holders of record of the Class G Preferred Stock. Upon receipt of
the Redemption Notice, the Board shall within thirty (30) days specify a
date on which the redemption of such shares provided herein shall take
place (the "Redemption Date"), which shall be no less than forty-five (45)
days and no more than ninety (90) days after receipt of the Redemption
Notice.
(b) OPTIONAL REDEMPTION PRICE. The redemption price for each share
of the Class G Preferred Stock shall be an amount equal to $11.12 (subject to
appropriate adjustment from time to time to reflect stock splits, dividends,
recapitalizations, combinations or the like) plus an amount equal to all
declared but unpaid dividends, if any, payable with respect to such share (the
"Optional Redemption Price").
(c) NOTIFICATION. At least fifteen (15) days prior to the
Redemption Date, the Corporation shall mail written notice by first class mail,
postage prepaid, to each holder of record of the Class G Preferred Stock, at its
address last shown on the records of the Corporation, notifying such holder of
such redemption, specifying the Redemption Date, the Optional Redemption Price
and the date on which such holder's conversion rights as to such shares
terminate and calling upon such holder to surrender to the Corporation, in the
manner and at the place designated, his, or its certificate or certificates
representing the shares to be redeemed (such notice, the "Closing Notice").
(d) SURRENDER AND PAYMENT. On or prior to the Redemption Date,
each holder of shares of Class G Preferred Stock shall surrender its certificate
or certificates representing such shares to the Corporation, in the manner and
at the place designated in the Closing Notice, and thereupon the Optional
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. The Optional Redemption Price
due to each holder shall be payable, from any source of funds legally available
therefor, by delivery on the Redemption Date of a certified or bank cashier's
check in an amount equal to the aggregate Optional Redemption Price due to such
holder. From and after the date a holder of shares of the Class G Preferred
Stock has received payment in full by receipt of cash, all rights of such holder
with respect to such Class G Preferred Stock so redeemed shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever.
(e) INSUFFICIENT FUNDS. If, on any Redemption Date, funds of the
Corporation legally available therefor shall be insufficient to redeem all of
the shares of Class G Preferred Stock required to be redeemed, funds to the
extent legally available shall be used to redeem the maximum possible number of
such shares ratably on the basis of the
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relative value of such shares based on the Optional Redemption Prices of such
shares on such date if the funds of the Corporation legally available therefore
had been sufficient to redeem all shares required to be redeemed on such date.
Thereafter, the Corporation shall use its best efforts to obtain sufficient
funds to redeem the balance of such shares. When additional funds of the
Corporation become legally available for the redemption of the balance of such
shares, such additional funds will be used to redeem at the Optional Redemption
Price (together with interest at the annual rate of 9%) the balance of the
shares which the Corporation was therefore obligated to redeem, ratably on the
basis set forth in the preceding sentence. Notwithstanding anything herein to
the contrary, if the Optional Redemption Price is not paid when due, all powers,
preferences, rights, qualifications, limitations and restrictions (including,
without limitation, dividend rights, conversion rights, and liquidation
preferences, and voting rights) with respect to shares surrendered for
redemption, but not actually redeemed, shall continue until the Optional
Redemption Price is paid in full.
(f) REISSUE. Any shares of Class G Preferred Stock redeemed
pursuant to this Section 7 shall permanently be retired, shall no longer be
deemed outstanding and shall not under any circumstances be reissued as Class G
Preferred Stock, but shall instead have the status of authorized Open Term
Preferred Stock, as defined in the Corporation's Restated Articles of
Incorporation.
8. OPTIONAL REDEMPTION AT THE ELECTION OF THE CORPORATION.
(a) ELECTION. At any time and from time to time after February 21,
2009, to the extent the Corporation shall have funds legally available for such
payment, and subject to the rights of the holders pursuant to Section 6 hereof,
the Corporation shall have the right to purchase and redeem all or any portion
of the then outstanding shares of Class G Preferred Stock. The Board of
Directors shall specify a Redemption Date, which shall be not less than thirty
(30) days nor more than sixty (60) days from the date the Corporation shall mail
a Closing Notice to the holders of Class G Preferred Stock.
(b) MANDATORY REDEMPTION PRICE. The redemption price for each
share of the Class G Preferred Stock shall be an amount equal to $22.24 (subject
to appropriate adjustment from time to time to reflect stock splits, dividends,
recapitalizations, combinations or the like) plus an amount equal to all
declared but unpaid dividends, if any, payable with respect to such share (the
"Mandatory Redemption Price").
(c) SURRENDER AND PAYMENT. On or prior to the Redemption Date,
each holder of shares of Class G Preferred Stock to be redeemed shall surrender
its certificate or certificate representing such shares to the Corporation, in
the manner and at the place designated in the Closing Notice, and thereupon the
Mandatory Redemption Price of such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be canceled. The Mandatory
Redemption Price due to each holder shall be payable, from any source of funds
legally available therefor, by delivery on the Redemption Date of a certified or
bank cashier's check in an amount equal to the aggregate Mandatory Redemption
Price due to
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such holder. From and after the date a holder of shares of the Class G Preferred
Stock has received payment in full by receipt of cash, all rights of such holder
with respect to such Class G Preferred Stock so redeemed shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever.
(d) PARTIAL REDEMPTION. In the event of a redemption of less than
all of the outstanding shares of Class G Preferred Stock pursuant to the first
paragraph of this Section 8, redemption as among the holders of such shares of
Class G Preferred Stock shall be on a pro rata basis.
(e) REISSUE. Any shares of Class G Preferred Stock redeemed
pursuant to this Section 8 shall permanently be retired, shall no longer be
deemed outstanding and shall not under any circumstances be reissued as Class G
Preferred Stock, but shall instead have the status of authorized Open Term
Preferred Stock, as defined in the Corporation's Restated Articles of
Incorporation.
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STATEMENT OF CANCELLATION
OF THE STATEMENT FIXING THE RIGHTS AND PREFERENCES
OF THE CLASS F CONVERTIBLE PREFERRED STOCK
OF
CAPELLA EDUCATION COMPANY
The undersigned officer of Capella Education Company (the "Company")
hereby certifies that:
1. The name of the Company is Capella Education Company.
2. The Company's Board of Directors has directed that the statement
fixing the rights and preferences of the Company's Class F Convertible Preferred
Stock be canceled pursuant to Section 302A.133 of the Minnesota Statutes.
3. There are currently no shares of Class F Convertible Preferred Stock
outstanding.
4. The 1,425,457 shares formerly designated as Class F Convertible
Preferred Stock shall have the status of authorized but unissued, undesignated
preferred shares.
5. After giving effect to the cancellation, the Company shall be
authorized to issue shares in the amount and class as follows:
15,000,000 Common Stock
3,000,000 Class A Convertible Preferred Stock
1,180,000 Class B Convertible Preferred Stock
1,022,222 Class D Convertible Preferred Stock
2,596,491 Class E Convertible Preferred Stock
2,184,550 Class G Convertible Preferred Stock
2,961,808 preferred shares (undesignated as to class or
series)
IN WITNESS WHEREOF, the undersigned has executed this statement of
cancellation this 19th day of February, 2003.
CAPELLA EDUCATION COMPANY
By: /s/ Paul Schroeder
------------------------------------
Its:Senior Vice President and
Chief Financial Officer