SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MINDLEADERS.COM, INC.
FIRST: The name of the corporation shall be MindLeaders.com, Inc.
SECOND: The place in Ohio where the principal office of the
corporation is to be located is in the City of Columbus, County of Franklin.
THIRD: The purpose for which the corporation is formed is to engage
in any lawful act or activity for which corporations may be formed under
Sections 1701.01 to 1701.98 of the Ohio Revised Code.
FOURTH: The authorized number of shares of the corporation is 70,000
shares, of which 60,731 shares are designated common stock, no par value (the
"Common Stock"), 5,123 shares are designated senior convertible preferred stock,
no par value (the "Senior Preferred Stock"), 2,979 shares are designated Series
B Convertible Preferred Stock, no par value (the "Series B Preferred Stock"),
1,167 shares are designated Series C Convertible Preferred Stock (the "Series C
Preferred Stock") (the Senior Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock are hereafter sometimes referred to collectively as the
"Preferred Stock"). Such shares of Common Stock and Preferred Stock may be
issued either as whole shares or as fractional shares in an amount not less than
one one-hundredth of a whole share.
(A) COMMON STOCK. The holders of Common Stock shall be entitled
to one vote per share on each matter submitted to a vote of the
shareholders and, except as required by law or as provided in
paragraph (B)(1) of this Article FOURTH, the shares of Common Stock
shall vote as a single class with the shares of Preferred Stock on all
such matters. The Common Stock shall not have any stated capital.
(B) PREFERRED STOCK. Each series of Preferred Stock shall rank
pari passu with each other series of Preferred Stock. The Preferred
Stock shall rank ahead of any junior securities, including the Common
Stock. The holders of the Preferred Stock shall be entitled to
rights, preferences, powers and privileges as follows:
(1) VOTING RIGHTS. Each holder of Preferred Stock shall be
entitled to the number of votes on each matter submitted to a vote of
the shareholders equal to the number of shares of Common Stock into
which the Preferred Stock held by such holder could be converted on
the record date fixed for the vote of shareholders and, except as
required by law, the shares of Preferred
Stock shall vote as a single class of stock with the shares of Common Stock
on all matters submitted to a vote of the holders of the Common Stock;
provided, however, that upon the occurrence of an event of default and an
election by the holders of a majority of the shares of Preferred Stock then
outstanding, the holders of Preferred Stock shall be entitled to elect a
majority of the Board of Directors of the corporation and to vote
two-thirds (2/3rds) of the combined voting power of the corporation until
the event of default is cured, all as provided in that certain Series C
Convertible Preferred Stock Purchase Agreement by and among the
corporation, River Cities Capital Fund II Limited Partnership, JG Funding,
LLC, Saunders Capital Group, LLC, Irving W. Bailey II and Carol A. Clark
(the "Series C Preferred Stock Purchase Agreement"). If any matter is
required by law to be submitted to a vote of the holders of Preferred Stock
as a separate class, such matter shall be determined by the affirmative
vote of a majority of the shares of Preferred Stock entitled to vote on
such matter.
(2) DIVIDENDS. The holders of record of the Preferred
Stock shall be entitled to receive dividends quarterly in arrears
beginning for the period commencing August 1, 1999 and ending July 31,
2000 at the rates specified below (adjusted for any stock dividends,
consolidations or splits with respect to such shares); provided,
however, that no dividends shall accrue or be payable with respect to
the Senior Preferred Stock prior to August 1, 1999, and with respect
to the Series B Preferred Stock and Series C Preferred Stock prior to
August 1, 2000:
12 Months Ending July 31, Annual Rate Quarterly Rate
------------------------- ----------- --------------
2000 4% 1.0%
2001 6% 1.5%
2002 8% 2.0%
2003 and thereafter 10% 2.5%
The annual dividend rate and quarterly dividend rate applicable
to each share of Preferred Stock shall be based on the purchase price
paid to the corporation at the time of the original issuance of the
share of Preferred Stock by the corporation ("Applicable Purchase
Price"). The Applicable Purchase Prices shall be $390.40 for each
share of Senior Preferred Stock, $1,007.09 for each share of Series B
Preferred Stock and $1,285.26 for each share of Series C Preferred
Stock (in each case, adjusted for any stock dividends, consolidations
or splits with respect to such shares).
Dividends may be paid on the Preferred Stock only from retained
earnings. Such dividends shall be fully payable in cash and shall be
payable quarterly in arrears on the last day of October, January,
April and July in each year to holders of record of the Preferred
Stock at the close of business on the last business day of the
preceding month. Such dividends shall be cumulative and dividends not
paid currently will accrue and compound quarterly at the rate of 10%
per annum
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regardless of the year in which such dividends were earned. If dividends
on the outstanding Preferred Stock shall not have been paid or declared and
set apart for payment, at the rate specified, for each past quarter-annual
dividend period, or payment of, or provision for the payment of, any
dividends thereon for the current quarter-annual dividend period shall not
have been made, dividends equal to the amount of such deficiency shall be
paid or declared and set apart for payment with respect to the Preferred
Stock before any dividends or other distributions with respect to the
Common Stock may be paid or declared and set apart for payment.
Except for any dividend paid to the holders of Common Stock
attributable to taxable income generated by the Company on or prior to
September 15, 1998, the holders of record of the Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of
Directors, any dividend or other distribution paid to the holders of
Common Stock in the amount which such holders of Preferred Stock would
have been entitled to receive if such Preferred Stock had been
converted to Common Stock immediately prior to the record date for the
determination of shareholders entitled to receive such dividend or
other distribution.
At the option of the Company, accrued dividends on the Preferred
Stock may be paid in Common Stock at the Conversion Price, as adjusted
pursuant to Section (4) below.
(3) LIQUIDATION PREFERENCE.
(a) In the event of any dissolution, liquidation or
winding up of the corporation or any Sale Transaction (as defined
below) which yields net proceeds to the holders of the Preferred Stock
of less than the Conversion Price, as adjusted (subject to adjustment
for stock dividends, splits and combinations) per fully diluted share
of Common Stock after payment or provision for payment of the debts
and other liabilities of the corporation (each a "Liquidation Event"),
each holder of a share of Preferred Stock shall be entitled, to the
extent of the remaining assets of the corporation legally available
for distribution, if any, and before any distribution is made upon any
other class of capital stock issued by the corporation, to be paid an
amount equal to the Applicable Purchase Price of such share of
Preferred Stock (as adjusted for stock dividends, splits and
combinations) held by such holder of Preferred Stock, together with an
amount equal to all accrued and unpaid dividends thereon to the date
of such payment. "Sale Transaction" means (i) a sale or transfer of
all or substantially all of the assets of the corporation and its
consolidated subsidiaries in any transaction or series of related
transactions (other than sales of inventory in the ordinary course of
business) or (ii) any merger, consolidation or reorganization to which
the corporation or a consolidated subsidiary thereof is a party,
except for a merger, consolidation or reorganization in which the
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corporation or such subsidiary is the surviving corporation and, after
giving effect to such merger, consolidation or reorganization, the
beneficial owners directly and indirectly of the corporation's outstanding
capital stock (on a fully-diluted basis) immediately prior to the merger,
consolidation or reorganization will beneficially own directly and
indirectly immediately following the merger, consolidation or
reorganization the corporation's outstanding capital stock (on a
fully-diluted basis) having a majority of the ordinary voting power to
elect the corporation's board of directors.
(b) After payment to the holders of the Preferred
Stock of the aggregate amount set forth in Section (3)(a) above (the
"Preferred Amount"), each holder of the Common Stock shall be
entitled, to the extent of the remaining assets of the corporation
legally available for distribution, if any, and before any further
distribution is made upon any other class of capital stock issued by
the corporation, to be paid an amount equal to such holder's pro rata
share of the Preferred Amount.
(c) After payment to the holders of the Preferred
Stock and the holders of the Common Stock of the amounts set forth in
Sections (3)(a) and (b) above, the entire remaining assets and funds
of the corporation legally available for distribution, if any, shall
be distributed among the holders of Preferred Stock and Common Stock
in proportion to the shares of Common Stock then held by them and
shares of Common Stock which they have the right to acquire upon
conversion of the Preferred Stock then held by them.
(d) Written notice of such Liquidation Event, stating
a payment date and the amount of the liquidation payment, shall be
given by mail, postage prepaid, not less than 30 days prior to the
date stated therein, to the holders of record of the Preferred Stock,
such notice to be addressed to each such holder at the address that
appears on the books of the corporation.
(4) CONVERSION.
(a) Any holder of Preferred Stock shall have the
right, at any time and from time to time, to convert all or any of
such Preferred Stock into fully-paid and nonassessable shares of
Common Stock of the corporation at the rate described in Section
(4)(b) below (an "Optional Conversion") and, upon the closing of a
Qualified IPO (as defined below), all outstanding shares of Preferred
Stock shall mandatorily and automatically (without any action by the
holders of the Preferred Stock) convert to shares of Common Stock of
the corporation at the rate described in Section (4)(b) (a "Mandatory
Conversion"). To the extent permitted by law, when a share of
Preferred Stock is converted into Common Stock, the holder of such
share of Preferred Stock so converted shall be immediately entitled to
an amount equal to all accrued and unpaid dividends
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thereon to the date of conversion and payment of such amount shall
accompany the certificate or certificates representing the Common Stock
issued upon such conversion.
(b) The number of shares of Common Stock into which a
share of Preferred Stock shall convert shall be determined by dividing
(i) the sum of the Applicable Purchase Price for such share of
Preferred Stock by (ii) the Conversion Price applicable to such share
in effect on the effective date of the conversion ("Conversion
Effective Date"). The "Conversion Price" per share at which shares of
Common Stock shall be issuable upon conversion of any shares of
Preferred Stock shall be equal initially to the Applicable Purchase
Price of such shares of Preferred Stock, subject to adjustment as
provided in Section (4)(d) below.
(c) To exercise an Optional Conversion right, a holder
of Preferred Stock shall surrender the certificates representing such
Preferred Stock at the principal office of the corporation or at such
other office of the corporation specified for such purpose together
with written notice to the corporation of the number of shares of
Preferred Stock which the holder elects to convert, and written
instructions regarding the registration and delivery of certificates
for the shares of Common Stock acquired thereby. On the date of the
closing of a Qualified IPO, each holder of Preferred Stock shall
surrender the certificates representing such Preferred Stock at the
principal office of the corporation or at such other place specified
by the corporation for such purpose and provide written instructions
regarding the registration and delivery of the certificates for the
shares of Common Stock acquired thereby. The person entitled to
receive Common Stock issuable upon conversion shall be deemed to have
become the holder of record of such Common Stock at the Conversion
Effective Date which shall be the close of business on the date, in
the case of an Optional Conversion, upon which the Optional Conversion
right is so exercised or, in the case of a Mandatory Conversion, upon
the date of the closing of the Qualified IPO. If, in the case of an
Optional Conversion, any certificate representing Preferred Stock
shall have been converted in part, the holder shall be entitled to a
new certificate representing the Preferred Stock not converted.
(d) The Conversion Price from time to time in effect
shall be subject to adjustment from time to time as follows:
(i) If, at any time after the issuance of the
Series C Preferred Stock and prior to March 15, 2000, the corporation
shall issue or sell any shares of its capital stock in a private
equity financing at a price per share less than the Conversion Price
then in effect for the Series C Preferred Stock, then in each such
case the applicable Conversion Price of the Series C
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Preferred Stock shall be decreased to equal the price per share at which
such capital stock was issued or sold.
(ii) If the corporation shall issue or sell
Common Stock at a price per share less than the applicable Conversion
Price, then in each such case the applicable Conversion Price shall be
reduced to an amount determined by multiplying the applicable
Conversion Price then in effect by a fraction:
(1) the numerator of which shall be (A)
the number of shares of Common Stock outstanding on a fully-diluted
basis immediately prior to the issuance of such additional shares of
Common Stock (including the total number of shares of Common Stock
available to be issued pursuant to the exercise of outstanding stock
options and pursuant to the conversion of Preferred Stock), plus (B)
the number of shares of Common Stock which the aggregate
consideration, if any, received by the corporation for the total
number of such additional shares of Common Stock so issued would
purchase at the Conversion Price; and
(2) the denominator of which shall be
(A) the number of shares of Common Stock outstanding on a
fully-diluted basis immediately prior to the issuance of such
additional shares of Common Stock (including the total number of
shares of Common Stock available to be issued pursuant to the exercise
of outstanding stock options and pursuant to the conversion of
Preferred Stock), plus (B) the number of such additional shares of
Common Stock so issued.
(iii) For the purpose of this Section (4)(d), the
issuance of any warrants, options, subscriptions, or purchase rights
with respect to Common Stock and the issuance of any securities
convertible into or exchangeable for Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible
or exchangeable securities) shall be deemed an issuance at such time
of such Common Stock at the Net Consideration Per Share (as
hereinafter defined) if such Net Consideration Per Share which may be
received by the corporation for such Common Stock shall be less than
the Conversion Price. Any obligation, agreement, or undertaking to
issue warrants, options, subscriptions, or purchase rights at any time
in the future shall be deemed to be an issuance at the time such
obligation, agreement or undertaking is made or arises. No adjustment
of the Conversion Price shall be made under this Section (4)(d) upon
the issuance of any Common Stock which is issued pursuant to the
exercise of any warrants, options, subscriptions, or purchase rights
or which is issued pursuant to the conversion or exchange of any
convertible or exchangeable securities (or the exercise of any such
warrants, options or rights with respect to such convertible or
exchangeable securities) if any adjustment shall previously
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have been made or deemed not required upon the issuance of any such
warrants, options, or subscription or purchase rights or upon the issuance
of any such convertible or exchangeable securities (or upon the issuance
of any warrants, options or rights with respect to such convertible or
exchangeable securities) as above provided. Notwithstanding anything to
the contrary contained in this Section (4)(d), no adjustment of the
Conversion Price of the Series C Preferred Stock shall be made under clause
(ii) as a result of any private equity financing for which an adjustment of
the Conversion Price of the Series C Preferred Stock shall be required
under clause (i).
Should the Net Consideration Per Share of any such
warrants, options, subscriptions, or purchase rights or convertible or
exchangeable securities be increased or decreased from time to time,
then, upon the effectiveness of each such change, the Conversion Price
shall be adjusted to such as would have been in effect had the
adjustments made upon the issuance of such warrants, options, rights
or convertible or exchangeable securities been made upon the basis of
the increased or decreased Net Consideration Per Share of such
securities, and any adjustments otherwise made to the Conversion Price
since the date of the issuance of such securities shall be
recalculated to reflect such adjustment. Any adjustment of the
Conversion Price with respect to this paragraph which relates to
warrants, options, subscriptions, purchase rights or convertible or
exchangeable securities with respect to Common Stock shall be
disregarded if, as, and when any such warrants, options,
subscriptions, purchase rights or convertible or exchangeable
securities expire or are canceled without being exercised, converted
or exchanged, so that the Conversion Price effective immediately upon
such cancellation or expiration shall be equal to the Conversion Price
that would have been in effect had the expired or canceled warrants,
options, subscriptions, purchase rights or convertible or exchangeable
securities not been issued and any adjustments otherwise made shall be
recalculated to reflect the cancellation of such adjustment.
For the purposes of this Section (4)(d), the "Net
Consideration Per Share" which may be received by the corporation
shall be determined as follows:
(1) The "Net Consideration Per Share"
shall mean the amount equal to the total amount of consideration, if
any, received by the corporation for the issuance of such warrants,
options, subscriptions or other purchase rights or convertible or
exchangeable securities, plus the amount of consideration, if any,
payable to the corporation upon exercise, conversion or exchange
thereof, divided by the aggregate number of shares of Common Stock
that would be issued if all such warrants, options, subscriptions, or
other purchase rights or convertible or exchangeable securities were
exercised, converted, or exchanged.
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(2) The "Net Consideration Per Share"
which may be received by the corporation shall initially be determined
in each instance as of the date of issuance of warrants, options,
subscriptions, or other purchase rights or convertible or exchangeable
securities without giving effect to any possible future upward or
downward price adjustments or rate adjustments which may be applicable
with respect to such warrants, options, subscriptions or other
purchase rights or convertible or exchangeable securities.
(iv) For purposes of this Section (4)(d), if
part or all of the consideration received by the corporation in
connection with the issuance of Common Stock or the issuance of any of
the securities described in this Section (4)(d) consists of property
other than cash, such consideration shall be deemed to have a fair
market value as reasonably determined in good faith by the Board of
Directors of the corporation.
(v) Notwithstanding anything to the contrary
contained herein, there shall be no adjustment of the Conversion Price
as a result of (1) the issuance of Common Stock upon the conversion of
Preferred Stock, (2) the issuance of Common Stock or the grant of
stock options to senior management, employees, non-employee directors
and other non-employees, such as consultants and independent
contractors, of the corporation, as permitted under Section 4 of the
Series C Preferred Stock Purchase Agreement, or (3) the issuance of
Common Stock upon exercise of the warrant for 292 shares of Common
Stock granted to the original purchaser of the Series C Preferred
Stock in connection with such purchase.
(vi) The foregoing provisions of this Section
(4)(d) shall not apply under any of the circumstances which would
constitute an Extraordinary Common Stock Event (as hereinafter
defined). Upon the happening of an Extraordinary Common Stock Event,
the Conversion Price shall, simultaneously with the happening of the
Extraordinary Common Stock Event, be proportionately increased or
decreased, as appropriate. The Conversion Price shall be adjusted in
the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (1)
the issuance of additional shares of Common Stock as a dividend or
other distribution on outstanding Common Stock or on any class or
series of convertible preferred stock, unless such distribution also
is made pro rata to holders of Preferred Stock, (2) a subdivision of
outstanding Common Stock into a greater number of shares of Common
Stock, or (3) a combination of outstanding Common Stock into a smaller
number of shares of Common Stock.
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(vii) Upon the happening of any event requiring
an adjustment or change in the Conversion Price, the corporation shall
forthwith give written notice thereof to the holders of the Preferred
Stock stating the adjusted number of shares of Common Stock or
securities or property receivable upon the conversion of the Preferred
Stock resulting from such event and setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is
based. The Board of Directors of the corporation shall determine in
good faith the computations made hereunder.
(viii) If the corporation does not effect a
Qualified IPO prior to July 1, 2000, the Conversion Price with respect
to the Series B Preferred Stock shall be automatically reduced to
$935.16 per share (adjusted for any stock dividends, consolidations or
splits with respect to such shares).
(ix) If the corporation does not effect a
Qualified IPO prior to August 31, 2004, the Conversion Price with
respect to the Series B Preferred Stock shall be automatically further
reduced to $701.37 per share (adjusted for any stock dividends,
consolidations or splits with respect to such shares).
(5) REDEMPTION.
(a) At any time during the period beginning September
1, 2003 and ending August 31, 2004, so long as there has not occurred
a closing of an initial public offering of the Common Stock which has
yielded net proceeds to the corporation of at least $30,000,000 at a
price per share indicating a total market equity capitalization (post
money) of at least $90,000,000 (a "Qualified IPO"), the holders of a
majority of the shares of Preferred Stock then outstanding may demand
the corporation to redeem all, but not less than all, of the shares of
Preferred Stock then outstanding and all, or a portion, of the shares
of Common Stock that the holders have acquired by conversion of
Preferred Stock (the "Converted Stock") at a price per share (the
"Redemption Price") equal to the greater of (i) the Applicable
Purchase Price for such share of Preferred Stock (as adjusted for any
stock dividends, consolidations or splits with respect to such shares)
or (ii) the fair market value for such share at the time of redemption
(taking into account the liquidation preference of the Preferred
Stock provided in Section (B)(3) above but not any discount for lack
of marketability or for the minority interest) as determined by a
qualified, independent appraiser experienced in valuation of shares of
companies similar to the corporation (the "Qualified Appraiser")
acceptable to both the corporation and the holders of a majority of
the shares of Preferred Stock then outstanding ("Fair Market Value").
If the holders of a majority of the shares of Preferred Stock then
outstanding so demand the redemption of the Preferred Stock, then all
holders of Preferred Stock (including those holders who did not join
in the demand) shall be obligated to have their
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shares of Preferred Stock redeemed by the corporation but each holder of
the Converted Stock shall have the right to decide whether such holder's
Converted Stock shall be redeemed by the corporation. If the holders of a
majority of the shares of Preferred Stock then outstanding and the
corporation are unable to agree upon a Qualified Appraiser, each of them
shall separately designate a person and those two persons shall jointly
designate a Qualified Appraiser. The Qualified Appraiser's determination
of the Fair Market Value of the Preferred Stock (and the Converted Stock)
shall be conclusive and binding upon the parties. The fees and expenses of
the Qualified Appraiser shall be borne one-half by the holders of Preferred
Stock to be redeemed and one-half by the corporation. At the redemption
closing, the corporation shall also pay to the holders of Preferred Stock
any accrued but unpaid dividends through the date of the redemption
closing. To exercise the redemption right, the holders of a majority of
the shares of the Preferred Stock then outstanding must give written notice
to the corporation 12 months prior to the proposed redemption closing,
which notice may be given any time after August 31, 2002. The redemption
closing shall take place at a time and place mutually agreed upon by the
parties on or before the 365th day after written notice of exercise of the
redemption is given to the corporation by the holder of Preferred Stock, or
if the parties shall not agree on the time and place, the redemption
closing shall take place at the principal office of the corporation in
Columbus, Ohio at 10:00 a.m. on the 365th day after written notice of
exercise is given, unless such day is a Saturday, Sunday or holiday, in
which case it shall occur on the next business day; provided, however, that
if subsequent to the date that notice of the redemption is given and prior
to the redemption closing, the corporation consummates a Qualified IPO,
merger or a sale of all or substantially all of its assets at a price per
share greater than the Redemption Price ("Interim Event"), then such
redemption closing shall take place upon the consummation of the Interim
Event.
(b) In addition to the obligation and rights of the
corporation to redeem the Preferred Stock pursuant to Section (5)(a)
above, the holders of the Preferred Stock also have certain
conditional rights of redemption pursuant to Section 12 of the Series
C Preferred Stock Purchase Agreement.
(6) LEGEND. The certificates representing the Preferred
Stock shall bear a legend evidencing the following restrictions on
transfer substantially in the following form:
'These shares have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or any
applicable state law. The shares have been acquired for
investment and may not be offered, sold or otherwise
transferred, pledged or hypothecated in the absence of (i)
an effective registration under the Securities Act and any
applicable state securities laws, or (ii) an opinion of
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counsel satisfactory to the corporation to the effect that such
registration is not required under the Securities Act and such
securities laws.'
(7) STATED CAPITAL. The stated capital of each share of Preferred
Stock shall initially be equal to its Applicable Purchase Price, but shall
be adjusted for stock dividends, splits and combinations. Notwithstanding
anything to the contrary contained in Section 1701.30 of the Ohio Revised
Code, and as permitted by Section 1701.31(D) of the Ohio Revised Code, upon
the conversion of a share of Preferred Stock into Common Stock, the stated
capital attributable to such share of Preferred Stock shall, without
further action, be eliminated and transferred to the capital surplus of the
corporation.
FIFTH: The directors of the corporation shall have the power to cause
the corporation from time to time and at any time to purchase, hold, sell,
transfer or otherwise deal with (A) shares of any class or series issued by it,
(B) any security or other obligation of the corporation which may confer upon
the holder thereof the right to convert the same into shares of any class or
series authorized by the articles of the corporation, and (C) any security or
other obligation which may confer upon the holder thereof the right to purchase
shares of any class or series authorized by the articles of the corporation.
The corporation shall have the right to repurchase, if and when any shareholder
desires to sell, or on the happening of any event is required to sell, shares of
any class or series issued by the corporation. The authority granted in this
ARTICLE FIFTH of these Amended Articles shall not limit the plenary authority of
the directors to purchase, hold, sell, transfer or otherwise deal with shares of
any class or series, securities, or other obligations issued by the corporation
or authorized by its articles.
SIXTH: No shareholder of the corporation shall have, as a matter of
right, the right to vote cumulatively in the election of directors.
SEVENTH: These Second Amended and Restated Articles of Incorporation take
the place of and supersede the Amended and Restated Articles of Incorporation,
as amended, of the corporation.
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