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Delaware
_______________________________
The First State
I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE RESTATED CERTIFICATE OF "ENGLISH LANGUAGE LEARNING
AND INSTRUCTION SYSTEM, INC.", FILED IN THIS OFFICE ON THE
SEVENTEENTH DAY OF MAY, A. D. 2002, AT 9 0'CLOCK A.M.
2706480 8100 <Delaware Seal appears here> /s/ Harriet Smith Windsor
040588473 -------------------------
Harriet Smith Windsor,
Secretary of State
AUTHENTICATION: 3289749
Date: 08-11-04
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 05/17/2002
020317687-2706480
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ENGLISH LANGUAGE LEARNING AND INSTRUCTION SYSTEM, INC.
a Delaware corporation
English Language Learning and Instruction System. Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "General Corporation Law"), hereby certifies as follows:
1. The name of this corporation is English Language Learning and
Instruction System, Inc. and the original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware (the "Secretary of
State") on January 17, 1997 (the original name of the corporation at that was
Lone Oak, Inc.); a certificate of merger affecting the corporation was filed
with the Secretary of State on June 1, 1998; a certificate of amendment was
filed with the Secretary of State on July 23, 1999; and certificate of
amendment changing the name of the corporation to "Politics.com, Inc.," was
filed with the Secretary of State on July 27, 1999; and a certificate of
amendment changing the name of the corporation to its present name was filed
with the Secretary of State on January 25, 2001; and a certificate of merger
was filed on September 17, 2001; and an amended and restated certificate of
incorporation was filed on September 21, 200l (as amended, the "Amended and
Restated Certificate of Incorporation").
2. This Second Amended and Restated Certificate of Incorporation set
forth below was duly adopted in accordance with the provisions of Sections 242
and 245 of the General Corporation Law and has been consented to in writing by
the stockholders, and written notice has been given, in accordance with
Section 228 of the General Corporation Law. This Second Amended and Restated
Certificate of Incorporation restates and integrates and further amends the
provisions of the Amended and Restated Certificate of Incorporation of this
corporation.
3. The text of the Amended and Restated Certificate of Incorporation
of this corporation is hereby amended and restated in its entirety to read as
follows:
ARTICLE I
The name of this corporation is English Language Learning and
Instruction System. Inc.
ARTICLE II
The address of the registered office of this corporation in the State
of Delaware is Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, DE 19808. The name of its registered agent at such address is
Corporation Service Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by
this corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
ARTICLE IV
This corporation is authorized to issue two classes of stock. to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares that this corporation is authorized to issue is 70,000,000.
with a par value of $0.00001 per share. The number of shares of Common Stock
authorized to be issued is 50,000,000. The number of shares of Preferred
Stock authorized to be issued is 20,000,000, of which 1,000,000 shares shall
be designated "Series A Preferred Stock" and 1,000,000 shares shall be
designated "Series B Preferred Stock." The Board of Directors, by resolution,
may fix the designation and number of shares of any series, and may determine,
alter, or revoke the rights, preferences, privileges or restrictions
pertaining to any wholly unissued series, subject to Section 5 of this Article
IV. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations
and restrictions stated in this Amended and Restated Certificate of
Incorporation, to fix the rights, preferences, privi1eges and restrictions
granted to or imposed upon any wholly unissued series of Preferred Stock, and
the number of shares constituting any such series and the designation thereof,
or any of them; and to increase or decrease the number of shares of any series
prior or subsequent to the issue of shares of that series, but not below the
number of shares of such series then outstanding.
This corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion of the Series A
Preferred Stock and the Series B Preferred Stock.
The relative rights, preferences, privileges and restrictions granted to
or imposed upon the respective classes and series of shares of capital stock
or the holders thereof are as set forth below.
1. Dividends.
(a) (I) The holders of the then outstanding shares of Series A
Preferred Stock shall rank pari passu with the holders of Series B Preferred
Stock and shall be entitled to receive prior, and in preference to, the
holders of any other class or series of capital stock of the Company
(including other series or classes of Preferred Stock), dividends (the "Series
A Dividend") at a rate of twelve percent (12%) per year, compounded annually,
of the Series A Preferred Original Issue Price (as defined below) out of
assets of this corporation legally available for distribution (I) payable upon
conversion of the Series A Preferred Stock into shares of Common Stock, (ii)
mandatorily payable upon a Liquidation Event, or (iii) when, as and if
declared by the Board of Directors.
(ii) The holders of the then outstanding shares of Series B
Preferred Stock shall rank pari passu with the holders of Series A Preferred
Stock and shall be entitled to receive prior, and in preference to, the
holders of any other class or series of capital stock of the Company
(including other series or classes of Preferred Stock), dividends (the "Series
B Dividend") at a rate of twelve percent (12%) per year, compounded annually,
of the Series B Preferred Original Issue Price (as defined below) out of
assets of this corporation legally available for distribution (I) payable upon
conversion of the Series B Preferred Stock into shares of Common Stock, (ii)
mandatorily payable upon a Liquidation Event, or (iii) when, as and if
declared by the Board of Directors. The right to dividends on shares of the
Series A Preferred Stock and the Series B Preferred Stock shall be cumulative,
and such dividends shall begin to accrue on the date such shares are issued
and outstanding and shall accrue regardless of whether there are profits,
surplus or other funds of this corporation legally available for payment of
dividends.
(b) At the election of the majority of the holders of Series A
Preferred Stock, the Series A Dividend may be paid in cash, in shares of
Common Stock or in a combination of cash and shares of Common Stock; provided,
that no fractional share of Common Stock shall be issued in payment of any
portion of the Series A Dividend. At the election of the majority of the
holders of Series B Preferred Stock, the Series B Dividend may be paid in cash
in shares of Common Stock or in a combination of cash and shares of Common
Stock; provided that no fractional share of Common Stock shall be issued in
payment of any portion of the Series B Dividend. If the holders of Series A
Preferred Stock or the holders of Series B Preferred Stock elect to receive
all or any portion of their respective dividends in shares of Common Stock,
such shares shall be valued based on the Average Closing Price as of the date
on which the Board authorizes issuance of such shares.
"Average Closing Price" shall mean, as of any particular date:
(I) if the Common Stock. is then traded on a securities exchange
(specifically including the NASDAQ National Market), the average of the
closing prices of the Common Stock on such securities exchange over the thirty
(30) trading days ending three (3) trading days prior to such date, as
reported in The Wall Street Journal Eastern Edition listing for each such day
(corrected for obvious typographical errors);
(ii) if the Common Stock is then traded over-the-counter, the
average of the closing bid or sale prices (whichever are applicable) over the
thirty (30) trading days ending three (3) trading days prior to such date as
reported in The Wall Street Journal Eastern Edition listing for each such day
(corrected for obvious typographical errors); and
(iii) if there is no active public market for the Common Stock,
the value shall be the fair market value thereof, as determined in good faith
by the Board of Directors.
) In addition to the dividend rights set forth in paragraphs l(a)
and l(b) above, each holder of then outstanding shares of each Series A
Preferred Stock and Series B Preferred Stock shall be entitled to share
ratably with the holders of Common Stock in all dividends or other
distributions declared and paid on the Common Stock, other than those payable
solely in shares of Common Stock (which shall have the effects described in
Section 3(e)(iii)(1)), on the basis that such holder held, on the record date
for such dividend or distribution, the number of shares of Common Stock into
which such holder's shares would have been convertible on such date upon
exercise of the Conversion Rights described in Section 3.
2. Liquidation Preference.
(a) Upon the occurrence of any (I) liquidation, Deemed Liquidation
(as defined in Section 2(d) below) dissolution or winding up of this
corporation, whether voluntary or involuntary
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(any of the foregoing including a Deemed Liquidation being a "Liquidation
Event"), the holders of Series A Preferred Stock shall be entitled to receive,
prior and in preference to any distribution of any of the assets or funds of
this corporation to the ho1ders of the Common Stock by reason of their
ownership thereof, an amount per share equal to $3.00 for each outstanding
shares of Series A Preferred Stock (appropriately adjusted in each case for
any recapitalizations, stock combinations, stock dividends, stock splits and
the like) (the "Series A Preferred Original Issue Price") plus an amount equal
to all accrued but unpaid dividends on the Series A Preferred Stock held by
them (collectively, with the Series A Preferred Original Issue Price, the
"Series A Preferred Liquidation Amount"). Upon the occurrence of any (I)
Liquidation, Deemed Liquidation (as defined in Section 2(d) below) dissolution
or winding up of this corporation, whether voluntary or involuntary (any of
the foregoing including a Deemed Liquidation being a "Liquidation Event"), the
holders of Series B Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or funds of this
corporation to the holders of the Common Stock by reason of their ownership
thereof, an amount per share equal to $1.75 for each outstanding share of
Series B Preferred Stock (appropriately adjusted in each case for any
recapitalizations, stock combinations, stock dividends, stock splits and the
like) (the "Series B Preferred Original Issue Price") plus an amount equal to
all accrued but unpaid dividends on the Series B Preferred Stock held by them
(collectively with the Series B Preferred Original Issue Price, the "Series B
Preferred Liquidation Amount"). If upon the occurrence of a Liquidation Event,
the assets and funds of this corporation legally available for distribution to
stockholders by reason of their ownership of the stock of this corporation
shall be insufficient to permit the payment to such holders of Series A
Preferred Stock and Series B Preferred Stock of the full Series A Preferred
Liquidation Amount and the full Series B Preferred Liquidation Amount as
applicable, then the entire assets and funds of this corporation legally
available for distribution to holders of Series A Preferred Stock and Series B
Preferred Stock shall be distributed ratably among the holders of the Series A
Preferred Stock and the holders of the Series B Preferred Stock in proportion
to the Series A Preferred Liquidation Amount and the Series B Preferred
Liquidation Amount each holder is otherwise entitled to receive.
(b) Upon a Deemed Liquidation (as defined below), a majority of then
outstanding shares of Series A Preferred Stock may, in lieu of receiving the
Series A Preferred Liquidation Amount elect to convert their shares of Series
A Preferred Stock into Common Stock and receive the consideration and other
securities and property provided for under the terms of the Deemed Liquidation
pro rata along with all other holders of Common Stock. Upon a Deemed
Liquidation (as defined below), a majority of then outstanding shares of
Series B Preferred Stock may, in lieu of receiving the Series B Preferred
Liquidation Amount elect to convert their shares of Series B Preferred Stock
into Common Stock and receive the consideration and other securities and
property provided for under the terms of the Deemed Liquidation pro rata along
with all other holders of Common Stock.
) After payment in full has been made to the holders of the Series A
Preferred Stock and the Series B Preferred Stock of the full amounts to which
they shall be entitled as provided in Sections 2(a) or 2(b), the entire
remaining assets and funds of this corporation legally available for
distribution to stockholders, if any, shall be distributed among the holders
of the Common Stock in proportion to the number of shares of Common Stock held
by them. Shares of Series A Preferred Stock and Series B Preferred Stock shall
be entitled to be converted into shares of Common Stock in order to
participate in any distribution as shares of Common Stock.
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(d) A consolidation or merger of this corporation with or into any
other corporation or other entity, or a sale, lease, conveyance or other
disposition (whether in one transaction or a series of related transactions)
of all or substantially all of the assets of this corporation, or the
effectuation by this corporation of any other transaction or series of related
transactions, in each such case (other than the sale, lease or other
disposition of an or substantially all of the assets) as a result of which the
owners of this corporation's outstanding voting securities immediately prior
thereto do not own at least a majority of the outstanding voting securities of
the surviving, resulting or consolidated entity (each such event(s) being a
"Deemed Liquidation"), shall be deemed to be a liquidation, dissolution or
winding up of this corporation.
(e) If any of the assets of this corporation are to be distributed
under this Section 2, or for any purpose (other than the ordinary course of
business), in a form other than cash, then the Board of Directors shall
promptly and reasonably determine in good faith the fair market value of the
assets to be distributed to the holders of Series A Preferred Stock, Series B
Preferred Stock or Common Stock.
Any securities shall be valued as follows:
(I) Securities not subject to restrictions on free marketability
covered by (ii) below shall be valued in accordance with Sections
1(b)(i)-(iii):
(ii) The method of valuation of securities subject to restrictions
on free marketability (other than restrictions arising solely by virtue of a
shareholder's status as an affiliate or former affiliate) shall be to make
appropriate discount from the market value determined in (I) above to reflect
the approximate fair market value thereof, as determined by the Board of
Directors. This corporation shall, upon receipt of such determination, give
prompt written notice of the determination to each holder of shares of Series
A Preferred Stock, Series B Preferred Stock or Common Stock.
3. Conversion. The holders of the Series A Preferred Stock and Series B
Preferred Stock shal1 have conversion rights as follows (the "Conversion
Rights"):
(a) Right to Convert - Series A Preferred Stock and Series B
Preferred. Each share of Series A Preferred Stock shall be convertible, at
the option of the holder thereof, at any time after the date of issuance of
such share, at the office of this corporation or any transfer agent for such
series of Series A Preferred Stock, into such number of fully paid and
non-assessable shares of Common Stock as is determined by dividing the Series
A Preferred Original Issue Price by the Series A Conversion Price (as
hereinafter defined) at the time in effect for a share of such series of
Series A Preferred Stock (the "Series A Conversion Rate"). The Series A
Preferred Original Issue Price per share of Series A Preferred Stock is $3.00.
The Conversion Price per share of Series A Preferred Stock initially shall be
$3.00 (the "Series A Conversion Price"), subject to adjustment from time to
time as provided below. Each share of Series B Preferred Stock shall be
convertible at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of this corporation or any transfer
agent for such series of Series B Preferred Stock, into such number of fully
paid and non-assessable shares of Common Stock as is determined by dividing
the Series B Preferred Original Issue Price by the Series B Conversion Price
(as hereinafter defined) at the time in effect for a share of such series of
Series B Preferred Stock (the "Series B Conversion Rate"). The Series B
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Preferred Original Issue Price per share of Series B Preferred Stock is $1.75.
The Conversion Price per share of Series B Preferred Stock initially shall be
$1.75 (the "Series B Conversion Price"), subject to adjustment from time to
time as provided below.
(b) Series A Mandatory Conversion. At any time after one year from
the date the Series A Preferred is issued, the corporation may force each
share of Series A Preferred Stock to be automatically converted into shares of
Common Stock at the Series A Conversion Rate at the time in effect for such
series of Series A Preferred Stock, so long as the corporation has filed and
maintained a "shelf" registration pursuant to Ru1e 415 of the Securities Act
of 1933, as amended (the "Act"), and such "shelf" registration is then
currently effective; and one of the following two conditions has been
satisfied:
(I) The average closing price (as determined by Section l(b)(I)
above) of the Common Stock for the preceding forty-five (45) trading days
exceeds $8.00 per share; or
(ii) The corporation completes an underwritten public offering
with proceeds to the Company in excess of $15 million.
) Series B Mandatory Conversion. At any time after one year from the
date the Series B Preferred is issued, the corporation may force each share of
Series B Preferred Stock to be automatically converted into shares of Common
Stock at the Series B Conversion Rate at the time in effect for such series of
Series B Preferred Stock, so long as the corporation has filed and maintained
a "shelf" registration pursuant to Rule 415 of the Act, and such "shelf"
registration is then currently effective; and one of the following two
conditions has been satisfied:
(I) The average closing price (as determined by Section 1(b)(I)
above) of the Common Stock for the preceding forty-five (45) trading days
exceeds $8.00 per share; or
(ii) The corporation completes an underwritten public offering
with proceeds to the Company in excess of $15 million.
(d) Mechanics of Conversion. Before any holder of Series A Preferred
Stock or Series B Preferred Stock shall be entitled to convert the same into
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for such Series A Preferred Stock or Series B Preferred
Stock and shall give written notice by mail, postage prepaid, to this
corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate of
certificates for shares of Common Stock are to be issued.
(e) Fractional Shares. In lieu of any fractional shares to which the
holder of the Series A Preferred Stock or the Series B Preferred Stock would
otherwise be entitled, this corporation shall pay cash equal to such fraction
multiplied by the Average Closing Price of one share of Common Stock as
determined in accordance with Section 1(b) above. Whether or not fractional
shares are issuab1e upon such conversion shall be determined on the basis of
the total number of shares of Series A Preferred Stock or Series B Preferred
Stock of each holder at the time converting into Common Stock and the number
of shares of Common Stock issuable upon such aggregate Conversion.
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(f) Adjustment of Conversion Price. The Conversion Price of the Series
A Preferred Stock and the Series B Preferred Stock shall be subject to
adjustment from time to time as follows:
(I) Special Definitions. For purposes of this section 3(e), the
following definitions shall apply:
(1) "Options" shall mean rights, notes, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(2) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities convertible into or exchangeable for
Common Stock.
(3) "Additional Shares of Common" shall mean all shares of
Common Stock issued (or, pursuant to Section 3(e)(iii), deemed to be issued)
by this corporation after the Original Issue Date, other than shares of Common
Stock issued or issuable:
(A) to officers, directors or employees of, or consu1tants
to, this corporation or its subsidiaries pursuant to that certain 2000 Stock
Plan approved by the Board of Directors on or about the Original Issue Date
(the "Stock Plan");
(B) upon conversion of shares of the Series A Preferred
Stock or the Series B Preferred Stock;
) as a dividend or other distribution on the Series A
Preferred Stock or the Series B Preferred Stock (so long as on a pro rata
basis to all holders of such Series);
(D) in a transaction described in Section 3(e)(iii).
(4) "Series A Original Issue Date" shall mean the date on which
the first share of Series A Preferred Stock was issued; "Series B Original
Issue Date" shall mean the date on which the first shares of Series B
Preferred Stock was issued.
(ii) No Adjustment of Conversion Price. Any provision herein to
the contrary notwithstanding, no adjustment in the Series A Conversion Price
or the Series B Conversion Price of a particular share of Series A Preferred
Stock or Series B Preferred Stock shall be made in respect of the issuance of
Additional Shares of Common unless the consideration per share (determined
pursuant to Section 3(e) hereof) for an Additional Share of Common issued or
deemed to be issued by this corporation is less than the Series A Conversion
Price or the Series B Conversion Price as the case may be, in effect on the
date of, and immediately prior to, such issue, for such share of Series A
Preferred Stock or Series B Preferred Stock, as the case may be.
(iii) Deemed Issue of Additional Shares of Common. In the event
this corporation at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the instrument relating thereto without regard to any
provisions contained
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therein designed to protect against dilution) of Common Stock issuable upon
the exercise of such Options or, in the case of Convertible Securities and
Options therefore, the exercise of such Options and conversion or exchange of
such Convertible Securities, shall be deemed to be Additiona1 Share of Common
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close. of business on such record date; provided,
however, that Additional Shares of Common shall not be deemed to have been
issued unless the consideration per share (determined pursuant to Section 3(e)
hereof) of such Additional Shares of Common would be less than the Series A
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be; and provided further that in any such
case in which Additional Shares of Common are deemed to be issued:
(1) no further adjustment in the Series A Conversion Price or
the Series B Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase of decrease
in the consideration payable to this corporation, or increase or decrease in
the number of shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof, the Series A Conversion Price or the Series B Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming effective be
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities; provided, however, that no adjustment of the Series A Conversion
Price or the Series B Conversion Price or shares of Series A Preferred Stock
or Series B Preferred Stock shall affect Common Stock previously issued upon
conversion of Series A Preferred Stock or Series B Preferred Stock;
(3) upon the expiration of any each Options or any rights of
conversion or exchange under such Convertible Securities which shall not have
been exercised, the Series A Conversion Price and the Series B Conversion
Price computed upon the original issue thereof or upon the occurrence of a
record date with respect thereto, and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed (provided that no such
recomputation shall affect Common Stock previously Issued upon conversion of
Series A Preferred Stock or Series B Preferred Stock) as if:
(A) in the case of Convertible Securities or Options for
Common Stock, the only Additional Shares of Common issued were the shares of
Common Stock, if any, actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, and the consideration
received therefor was the consideration actually received by this corporation
for the issue of all such Options, whether or not exercised, plus the
consideration actually received by this corporation upon such exercise, or for
the issue of all such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually received by
this corporation upon such conversion or exchange; and
(B) in the case of Options for Convertib1e Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of
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issue of such Options, and the consideration received by this corporation for
the Additional Shares of Common deemed to have been then issued was the
consideration actually received by this corporation for the issue of all such
Options, whether or not exercised, plus the consideration deemed to have been
received by this corporation (determined pursuant to Section 3(e)) upon the
issue of the Convertible Securities with respect to which such Options were
actually exercised: and
(4) no readjustment pursuant to clause (2) or (3) above or (iv)
below shall have the effect of increasing the Series A Conversion Price or the
Series B Conversion Price to an amount which exceeds the lower of (1) the
Series A Conversion Price or the Series B Conversion Price, as applicable, on
the original adjustment date, or (2) the Series A Conversion Price or the
Series B Conversion Price as applicable, that would have resulted from any
issuance of Additional Shares of Common between the original adjustment date
and such readjustment date;
(iv) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common. In the event this corporation shall issue Additional Shares
of Common (including Additional Shares of Common deemed to be issued pursuant
to Section 3(e)(iii)) without consideration or for a consideration per share
less than the Series A Conversion Price in effect on the date of and
immediately prior to such issue, then and in each such event, such Series A
Conversion Price shall be reduced, concurrently with such issue, to the lowest
price pet share at which any such Additional Shares of Common are issued. In
the event this corporation shall issue Additional Shares of Common (including
Additional Shares of Common deemed to be issued pursuant to Section
3(e)(iii))without consideration or for a consideration per share less than the
Series B Conversion Price in effect on the date of and immediately prior to
such issue, then and in each such event, such Series B Conversion Price shall
be reduced, concurrently with such issue, to the lowest price per share at
which any such Additional Shares of Common are issued.
(g) Determination of Consideration. For purposes of this Section
3(e), the consideration received by this corporation for the issue of any
Additional Shares of Common shall be computed as follows;
(I) Cash and Property. Such consideration shall:
(1) insofar as it consists of cash, be computed at the
aggregate amount of cash received by this corporation after deducting any
commissions paid by this corporation with respect to such issuance and
excluding amounts paid or payab1e for accrued interest or accrued dividends;
(2) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, as determined in
the good faith by the Board of Directors; and
(3) in the event Additional Shares of Common are issued
(or, pursuant to Section 3(e)(iii), deemed to be issued) together with other
shares or securities or other assets of this corporation for consideration
which covers both. be the proportion of such consideration so received,
computed, as provided in clauses (A) and (B) above, as determined in good
faith by the Board of Directors.
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(ii) Options and Convertib1e Securities. The consideration per
share received by this corporation for Additional Shares of Common deemed to
have been issued pursuant to Section 3(e)(iii), relating to Options and
Convertible Securities, shall equal the quotient determined by dividing:
(1) the total amount, if any, received or receivable by
this corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) payable to this
corporation upon the exercise of such Options or me conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(2) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained designed to protect against dilution) issuable upon the exercise of
such Options or the conversion or exchange of such Convertible Securities.
(iii) Other Adjustments to Conversion Price. The Series A
Conversion Price and the Series B Conversion Price shall also be subject to
adjustment from time to time as follows:
(1) Adjustments for Subdivisions or Combinations of Common
Stock. In the event the outstanding shares of Common Stock shall be subdivided
by stock split stock dividend, reclassification or otherwise, into a greater
number of shares of Common Stock or this corporation declares a dividend
payable in any right to acquire Common Stock for no consideration, the Series
A Conversion Price and the Series B Conversion Price immediately prior to such
event shall concurrently with the effectiveness of such subdivision, be
proportionately decreased. In the event the outstanding shares of Common Stock
shall be combined or consolidated by reclassification or otherwise into a
lesser number of shares of Common Stock and the Series A Conversion Price and
the Series B Conversion Price then in effect shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(2) Adjustments for Stock: Dividends and Other
Distributions. In the event this corporation makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution (excluding repurchases of securities by this corporation not made
on a pro rata basis) payable in property or in securities of this corporation
other than shares of Common Stock, and other than as otherwise adjusted for in
this Section 3 or as provided in Section 1 in connection with a dividend, then
and in each such event the holders of the Series A Preferred Stock and the
Series B Preferred Stock shall receive, at the time of such distribution, the
amount of property or the number of securities of this corporation that they
would have received had their Series A Preferred Stock and Series B Preferred
Stock been converted into Common Stock on the date of such event.
(3) Adjustments for Reorganizations, Reclassifications or
Similar Events. If the Common Stock shall be changed into the same or a
different number of shares of any other class or classes of stocks, whether by
capital reorganization, reclassification or otherwise
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(other than a subdivision or combination of shares provided for in subsections
(1) or (2) above, or a Change of Control referred to in Section 2 ) above)
then the Series A Conversion Price and the Series B Conversion Price then in
effect shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted so that each share of Series A
Preferred Stock and Series B Preferred Stock shall thereafter be convertible
into the number of shares of such other class or classes of stock or the
number of shares of Common Stock of this corporation deliverable upon
conversion of such share of Series A Preferred Stock and Series B Preferred
Stock immediately before such reorganization, reclassification or other event.
(iv) Miscellaneous.
(1) All calculations under this Section 3(e) shall be made
to the nearest cent or to the nearest one hundredth (1/100) of a share, as the
case may be.
(2) No adjustment in the Series A Conversion Price or the
Series B Conversion Price need be made if such adjustment would result in a
change in such Series A Conversion Price or Series B Conversion Price, as
applicable, of less than $0.01. Any adjustment of less than $0.01 which is not
made sba1l be carried forward and shall be made at the time of and together
with any subsequent adjustment which, on a cumulative basis, amounts to an
adjustment of $0.01 or more in such Series A Conversion Price or Series B
Conversion Price, as applicable.
(h) No Impairment. This corporation will not, by amendment of
this Second Amended and Restated Certificate of Incorporation or through any
organization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by this corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 3
and in the taking of all such actions as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of Series A Preferred
Stock and Series B Preferred Stock against impairment.
(I) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price or Series B
Conversion Price pursuant to this Section 3, this corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each bolder of Series A Preferred
Stock and Series B Preferred Stock, a certificate executed by this
corporation's President or Chief Executive Officer setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This corporation shall, upon the written
request at any time of any bolder of Series A Preferred Stock or Series B
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the Series
A Conversion Price or Series B Conversion Price (as the case may be) at the
time in effect, and ) the number of shares of Common Stock and the amount, if
any, of other property that at the time would be received upon the conversion
of such holder's Series A Preferred Stock or Series B Preferred Stock (as the
case may be).
(j) Notices of Record Date. In the event that this corporation
shall propose at any time:
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(I) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights; or
(iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock;
then, in connection with each such event, this corporation
shall send to the holders of the Series A Preferred Stock and Series B
Preferred Stock (1) at least twenty (20) days' prior written notice of the
date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which holders of Common Stock
shall be entitled thereto) or for determining rights to vote in respect of the
matters referred to in (iii) above; (2) in the case of the matters referred to
in (iii) above, at least twenty (20) days' prior written notice of the date
when the same shall take place (and specifying the date on which the holders
of Common Stock shall be entitled to change their Common Stock for securities
or other property deliverable upon the occurrence of such event).
(k) Issue Taxes. This corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares
of Common Stock on conversion of Series A Preferred Stock pursuant hereto
provided, however, that this corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
(l) Reservation of Stock Issuable Upon Conversion. This
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the shares of the Series A Preferred Stock and the
Series B Preferred Stock such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series A Preferred Stock and Series B Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of
the Series A Preferred Stock and Series B Preferred Stock, in addition to such
other remedies as shall be available to the holder of such Series A Preferred
Stock and Series B Preferred Stock, this corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
(m) Notices. Any notice required by the provisions of this Section
3 to be given to the holders of shares of Series A Preferred Stock or Series B
Preferred Stock shall be deemed given if delivered by confirmed facsimile or
e1ectronic transmission (with duplicate original sent by United States mail)
or three business days after such notice is deposited in the United States
certified mail (return receipt requested), postage prepaid, and addressed
correctly to each holder of record at his address or facsimile number
appearing on the books of this corporation
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4. Voting Rights. The stockholders of this corporation shall have
voting rights as follows:
(a) Except as otherwise required by law or as otherwise set forth
herein, each holder of Common Stock sha11 have one vote for each share of
Common Stock so held, each holder of Series A Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which the shares of Series A Preferred Stock so held could be converted
at the record date for determination of the stockholders entitled to vote, or,
if no inch record date is established at the date such vote is taken or any
written consent of stockholders is solicited, and each holder of Series B
Preferred Stock shall be entitled to the number of votes equal to the number
of shares of Common Stock into which the shares of Series B Preferred Stock so
held could be converted at the record date for determination of the
stockholders entitled to vote, or, if no such record date is established, at
the date such vote is taken or any written consent of stockholders is
solicited. Except as required by law or as otherwise set forth herein, all
shares of Series A Preferred Stock, all shares of Series B Preferred Stock and
all shares of Common Stock shall vote together as a single class on all
matters to come before the stockholders of this corporation.
(b) The holders of Series A Preferred Stock and Series B Preferred
Stock, voting together as a single class, shall be entitled to elect one of
this corporation's seven (7) Directors (the "Preferred Stock Director"). The
Preferred Stock Director shall be elected at the annual meeting or at any
special meeting of holders of Series A Preferred Stock and Series B Preferred
Stock called by holders of 10% or more of the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, or by the written consent of
such holder. If a person elected by the holders of Series A Preferred Stock
should cease to be a director for any reason, the vacancy shall only be filled
by the vote of a majority or written consent of the outstanding shares of
Series A Preferred Stock and Series B Preferred Stock.
5. Preferred Stock Protective Provisions. This corporation shall not,
without first obtaining the approval (by vote or written consent, as provided
by law) of at least 66.67% of the then outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, voting together as a single
class (except as required by law), on an as-converted basis;
(I) alter or change the rights, preferences or privileges of
the Series A Preferred Stock or the Series B Preferred Stock;
(ii) increase or decrease the authorized number of shares of
Common Stock, Series A Preferred Stock or Series B Preferred Stock;
(iii) authorize, designate, create or issue or obligate itself
to issue, through reclassification or otherwise, any new class or series of
stock or any other securities convertible into equity securities of this
corporation with rights, preferences or privileges senior to, or on parity
with, those of the Series A Preferred Stock or the Series B Preferred Stock,
or issue a number of shares of Series A Preferred Stock in excess of
1,000,000, or of Series B Preferred Stock in excess of 1,000,000;
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(iv) redeem, purchase, or otherwise acquire(or pay into or set
aside for a sinking fund for such purpose) any of the equity securities of
this corporation (including Options and Convertible Securities and Series A
Preferred, Stock and Series B Preferred Stock);
(v) amend or repeal any provision of, or add any provision to,
this corporation's Amended and Restated Certificate of Incorporation or Bylaws
if such action would change adversely the preferences, rights, privileges or
powers of, or restrictions provided for the benefit of, the Series A Preferred
Stock or the Series B Preferred Stock;
(vi) take any action that would be a deemed Liquidation with
net proceeds to holder of the Series A Preferred Stock less than the Series A
Preferred Liquidation Amount or a Deemed Liquidation with net proceeds to
holders of the Series B Preferred Stock less than the Series B Preferred
Liquidation Amount;
(vii) consent to any voluntary dissolution, recapitalization,
liquidation or winding up of the corporation;
(viii) pay or declare any dividends;
(ix) increase the number of shares of capital stock of this
corporation issued or reserved for issuance to officers, directors, or
employees of, or consultants to, this corporation pursuant to the 2000 Stock
Plan;
(x) increase the size of the Board of Directors to more than
seven (7) members;
(xi) materially change the nature of the corporation's
business;
(xii) incur indebtedness or guarantee the debt of another
person or entity such that this Corporation's aggregate debt (including,
without limitation, guaranteed debt) exceeds $5,000,000; or
(xiii) take any action that results in any corporation
expenditure or commitment (including but not limited to debt repayments,
acquisitions, and joint ventures) in excess of $5,000,000 to the extent that
such expenditure or commitment has not been previously approved by this
corporation' s Board of Directors, including the Preferred Stock Director.
6. No Restriction of Preferred Stock. No share or shares of Series A
Preferred Stock or Series B Preferred Stock, acquired by this corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and
all such shares shall be cancelled, retired and eliminated from the shares
which this corporation shall be authorized to issue.
ARTICLE V
To the fullest extent permitted by the General Corporation Law as the
same exists or as may hereafter be amended, a director of this corporation
shall not be personally liable to this corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
This Corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the
fact that he, his testator or intestate is or was a director or officer of
this corporation or any predecessor of this corporation or serves or served at
any other enterprise as a director, officer or employee at the request of this
corporation or any predecessor to this corporation.
Neither any amendment nor repeal of this Article V, nor the adoption of
any provision of this Second Amended and Restated Certificate of Incorporation
inconsistent with this Article V, shall eliminate or reduce the effect of this
Article V, in respect of any matter occurring, or any cause of action, suit,
claim or proceeding that, but for this Article V, would accrue or arise, prior
to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE VI
This corporation reserves the right to amend, alter, change or repeal
any provision contained in this Second Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute or this
Second Amended and Restated Certificate of Incorporation, and subject to the
rights, preferences and privileges granted herein to the stockholders of this
corporation. The number of shares of Common Stock may be increased or
decreased (but not below the number of shares then outstanding) by an
affirmative vote of the holders of a majority of the voting stock of this
corporation, voting on an as converted basis, subject to provisions of Article
IV, Section 5.
ARTICLE VII
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repea1
the Bylaws of this corporation, subject to the provisions of Article IV,
Section 5.
ARTICLE VIII
The number of directors which constitute the whole Board of Directors of
this corporation shall be as specified in the Bylaws of this corporation.
ARTICLE IX
Elections of directors need not be by written ballot unless the Bylaws
of this corporation shall so provide.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of this corporation.
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ARTICLE XI
This corporation is to have perpetual existence.
***
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I hereby declare and certify under penalty of perjury under the laws of
the State of Delaware that the facts set forth in the foregoing certificate
are true and correct of my own knowledge and that this certificate is my act
and deed.
IN WITNESS WHEREOF, this second amendment and restated Certificate of
Incorporation has been signed by the sole director of this corporation this
16th day of May, 2002.
/s/ Timothy Otto
-------------------------
Name: Timothy D. Otto
Office: President and CEO
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