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EXHIBIT 10.39
STOCK PURCHASE AGREEMENT
THE LIGHTSPAN PARTNERSHIP, INC.
JANUARY 11, 2000
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TABLE OF CONTENTS
PAGE
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1. PURCHASE AND SALE OF STOCK........................................................... 1
1.1 Sale and Issuance of Common Stock............................................. 1
1.2 Closing....................................................................... 1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................ 2
2.1 Organization, Good Standing and Qualification................................. 2
2.2 Capitalization................................................................ 2
2.3 Subsidiaries.................................................................. 3
2.4 Authorization................................................................. 3
2.5 Valid Issuance of Common Stock................................................ 3
2.6 Governmental Consents......................................................... 4
2.7 Litigation.................................................................... 4
2.8 Employees..................................................................... 4
2.9 Intellectual Property......................................................... 5
2.10 Compliance with Law and Other Instruments..................................... 5
2.11 Permits....................................................................... 6
2.12 Environmental and Safety Laws................................................. 6
2.13 Disclosure.................................................................... 6
2.14 Registration Rights........................................................... 6
2.15 Title to Property and Assets.................................................. 6
2.16 Financial Statements.......................................................... 7
2.17 Outstanding Indebtedness; Material Liabilities................................ 7
2.18 Agreements; Action............................................................ 8
2.19 Tax Returns and Audits........................................................ 9
2.20 Insurance..................................................................... 9
2.21 Shareholder Agreements........................................................ 9
2.22 Certain Transactions.......................................................... 9
2.23 Brokers or Finders............................................................ 9
2.24 Corporate Documents........................................................... 9
2.25 Other......................................................................... 10
2.26 Qualified Small Business...................................................... 10
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TABLE OF CONTENTS
(CONTINUED)
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2.27 Year 2000.................................................................... 10
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR...................................... 10
3.1 Accredited Investor.......................................................... 10
3.2 Experience................................................................... 10
3.3 Investment................................................................... 10
3.4 Rule 144..................................................................... 10
3.5 Access to Data............................................................... 11
3.6 Authorization................................................................ 11
3.7 Principal Address............................................................ 11
3.8 Legends...................................................................... 11
3.9 No Assurances................................................................ 11
3A. PRE CLOSING COVENANTS OF COMPANY.................................................... 11
3A.1 Reincorporation.............................................................. 11
3A.2 Post-IPO Capitalization...................................................... 12
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING..................................... 12
4.1 Representations and Warranties............................................... 12
4.2 Performance.................................................................. 12
4.3 Blue Sky..................................................................... 12
4.4 Proceedings and Documents.................................................... 12
4.5 Reincorporation.............................................................. 12
4.6 Capitalization............................................................... 12
4.7 Form S-1..................................................................... 12
4.8 Compliance Certificate....................................................... 12
4.9 Legal Opinion................................................................ 13
4.10 Board of Directors........................................................... 13
4.11 Warrant...................................................................... 13
4.12 Claims....................................................................... 13
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.................................. 13
5.1 Representations and Warranties............................................... 13
5.2 Blue Sky..................................................................... 13
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TABLE OF CONTENTS
(CONTINUED)
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5.3 Proceedings and Documents.................................................... 13
5.4 Form S-1..................................................................... 13
5.5 Compliance Certificate....................................................... 13
6. TERMINATION......................................................................... 13
7. MISCELLANEOUS....................................................................... 14
7.1 Governing Law................................................................ 14
7.2 Survival..................................................................... 14
7.3 Successors and Assigns....................................................... 14
7.4 Entire Agreement; Amendment.................................................. 14
7.5 Notices, Etc................................................................. 14
7.6 Delays or Omissions.......................................................... 14
7.7 Expenses..................................................................... 15
7.8 Finder's Fee................................................................. 15
7.9 Counterparts................................................................. 15
7.10 Severability................................................................. 15
7.11 Closing Conditions........................................................... 15
7.12 Market Standoff.............................................................. 15
7.13 Board of Directors........................................................... 16
7.14 Registration Rights.......................................................... 16
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THE LIGHTSPAN PARTNERSHIP, INC.
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is made as of January 11, 2000, by and among
THE LIGHTSPAN PARTNERSHIP, INC., a California corporation ("LIGHTSPAN
CALIFORNIA"), THE LIGHTSPAN PARTNERSHIP, INC., a Delaware corporation
wholly-owned by Lightspan California ("LIGHTSPAN DELAWARE"), each with its
principal office at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, and
▇▇▇ COMMUNICATIONS HOLDINGS, INC., a Delaware corporation (the "Investor.") As
used herein the term "COMPANY" shall refer to Lightspan California before the
reincorporation of Lightspan California into Delaware (the "REINCORPORATION")
and to Lightspan Delaware after the Reincorporation.
RECITALS
WHEREAS, the Company desires to sell and issue, and the Investor desires
to purchase shares of the common stock of the Company (the "SHARES") for an
aggregate purchase price of $12,500,000 in a private placement concurrent with
an initial public offering of the common stock of the Company pursuant to an
effective registration statement on Form S-1 (the "REGISTRATION STATEMENT")
under the Securities Act of 1933, as amended, covering the offer and sale of
shares of the Company's common stock (the "IPO"), at a price per share equal to
the price per share paid by purchasers in such IPO; and
WHEREAS, the company desires to grant, and the Investor desires to acquire
a warrant to purchase 750,000 shares (on a post-split basis, assuming a 1:2
reverse stock split) of the Company's common stock (the "WARRANT"), which
Warrant shall be exercisable upon the satisfaction of the conditions and
otherwise subject to terms specified therein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, at the Closing (as defined below) the Company
shall issue to the Investor and the Investor shall purchase from the Company in
a private placement that number of shares of the Company's common stock (rounded
to the nearest whole share) equal to $12,500,000 divided by the per share price
at which the common stock is offered to the public in the IPO, at a price per
share equal to the price per share at which the common stock is offered to the
public in the IPO;
1.2 CLOSING. The closing of the purchase and sale of the Shares
shall take place at the offices of ▇▇▇▇▇▇ Godward LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, on the closing date of the IPO (such time and
place are referred to herein as the "CLOSING"). At the Closing, the Company
shall deliver to the Investor a certificate or certificates representing the
Shares against payment of the purchase price therefor by check or wire transfer.
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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedule of Exceptions provided to the investor
contemporaneously with the execution hereof, the Company hereby represents and
warrants as follows:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the
Company and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the State of California or the
laws or the State of Delaware, as appropriate, and has all requisite corporate
power and authority to own and operate its properties and assets, to execute and
deliver this Agreement, to issue and sell the Shares, to carry out the
provisions of this Agreement and to carry on its business as currently conducted
and as it is currently planned to be conducted. Each of the Company and each of
its subsidiaries is duly qualified to transact business and is in good standing
in each jurisdiction in which the failure to so qualify would have a material
adverse effect on its business or properties. True and accurate copies of the
Company's Articles of Incorporation and Bylaws, each as amended and in effect at
the Closing, have been attached hereto as EXHIBIT A and EXHIBIT B, respectively.
2.2 CAPITALIZATION. As of the date hereof, the authorized capital
stock of Lightspan California consists of Eighty-Seven Million (87,000,000)
shares of common stock, of which Nine Million Four Hundred Fifty-Four Thousand
Five Hundred Forty-Two (9,454,542) shares are issued and outstanding on the date
of this Agreement and Sixty-One Million Seven Hundred Ninety-Five Thousand
Seventy-Four (61,795,074) shares of Preferred Stock, which are designated as
follows: (i) 7,617,500 shares of Series A Preferred Stock, 7,467,500 of which
are issued and outstanding, (ii) 11,816,664 shares of Series B Preferred Stock,
11,666,664 of which are issued and outstanding, (iii) 3,360,910 shares of Series
C Preferred, 3,264,285 of which are issued and outstanding, (iv) 17,000,000
shares of Series D Preferred, 13,129,443 of which are issued and outstanding and
(v) 22,000,000 shares of Series E Preferred, 16,703,023 of which are issued and
outstanding. All such issued and outstanding shares have been duly authorized
and validly issued and are fully paid and non-assessable. Lightspan California
has reserved 9,780,544 shares of its common stock for issuance under Lightspan
California's 1993 Stock Option Plan (the "1993 OPTION PLAN") to employees,
officers, directors and consultants of Lightspan California as may be determined
by Lightspan California's Board of Directors from time to time, of which options
to purchase 7,513,503 shares are presently outstanding and options to purchase
442,764 are presently available for grants. The Board of Directors of Lightspan
California has approved an amendment to the 1993 Option Plan, which will become
effective concurrently with the IPO, that, among other things, (i) changes the
name of the plan to the 2000 Equity Incentive Plan and (ii) increases the number
of shares reserved for issuance by an additional 2,500,000 shares. Lightspan
California has reserved 526,808 shares of its common stock for issuance under
Lightspan California's 1992 Stock Option Plan (the "1992 OPTION PLAN") to
employees, officers, directors and consultants of Lightspan California as may be
determined by Lightspan California's Board of Directors from time to time, of
which options to purchase 503,728 shares are presently outstanding and options
to purchase no shares are presently available for grants. There are no other
outstanding rights, options, warrants, preemptive rights, rights of first
refusal or similar rights for the purchase or acquisition from Lightspan
California (or any of its subsidiaries) of any securities of Lightspan Delaware
(or any of its subsidiaries) nor are there any commitments to issue or execute
any such rights, options,
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warrants, preemptive rights or rights of first refusal. All outstanding shares
have been issued in compliance with state and federal securities laws. The fully
diluted capitalization of Lightspan California as of the date hereof is as set
forth in EXHIBIT C. Except as specifically set forth in the several stock
purchase agreements pursuant to which Lightspan California has issued and sold
shares of its preferred stock and which are listed on EXHIBIT D (copies of which
have been provided to or made available to Investor), the Agreement and Plan of
Reorganization dated as of May 10, 1999 by and between Lightspan California and
Academic Systems Corporation, this Agreement, Lightspan California's Certificate
of Amendment of Restated Articles of Incorporation and Amended and Restated
Articles of Incorporation, the Amended Investor Rights Agreement by and among
certain investors and Lightspan California dated as of October 29, 1999 (the
"INVESTOR RIGHTS AGREEMENT"), the Voting Agreement among certain investors and
Lightspan California dated as of February 7, 1995 (the "SERIES B VOTING
AGREEMENT"), the Voting Agreement among certain investors and Lightspan
California dated as of September 20, 1996 (the "SERIES C VOTING AGREEMENT") and
the Voting Agreement among certain investors and Lightspan California dated as
of June 24, 1997 (the "SERIES D VOTING AGREEMENT"), there are no agreements,
understandings or other arrangements existing between Lightspan California, on
the one hand, and any investor or any other holder of Lightspan California's
preferred stock, on the other hand, governing the rights or privileges of any
such investor or any such holder in respect of its equity interests in Lightspan
California. As of Closing, the Series B, C, and D Voting Agreement shall be
terminated and all sections of the Investor Rights Agreement (other than
registration rights provisions of Section 1) shall terminate.
2.3 SUBSIDIARIES. Except as set forth on Schedule 2.3, the Company
does not presently own or control, directly or indirectly, any interest in any
other corporation, association, or other business entity. The entities listed on
Schedule 2.3 are wholly owned by the Company. The Company is not a participant
in any joint venture, partnership, or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder, and the authorization, issuance (or reservation for
issuance), sale and delivery of the Shares being sold hereunder has been taken
and this Agreement constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms, subject to: (i) judicial
principles limiting the availability of specific performance, injunctive relief,
and other equitable remedies; (ii) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect generally relating
to or affecting creditors' rights; and (iii) limitations on the enforceability
of any relevant indemnification provisions.
2.5 VALID ISSUANCE OF COMMON STOCK. The Shares, when issued, sold
and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, will be free of any liens or encumbrances, will not be subject to
any preemptive rights or rights of first refusal and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement and under applicable state and federal securities laws. Except as set
forth in Schedule 2.5, and except for any rights or arrangements that shall have
been terminated prior to the Closing, no stock plan, stock purchase, stock
option or other agreement or understanding between the Company and any holder of
any equity securities or rights to purchase equity securities provides for
acceleration or
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other changes in the vesting provisions or other terms of such agreement or
understanding (including drag-along and tag-along rights) as the result of any
merger, consolidated sale of stock or assets, change in control or any other
transaction(s) by the Company.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the offer, sale or issuance of the
Shares, the execution of this Agreement or the consummation of any other
transaction contemplated hereby, except for the following: (i) the completion of
the Reincorporation, which shall be completed by the Company prior to the
Closing; and (ii) the compliance with applicable state securities laws, which
compliance will have occurred within the appropriate time periods therefor.
Assuming the accuracy of the representations of the Investor set forth in
Section 3 below, the offer, sale and issuance of the Shares in conformity with
the terms of this Agreement are exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended (the "SECURITIES ACT"), and
from the qualification requirements of Section 25110 of the California
Securities Law.
2.7 LITIGATION. Except as set forth on Schedule 2.7, there is no
action, suit, proceeding or investigation pending or, to the best of the
Company's knowledge, currently threatened before any arbitrator, court,
administrative agency or other governmental body (nor, to best of the Company's
knowledge, is there any basis for any such action, suit, proceeding or
investigation). The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or threatened (or any basis therefor known
to the Company) involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers or the
issuance of securities by the Company or the breach of any agreement made by the
Company relating to the issuance of such securities. Neither the Company nor any
of its subsidiaries is a party or subject to, and none of the assets of the
Company or any of its subsidiaries is bound by, the provisions of any order,
writ, injunction, judgment or decree of any arbitrator, court or government
agency or instrumentality.
2.8 EMPLOYEES. Each founder of the Company and each employee of the
Company who has access to the Company's confidential or proprietary information
has executed a proprietary information agreement, in substantially the form that
will be delivered to the Investor upon request. No officer or key employee is in
violation of any prior employee contract or proprietary information or
noncompetition agreement. Each holder of Common Stock of the Company has entered
into a Restricted Stock Purchase Agreement in the form delivered to the
Investor. The Company is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
agreement or arrangement with any collective bargaining agent, other than the
1993 Stock Option Plan and the 1992 Stock Option Plan. No employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement. There is no pending or, to the best of the Company's
knowledge, threatened labor dispute involving the Company and any group of its
employees. The Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate his, her or their employment
with the Company, nor does the Company have
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a present intention to terminate the employment of any officer, key employee or
group of key employees.
2.9 INTELLECTUAL PROPERTY. The Company has good title and ownership
of all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, proprietary rights and processes necessary for
its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. There are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. To the best knowledge of the Company,
the Company has not violated and, by conducting its business as proposed, will
not violate any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity nor have any claims been asserted, threatened or pending regarding any
such alleged violation. None of the Company's employees are obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor the
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will conflict with or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any contract, covenant or instrument under
which any of such employees is now obligated. The Company does not, and does not
intend to, utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company. None
of the Company's current employees is, by virtue of such employee's activities
in connection with the Company's business, violating, infringing or
appropriating any patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights or processes of any
former employer of such employee. All consultants of the Company with access to
material confidential information of the Company are parties to a written
agreement pursuant to which, among other things, each such consultant is
obligated to maintain the confidentiality of confidential information of the
Company. The Company is not aware that any of its consultants are in violation
thereof, and the Company will use best efforts to prevent any such violation.
2.10 COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. Neither the Company
nor any of its subsidiaries is in violation or default of any provision of its
Articles of Incorporation, Certificate of Incorporation, as appropriate, or
Bylaws, each as amended and in effect on and as of the Closing. To the Company's
knowledge, except as set forth in Schedule 2.10, neither the Company nor any of
its subsidiaries are in violation in any material respect of any material
statute, rule, regulation, order or restriction of any state, local or federal
government or any instrumentality or agency thereof in respect of the conduct of
its business or the ownership of its properties. Neither the Company nor any of
its subsidiaries is in material violation or default of any provision of any
instrument, mortgage, deed of trust, loan, contract, commitment, judgment,
decree, order or obligation to which it is a party or by which it or any of its
properties or assets are bound which would materially adversely affect the
condition (financial or otherwise), business, property, assets or liabilities of
the Company or any of its
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subsidiaries. The execution, delivery and performance of and compliance with
this Agreement, and the issuance and sale of the Shares, will not result in any
such violation, be in conflict with or constitute, with or without the passage
of time or giving of notice, a default under any such provision, require any
consent or waiver under any such provision (other than any consents or waivers
that have been obtained), or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company
or any of its subsidiaries pursuant to any such provision.
2.11 PERMITS. The Company and each of its subsidiaries have all
franchises, permits, licenses, and any similar authority necessary for the
conduct of their respective businesses as presently being conducted, the lack of
which could materially and adversely affect the business, properties, prospects,
or financial condition of the Company and its subsidiaries, taken as a whole,
and the Company believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses, or other similar authority.
2.12 ENVIRONMENTAL AND SAFETY LAWS. To the best of the Company's
knowledge, neither the Company nor any of its subsidiaries is in violation, or
has engaged in activities that would result in a violation, of any applicable
statute, law or regulation relating to the environment or occupational health
and safety, and to the best of the Company's knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation. There has been no complaint, notice of violation, investigation
or report received by the Company or its subsidiaries relating to any alleged
violation of any such applicable statute, law or regulation and there is no such
complaint, notice of violation, investigation or report pending or threatened.
2.13 DISCLOSURE. No representation, warranty or statement by the
Company in this Agreement, or in any written statement, exhibit or certificate
furnished to the Investor pursuant to this Agreement or the transactions
contemplated hereby, contains any untrue statement of a material fact or, when
taken together, omits to state a material fact necessary to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading.
2.14 REGISTRATION RIGHTS. Except as provided in the Investor Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.15 TITLE TO PROPERTY AND ASSETS. The Company and each of its
subsidiaries have good and marketable title to all of their properties and
assets free and clear of all mortgages, liens and encumbrances, except liens for
current taxes and assessments not yet due and possible minor liens and
encumbrances which do not, in any case, in the aggregate, materially detract
from the value of the property subject thereto or materially impair the
operations of the Company or any of its subsidiaries. With respect to the
property and assets they lease, the Company and each of its subsidiaries are in
compliance with such leases and hold a valid leasehold interest free of all
liens, claims or encumbrances. The Company's properties and assets are in good
condition
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and repair in all material respects. Neither the Company nor any of its
subsidiaries owns any real property.
2.16 FINANCIAL STATEMENTS. The Company has delivered or made
available to the Investor its audited balance sheet at January 31, 1999, and its
audited statement of operations for the fiscal period then ended (the "AUDITED
FINANCIAL STATEMENTS"), and its unaudited balance sheet at October 31, 1999 and
its unaudited statement of operations for the fiscal period then ended (the
"UNAUDITED FINANCIAL STATEMENTS," and, together with the Audited Financial
Statements, the "FINANCIAL STATEMENTS"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated (except that the Unaudited
Financial Statements do not contain footnotes). The Financial Statements fairly
and accurately present the consolidated financial condition of the Company as of
the date of the balance sheet, and the statements of operations contained
therein accurately present the operating results of the Company during the
period indicated therein. Since October 31, 1999, there has been no (i) material
adverse change in the assets, liabilities, condition (financial or otherwise),
result of operations or business of the Company, (ii) damage, destruction or
loss to any material asset of the Company or any of its subsidiaries (whether or
not covered by insurance), (iii) sale, waiver or other disposition of any
rights, debt owed to it, title or interest in or to any asset or property of the
Company or any subsidiary or any revenues derived therefrom, other than in the
ordinary course of business consistent with past practice, (iv) approval or
action to put in effect any increase in the compensation or benefits payable to
any class or group of employees of the Company or any subsidiary or any increase
in the compensation or benefits payable or to become payable by the Company or
any subsidiary to any of its directors, officers or employees whose total
compensation after such increase would exceed $60,000, (v) adoption or amendment
of any employee benefit plan compensation commitment or any severance agreement
or employment contract to which any director, officer or employee of the Company
or any subsidiary is a party, (vi) resignation or termination, or impending
resignation or termination of employment of any director, officer or key
employee of the Company, or any subsidiary, (vii) any material change in any
accounting principle or method or election for federal income tax purposes used
by the Company or any subsidiary, or (viii) arrangement or commitment by the
Company or any of its subsidiaries to do any of the acts described in (i)
through (vii) above.
2.17 OUTSTANDING INDEBTEDNESS; MATERIAL LIABILITIES. Neither the
Company nor any of its subsidiaries have any material liabilities or
obligations, absolute or contingent (individually or in the aggregate), except
(i) the liabilities and obligations set forth in the Financial Statements, (ii)
liabilities and obligations which have been incurred subsequent to October 31,
1999 in the ordinary course of business of the same character as those set forth
in the Financial Statements which are not, considered together with theretofore
existing liabilities set forth in the Financial Statements which remain
outstanding, materially in excess of like liabilities and obligations set forth
in the Financial Statements, (iii) liabilities and obligations under a lease for
its principal offices and leases for equipment, and (iv) liabilities and
obligations under sales, procurement and other contracts and arrangements
entered into in the normal course of business, which liabilities and obligations
do not exceed $100,000 in the aggregate.
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2.18 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby, by
the Investor Rights Agreement, by the Series B Voting Agreement, by the Series C
Voting Agreement and by the Series D Voting Agreement, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company or any of its subsidiaries is a party or by which it is bound that
may involve (i) obligations (contingent or otherwise) of, or payments to the
Company in excess of, $10,000, or (ii) the transfer or license of any patent,
copyright, trade secret or other proprietary right to or from the Company, or
(iii) provisions restricting or adversely affecting the development, manufacture
or distribution of the Company's products or services or (iv) indemnification by
the Company with respect to infringements of proprietary rights.
(c) Neither the Company nor any of its subsidiaries has (i)
declared or paid any dividends or authorized or made any distribution upon or
with respect to any class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or any other liabilities individually in excess
of $10,000 or, in the case of indebtedness and/or liabilities individually less
than $5,000, in excess of $25,000 in the aggregate, (iii) made any loans or
advances to any person, other than ordinary advances for travel expenses, or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights, other
than the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) Neither the Company nor any of its subsidiaries is a party
to or is bound by any contract, agreement or instrument, or subject to any
restriction under its Articles of Incorporation or Bylaws that adversely affects
its business as now conducted, its properties or its financial condition.
(f) The Company has not engaged in any discussion (i) with any
representative of any corporation or corporations regarding the consolidation or
merger of the Company with or into any such corporation or corporations, (ii)
with any corporation, partnership, association or other business entity or any
individual regarding the sale, conveyance or disposition of all or substantially
all of the assets of the Company or a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of the
Company is disposed of, or (iii) regarding any other form of acquisition,
liquidation, dissolution or winding up of the Company.
8.
13
2.19 TAX RETURNS AND AUDITS. The Company has accurately prepared and
filed all Federal, state and municipal tax returns and tax reports required to
be filed by it, has paid all taxes (including, but not limited to, all income,
profits, franchise, sales, use, property, excise and withholding taxes),
assessments, fees and charges when and as due under such returns and has made
adequate provision for the payment of all taxes, assessments, fees and charges
shown on such returns or on assessments received by the Company. No audit,
deficiency assessment or proposed adjustment of any of the Company's tax returns
is pending, or to the best knowledge of the Company, threatened.
2.20 INSURANCE. EXHIBIT E lists the insurance policies maintained by
the Company. The Company has in full force and effect insurance policies, with
extended coverage, insuring the Company and its property and business against
such losses and risks, and in such amounts, as are customary for corporations
engaged in a similar business and similarly situated. The Company has in full
force and effect insurance policies on the lives of ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇▇▇.
2.21 SHAREHOLDER AGREEMENTS. Except as contemplated by this
Agreement, the Investor Rights Agreement, the Series B Voting Agreement, the
Series C Voting Agreement and the Series D Voting Agreement, there are no
agreements between the Company and any of the Company's shareholders, or to the
best knowledge of the Company, among any of the Company's shareholders, which in
any way affect any shareholder's ability or right freely to alienate or vote
such shares (except restrictions designed to provide compliance with securities
laws).
2.22 CERTAIN TRANSACTIONS. Neither the Company nor any of its
subsidiaries is indebted, either directly or indirectly, to any of its officers,
directors or 5% stockholders, other than current liabilities for payment of
salary for services rendered and reasonable expenses; none of such officers, or
directors or 5% stockholders, or to the knowledge of the Company, any members of
their immediate families is indebted to the Company or any of its subsidiaries
or has any direct or indirect ownership interest in any firm or corporation with
which the Company is in competition, with which the Company is affiliated or
with which the Company has a business relationship which is material to the
Company. To the best of the Company's knowledge, no officer or director or 5%
stockholder is directly or indirectly interested in any contract with the
Company or any of its subsidiaries which is material to the Company. Except as
may be disclosed in the Financial Statements, neither the Company nor any of its
subsidiaries is a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
2.23 BROKERS OR FINDERS. The Company has not utilized the services
of any person as a broker, nor agreed to incur, directly or indirectly, any
liability for, brokerage or finders' fees, agents' commissions or other similar
charges in connection with this Agreement or any of the transactions
contemplated hereby.
2.24 CORPORATE DOCUMENTS. Except for amendments necessary to satisfy
representations and warranties or conditions contained herein (the form of which
amendments has been approved by the Investor), the Articles of Incorporation and
Bylaws of the Company are in the forms attached hereto as EXHIBIT A and EXHIBIT
B. The minute books of the Company
9.
14
made available to the Investor contain a complete summary of all meetings of
directors and stockholders since the time of incorporation.
2.25 OTHER. Except as disclosed in Section 2.2, there are no
outstanding rights, options, warrants, preemptive rights, rights of first
refusal or similar rights for the purchase or acquisition from Lightspan
Delaware of any securities of Lightspan Delaware, nor are there any commitments
to issue or execute any such rights, options, warrants, preemptive rights or
rights of first refusal.
2.26 QUALIFIED SMALL BUSINESS. To its knowledge, the Company
qualifies as a "Qualified Small Business" as defined in Section 1202(d) of the
Internal Revenue Code of 1986, as amended.
2.27 YEAR 2000. The Company has established a Year 2000 remediation
program pursuant to which the computer and other systems of the Company and its
subsidiaries will be Year 2000 ready.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor hereby represents and warrants that:
3.1 ACCREDITED INVESTOR. The Investor is an "accredited investor" as
such term is defined in Rule 501 under the Securities Act.
3.2 EXPERIENCE. The Investor is experienced in evaluating start-up
companies such as the Company, and has either individually or through its
current officers such knowledge and experience in financial and business matters
that Investor is capable of evaluating the merits and risks of Investor's
prospective investment in the Company, and has the ability to bear the economic
risks of the investment. It being understood that the foregoing shall have no
affect on the Investor being entitled to rely on the representations, warranties
and other agreements of the Company made herein.
3.3 INVESTMENT. The Investor is acquiring the Shares for investment
for Investor's own account (whether held directly by Investor or indirectly
through affiliates of Investor) and not with the view to, or for resale in
connection with, any distribution thereof to any third party not affiliated with
such Investor. Investor understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent as expressed herein. Investor further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to any
third person not affiliated with Investor with respect to any of the Shares.
Investor understands and acknowledges that the offering of the Shares pursuant
to this Agreement will not be registered under the Securities Act.
3.4 RULE 144. Investor acknowledges that the Shares must be held
until subsequently registered under the Securities Act or an exemption from such
registration is available. Investor is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction
10.
15
of certain conditions. Investor covenants that, in the absence of an effective
registration statement covering the stock in question, Investor will sell,
transfer, or otherwise dispose of the Shares only in a manner consistent with
Investor's representations and covenants set forth in this Section 3 or as is
otherwise permitted by law. In connection therewith, Investor acknowledges that
the Company will make a notation on its stock books regarding the restrictions
on transfers set forth in this Section 3 and will transfer securities on the
books of the Company only to the extent not inconsistent therewith.
3.5 ACCESS TO DATA. Investor has received and reviewed information
about the Company and has had an opportunity to discuss the Company's business,
management and financial affairs with its management and to review the Company's
facilities. Investor understands that such discussions, as well as any written
information issued by the Company, were intended to describe the aspects of the
Company's business and prospects which the Company believes to be material, but
were not necessarily an exhaustive description.
3.6 AUTHORIZATION. This Agreement when executed and delivered by
such Investor will constitute a valid and legally binding obligation of the
Investor, enforceable in accordance with its terms, subject to: (i) judicial
principles respecting election of remedies or limiting the availability of
specific performance, injunctive relief, and other equitable remedies; (ii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect generally relating to or affecting creditors' rights; and
(iii) limitations on the enforceability of the indemnification provisions of the
Investor Rights Agreement incorporated herein by reference by Section 7.14
hereof.
3.7 PRINCIPAL ADDRESS. For state securities law purposes, the
principal address of the Investor is as set forth on the signature page hereto.
3.8 LEGENDS. The Investor understands that the certificates
evidencing the IPO Shares may bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER OR PLEDGE IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT."
3.9 NO ASSURANCES. The Investor acknowledges and agrees that there
can be no assurance that the Company will be able to successfully complete an
IPO in the near future or at any time.
3A. PRE CLOSING COVENANTS OF COMPANY.
3A.1. REINCORPORATION. Lightspan California shall use its best
efforts to ensure that (i) prior to the Closing, its state of incorporation is
changed to Delaware by merging into its
11.
16
wholly-owned subsidiary, Lightspan Delaware, and Lightspan Delaware shall
survive the merger, and (ii) as of the Closing, the Certificate of Incorporation
and Bylaws of Lightspan Delaware shall be substantially as attached hereto as
EXHIBIT F and EXHIBIT G, respectively.
3A.2 POST-IPO CAPITALIZATION. Immediately prior to the Closing,
which shall take place concurrently with the closing of the IPO, the authorized
capitalization of Lightspan Delaware shall be as set forth on EXHIBIT H.
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING.
The obligation of the Investor to purchase Shares at the Closing is
subject to the fulfillment on or before the Closing of each of the following
conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing (other than representations and
warranties that speak of a specific date or of the date of the signing of this
agreement, which only need to be correct as of such date).
4.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 BLUE SKY. The Company shall have obtained all necessary permits
and qualifications, if any, or secured an exemption therefrom, required by any
state or country prior to the offer and sale of the Shares.
4.4 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing hereby, and all
documents and instruments incident to these transactions, shall be reasonably
satisfactory in substance to the Investor and its counsel.
4.5 REINCORPORATION. The Company shall have effected the
Reincorporation.
4.6 CAPITALIZATION. Lightspan Delaware shall have authorized and
reserved for issuance shares sufficient to allow issuance of the Shares as
provided herein.
4.7 FORM S-1. The United States Securities and Exchange Commission
("SEC") shall have declared the Registration Statement effective and the IPO
shall have been consummated, or shall be consummated substantially concurrent
with the Closing.
4.8 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Investor a Compliance Certificate, executed by the President of the Company,
dated the date of the Closing, to the effect that the conditions specified in
Sections 4.1, 4.2, 4.5, 4.6 and 4.7 have been satisfied.
12.
17
4.9 LEGAL OPINION. the Investor shall have received from legal
counsel to the Company an opinion addressed to the Investor, dated as of the
date of the Closing, in substantially the form attached hereto as EXHIBIT I.
4.10 BOARD OF DIRECTORS. A nominee chosen by the Investor shall have
been appointed as a Class III Director as contemplated in Section 7.13.
4.11 WARRANT. The Warrant in the Form of EXHIBIT J shall have been
executed.
4.12 CLAIMS. To the Company's knowledge, no former holders of Series
D or Series E Preferred Stock of Academic System Corporation shall have asserted
claims for consideration related to the merger between the Company and Academic
Systems Corporation in excess of the value of approximately 1.1 million shares
(valued at $5.00 per share) of the Series E Preferred Stock of the Company, or
other consideration of similar value.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to the Investor under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions by the Investor:
5.1 REPRESENTATIONS AND WARRANTIES. Except as otherwise referenced
herein, the representations and warranties of the Investor contained in Section
3 shall be true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing (other
than representations and warranties that speak of a specific date, which only
need to be correct as of such date).
5.2 BLUE SKY. The Company shall have obtained all necessary permits
and qualifications, if any, or secured an exemption therefrom, required by any
state or country for the offer and sale of the Shares.
5.3 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing hereby, and all
documents and instruments incident to these transactions, shall be reasonably
satisfactory in substance to the Company and its counsel.
5.4 FORM S-1. The SEC shall have declared the Registration Statement
effective.
5.5 COMPLIANCE CERTIFICATE. The Investor shall have delivered to the
Company a Compliance Certificate, executed by the an authorized representative
of the Investor, dated the date of the Closing, to the effect that the
conditions specified in Section 2.1 has been satisfied.
6. TERMINATION.
This agreement shall immediately terminate if the conditions specified in
Sections 4.7 and 5.4 relating to the effectiveness of the Registration Statement
shall not have been satisfied on
13.
18
or before the date six months from the date hereof. Upon such termination, all
further obligations of the parties under this Agreement shall terminate;
provided, however, that no party shall be relieved of any obligation or
liability arising from any prior breach by such party of any provision of this
agreement.
7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California.
7.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Investor and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or exhibit delivered by or on
behalf of the Company pursuant hereto shall be deemed to be the representations
and warranties of the Company hereunder as of such date of such certificate or
exhibit, and as of the date of the Closing.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the rights of Investor to purchase Shares shall not be
assignable, except to an affiliate of Investor, without the consent of the
Company.
7.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
7.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, return receipt requested, or otherwise
delivered by hand or by messenger, addressed (a) if to the Investor, at the
Investor's address set forth on the signature page hereof, or at such other
address as the Investor shall have furnished to the Company in writing, or (b)
if to the Company, at its address set forth on the first page of this Agreement
addressed to the attention of the Corporate Secretary, or at such other address
as the Company shall have furnished to the Investor. If notice is provided by
mail, notice shall be deemed to be given upon proper deposit in a mailbox.
7.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party hereto upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such party, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party of any breach or default under this Agreement, or any
waiver on the part of any party of any provisions or
14.
19
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing or as provided in this
Agreement. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
7.7 EXPENSES. The Company and the Investor shall each bear their own
expenses and legal fees incurred on their behalf with respect to this Agreement
and the transactions contemplated hereby.
7.8 FINDER'S FEE. The Company shall indemnify and hold the Investor
harmless from any liability for any commission or compensation in the nature of
a finder's fee (including the costs, expenses and legal fees of defending
against such liability) for which the Company, or any of its partners,
employees, or representatives, as the case may be, is responsible. The Investor
acknowledges that it shall be solely liable for any commission or compensation
in the nature of a finder's fee (including the costs, expenses and legal fees of
defending against such liability) for which Investor may be responsible.
7.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
7.10 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
7.11 CLOSING CONDITIONS. Each party will use its reasonable best
efforts to satisfy the applicable conditions to Closing.
7.12 MARKET STANDOFF. The Investor agrees that the Company (or a
representative of the underwriters) may, in connection with the IPO, require
that it not sell, dispose of, transfer, make any short sale of, grant any option
for the purchase of, or enter into any hedging or similar transaction with the
same economic effect as a sale of, any shares of Common Stock or other
securities of the Company held by it, for a period of time specified by the
underwriter(s) (not to exceed one hundred eighty (180) days) following the
effective date of the registration statement of the Company filed under the
Securities Act. The Investor further agrees to execute and deliver such other
agreements as may be reasonably requested by the Company and/or the
underwriter(s) which are consistent with the foregoing or which are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Investor's
common stock until the end of such period. Notwithstanding the above, if
permitted in writing by the underwriters, the Investor may transfer such shares
to any corporation or other entity which controls, is controlled by, or is under
common control with the Investor, all as defined in the following sentence. A
corporation or other entity will be regarded as in control of another
corporation or entity if it owns or directly or indirectly controls 100% of the
voting securities or other ownership interest of the other corporation or
entity.
15.
20
7.13 BOARD OF DIRECTORS. The Company shall use its best efforts to
ensure that a nominee chosen by Investor is appointed as a member of the
Company's Board of Directors as of the Closing, and that, as of the IPO, such
nominee will serve as member of Class III of the Board of Directors, with a term
scheduled to run until the third annual meeting of stockholders following the
IPO. If, prior to the IPO, the Company shall enter into any agreement, or if the
Company's Series E preferred shareholders shall enter into any agreement,
providing for the nomination or election of any one or more of the Company's
directors to be elected by the holders of the Company's Series E preferred
shareholders, the Company shall use its best efforts to ensure that such
agreement also calls for the nomination of and, if applicable, the election of,
the nominee chosen by the Investor.
7.14 REGISTRATION RIGHTS. From and after the date that is one year
from the Closing, the Investor shall be entitled to all of the rights and
subject to all of the obligations set forth in Section 1 of that Investor Rights
Agreement, a copy of which is attached hereto as EXHIBIT K and Section 1 of
which is incorporated herein by reference (the "▇▇▇") such that Investor shall
have such rights set forth in such Section 1 as if the Investor were a "Holder"
(as defined therein) thereunder and the Shares and the shares of common stock to
be issued upon exercise of the Warrant (the "WARRANT SHARES") were "Registrable
Securities" (as defined therein) thereunder (including, without limitation,
provisions in such Section 1 relating to termination and transfer of such
rights, Rule 144 reporting and indemnification and excepting only Section 1.15
relating to a standoff agreement, to which Investor shall not be subject but
shall be similarly bound pursuant to Section 17.12 hereof). The Investor shall
be entitled to exercise such rights on a pari passu basis with the holders of
such rights under the ▇▇▇. This Section 7.14 does not conflict with or violate
the Investor Rights Agreement.
[THIS SPACE LEFT BLANK INTENTIONALLY]
16.
21
IN WITNESS WHEREOF, the parties have executed this STOCK PURCHASE
AGREEMENT as of the date first above written.
COMPANY:
THE LIGHTSPAN PARTNERSHIP, INC.
By:
-------------------------------
Title:
-------------------------------
INVESTOR:
▇▇▇ COMMUNICATIONS HOLDINGS, INC.
By:
-------------------------------
Title:
-------------------------------
Address:
17.
22
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
23
CERTIFICATE OF AMENDMENT
OF RESTATED ARTICLES OF INCORPORATION
OF THE LIGHTSPAN PARTNERSHIP, INC.
▇▇▇▇ ▇. ▇▇▇▇▇▇ hereby certifies that:
I. He is the duly elected and acting Chief Executive Officer of the Lightspan
Partnership, Inc., a California corporation.
II. Section A. of the Article Third of the Amended and Restated Articles of
Incorporation of this corporation is amended to read as follows:
A. The aggregate number of shares that the corporation shall have
authority to issue is one hundred forty-eight million seven hundred ninety-five
thousand seventy-four (148,795,074) which is comprised of eighty-seven million
(87,000,000) shares of Common Stock each with the par value of $0.001 per
share, and sixty-one million seven hundred ninety-five thousand seventy-four
(61,795,074) shares of Preferred Stock each with the par value of $0.001 per
share. The Preferred Stock shall be issued in five series, which shall be
designated "Series A Preferred Stock," "Series B Preferred Stock," "Series C
Preferred Stock," "Series D Preferred Stock," "Series E Preferred Stock." The
Series A Preferred Stock shall consist of seven million six hundred seventeen
thousand five hundred (7,617,500) shares. The Series B Preferred Stock shall
consist of eleven million eight hundred sixteen thousand six hundred sixty-four
(11,816,664) shares. The Series C Preferred Stock shall consist of three
million three hundred sixty thousand nine hundred ten (3,360,910) shares. The
Series D Preferred Stock shall consist of seventeen million (17,000,000)
shares. The Series E Preferred Stock shall consist of twenty-two million
(22,000,000) shares.
III. The foregoing amendment of the Amended and Restated Articles of
Incorporation has been duly approved by the board of directors.
IV. The foregoing amendment of the Amended and Restated Articles of
Incorporation has been duly approved by the required vote of shareholders
in accordance with Section 902, California Corporations Code. The total
number of outstanding shares of the corporation is 9,142,723 shares of
Common Stock, 7,467,500 shares of Series A Preferred Stock, 11,666,664
shares of Series B Preferred Stock, 3,264,285 shares of Series C Preferred
Stock, 13,129,444 shares of Series D Preferred Stock and 7,575,529 shares
of Series E Preferred Stock. The number of shares voting in favor of the
amendment equaled or exceeded the vote required. The vote required was not
less than a majority of the outstanding shares of Common Stock and not less
than a majority of the outstanding shares of Preferred Stock considered
together for such purpose as a single class.
V. I further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and
correct of our own knowledge.
Date: October 26, 1999 /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
24
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
THE LIGHTSPAN PARTNERSHIP, INC.
The undersigned, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, certify that:
1. They are the duly elected and acting President and Chief Operating
Officer, and Vice President, Finance, and Chief Financial Officer, respectively,
of The Lightspan Partnership, Inc., a California corporation (the "Company").
2. The Articles of Incorporation of the Company are amended and restated
in full to read as set forth in Exhibit A attached hereto.
3. The Amended and Restated Articles of Incorporation of the Company
attached hereto have been duly approved by the Board of Directors of the
Company.
4. The Amended and Restated Articles of Incorporation of the Company
attached hereto have been duly approved by the shareholders of this Company in
accordance with Sections 902 and 903 of the California Corporations Code. The
total number of outstanding shares of Common Stock is 7,555,527. The total
number of outstanding shares of Preferred Stock is 35,527,893. The number of
shares voting in favor of the Amended and Restated Articles of Incorporation
equaled or exceeded the vote required. The percentage vote required was a simple
majority of the outstanding shares of Preferred Stock, voting separately as a
single class, a simple majority of the Common Stock, voting separately as a
single class and a simple majority of the Common Stock and Preferred Stock,
voting together as a single class.
The undersigned further declare under penalty of perjury under the laws
of the State of California that the matters set forth in this certificate are
true and correct of their own knowledge.
Date: June 23, 1999
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
and Chief Operating Officer
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President,
Finance, and Chief Financial Officer
25
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
THE LIGHTSPAN PARTNERSHIP, INC.
FIRST. The name of the corporation is The Lightspan Partnership, Inc.
SECOND. The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated under the California
Corporations Code.
THIRD. (a) The aggregate number of shares that the corporation shall
have authority to issue is one hundred thirty-one million seven hundred
ninety-five thousand seventy-four (131,795,074) which is comprised of
seventy-five million (75,000,000) shares of Common Stock each with the par value
of $0.001 per share, and fifty-six million seven hundred ninety-five thousand
seventy-four (56,795,074) shares of Preferred Stock each with the par value of
$0.001 per share. The Preferred Stock shall be issued in five series, which
shall be designated "Series A Preferred Stock," "Series B Preferred Stock,"
"Series C Preferred Stock," "Series D Preferred Stock," "Series E Preferred
Stock." The Series A Preferred Stock shall consist of seven million six hundred
seventeen thousand five hundred (7,617,500) shares. The Series B Preferred Stock
shall consist of eleven million eight hundred sixteen thousand six hundred
sixty-four (11,816,664) shares. The Series C Preferred Stock shall consist of
three million three hundred sixty thousand nine hundred ten (3,360,910) shares.
The Series D Preferred Stock shall consist of seventeen million (17,000,000)
shares. The Series E Preferred Stock shall consist of seventeen million
(17,000,000) shares.
(b) The terms and provisions of the Preferred Stock are as
follows:
1. Definitions. For purposes of this Article, the following definitions
shall apply:
(a) "Company" shall mean the corporation.
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities (other than shares of Preferred Stock)
convertible into or exchangeable for Common Stock or convertible into or
exchangeable for securities that are convertible into or exchangeable for Common
Stock.
-2-
26
(c) "Employee Sale" shall mean the sale or grant of any right to
purchase (including any option or warrant) any shares of Common Stock to any
employee, officer or director of, or consultant to, the Company pursuant to any
employee, officer, director or consultant plan or agreement adopted or approved
by the Board of Directors of the Company, and any exercise of any such right,
net of any such rights to purchase expiring unexercised and net of any shares
repurchased by the Company from employees, officers, directors or consultants at
cost upon termination of employment or tenure pursuant to such agreements.
Employee Sale shall also mean (in addition to the shares described in the
preceding sentence) the sale or grant of any right to purchase (including any
option or warrant) shares of Common Stock to any bank, equipment lessor or other
similar financial institution if and to the extent that the transaction in which
such sale or grant is to be made is approved by the Company's Board of
Directors.
(d) "Liquidation Preference" shall mean $1.00 per share for the
Series A Preferred Stock, $3.00 per share for the Series B Preferred Stock,
$6.00 per share for the Series C Preferred Stock, $3.76 per share for the Series
D Preferred Stock and $5.00 per share for the Series E Preferred Stock (subject
to adjustment from time to time as set forth elsewhere herein).
(e) "Options" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities.
(f) "Original Issue Date" shall mean, respectively, the dates
upon which shares of each of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock are first issued.
(g) "Original Issue Price" shall mean $1.00 per share for the
Series A Preferred Stock, $3.00 per share for the Series B Preferred Stock,
$6.00 per share for the Series C Preferred Stock, $3.76 per share for the Series
D Preferred Stock and $5.00 per share for the Series E Preferred Stock.
(h) "Preferred Stock" shall mean, collectively, the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock and the Series E Preferred Stock.
2. Dividends.
(a) Dividend Preference. The holders of outstanding shares of
Preferred Stock shall be entitled to receive dividends, out of any assets at the
time legally available therefore, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock of this Companyny)
on the Common Stock of this Company, at the rate of ten cents ($0.10) per share
per annum for the Series A Preferred Stock, thirty cents ($0.30) per share per
annum for the Series B Preferred Stock, sixty cents ($0.60) per share per annum
for the Series C Preferred Stock, thirty-seven and six-tenths cents ($0.376) per
share per annum for the Series D Preferred Stock and
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fifty cents ($0.50) per share per annum for the Series E Preferred Stock, when,
as and if declared by the Board of Directors; provided, however, that the Board
of Directors is under no obligation to pay dividends to such holders, and such
dividends, if any, shall be noncumulative such that no rights shall accrue to
the holders of the Preferred Stock as a result of the failure to declare such
dividends in any prior year. Such dividends may be payable quarterly or
otherwise as the Board of Directors may from time to time determine. No such
dividend shall be declared or paid on the Preferred Stock of any series in
accordance with the preceding sentences unless dividends are simultaneously
declared or paid on the Preferred Stock of each other series, and if less than
the full annual dividend for each series is so declared or paid, the amounts
declared and paid for each series shall be determined pro rata on the basis of
the Liquidation Preferences for the shares of the respective series. If and to
the extent that the Board of Directors of the Company shall declare and set
aside for payment any other and further amount of cash or property (other than
Common Stock of the Company) as a distribution, such distribution shall be made
with equal priority to the Common Stock and the Preferred Stock, with each share
of Preferred Stock of each series being treated for such purpose as if it had
been converted into Common Stock at the then effective Conversion Rate for such
series. For such purpose, all shares of Preferred Stock held by each holder of
Preferred Stock shall be aggregated, and any resulting fractional share of
Common Stock shall be disregarded.
(b) Priority of Dividends. The Company shall make no
Distribution (as defined below) to the holders of shares of Common Stock in any
fiscal year unless and until full annual dividends shall have been paid, or
declared and set apart, upon all shares of Preferred Stock of each series. The
Company shall not permit any subsidiary of the Company to purchase or otherwise
acquire for consideration any shares of stock of the Company, or take any other
action, unless the Company could, under this Section 2, purchase or otherwise
acquire such shares or take such other action at such time and in such manner.
(c) Distribution. As used in this section, "Distribution" means
the transfer of cash or property without consideration, whether by way of
dividend or otherwise (except a dividend in shares of the Company) or the
purchase of shares of the Company (other than in connection with the repurchase
of shares of Common Stock issued to or held by employees, consultants, officers
and directors, at a price not greater than the amount paid by such persons for
such shares upon termination of their employment or services pursuant to
agreements providing for the right of said repurchase, which agreements were
authorized by the unanimous approval of the Board of Directors) for cash or
property.
(d) Consent to Certain Repurchases. As authorized by Section
402.5(c) of the California Corporations Code, Sections 502 and 503 of the
California Corporations Code shall not apply with respect to Distributions made
by the Companym in connection with the repurchase of shares of Common Stock
issued to or held by employees, consultants, officers and directors, at a price
not greater than the amount paid by such persons for such shares, upon
termination of their employment or services pursuant to agreements providing for
the right of said repurchase upon the unanimous approval of the Board of
Directors.
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3. Liquidation Rights.
(a) Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Company, either voluntary or involuntary, the
holders of the Preferred Stock shall be entitled to receive, out of the assets
of the Company, the Liquidation Preference specified for each share of Preferred
Stock then held by them plus an amount equal to all declared and unpaid
dividends thereon, if any, to the date that payment is made, before any payment
shall be made or any assets distributed to the holders of Common Stock.
(b) Priority. If upon the liquidation, dissolution or winding up
of the Company, the assets to be distributed among the holders of the Preferred
Stock are insufficient to permit the payment to such holders of the full
Liquidation Preference for their shares, then the entire assets of the Company
legally available for distribution shall be distributed with equal priority and
pro rata among the holders of the Preferred Stock in proportion to the numbers
of shares of Preferred Stock of each series held by them multiplied by the
Liquidation Preference for the shares of such series of Preferred Stock.
(c) Remaining Assets. After the payment to the holders of
Preferred Stock of the full preferential amounts specified herein, any remaining
assets of the Company shall be distributed ratably to the holders of the
Company's capital stock then outstanding, with each share of Preferred Stock of
each series being treated for such purpose as if it had been converted into
Common Stock at the then effective Conversion Rate for such series. For such
purpose, all shares of Preferred Stock of each series held by each holder of
Preferred Stock shall be aggregated, and any resulting fractional share of
Common Stock shall be disregarded.
(d) Reorganization. Notwithstanding anything else in these
Articles of Incorporation, a liquidation, dissolution or winding up of the
Company shall be deemed to be occasioned by, or to include, (a) the acquisition
of the Company by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization, merger
or consolidation, whether of the Company with or into any other corporation or
corporations or of any other corporation or corporations with or into the
Company but excluding any merger effected exclusively for the purpose of
changing the domicile of the Company); or (b) a sale of all or substantially all
of the assets of the Company; provided, however, that a consolidation or merger
as a result of which the holders of capital stock of the Company immediately
prior to such merger or consolidation possess (by reason of such holdings) 50%
or more of the voting power of the Company surviving such merger or
consolidation (or other corporation which is the issuer of the capital stock
into which the capital stock of the Company is converted or exchanged in such
merger or consolidation) shall not be treated as a liquidation, dissolution or
winding up of the Company within the meaning of this Section 3.
4. Conversion. The holders of the Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
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(a) Right to Convert. Each share of Preferred Stock shall be
convertible, without payment of additional consideration, into shares of Common
Stock, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of the Company or any transfer agent for
the Preferred Stock. Each share of Series A Preferred Stock shall be converted
into that number of fully-paid and nonassessable shares of Common Stock that is
determined by dividing $1.00 by the appropriate Conversion Price (as hereinafter
defined). Each share of Series B Preferred Stock shall be convertible into that
number of fully paid and nonassessable shares of Common Stock that is determined
by dividing $3.00 by the appropriate Conversion Price (as hereinafter defined).
Each share of Series C Preferred Stock shall be convertible into that number of
fully paid and nonassessable shares of Common Stock that is determined by
dividing $6.00 by the appropriate Conversion Price (as hereinafter defined).
Each share of Series D Preferred Stock shall be convertible into that number of
fully paid and nonassessable shares of Common Stock that is determined by
dividing $3.76 by the appropriate Conversion Price (as hereinafter defined).
Each share of Series E Preferred Stock shall be convertible into that number of
fully paid and nonassessable shares of Common Stock that is determined by
dividing $5.00 by the appropriate Conversion Price (as hereinafter defined). The
initial Conversion Price for the Series A Preferred Stock shall be $1.00, and
shall be subject to adjustment as provided herein. The initial Conversion Price
for the Series B Preferred Stock shall be $3.00, and shall be subject to
adjustment as provided herein. The initial Conversion Price for the Series C
Preferred Stock shall be $3.76, and shall be subject to adjustment as provided
herein. The initial Conversion Price for the Series D Preferred Stock shall be
$3.76, and shall be subject to adjustment as provided herein. The initial
Conversion Price for the Series E Preferred Stock shall be $5.00, and shall be
subject to adjustment as provided herein. (The number of shares of Common Stock
into which each share of Preferred Stock may be converted is hereinafter
referred to as the "Conversion Rate" for each such series.) Upon any decrease or
increase in the Conversion Price or the Conversion Rate for a series, as
described in this Section 4, the Conversion Rate or Conversion Price for such
series, as the case may be, shall be appropriately increased or decreased.
(b) Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Rate for such share immediately upon the consummation of a firm
commitment underwritten public offering of Common Stock on Form S-1, provided
that the public offering price per share is not less than $10.00 (subject to
appropriate adjustment for stock splits, stock dividends, combinations,
recapitalizations and the like) and the aggregate gross proceeds to the Company
are not less than $20,000,000 (a "Qualifying Public Offering").
(c) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of Preferred Stock. All shares of Common
Stock (including fractions) issuable upon conversion of shares of Preferred
Stock held by each holder of Preferred Stock shall be aggregated for the purpose
of determining whether the conversion would result in the issuance of any
fractional share. If, after aggregation, the conversion would result in the
issuance of a fractional share of Common Stock, the Company shall, in lieu of
issuing any fractional shares to which the
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holder would otherwise be entitled, pay a sum of cash equal to the then fair
market value of such fractional share as determined in good faith by the Board
of Directors of the Company. Before any holder of Preferred Stock shall be
entitled to convert the same into full shares of Common Stock, and to receive
certificates therefor, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or of any transfer agent
for the Preferred Stock, and shall give written notice to the Company at such
office that he elects to convert the same; provided, however, that in the event
of an automatic conversion pursuant to paragraph 4(b) above, the outstanding
shares of Preferred Stock shall be converted automatically without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Company or its transfer agent;
provided further, however, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such automatic
conversion unless either the certificates evidencing such shares of Preferred
Stock are delivered to the Company or its transfer agent as provided above, or
the holder notifies the Company or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Company to indemnify the Company from any loss incurred by it in connection
with such certificates.
The Company shall, as soon as practicable after such delivery,
or after such agreement and indemnification, issue and deliver at such office to
such holder of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which he shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock, plus any declared and
unpaid dividends on the converted Preferred Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date; provided, however, that if
the conversion is in connection with an underwritten offer of securities
registered pursuant to the Securities Act of 1933, as amended, the conversion
may, at the option of any holder tendering Preferred Stock for conversion, be
conditioned upon the closing of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Preferred Stock shall not be deemed to have
converted such Preferred Stock until immediately prior to the closing of the
sale of such securities.
(d) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definition. For purposes of this paragraph
4(d), "Additional Shares of Common" shall mean all shares of Common Stock issued
(or, pursuant to paragraph 4(d)(iii), deemed to be issued) by the Company after
the Original Issue Date of a particular series of Preferred Stock, other than:
a. shares of Common Stock issued or issuable
upon conversion of shares of Preferred Stock;
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b. shares of Common Stock issued or issuable
pursuant to the exercise or conversion of Series A Preferred Stock Purchase
Warrants, Series B Preferred Stock Purchase Warrants, Series C Preferred Stock
Purchase Warrants, Series D Preferred Stock Purchase Warrants, Series E
Preferred Stock Purchase Warrants or any warrants or shares of capital stock
assumed or issued by the Company in any acquisition of another business or
entity;
c. shares of Common Stock issued or issuable in
an Employee Sale; and
d. shares of Common Stock issued or issuable as
a dividend or distribution on Preferred Stock or pursuant to any event for which
adjustment is made pursuant to paragraph 4(d)(vi), (vii) or (viii) hereof.
(ii) No Adjustment of Conversion Price. No adjustment in
the Conversion Price of a particular share of Preferred Stock shall be made in
respect of the issuance of Additional Shares of Common unless the consideration
per share for an Additional Share of Common issued or deemed to be issued by the
Company is less than the Conversion Price in effect on the date of, and
immediately prior to such issue, for such share of Preferred Stock. No
adjustment in the Conversion Price otherwise required by this paragraph 4 shall
affect any shares of Common Stock issued upon conversion of Preferred Stock
prior to such adjustment.
(iii) Deemed Issue of Additional Shares of Common.
a. Options and Convertible Securities. In the
event the Company at any time or from time to time after the Original Issue Date
of a particular series of Preferred Stock 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 therein for a
subsequent adjustment of such number) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities or exercise of such
Options, shall be deemed to be Additional Shares 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 that Additional Shares of Common
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to paragraph 4(d)(v) hereof) of such Additional Shares of
Common would be less than the Conversion Price of such series of Preferred Stock
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
Conversion Price of such series of Preferred Stock shall be made upon the
subsequent issue of Convertible Securities or shares
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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 in the consideration payable to the Company, or decrease in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Conversion Price of such series of Preferred Stock
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;
(3) no readjustment pursuant to clause
(b) above shall have the effect of increasing the Conversion Price of such
series of Preferred Stock to an amount which exceeds the lower of (i) the
Conversion Price of such Series of Preferred Stock on the original adjustment
date, or (ii) the Conversion Price of such Series of Preferred Stock that would
have resulted from any issuance of Additional Shares of Common between the
original adjustment date and such readjustment date;
(4) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Conversion Prices 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 as if:
i) 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 the Companyny for the issue of such exercised Options plus
the consideration actually received by the Company 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 the
Companyy upon such conversion or exchange, and
ii) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such Options, and
the consideration received by the Company for the Additional Shares of Common
deemed to have been then issued was the consideration actually received by the
Company for the issue of such exercised Options, plus the consideration deemed
to have been received by the Companypany (determined pursuant to paragraph
4(d)(v)) upon the issue of the Convertible Securities with respect to which such
Options were actually exercised; and
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(5) if such record date shall have been
fixed and such Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the Conversion Prices which
became effective on such record date shall be canceled as of the close of
business on such record date, and thereafter the Conversion Prices shall be
adjusted pursuant to this paragraph 4(d)(iii) as of the actual date of their
issuance.
b. Stock Dividends. In the event the Company at
any time or from time to time after the Original Issue Date of a particular
series of Preferred Stock shall declare or pay any dividend on the Common Stock
payable in Common Stock, and with respect to which no similar Common Stock
dividend is to be distributed to holders of such series of Preferred Stock, then
and in any such event, Additional Shares of Common shall be deemed to have been
issued immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend.
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common. In the event this Company shall issue Additional
Shares of Common (including Additional Shares of Common deemed to be issued
pursuant to paragraph 4(d)(iii)) without consideration or for a consideration
per share less than the applicable Conversion Price for any series of Preferred
Stock in effect on the date of and immediately prior to such issue, then and in
such event, the Conversion Price for such series of the Preferred Stock shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock and Preferred
Stock outstanding immediately prior to such issue (without counting as
outstanding any Options or Convertible Securities) plus the number of shares of
Common Stock which the aggregate consideration received by the Company for the
total number of Additional Shares of Common so issued would purchase at such
Conversion Price, and the denominator of which shall be the number of shares of
Common Stock and Preferred Stock outstanding immediately prior to such issue
(without counting as outstanding any Options or Convertible Securities) plus the
number of such Additional Shares of Common so issued.
(v) Determination of Consideration. For purposes of this
subsection 4(d), the consideration received by the Company for the issue of any
Additional Shares of Common shall be computed as follows:
a. Cash and Property. Such consideration shall:
(1) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Company excluding
amounts paid or payable for accrued interest or accrued dividends and excluding
any discounts, commissions or placement fees payable by the Company to any
underwriter or placement agent in connection with the issuance of any Additional
Shares of Common;
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(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 good faith by the Board; and
(3) in the event Additional Shares of
Common are issued together with other shares or securities or other assets of
the Company for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (1) and (2) above, as
reasonably determined in good faith by the Board.
b. Options and Convertible Securities. The
consideration per share received by the Companyy for Additional Shares of Common
deemed to have been issued pursuant to paragraph 4(d)(iii)(1), relating to
Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received
or receivable by the Company as consideration for the issue of such Options or
Convertible Securities (determined in the manner described in subparagraph (a)
above), 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 Company upon the exercise of such Options or the 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
(y) 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 or the conversion or exchange of such
Convertible Securities.
c. Stock Dividends. Any Additional
Shares of Common deemed to have been issued relating to stock dividends shall be
deemed to have been issued for no consideration.
(vi) Adjustments for Subdivisions or Combinations of
Common. In the event the outstanding shares of Common Stock shall be subdivided
(by stock split or otherwise than by payment of a dividend in Common Stock),
into a greater number of shares of Common Stock, the Conversion Price for each
series of Preferred Stock in effect immediately prior to such subdivision shall,
concurrently with the effectiveness of such subdivision, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be combined
(by reclassification or otherwise) into a lesser number of shares of Common
Stock, the Conversion Prices in effect immediately prior to such combination
shall, concurrently with the effectiveness of such combination, be
proportionately increased.
(vii) Adjustments for Reclassification, Exchange and
Substitution. Subject to Section 3(d) above ("Liquidation Rights"), if the
Common Stock issuable upon conversion of the
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Preferred Stock shall be changed into the same or a different number of shares
of any other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for above), the Conversion Prices then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification, be
proportionately adjusted such that the Preferred Stock shall be convertible
into, in lieu of the number of shares of Common Stock which the holders would
otherwise have been entitled to receive, a number of shares of such other class
or classes of stock which a holder of the number of shares of Common Stock
deliverable upon conversion of the Preferred Stock immediately before that
change would have been entitled to receive in such reorganization or
reclassification.
(e) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Companyany but will at all times in good
faith assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Preferred Stock against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section 4,
the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Company shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Prices at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of Preferred Stock.
(g) Notices of Record Date. In the event that this Companyany
shall propose at any time:
(i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the holders
of any class or series of its stock any additional shares of stock of any class
or series or other rights;
(iii) to effect any reclassification or recapitalization
of its Common Stock outstanding involving a change in the Common Stock; or
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36
(iv) to merge with or into any other corporation, or
sell, lease or convey all or substantially all its property or business, or to
liquidate, dissolve or wind up;
then, in connection with each such event, this Company shall send to the holders
of the Preferred Stock at least 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 the holders of Common Stock shall be
entitled thereto) or for determining rights to vote in respect of the matters
referred to in (iii) and (iv) above.
Each such written notice shall be given by first class mail, postage
prepaid, addressed to the holders of Preferred Stock at the address for each
such holder as shown on the books of this Company.
(h) Reservation of Stock Issuable Upon Conversion. The Company
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 Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all then
outstanding shares of the 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 Preferred Stock, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
5. Redemption. Subject to the provisions of this Section 5, the Company
may redeem, at the applicable Redemption Price (defined below) and ratably among
the holders of the then outstanding Preferred Stock to be redeemed, all or any
portion of the Consenting Preferred (as defined below) outstanding on the
Redemption Date (defined below). As more fully set forth below in Section 5(a),
in order to redeem any shares of Preferred Stock, the Company shall give notice
pursuant to this Section 5 to all holders of the then outstanding Preferred
Stock of all series at the address of each such holder appearing on the books of
the Company or given by such holder to the Company for the purpose of notice.
Any such notice, however, shall be effective (and the Company shall have the
right to redeem any shares of Preferred Stock) only as follows: (i) with respect
to shares of Series A Preferred Stock, the Company shall have the right to
redeem such shares of Series A Preferred Stock (ratably and with equal priority
among each holder thereof), only with the written consent of holders of not less
than a majority of such shares of Series A Preferred Stock, voting separately as
a single class, (ii) with respect to shares of Series B Preferred Stock, the
Company shall have the right to redeem such shares of Series B Preferred Stock
(ratably and with equal priority among each holder thereof), only with the
written consent of holders of not less than 57% of such shares of Series B
Preferred Stock, voting separately as a single class, (iii) with respect to
shares of Series C Preferred Stock, the Company shall have the right to redeem
such shares of Series C Preferred Stock (ratably and with equal priority among
each holder thereof), only with the written consent of holders of not less than
a majority of such shares of Series C Preferred Stock, voting separately as a
single class, (iv) with respect to shares of Series D Preferred Stock, the
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Company shall have the right to redeem such shares of Series D Preferred Stock
(ratably and with equal priority among each holder thereof), only with the
written consent of holders of not less than a majority of such shares of Series
D Preferred Stock, and (v) with respect to shares of Series E Preferred Stock,
the Company shall have the right to redeem such shares of Series E Preferred
Stock (ratably and with equal priority among each holder thereof), only with the
written consent of holders of not less than a majority of such shares of Series
E Preferred Stock, voting separately as a single class. In the event that the
appropriate consents for redemption have been obtained from the holders of each
of the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock,
all of such shares of Preferred Stock shall be referred to hereinafter as
"Consenting Preferred". The right of redemption contained in this Section 5
shall not be exercised with respect to any series of Preferred Stock prior to
the fifth anniversary of the Original Issue Date of the Series E Preferred
Stock, but may be exercised at any time and from time to time thereafter. No
such notice of redemption shall be effective if and to the extent that the
Company, at the date of such redemption, shall be prohibited by applicable law
from effecting such redemption.
(a) Notice. If the Company determines to effect a redemption, it
shall give not less than 60 days prior written notice to all holders of the
Preferred Stock that up to a specified percentage of the outstanding shares of
the Preferred Stock shall be redeemed on the date specified in such notice (the
"Redemption Date") at the applicable Redemption Price, which shall equal the
Original Issue Price per share, as adjusted for any stock split, reverse or
similar recapitalization with respect to such shares, plus any declared and
unpaid dividends on the Preferred Stock (the "Redemption Price"). The notice
shall further call upon such holders to surrender to the Company on or before
the Redemption Date, at the place designated in the notice, such holder's
certificate or certificates representing the shares of Preferred Stock to be
redeemed. On or after the Redemption Date, each holder of shares of Consenting
Preferred called for redemption shall surrender the certificate or certificates
evidencing such shares to the Company, at the place designated in such notice
and shall thereupon be entitled to receive payment of the appropriate Redemption
Price. The Company shall be under no obligation to redeem shares of Preferred
Stock (i) for which no stock certificate or affidavit of lost stock certificate
is surrendered or (ii) to the extent that any such redemption would be in
violation of applicable law.
(b) Cessation of Rights. From and after the Redemption Date,
unless there shall have been a default in payment of the appropriate Redemption
Price, all rights of the holders of shares of the Preferred Stock designated and
called for redemption in the redemption notice (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be outstanding for any purpose whatsoever. The shares of Preferred
Stock not redeemed shall remain outstanding and entitled to all rights and
preferences provided herein.
(c) Deposit of Redemption Price. Two days prior to the
Redemption Date, the Company shall deposit in cash the Redemption Price of all
outstanding shares of the Preferred Stock designated for redemption in the
redemption notice, and not yet redeemed or converted, with a bank
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38
or trust company having aggregate capital and surplus in excess of $50,000,000
as a trust fund for the benefit of the respective holders of the shares
designated for redemption and not yet redeemed. Simultaneously, the Company
shall deposit irrevocable instructions and authority to such bank or trust
company to pay, on and after the Redemption Date, the Redemption Price of the
Preferred Stock to the holders thereof upon surrender of their certificates. Any
monies deposited by the Company pursuant to this Section 5(c) for the redemption
of shares that are thereafter converted into shares of Common Stock pursuant to
Section 4 above no later than the close of business on the Redemption Date shall
be returned to the Company forthwith upon such conversion. The balance of any
monies deposited by the Company pursuant to this Subsection 5(c) remaining
unclaimed at the expiration of six (6) months following the Redemption Date
shall thereafter be returned to the Company, provided that the shareholder to
which such monies would be payable hereunder shall be entitled, upon proof of
its ownership of the Preferred Stock and payment of any bond requested by the
Company, to receive such monies but without interest from the Redemption Date.
6. Voting. Except as otherwise expressly provided herein or as required
by law, the holders of Preferred Stock and the holders of Common Stock shall
vote together and not as separate classes.
(a) Preferred Stock. Each holder of shares of Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such shares of Preferred Stock held by such holder of Preferred
Stock could then be converted. The holders of shares of the Preferred Stock
shall be entitled to vote on all matters on which the Common Stock shall be
entitled to vote. The holders of the Preferred Stock shall be entitled to notice
of any shareholders' meeting in accordance with the Bylaws of the Company.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares into which
shares of Preferred Stock held by each holder could be converted), shall be
disregarded.
(b) Common Stock. Each holder of shares of Common Stock shall be
entitled to one vote for each share thereof held.
(c) Election of Directors. The holders of the Series A Preferred
Stock, voting separately as a single class, shall be entitled to elect two (2)
directors. The holders of the Series B Preferred Stock, voting separately as a
single class, shall be entitled to elect three (3) directors. The holders of the
Series C Preferred Stock, voting separately as a single class, shall be entitled
to elect one (1) director. The holders of the Series D Preferred Stock, voting
separately as a single class, shall be entitled to elect two (2) directors. The
holders of Common Stock, voting separately as a single class, shall be entitled
to elect two (2) directors. Any vacancy among the directors to be elected by any
class or series of Preferred Stock or Common Stock shall be filled, if by the
Board of Directors, only at the written direction of the holders of the class or
series entitled to elect the directors as to whom a vacancy has arisen, or, if
by the shareholders, by the shareholders of the class or series entitled to
elect such directors. A meeting of shareholders to fill any such vacancy shall
promptly be called upon request of holders of not less than 25% of the shares of
such class or series
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39
(as applicable) entitled to elect the directors as to whom
a vacancy has arisen. In the event the Bylaws of the Company provide for more
than ten (10) directors to be elected, such additional directors shall be
elected by the holders of the Common Stock and the Preferred Stock, voting
together as a single class.
7. Amendments and Changes.
(a) No Series Voting. Other than as provided in these Amended
and Restated Articles of Incorporation or by law, there shall be no series
voting.
(b) Approval by Class. As long as any of the Preferred Stock
shall be issued and outstanding, the Company shall not, without first obtaining
the approval (by vote or consent as provided by law) of the holders of not less
than a majority of the total number of shares of the Preferred Stock then
outstanding (considered together for such purpose as a single class):
(i) amend or repeal any provision of, or add any
provision to, the Company's Amended and Restated Articles of Incorporation or
Bylaws;
(ii) authorize, create or issue shares of any class or
series of stock having any preference or priority superior to or on a parity
with any such preference or priority of the Preferred Stock;
(iii) enter into any transaction or series of related
transactions, as a result of which voting control of the Company shall have
passed to another person or entity (or group of related persons or entities);
(iv) increase or decrease (other than for decreases
resulting from conversion of the Preferred Stock) the number of authorized
shares of Preferred Stock;
(v) issue, at any time prior to the second anniversary
of the Original Issue Date of the Series E Preferred Stock, any Additional
Shares of Common if such issuance would result in an adjustment of the
Conversion Price of the Series E Preferred Stock pursuant to Section 4(d)(iv)
above;
(vi) effect a fundamental change in the Company's
business strategy as set forth in the Company's Business Plan dated February
1999; or
(vii) amend this Subsection 7(b).
For purposes of clause (i) of this Section 7(b), such an amendment shall
be deemed to occur upon the conversion or exchange of the Preferred Stock in any
reorganization into or for securities of any other corporation or cash or
property other than preferred stock having like rights, preferences, privileges
and powers as, and like restrictions provided for the benefit of, the Preferred
Stock. Like
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40
preferences shall be deemed to include the right to convert such preferred stock
into the kind and amount of securities, cash or other property receivable in
such reorganization by a holder of the number of shares of Common Stock into
which such shares of Preferred Stock might have been converted immediately prior
to such reorganization. Notwithstanding anything herein to the contrary, no
separate series vote of the Preferred Stock shall be necessary to approve any
consolidation, merger or sale deemed to be, and treated as, a liquidation,
dissolution or winding up under Section 3(d).
8. Notices. Any notice required by the provisions of this Article THIRD
to be given to the holders of Preferred Stock shall be deemed given if deposited
in the United States mail, postage prepaid, and addressed to each holder of
record at such holder's address appearing on the books of the Company.
FOURTH. (a) Limitation of Directors' Liability. The liability of the
directors of this Company for monetary damages shall be eliminated to the
fullest extent permissible under California law.
(b) Indemnification of Corporate Agents. The Company is
authorized to provide indemnification of agents (as defined in Section 317 of
the California Corporations Code) through bylaw provisions, agreements with
agents, votes of shareholders or disinterested directors or otherwise, in excess
of the indemnification otherwise permitted by Section 317 of the California
Corporations Code, subject only to the applicable limits set forth in Section
204 of the California Corporations Code with respect to actions for breach of
duty to the Company and its shareholders.
(c) Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Article FOURTH shall not adversely affect any right
of indemnification or limitation of liability of an agent of this Company
relating to acts or omissions occurring prior to such repeal or modification.
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41
EXHIBIT B
BYLAWS
42
BYLAWS
OF
THE LIGHTSPAN PARTNERSHIP, INC.
43
BYLAWS OF
THE LIGHTSPAN PARTNERSHIP, INC.
TABLE OF CONTENTS
Page
ARTICLE 1 -- CORPORATE OFFICES ............................................................................ 1
1.1 PRINCIPAL OFFICE ...................................................................... 1
1.2 OTHER OFFICES ......................................................................... 1
ARTICLE 2 -- MEETINGS OF SHAREHOLDERS ..................................................................... 1
2.1 PLACE OF MEETINGS ..................................................................... 1
2.2 ANNUAL MEETING......................................................................... 1
2.3 SPECIAL MEETING ...................................................................... 1
2.4 NOTICE OF SHAREHOLDERS' MEETINGS ...................................................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE .......................................... 3
2.6 QUORUM ................................................................................ 3
2.7 ADJOURNED MEETING, NOTICE ............................................................. 4
2.8 VOTING ................................................................................ 4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT ..................................... 5
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING ............................... 5
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS............................ 6
2.12 PROXIES ............................................................................... 7
2.13 INSPECTORS OF ELECTION ................................................................ 7
ARTICLE 3 -- DIRECTORS .................................................................................... 8
3.1 POWERS ................................................................................ 8
3.2 NUMBER OF DIRECTORS ................................................................... 8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS .............................................. 9
3.4 RESIGNATION AND VACANCIES ............................................................. 9
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE .............................................. 10
3.6 REGULAR MEETINGS ...................................................................... 10
3.7 SPECIAL MEETINGS; NOTICE .............................................................. 10
3.8 QUORUM ................................................................................ 10
3.9 WAIVER OF NOTICE ...................................................................... 11
3.10 ADJOURNMENT ........................................................................... 11
3.11 NOTICE OF ADJOURNMENT ................................................................. 11
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING ..................................... 11
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44
TABLE OF CONTENTS
(Continued)
Page
3.13 FEES AND COMPENSATION OF DIRECTORS .................................................... 12
3.14 APPROVAL OF LOANS TO OFFICERS ......................................................... 12
ARTICLE 4 -- COMMITTEES ................................................................................... 12
4.1 COMMITTEES OF DIRECTORS ............................................................... 12
4.2 MEETINGS AND ACTION OF COMMITTEES ..................................................... 13
ARTICLE 5 -- OFFICERS ..................................................................................... 13
5.1 OFFICERS .............................................................................. 13
5.2 ELECTION OF OFFICERS .................................................................. 14
5.3 SUBORDINATE OFFICERS .................................................................. 14
5.4 REMOVAL AND RESIGNATION OF OFFICERS ................................................... 14
5.5 VACANCIES IN OFFICES .................................................................. 14
5.6 CHAIRMAN OF THE BOARD ................................................................. 14
5.7 PRESIDENT ............................................................................. 15
5.8 VICE PRESIDENTS ....................................................................... 15
5.9 SECRETARY ............................................................................. 15
5.1 CHIEF FINANCIAL OFFICER ............................................................... 16
ARTICLE 6 -- INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS .......................... 16
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS ............................................. 16
6.2 INDEMNIFICATION OF OTHERS ............................................................. 16
6.3 PAYMENT OF EXPENSES IN ADVANCE ........................................................ 17
6.4 INDEMNITY NOT EXCLUSIVE ............................................................... 17
6.5 INSURANCE INDEMNIFICATION ............................................................. 17
6.6 CONFLICTS ............................................................................. 17
ARTICLE 7 -- RECORDS AND REPORTS .......................................................................... 18
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER .......................................... 18
7.2 MAINTENANCE AND INSPECTION OF BYLAWS .................................................. 18
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS ................................. 19
7.4 INSPECTION BY DIRECTORS ............................................................... 19
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER ................................................. 19
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45
TABLE OF CONTENTS
(Continued)
Page
7.6 FINANCIAL STATEMENTS .................................................................. 20
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ........................................ 20
ARTICLE 8 -- GENERAL MATTERS .............................................................................. 21
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING ................................. 21
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS ............................................. 21
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED ..................................... 21
8.4 CERTIFICATES FOR SHARES ............................................................... 21
8.5 LOST CERTIFICATES ..................................................................... 22
8.6 CONSTRUCTION; DEFINITIONS ............................................................. 22
ARTICLE 9 AMENDMENTS ...................................................................................... 22
9.1 AMENDMENT BY SHAREHOLDERS ............................................................. 22
9.2 AMENDMENT BY DIRECTORS ................................................................ 23
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46
BYLAWS
OF
THE LIGHTSPAN PARTNERSHIP, INC.
ARTICLE 1
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The board of directors shall fix the location of the principal
executive office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the board
of directors shall fix and designate a principal business office in the State of
California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE 2
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the board of directors. In the absence of
any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on a date
and at a time designated by the board of directors. At the meeting, directors
shall be elected, and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
47
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10) (or,
if sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty
(30)) nor more than sixty (60) days before the date of the meeting. The notice
shall specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to Section
902 of the Code, (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
com-
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48
munication. Notices not personally delivered shall be sent charges prepaid and
shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting is
fixed or if the adjournment is for more than forty-five (45) days from the date
set for the original meeting, then notice of the adjourned meeting shall be
given. Notice of any such adjourned meeting shall be given to each shareholder
of record entitled to vote at the adjourned meeting in accordance
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49
with the provisions of Sections 2.4 and 2.5 of these bylaws. At any adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting.
2.8 VOTING
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may
be otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of the shareholders. Any shareholder entitled to vote on any matter may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote by
classes is required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
normally entitled or (ii) by distributing the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit. The
candidates receiving the highest number of affirmative votes, up to the number
of directors to be elected, shall be elected; votes against any candidate and
votes withheld shall have no legal effect.
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50
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent
or approval shall state the general nature of the proposal. All such waivers,
consents, and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled to vote for the
election of directors. However, a director may be elected at any time to fill
any vacancy on the board of directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (i) a
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51
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Code, (ii) indemnification of a
corporate "agent," pursuant to Section 317 of the Code, (iii) a reorganization
of the corporation, pursuant to Section 1201 of the Code, and (iv) a
distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, pursuant to Section 2007 of the Code, the notice
shall be given at least ten (10) days before the consummation of any action
authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
2.11.1 the record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held; and
2.11.2 the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in Article 8
of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in fun force and effect unless (i) the person who
executed the proxy revokes it prior to the time of voting by delivering a
writing to the corporation stating that the proxy is revoked or by executing a
subsequent proxy and presenting it to the meeting
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or by voting in person at the meeting, or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of eleven (11) months from the date of the proxy,
unless otherwise provided in the proxy. The dates contained on the forms of
proxy presumptively determine the order of execution, regardless of the postmark
dates on the envelopes in which they are mailed. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Sections 705(e) and 705(f) of the Code.
2.13 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The number
of inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting pursuant to the request of one (1) or more shareholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any shareholder or
a shareholder's proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
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ARTICLE 3
DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The authorized number of directors of the corporation shall be not less
than six (6) nor more than eleven (11). The exact number of directors shall be
eleven (11) until changed, within the limits specified above, by a bylaw
amending this Section 3.2, duly adopted by the board of directors or by
shareholders. The indefinite number of directors may be changed, or a definite
number may be fixed without provision for an indefinite number, by a duly
adopted amendment to the articles of incorporation or by an amendment to this
bylaw adopted by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote; provided, however, that an amendment
reducing the fixed number or the minimum number of directors to a number less
than five (5) cannot be adopted if the votes cast against its adoption at a
meeting, or the shares not consenting in the case of an action by written
consent, are equal to more than sixteen and two-thirds percent (16-2/3%) of the
outstanding shares entitled to vote thereon.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of shareholders to
hold office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
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Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the shareholders fail, at any meeting of shareholders at which any director
or directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
3.5 PLACE OF MEETING; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of California that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
if the times of such meetings are fixed by the board of directors.
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3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.10 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation, and other
applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
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3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given unless the meeting is adjourned for more than twenty-four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 APPROVAL OF LOANS TO OFFICERS*
The corporation may, upon the approval of the board of directors alone,
make loans of money or property to, or guarantee the obligations of, any officer
of the corporation or its parent or subsidiary, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or guaranties
provided that (i) the board of directors determines that such a loan or guaranty
or plan may reasonably be expected to benefit the corporation, (ii) the
corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by a
vote sufficient without counting the vote of any interested director or
directors.
--------------------------
* This section is effective only if it has been approved by the
shareholders in accordance with Sections 315(b) and 152 of the Code.
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ARTICLE 4
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, except with respect to:
(a) the approval of any action which, under the Code, also requires
shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at
a rate or in a periodic amount or within a price range determined by the board
of directors; or
(g) the appointment of any other committees of the board of
directors or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article 3 of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of
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directors or by resolution of the committee, that special meetings of committees
may also be called by resolution of the board of directors, and that notice of
special meetings of committees shall also be given to all alternate members, who
shall have the right to attend all meetings of the committee. The board of
directors may adopt rules for the government of any committee not inconsistent
with the provisions of these bylaws.
ARTICLE 5
OFFICERS
5.1 OFFICER
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not
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be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the
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notice given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seat of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
ARTICLE 6
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the Code, indemnify each of its directors and officers against
expenses (as defined in Section 317(a) of the Code), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding (as defined in Section 317(a) of the Code), arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Article 6, a
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"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
Code), arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Article 6, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required pursuant to Section 6.1 or for
which indemnification is permitted pursuant to Section 6.2 following
authorization thereof by the Board of Directors shall be paid by the corporation
in advance of the final disposition of such action or proceeding upon receipt of
an undertaking by or on behalf of the indemnified party to repay such amount if
it shall ultimately be determined that the indemnified party is not entitled to
be indemnified as authorized in this Article 6.
6.4 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article 6 shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Articles of
Incorporation.
6.5 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation against any liability asserted against or incurred by such
person in such capacity or arising out of such person's status as
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such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Article 6.
6.6 CONFLICTS
No indemnification or advance shall be made under this Article 6,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(a) That it would be inconsistent with a provision of the Articles
of Incorporation, these bylaws, a resolution of the shareholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE 7
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or
at the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least
five percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior written demand on the corporation, (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
compiled or as of a date specified by the shareholder after the date of demand.
Such list shall be made available to any such shareholder by the transfer agent
on or before the later of five (5) days after the demand is received or five (5)
days after the date specified in the demand as the date as of which the list is
to be compiled.
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The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in person
or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time during usual business hours, for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or by
an agent or attorney and shall include the right to copy and make extracts. Such
rights of inspection shall extend to the records of each subsidiary corporation
of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
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7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of
the fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any report of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long
as the shares of the corporation are held by fewer than one hundred (100)
holders of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
-19-
65
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE 8
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
If the board of directors does not so fix a record date, then the
record date for determining shareholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable resolution
or the sixtieth (60th) day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an
-20-
66
officer, no officer, agent or employee shall have any power or authority to bind
the corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The board of
directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All certificates
shall be signed in the name of the corporation by the chairman of the board or
the vice chairman of the board or the president or a vice president and by the
chief financial officer or an assistant treasurer or the secretary or an
assistant secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate ceases to be that
officer, transfer agent or registrar before that certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
-21-
67
ARTICLE 9
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed by
the vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation set forth the number of authorized directors of the corporation,
then the authorized number of directors may be changed only by an amendment of
the articles of incorporation.
9.2 AMENDMENTS BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of directors
pursuant to a bylaw providing for a variable number of directors), may be
adopted, amended or repealed by the board of directors.
-22-
68
CERTIFICATE OF ADOPTION AND AMENDMENT OF BYLAWS
OF
THE LIGHTSPAN PARTNERSHIP, INC.
Certificate by Secretary of Adoption
by Incorporator and Amendment
The undersigned hereby certifies that (i) she is the duly elected,
qualified and acting Secretary of The Lightspan Partnership, Inc. (the
"Company"); (ii) the foregoing Bylaws, comprising twenty (20) pages, were
adopted as the Bylaws of the Company on September 24, 1993 by the person
appointed in the Articles of Incorporation to act as the Incorporator of the
Company; (iii) the Board of Directors of the Company by unanimous written
consent effective November 18, 1993 approved the amendment of Section 3.2 of
such duly adopted Bylaws; (iv) the Board of Directors and the shareholders of
the Company by written consent effective January 30, 1995 approved the further
amendment of Section 3.2 of such duly adopted Bylaws; (v) the Board of Directors
of the Company by written consent effective September 13, 1996 approved the
amendment of Section 3.2 of such duly adopted Bylaws; (vi) the Board of
Directors of the Company, effective as of June 24, 1997, approved the further
amendment of Section 3.2 of such duly adopted Bylaws; and (vii) the Board of
Directors of the Company on October 28, 1999 approved the further amendment of
Section 3.2 of such duly adopted Bylaws in their current form.
IN WITNESS WHEREOF, the undersigned has thereunto set his hand and
affixed the corporate seal this 1st day of November, 1999.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary
-23-
69
EXHIBIT E
SCHEDULE OF INSURANCE COVERAGE
70
L I G H T S P A N
--------------------------------------------------------------------------------
Page 1 of 9 Binder
PROPERTY COVERAGE - INCLUDING
BOILER & MACHINERY
NAMED INSURED
The Lightspan Partnership, Inc.
Academic Systems Corporation
ADDRESS
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INSURING COMPANY
Federal Insurance Company (Chubb)
POLICY NUMBER
3535-93-19
POLICY PERIOD
12:01 am, November 1, 1999-November 1, 2000
BINDER PERIOD
12:01 am, November 1, 1999-February 1, 2000
LIMITS OF INSURANCE & PROPERTY COVERED
* Blanket Business Personal Property including Stock $5,575,000
* Blanket Business Income with Extra Expense $9,000,000
* Blanket Electronic Data Processing Equipment and Media $6,525,000
Property at Exhibition $ 60,000
Property in Transit $ 100,000
Salesperson's Samples $ 10,000
Unscheduled Locations $ 10,000
It is agreed that insurance contracts and premium agreements subsequently
issued shall conform to this binder.
/s/ [Signature Illegible] 10-29-99
---------------------------- ------------------------------------- -----------
Underwriter's Signature Title Date
71
L I G H T S P A N
--------------------------------------------------------------------------------
Page 2 of 9 Binder
PROPERTY COVERAGE - INCLUDING
BOILER & MACHINERY
DEDUCTIBLE
All Perils Except $1,000
Boiler & Machinery Business Income with Extra Expense 24 Hours
ANNUAL PREMIUM $15,000
COVERAGE EXTENSIONS AND CONDITIONS
* Per Chubb "Customarq" Form 80-02-1000
* Cancellation Notice - 60 Days (10 days for Non-Payment)
* California Cancellation/Non-Renewal Endorsement
* Agreed Amount - Business Personal Property, Electronic Data
Processing Equipment, and Business Income with Extra Expense
* Earthquake Sprinkler Leakage
* Replacement Cost Coverage
* Selling Price Valuation on Stock
* $250,000 Blanket Limit of Insurance (per Chubb Form 80-02-0006)
EXCLUSIONS
* Per Policy Form
* Earthquake
* Flood
* Date Recognition (Y2K)**
* Blanket limits per Statement of Values on file with the company.
** New exclusion applies to direct loss, but damage from ensuing perils
covered.
It is agreed that insurance contracts and premium agreements subsequently
issued shall conform to this binder.
/s/ [Signature Illegible] 10-29-99
---------------------------- ------------------------------------- -----------
Underwriter's Signature Title Date
72
L I G H T S P A N
--------------------------------------------------------------------------------
Page 3 of 9 Binder
COMMERCIAL GENERAL LIABILITY
NAMED INSURED
The Lightspan Partnership, Inc.
Academic Systems Corporation
ADDRESS
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INSURING COMPANY
Federal Insurance Company (Chubb)
POLICY NUMBER
3535-93-19
POLICY PERIOD
12:01 am, November 1, 1999-November 1, 2000
BINDER PERIOD
10:01 am, November 1, 1999-February 1, 2000
POLICY FORM
"New" Occurrence; Defense Costs in Addition to Policy Limits
LIMITS OF INSURANCE
General Aggregate $2,000,000
Products -- Completed Operations Aggregate $2,000,000
Personal Injury $1,000,000
Advertising Injury $1,000,000
Each Occurrence $1,000,000
Fire Damage -- Any One Fire Included
Medical Expense -- Any One Person $ 10,000
It is agreed that insurance and premium arrangements subsequently shall
conform to this binder.
[Signature Illegible] 10-29-99
--------------------------- -------------------------- --------
Underwriter's Signature Title Date
73
L I G H T S P A N
--------------------------------------------------------------------------------
Page 4 of 9 Binder
COMMERCIAL GENERAL LIABILITY
ESTIMATED ANNUAL PREMIUM
Adjustable or Audit, Based on 72,100,000 $23,091
Estimated Annual Sales + 200
-------
$23,291
COVERAGE EXTENSIONS AND CONDITIONS
- Per Chubb Customary Form 80-02-0010
- Cancellation Notice -- 60 Days (10 Days for Non-Payment)
- California Cancellation/Non-Renewal Endorsement
- Cumis Counsel Endorsement
- Employee Benefit Administration Liability*
Claims Made; Retroactive Date November 1, 1997;
Limit -- $1,000,000 Each Wrongful Act
$1,000,000 Aggregate; Deductible - $1,000
- Stop Gap Liability -- West Virginia and Puerto Rico
EXCLUSIONS
- Per Policy Form
- Employment Related Practices
- Pollution (except as a result of Hostile Fire)
- Professional Liability
- Benefits Due**
- Millennium Date Change**
* This coverage is written on a Claims-Made basis. Claims under
this coverage must be submitted by the insured to the carrier
during the policy period or within 60 days after expiration
of the policy for coverage to apply. Be aware that late
reporting could result in a disclaimer of coverage letter
from the insurer. This coverage also makes available an
Extended Reporting Period which can be exercised per the
conditions of the policy.
** New -- These Y2K exclusions apply to Employee Benefit
Administration Liability only.
It is agreed that insurance contracts and premiums agreements
subsequently issued shall conform to this binder.
[Signature Illegible] 10-29-99
--------------------------- -------------------------- --------
Underwriter's Signature Title Date
74
L I G H T S P A N
-------------------------------------------------------------------------------
Page 5 of 9 Binder
NON-OWNED AND HIRED AUTOMOBILE
NAMED INSURED
The Lightspan Partnership, Inc.
Academic Systems Corporation
ADDRESS
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INSURING COMPANY
Federal Insurance Company (Chubb)
POLICY NUMBER
7323-48-63
POLICY PERIOD
12:01 am, November 1, 1999 - November 1, 2000
BINDER PERIOD
12:01 am, November 1, 1999 - February 1, 2000
LIMITS OF INSURANCE
Non-Owned and Hired Automobile Liability $1,000,000
Hired Auto Physical Damage; $500 Deductible $ 50,000
ANNUAL PREMIUM 5,789
COVERAGE EXTENSIONS AND CONDITIONS
* Per ISO Form CA 0001 (12/93)
* Cancellation Notice - 60 Days (10 Days for Non-Payment)
* California Changes - Cancellation and Non-Renewal
EXCLUSIONS
* Per Policy Form
It is agreed that Insurance contracts and premium agreements subsequently
issued shall confirm to this binder.
/s/ [Signature Illegible] 10-29-99
---------------------------- ------------------------------- ---------------
Underwriter's Signature Title Date
75
L I G H T S P A N
--------------------------------------------------------------------------------
Page 6 of 9 Binder
CRIME
NAMED INSURED
The Lightspan Partnership, Inc.
Academic Systems Corporation
ADDRESS
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INSURING COMPANY
Federal Insurance Company (Chubb)
POLICY NUMBER
3535-93-19
POLICY PERIOD
12:01 am, November 1, 1999-November 1, 2000
BINDER PERIOD
12:01 am, November 1, 1999-February 1, 2000
LIMITS OF INSURANCE
Blanket Employee Dishonesty $250,000
ERISA - Welfare & Pension Plan Coverage $500,000
Premises Coverage (Money and Securities - Inside) $ 10,000
Transit Coverage (Money and Securities - Outside) $ 10,000
DEDUCTIBLE 1,000 Each Claim
PREMIUM $3,404
It is agreed that insurance contracts and premium agreements subsequently
issued shall conform to this binder.
/s/ [Signature Illegible] 10-29-99
---------------------------- ------------------------------- ---------------
Underwriter's Signature Title Date
76
L I G H T S P A N
--------------------------------------------------------------------------------
PAGE 7 OF 9 Binder
CRIME
COVERAGE EXTENSIONS AND CONDITIONS
* Per Chubb Customary Form 80-02-3000
* Cancellation Notice - 60 days (10 days for Non-Payment)
* Employee Benefit Plans per Schedule on file with the company
EXCLUSIONS
* Per Policy Form
It is agreed that insurance contracts and premium agreements subsequently
issued shall conform to this binder.
/s/ [Signature Illegible] 10-29-99
-------------------------------- ------------------------ ----------------
Underwriter's Signature Title Date
77
LIGHTSPAN
--------------------------------------------------------------------------------
PAGE 9 OF 9 Binder
UMBRELLA LIABILITY
EXCESS OF PRIMARY
o Commercial General Liability
o Employer's Liability
o Non-Owned & Hired Automobile Liability
o Employee Benefit Liability
ANNUAL PREMIUM $8,280
POLICY FORM
o Umbrella Form
COVERAGE EXTENSIONS AND CONDITIONS
o Per Chubb Commercial Umbrella Form 07-02-0815
o Cancellation Notice - 60 Days (10 Days for Non-Payment)
o Duties in the Event of Occurrence, Claim or Suit
o Following Form Foreign Liability
Exclusions
o Per Policy
o Care, Custody or control - Real and Personal Property
o Electronic Errors & Omissions
o Intellectual Property
o Pollution (except as a result of Hostile Fire)
It is agreed that insurance contracts and premium agreements subsequently
issued shall conform to this binder.
/s/ [Signature Illegible] 10-29-99
-------------------------------- ------------------------ ----------------
Underwriter's Signature Title Date
78
L I G H T S P A N
--------------------------------------------------------------------------------
Page 1 of 2 Binder
WORKER'S COMPENSATION AND EMPLOYERS LIABILITY
NAMED INSURED
The Lightspan Partnership, Inc.
Academic Systems Corporation
ADDRESS
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INSURING COMPANY
Fremont Industrial Indemnity Company
POLICY NUMBER
TBA JY 531118-1
JY 531117-1
POLICY PERIOD
12:01 am, November 1, 1999--November 1, 2000
BINDER PERIOD
12:01 am, November 1, 1999--February 1, 2000
COVERAGE AND LIMITS OF INSURANCE
Coverage A - Worker's Compensation - Statutory
Coverage B - Employers Liability
Bodily Injury by Accident $1,000,000 Each Accident
Bodily Injury by Disease $1,000,000 Each Employee
Bodily Injury by Disease $1,000,000 Policy Limit
RATES
Per $100 Payroll; Standard Rates Filed with Each State
It is agreed that insurance contracts and premium agreements subsequently issued
shall conform to this binder.
/s/ [SIGNATURE ILLEGIBLE] Sr. Underwriter 10-29-99
---------------------------- ------------------------------- ---------------
Underwriter's Signature Title Date
79
LIGHTSPAN
--------------------------------------------------------------------------------
Page 2 of 2 Binder
WORKER'S COMPENSATION AND EMPLOYERS LIABILITY
ESTIMATED ANNUAL PREMIUM
Adjustable at Audit $108,118
EXPERIENCE MODIFICATIONS
California (adjustment rating to reflect
inclusion of Academic Systems) 131%
Interest 90%
COVERAGE EXTENSIONS AND CONDITIONS
- Per Policy Form ▇▇ ▇▇▇▇ 00
- Cancellation Notice - 30 days (10 Days for Non-Payment)
- ▇▇▇▇▇▇▇▇▇ and Harbor Workers Compensation Act Coverage
- Other States Coverage
- Stop Gap Liability - All Monopolistic States except
West Virginia and Puerto Rico
- Voluntary Compensation
- Nevada coverage to be written on separate policy - JY-531117-1
EXCLUSIONS
- Per Policy Form
- Employment Related Practices
- Monopolistic States: North Dakota, Ohio, Washington, West
Virginia, Wyoming, Puerto Rico
It is agreed that insurance contracts and premium agreements subsequently
issued shall conform to this binder.
/s/ [SIGNATURE ILLEGIBLE] Sr. Underwriter 10/29/95
----------------------------- ----------------------- --------------------
Underwriter's Signature Title Date
80
L I G H T S P A N
--------------------------------------------------------------------------------
Page 1 of 2 Binder
EDP ERRORS & OMISSIONS COVERAGE
NAMED INSURED
The Lightspan Partnership, Inc.
Academic Systems Corporation
ADDRESS
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INSURING COMPANY
Federal Insurance Company (Chubb)
POLICY NUMBER
3535-93-19
POLICY PERIOD
12:01 am, November 1, 1999-November 1, 2000
BINDER PERIOD
12:01 am, November 1, 1999-November 1, 2000
POLICY FORM
Claims Made (Defense Costs Within the Limit of Liability)
RETROACTIVE DATE
August 27, 1999
LIMITS OF LIABILITY
Each Claim $1,000,000
Aggregate $1,000,000
It is agreed that insurance contracts and premium agreements
subsequently issued shall conform to this binder.
/s/ [Signature Illegible] 11-22-99
--------------------------- -------------------------- --------
Underwriters' Signature Title Date
81
L I G H T S P A N
--------------------------------------------------------------------------------
Page 2 of 2 Binder
EDP ERRORS & OMISSIONS COVERAGE
DEDUCTIBLE
Each Claim $25,000
ESTIMATED ANNUAL PREMIUM
Adjustable at Audit, Based on $72,100,000 Annual Sales $12,979
COVERAGE EXTENSIONS, CONDITIONS, AND EXCLUSIONS
- Per Policy Form
COVERAGE TERRITORY
- Worldwide
This coverage is written on a Claims-Made basis. Claims under
this coverage must be submitted by the insured to the carrier
during the policy period for coverage to apply. Be aware that
late reporting could result in a disclaimer of coverage letter
from the insurer. This coverage also makes available on Extended
Reporting Period which can be exercised per the conditions of
the policy.
It is agreed that insurance contracts and premium agreements
subsequently issued shall conform to this binder.
/s/ [Signature Illegible] 11-22-99
--------------------------- -------------------------- --------
Underwriters' Signature Title Date
82
INSURANCE BINDER 20405 ▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO., INC.
INSURANCE
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ * ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ * (▇▇▇) ▇▇▇-▇▇▇▇
TELEX: 222792 * CABLE: CRYSTINSCOS
TELECOPIER: (▇▇▇) ▇▇▇-▇▇▇▇
California Non-Resident License Number 0198376
------------------------------------------------------------------------------------------------------------------------------------
Insured's The Lightspan Partnership, Inc. Date Typed 11/01/99
Mailing ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ By: jsm/20405
Address ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ A/E: JSM
insured's No.
Telephone Confirmation [X]
---------------------------------------------------------------------------------------
Company Underwriters at Lloyds of London Date
of c/o E Risk Services, LLC With Whom
Agency ▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
New Order [ ] Endorsement [ ] Renewal [X] Rewrite [ ] Information Only [ ] Inception or Effective Date 11/01/99
---------------------------------------------------------------------------------------
Name (if different from mailing address) Expiration 11/01/00
Policy No. TBD
Company Lloyds of London
---------------------------------------------------------------------------------------
Location(s) (if different from mailing address) Prepaid [ ]
Installment [ ]
Premium $39,000
------------------------------------------------------------------------------------------------------------------------------------
Type of Coverage - Directors and Officers Liability/Employment Practices Liability
------------------------------------------------------------------------------------------------------------------------------------
SPECIFICATIONS -
It is hereby understood and agreed that coverage is bound, effective November 1, 1999
to November 1, 2000, as follows:
Limit of Liability Retention Premium*
(Inclusive of Defense Costs) (Each Loss) (One Year)
$5,000,000 $5,000(EPL)/$50,000(D&O) $39,000
*Premium is not inclusive of applicable surplus lines taxes and fees.
Please see the attached Addendum.
------------------------------------------------------------------------------------------------------------------------------------
Mortgage [ ] Loss Payee [ ] Additional Insured [ ] Other [ ]
------------------------------------------------------------------------------------------------------------------------------------
Enclosure [ ]
--------------------------------------------------------------------
Remarks [ ]
--------------------------------------------------------------------
For ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc.
Refer to: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------------------------------
Admitted [ ] Non-Admitted [X]
--------------------------------------------------------------------
The undersigned company agrees, for its respective interests
only and to the extent respectively indicated to effect
insurance or changes as set forth. This agreement is binding
for account of the Assured until acceptance of satisfactory
policy and/or endorsement and/or term agreed to by ▇▇▇▇▇
▇▇▇▇▇▇▇ & Co., Inc. This Binder is issued for a period of 60
days and automatically will be extended for additional
consecutive periods of 60 days until acceptance of the
Policy, Bond, and/or Endorsement by the Assured.
--------------------------------------------------------------------
Name of Underwriter:
(Print or Type) ▇▇▇▇▇▇▇ ▇. Bigger
Signature Original signature is on file with ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc.
--------------------------------------------------------------------
For (Insurance Company) E Risk Services, LLC
Date Signed
--------------------------------------------------------------------
83
[▇▇▇▇▇ ▇▇▇▇▇▇▇ FINANCIAL SERVICES LETTERHEAD]
ADDENDUM TO INSURANCE BINDER 20405
Coverage will be provided under the E Risk Services, LLC Business and
Management Indemnity Insurance Policy, inclusive of the following terms and
conditions:
- Continuity Date - Employment Practices Liability Coverage: November 1, 1997
Directors & Officers and Assured Organization Coverage:
November 1, 1997
1. Breach of Contract Exclusion (Applies to D&O Coverage Only)
2. Professional Liability Exclusion (Applies to D&O Coverage Only)
3. Employment Contract Exclusion (Applies to EPL Coverage Only)
Coverage is bound subject to the Underwriter's receipt, review and acceptance
of E Risk Services, LLC. Directors' and Officers' and Company Reimbursement
Indemnity Insurance Application and E Risk Services, LLC Year 2000 Compliance
Addendum.
84
INSURANCE BINDER 20406 ▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO., INC.
INSURANCE
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ o (▇▇▇) ▇▇▇-▇▇▇▇
TELEX: 222792 o CABLE: CRYSTINSCOS
TELECOPIER: (▇▇▇) ▇▇▇-▇▇▇▇
Insured's The Lightspan Partnership, Inc. Date Typed 11/01/99
Mailing ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ By: mb/20406
Address ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ A/E: RD
Insured's No.
Telephone Confirmation [X]
---------------------------------------------------------------------------------- Date
Company Executive Risk Indemnity, Inc. With Whom
of ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
New Order [X] Endorsement [ ] Renewal [ ] Rewrite [ ] Information Only [ ] Inception or Effective Date 11/01/99
---------------------------------------------------------------------------------- Expiration 11/01/00
Name (if different from mailing address) Policy No. TBD
Company Executive Risk
Prepaid [X]
---------------------------------------------------------------------------------- Installment [ ]
Location(s) (if different from mailing address) Premium $15,000
------------------------------------------------------------------------------------------------------------------------------------
Type of Coverage - Miscellaneous Professional Liability
------------------------------------------------------------------------------------------------------------------------------------
SPECIFICATIONS-
It is hereby understood and agreed that coverage is bound, effective November 1, 1999
to November 1, 2000, as follows:
Limit of Liability Retention Premium
(Inclusive of Defense Costs) (Each Loss) (One Year)
$1,000,000 $10,000 $15,000
Please see the attached Addendum.
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Mortgagee [ ] Loss Payee [ ] Additional Insured [ ] Other [ ]
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Enclosure [ ] The undersigned company agrees, for its respective interests only and to the extent respectively
indicated to effect insurance or changes as set forth. This agreement is binding for account of the
Assured until acceptance of satisfactory policy and/or endorsement and/or term agreed to by ▇▇▇▇▇
▇▇▇▇▇▇▇ & Co., Inc. This Binder is issued for a period of 60 days and automatically will be extended
----------------------------- for additional consecutive periods of 60 days until acceptance of the Policy, Bond, and/or
Remarks [ ] Endorsement by the Assured.
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For ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. Name of Underwriter:
Refer to: ▇▇▇▇▇▇ ▇▇▇▇▇ (Print or Type) ▇▇▇▇ ▇. ▇▇▇▇▇▇
Signature Original signature is on file with ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc.
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Admitted [X] Non-Admitted [ ] For (Insurance Company) Executive Risk
Date Signed
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85
[▇▇▇▇▇ ▇▇▇▇▇▇▇ FINANCIAL SERVICES LETTERHEAD]
ADDENDUM TO INSURANCE BINDER 20406
Coverage will be provided under the Executive Risk Indemnity, Inc. Miscellaneous
Professional Liability Policy, inclusive of the following terms and conditions:
* Retroactive Date - November 1, 1999
1. Internet/Media Coverage Endorsement
2. Computer Services Endorsement
3. Expanded Territory Endorsement
4. 90 Day Cancellation Notice Endorsement
5. 60 Day Post Policy Window to Report Claims
6. Amended Defense Expenses Endorsement
7. Anti-Trust Exclusion
8. Dishonest/Fraudulent Acts Exclusion
9. Unauthorized Access Exclusion (may be deleted upon the Underwriter's
receipt, review and acceptance of the Executive Risk Internet Security
Supplemental Application)
10. Year 2000 Exclusion
11. California State Amendatory Endorsement
Coverage is bound subject to the Underwriter's receipt, review and acceptance of
the Executive Risk Miscellaneous Professional Liability Application and
Intellectual Property Questionnaire.
86
EXHIBIT F
DELAWARE CERTIFICATE OF INCORPORATION
87
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
THE LIGHTSPAN PARTNERSHIP, INC.
▇▇▇▇ ▇. ▇▇▇▇▇▇ hereby certifies that:
ONE: The original name of this corporation is The Lightspan Partnership,
Inc. and the date of filing the original Certificate of Incorporation of this
corporation with the Secretary of State of the State of Delaware is _____, 1999.
TWO: He is the duly elected and acting Chief Executive Officer of The
Lightspan Partnership, Inc., a Delaware corporation.
THREE: The Certificate of Incorporation of this corporation is hereby
amended and restated in its entirety to read as follows:
I.
The name of this corporation is The Lightspan Partnership, Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of New Castle, and the
name of the registered agent of the corporation in the State of Delaware at such
address is Corporation Service Company.
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. The aggregate number of shares that the corporation shall have
authority to issue is one hundred forty-nine million (149,000,000) which is
comprised of eighty-seven million (87,000,000) shares of Common Stock each with
the par value of $0.001 per share, and sixty-one million seven hundred
ninety-five thousand seventy-four (61,795,074) shares of Preferred Stock each
with the par value of $0.001 per share. The Preferred Stock shall be issued in
five series, which shall be designated "SERIES A PREFERRED STOCK," "SERIES B
PREFERRED STOCK," "SERIES C PREFERRED STOCK," "SERIES D PREFERRED STOCK" and
"SERIES E PREFERRED STOCK." The Series A Preferred Stock shall consist of seven
million six hundred seventeen thousand five hundred (7,617,500) shares. The
Series B Preferred Stock shall consist of eleven million eight hundred sixteen
thousand six hundred sixty-four (11,816,664) shares. The Series C Preferred
Stock shall
1.
88
consist of three million three hundred sixty thousand nine hundred ten
(3,360,910) shares. The Series D Preferred Stock shall consist of seventeen
million (17,000,000) shares. The Series E Preferred Stock shall consist of
twenty-two million (22,000,000) shares.
B. 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 Certificate of Incorporation, by filing a
certificate (a "PREFERRED STOCK DESIGNATION") pursuant to the Delaware General
Corporation Law ("DGCL"), to fix or alter from time to time the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions of any wholly unissued series of
Preferred Stock, and to establish from time to time the number of shares
constituting any such series or any of them; and to increase or decrease the
number of shares of any series subsequent to the issuance of shares of that
series, but not below the number of shares of such series then outstanding. In
case the number of shares of any series shall be decreased in accordance with
the foregoing sentence, the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally fixing
the number of shares of such series.
C. The terms and provisions of the Preferred Stock are as follows:
1. DEFINITIONS. For purposes of this Article, the following
definitions shall apply:
a. "COMPANY" shall mean the corporation.
b. "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares or other securities (other than shares of Preferred Stock)
convertible into or exchangeable for Common Stock or convertible into or
exchangeable for securities that are convertible into or exchangeable for Common
Stock.
c. "EMPLOYEE SALE" shall mean the sale or grant of any
right to purchase (including any option or warrant) any shares of Common Stock
to any employee, officer or director of, or consultant to, the Company pursuant
to any employee, officer, director or consultant plan or agreement adopted or
approved by the Board of Directors of the Company, and any exercise of any such
right, net of any such rights to purchase expiring unexercised and net of any
shares repurchased by the Company from employees, officers, directors or
consultants at cost upon termination of employment or tenure pursuant to such
agreements. Employee Sale shall also mean (in addition to the shares described
in the preceding sentence) the sale or grant of any right to purchase (including
any option or warrant) shares of Common Stock to any bank, equipment lessor or
other similar financial institution if and to the extent that the transaction in
which such sale or grant is to be made is approved by the Company's Board of
Directors.
d. "LIQUIDATION PREFERENCE" shall mean $1.00 per share for
the Series A Preferred Stock, $3.00 per share for the Series B Preferred Stock,
$6.00 per share for the Series C Preferred Stock, $3.76 per share for the Series
D Preferred Stock and $5.00 per share for the Series E Preferred Stock (subject
to adjustment from time to time as set forth elsewhere herein).
2.
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e. "OPTIONS" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities.
f. "ORIGINAL ISSUE DATE" shall mean, respectively, the
dates upon which shares of each of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock are first issued.
g. "ORIGINAL ISSUE PRICE" shall mean $1.00 per share for
the Series A Preferred Stock, $3.00 per share for the Series B Preferred Stock,
$6.00 per share for the Series C Preferred Stock, $3.76 per share for the Series
D Preferred Stock and $5.00 per share for the Series E Preferred Stock.
h. "PREFERRED STOCK" shall mean, collectively, the Series
A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock,
the Series D Preferred Stock and the Series E Preferred Stock.
2. DIVIDENDS.
a. DIVIDEND PREFERENCE. The holders of outstanding shares
of Preferred Stock shall be entitled to receive dividends, out of any assets at
the time legally available therefore, prior and in preference to any declaration
or payment of any dividend (payable other than in Common Stock of this Company)
on the Common Stock of this Company, at the rate of ten cents ($0.10) per share
per annum for the Series A Preferred Stock, thirty cents ($0.30) per share per
annum for the Series B Preferred Stock, sixty cents ($0.60) per share per annum
for the Series C Preferred Stock, thirty-seven and six-tenths cents ($0.376) per
share per annum for the Series D Preferred Stock and fifty cents ($0.50) per
share per annum for the Series E Preferred Stock, when, as and if declared by
the Board of Directors; provided, however, that the Board of Directors is under
no obligation to pay dividends to such holders, and such dividends, if any,
shall be noncumulative such that no rights shall accrue to the holders of the
Preferred Stock as a result of the failure to declare such dividends in any
prior year. Such dividends may be payable quarterly or otherwise as the Board of
Directors may from time to time determine. No such dividend shall be declared or
paid on the Preferred Stock of any series in accordance with the preceding
sentences unless dividends are simultaneously declared or paid on the Preferred
Stock of each other series, and if less than the full annual dividend for each
series is so declared or paid, the amounts declared and paid for each series
shall be determined pro rata on the basis of the Liquidation Preferences for the
shares of the respective series. If and to the extent that the Board of
Directors of the Company shall declare and set aside for payment any other and
further amount of cash or property (other than Common Stock of the Company) as a
distribution, such distribution shall be made with equal priority to the Common
Stock and the Preferred Stock, with each share of Preferred Stock of each series
being treated for such purpose as if it had been converted into Common Stock at
the then effective Conversion Rate for such series. For such purpose, all shares
of Preferred Stock held by each holder of Preferred Stock shall be aggregated,
and any resulting fractional share of Common Stock shall be disregarded.
b. PRIORITY OF DIVIDENDS. The Company shall make no
Distribution (as defined below) to the holders of shares of Common Stock in any
fiscal year unless and until full annual dividends shall have been paid, or
declared and set apart, upon all shares of Preferred
3.
90
Stock of each series. The Company shall not permit any subsidiary of the Company
to purchase or otherwise acquire for consideration any shares of stock of the
Company, or take any other action, unless the Company could, under this Section
2, purchase or otherwise acquire such shares or take such other action at such
time and in such manner.
c. DISTRIBUTION. As used in this section, "DISTRIBUTION"
means the transfer of cash or property without consideration, whether by way of
dividend or otherwise (except a dividend in shares of the Company) or the
purchase of shares of the Company (other than in connection with the repurchase
of shares of Common Stock issued to or held by employees, consultants, officers
and directors, at a price not greater than the amount paid by such persons for
such shares upon termination of their employment or services pursuant to
agreements providing for the right of said repurchase, which agreements were
authorized by the unanimous approval of the Board of Directors) for cash or
property.
d. CONSENT TO CERTAIN REPURCHASES. As authorized by
Section 402.5(c) of the California Corporations Code, Sections 502 and 503 of
the California Corporations Code shall not apply with respect to Distributions
made by the Company in connection with the repurchase of shares of Common Stock
issued to or held by employees, consultants, officers and directors, at a price
not greater than the amount paid by such persons for such shares, upon
termination of their employment or services pursuant to agreements providing for
the right of said repurchase upon the unanimous approval of the Board of
Directors.
3. LIQUIDATION RIGHTS.
a. LIQUIDATION PREFERENCE. In the event of any
liquidation, dissolution or winding up of the Company, either voluntary or
involuntary, the holders of the Preferred Stock shall be entitled to receive,
out of the assets of the Company, the Liquidation Preference specified for each
share of Preferred Stock then held by them plus an amount equal to all declared
and unpaid dividends thereon, if any, to the date that payment is made, before
any payment shall be made or any assets distributed to the holders of Common
Stock.
b. PRIORITY. If upon the liquidation, dissolution or
winding up of the Company, the assets to be distributed among the holders of the
Preferred Stock are insufficient to permit the payment to such holders of the
full Liquidation Preference for their shares, then the entire assets of the
Company legally available for distribution shall be distributed with equal
priority and pro rata among the holders of the Preferred Stock in proportion to
the numbers of shares of Preferred Stock of each series held by them multiplied
by the Liquidation Preference for the shares of such series of Preferred Stock.
c. REMAINING ASSETS. After the payment to the holders of
Preferred Stock of the full preferential amounts specified herein, any remaining
assets of the Company shall be distributed ratably to the holders of the
Company's capital stock then outstanding, with each share of Preferred Stock of
each series being treated for such purpose as if it had been converted into
Common Stock at the then effective Conversion Rate for such series. For such
purpose, all shares of Preferred Stock of each series held by each holder of
Preferred Stock shall be aggregated, and any resulting fractional share of
Common Stock shall be disregarded.
4.
91
d. REORGANIZATION. Notwithstanding anything else in these
Articles of Incorporation, a liquidation, dissolution or winding up of the
Company shall be deemed to be occasioned by, or to include, (a) the acquisition
of the Company by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization, merger
or consolidation, whether of the Company with or into any other corporation or
corporations or of any other corporation or corporations with or into the
Company but excluding any merger effected exclusively for the purpose of
changing the domicile of the Company); or (b) a sale of all or substantially all
of the assets of the Company; provided, however, that a consolidation or merger
as a result of which the holders of capital stock of the Company immediately
prior to such merger or consolidation possess (by reason of such holdings) 50%
or more of the voting power of the Company surviving such merger or
consolidation (or other corporation which is the issuer of the capital stock
into which the capital stock of the Company is converted or exchanged in such
merger or consolidation) shall not be treated as a liquidation, dissolution or
winding up of the Company within the meaning of this Section 3.
4. CONVERSION. The holders of the Preferred Stock shall have
conversion rights as follows (the "CONVERSION RIGHTS"):
a. RIGHT TO CONVERT. Each share of Preferred Stock shall
be convertible, without payment of additional consideration, into shares of
Common Stock, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of the Company or any transfer agent for
the Preferred Stock. Each share of Series A Preferred Stock shall be converted
into that number of fully-paid and nonassessable shares of Common Stock that is
determined by dividing $1.00 by the appropriate Conversion Price (as hereinafter
defined). Each share of Series B Preferred Stock shall be convertible into that
number of fully paid and nonassessable shares of Common Stock that is determined
by dividing $3.00 by the appropriate Conversion Price (as hereinafter defined).
Each share of Series C Preferred Stock shall be convertible into that number of
fully paid and nonassessable shares of Common Stock that is determined by
dividing $6.00 by the appropriate Conversion Price (as hereinafter defined).
Each share of Series D Preferred Stock shall be convertible into that number of
fully paid and nonassessable shares of Common Stock that is determined by
dividing $3.76 by the appropriate Conversion Price (as hereinafter defined).
Each share of Series E Preferred Stock shall be convertible into that number of
fully paid and nonassessable shares of Common Stock that is determined by
dividing $5.00 by the appropriate Conversion Price (as hereinafter defined). The
initial Conversion Price for the Series A Preferred Stock shall be $2.00, and
shall be subject to adjustment as provided herein. The initial Conversion Price
for the Series B Preferred Stock shall be $6.00, and shall be subject to
adjustment as provided herein. The initial Conversion Price for the Series C
Preferred Stock shall be $7.52, and shall be subject to adjustment as provided
herein. The initial Conversion Price for the Series D Preferred Stock shall be
$7.52, and shall be subject to adjustment as provided herein. The initial
Conversion Price for the Series E Preferred Stock shall be $10.00, and shall be
subject to adjustment as provided herein. (The number of shares of Common Stock
into which each share of Preferred Stock may be converted is hereinafter
referred to as the "CONVERSION RATE" for each such series.) Upon any decrease or
increase in the Conversion Price or the Conversion Rate for a series, as
described in this Section 4, the Conversion Rate or Conversion Price for such
series, as the case may be, shall be appropriately increased or decreased.
5.
92
b. AUTOMATIC CONVERSION. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at the then
effective Conversion Rate for such share immediately upon the consummation of a
firm commitment underwritten public offering of Common Stock on Form S-1,
provided that the aggregate gross proceeds to the Company are not less than
$20,000,000 (a "QUALIFYING PUBLIC OFFERING").
c. MECHANICS OF CONVERSION. No fractional shares of Common
Stock shall be issued upon conversion of Preferred Stock. All shares of Common
Stock (including fractions) issuable upon conversion of shares of Preferred
Stock held by each holder of Preferred Stock shall be aggregated for the purpose
of determining whether the conversion would result in the issuance of any
fractional share. If, after aggregation, the conversion would result in the
issuance of a fractional share of Common Stock, the Company shall, in lieu of
issuing any fractional shares to which the holder would otherwise be entitled,
pay a sum of cash equal to the then fair market value of such fractional share
as determined in good faith by the Board of Directors of the Company. Before any
holder of Preferred Stock shall be entitled to convert the same into full shares
of Common Stock, and to receive certificates therefor, he shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Company or of any transfer agent for the Preferred Stock, and shall give written
notice to the Company at such office that he elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
paragraph 4(b) above, the outstanding shares of Preferred Stock shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided further, however, that the Company
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such automatic conversion unless either the certificates
evidencing such shares of Preferred Stock are delivered to the Company or its
transfer agent as provided above, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates.
The Company shall, as soon as practicable after such delivery, or after
such agreement and indemnification, issue and deliver at such office to such
holder of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which he shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock, plus any declared and
unpaid dividends on the converted Preferred Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date; provided, however, that if
the conversion is in connection with an underwritten offer of securities
registered pursuant to the Securities Act of 1933, as amended, the conversion
may, at the option of any holder tendering Preferred Stock for conversion, be
conditioned upon the closing of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Preferred Stock shall not be deemed to have
converted such Preferred Stock until immediately prior to the closing of the
sale of such securities.
6.
93
d. ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
(i) SPECIAL DEFINITION. For purposes of this paragraph
4(d), "ADDITIONAL SHARES OF COMMON" shall mean all shares of Common Stock issued
(or, pursuant to paragraph 4(d)(iii), deemed to be issued) by the Company after
the Original Issue Date of a particular series of Preferred Stock, other than:
(a) shares of Common Stock issued or issuable upon
conversion of shares of Preferred Stock;
(b) shares of Common Stock issued or issuable
pursuant to the exercise or conversion of Series A Preferred Stock Purchase
Warrants, Series B Preferred Stock Purchase Warrants, Series C Preferred Stock
Purchase Warrants, Series D Preferred Stock Purchase Warrants, Series E
Preferred Stock Purchase Warrants or any warrants or shares of capital stock
assumed or issued by the Company in any acquisition of another business or
entity;
(c) shares of Common Stock issued or issuable in an
Employee Sale; and
(d) shares of Common Stock issued or issuable as a
dividend or distribution on Preferred Stock or pursuant to any event for which
adjustment is made pursuant to paragraph 4(d)(vi) or (vii) hereof.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in
the Conversion Price of a particular share of Preferred Stock shall be made in
respect of the issuance of Additional Shares of Common unless the consideration
per share for an Additional Share of Common issued or deemed to be issued by the
Company is less than the Conversion Price in effect on the date of, and
immediately prior to such issue, for such share of Preferred Stock. No
adjustment in the Conversion Price otherwise required by this paragraph 4 shall
affect any shares of Common Stock issued upon conversion of Preferred Stock
prior to such adjustment.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON.
(a) OPTIONS AND CONVERTIBLE SECURITIES. In the
event the Company at any time or from time to time after the Original Issue Date
of a particular series of Preferred Stock 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 therein for a
subsequent adjustment of such number) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities or exercise of such
Options, shall be deemed to be Additional Shares 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 that Additional Shares of Common
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to paragraph 4(d)(v) hereof) of such Additional Shares of
Common would be less than the Conversion Price
7.
94
of such series of Preferred Stock 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 Conversion Price of such
series of Preferred Stock 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 in the
consideration payable to the Company, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price of such series of Preferred Stock 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;
(3) no readjustment pursuant to clause (2) above shall
have the effect of increasing the Conversion Price of such series of Preferred
Stock to an amount which exceeds the lower of (i) the Conversion Price of such
Series of Preferred Stock on the original adjustment date, or (ii) the
Conversion Price of such Series of Preferred Stock that would have resulted from
any issuance of Additional Shares of Common between the original adjustment date
and such readjustment date;
(4) upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Conversion Prices 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
as if:
i) 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 the Company for the
issue of such exercised Options plus the consideration actually received by the
Company 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 the Company upon such conversion or exchange, and
ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Company for the Additional Shares of Common deemed
to have been then issued was the consideration actually received by the Company
for the issue of such exercised Options, plus the consideration deemed to have
been received by the Company (determined pursuant to paragraph
8.
95
4(d)(v)) upon the issue of the Convertible Securities with respect to which such
Options were actually exercised; and
(5) if such record date shall have been
fixed and such Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the Conversion Prices which
became effective on such record date shall be canceled as of the close of
business on such record date, and thereafter the Conversion Prices shall be
adjusted pursuant to this paragraph 4(d)(iii) as of the actual date of their
issuance.
(b) STOCK DIVIDENDS. In the event the
Company at any time or from time to time after the Original Issue Date of a
particular series of Preferred Stock shall declare or pay any dividend on the
Common Stock payable in Common Stock, and with respect to which no similar
Common Stock dividend is to be distributed to holders of such series of
Preferred Stock, then and in any such event, Additional Shares of Common shall
be deemed to have been issued immediately after the close of business on the
record date for the determination of holders of any class of securities entitled
to receive such dividend.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE
OF ADDITIONAL SHARES OF COMMON. In the event this Company shall issue Additional
Shares of Common (including Additional Shares of Common deemed to be issued
pursuant to paragraph 4(d)(iii)) without consideration or for a consideration
per share less than the applicable Conversion Price for any series of Preferred
Stock in effect on the date of and immediately prior to such issue, then and in
such event, the Conversion Price for such series of the Preferred Stock shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock and Preferred
Stock outstanding immediately prior to such issue (without counting as
outstanding any Options or Convertible Securities) plus the number of shares of
Common Stock which the aggregate consideration received by the Company for the
total number of Additional Shares of Common so issued would purchase at such
Conversion Price, and the denominator of which shall be the number of shares of
Common Stock and Preferred Stock outstanding immediately prior to such issue
(without counting as outstanding any Options or Convertible Securities) plus the
number of such Additional Shares of Common so issued.
(v) DETERMINATION OF CONSIDERATION. For purposes of
this subsection 4(d), the consideration received by the Company for the issue of
any Additional Shares of Common shall be computed as follows:
(a) CASH AND PROPERTY. Such consideration
shall:
(1) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Company excluding
amounts paid or payable for accrued interest or accrued dividends and excluding
any discounts, commissions or placement fees payable by the Company to any
underwriter or placement agent in connection with the issuance of any Additional
Shares of Common;
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96
(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 good faith by the Board; and
(3) in the event Additional Shares of
Common are issued together with other shares or securities or other assets of
the Company for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (1) and (2) above, as
reasonably determined in good faith by the Board.
(b) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Company for Additional Shares of Common
deemed to have been issued pursuant to paragraph 4(d)(iii)(a), relating to
Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the Company as
consideration for the issue of such Options or Convertible Securities
(determined in the manner described in subparagraph (a) above), 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 Company upon the
exercise of such Options or the 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
(y) 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 or the conversion or exchange of such Convertible Securities.
(c) STOCK DIVIDENDS. Any Additional Shares
of Common deemed to have been issued relating to stock dividends shall be deemed
to have been issued for no consideration.
(vi) ADJUSTMENTS FOR SUBDIVISIONS OR COMBINATIONS
OF COMMON. In the event the outstanding shares of Common Stock shall be
subdivided (by stock split or otherwise than by payment of a dividend in Common
Stock), into a greater number of shares of Common Stock, the Conversion Price
for each series of Preferred Stock in effect immediately prior to such
subdivision shall, concurrently with the effectiveness of such subdivision, be
proportionately decreased. In the event the outstanding shares of Common Stock
shall be combined (by reclassification or otherwise) into a lesser number of
shares of Common Stock, the Conversion Prices in effect immediately prior to
such combination shall, concurrently with the effectiveness of such combination,
be proportionately increased.
(vii) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE
AND SUBSTITUTION. Subject to Section 3(d) above ("LIQUIDATION RIGHTS"), if the
Common Stock issuable upon conversion of the Preferred Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares provided for
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above), the Conversion Prices then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted such that the Preferred Stock shall be convertible into, in lieu of the
number of shares of Common Stock which the holders would otherwise have been
entitled to receive, a number of shares of such other class or classes of stock
which a holder of the number of shares of Common Stock deliverable upon
conversion of the Preferred Stock immediately before that change would have been
entitled to receive in such reorganization or reclassification.
e. NO IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company but will at all times in good
faith assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Preferred Stock against
impairment.
f. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section 4,
the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Company shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Prices at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of Preferred Stock.
g. NOTICES OF RECORD DATE. In the event that this Company shall
propose at any time:
(i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the holders of
any class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization
of its Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge with or into any other corporation, or sell,
lease or convey all or substantially all its property or business, or to
liquidate, dissolve or wind up;
then, in connection with each such event, this Company shall send to the
holders of the Preferred Stock at least 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 the holders of Common
Stock shall be entitled thereto) or for determining rights to vote in respect of
the matters referred to in (iii) and (iv) above.
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Each such written notice shall be given by first class mail, postage
prepaid, addressed to the holders of Preferred Stock at the address for each
such holder as shown on the books of this Company.
h. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Company 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 Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all then outstanding shares of the 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 Preferred Stock,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
5. REDEMPTION. Subject to the provisions of this Section 5, the
Company may redeem, at the applicable Redemption Price (defined below) and
ratably among the holders of the then outstanding Preferred Stock to be
redeemed, all or any portion of the Consenting Preferred (as defined below)
outstanding on the Redemption Date (defined below). As more fully set forth
below in Section 5(a), in order to redeem any shares of Preferred Stock, the
Company shall give notice pursuant to this Section 5 to all holders of the then
outstanding Preferred Stock of all series at the address of each such holder
appearing on the books of the Company or given by such holder to the Company for
the purpose of notice. Any such notice, however, shall be effective (and the
Company shall have the right to redeem any shares of Preferred Stock) only as
follows: (i) with respect to shares of Series A Preferred Stock, the Company
shall have the right to redeem such shares of Series A Preferred Stock (ratably
and with equal priority among each holder thereof), only with the written
consent of holders of not less than a majority of such shares of Series A
Preferred Stock, voting separately as a single class, (ii) with respect to
shares of Series B Preferred Stock, the Company shall have the right to redeem
such shares of Series B Preferred Stock (ratably and with equal priority among
each holder thereof), only with the written consent of holders of not less than
57% of such shares of Series B Preferred Stock, voting separately as a single
class, (iii) with respect to shares of Series C Preferred Stock, the Company
shall have the right to redeem such shares of Series C Preferred Stock (ratably
and with equal priority among each holder thereof), only with the written
consent of holders of not less than a majority of such shares of Series C
Preferred Stock, voting separately as a single class, (iv) with respect to
shares of Series D Preferred Stock, the Company shall have the right to redeem
such shares of Series D Preferred Stock (ratably and with equal priority among
each holder thereof), only with the written consent of holders of not less than
a majority of such shares of Series D Preferred Stock, and (v) with respect to
shares of Series E Preferred Stock, the Company shall have the right to redeem
such shares of Series E Preferred Stock (ratably and with equal priority among
each holder thereof), only with the written consent of holders of not less than
a majority of such shares of Series E Preferred Stock, voting separately as a
single class. In the event that the appropriate consents for redemption have
been obtained from the holders of each of the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock and the Series E Preferred Stock, all of such shares of Preferred Stock
shall be referred to hereinafter as "CONSENTING PREFERRED". The right of
redemption contained in this Section 5 shall not be exercised with respect to
any series of Preferred Stock prior to the fifth anniversary of the Original
Issue Date of the Series E
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Preferred Stock, but may be exercised at any time and from time to time
thereafter. No such notice of redemption shall be effective if and to the extent
that the Company, at the date of such redemption, shall be prohibited by
applicable law from effecting such redemption.
a. NOTICE. If the Company determines to effect a
redemption, it shall give not less than 60 days prior written notice to all
holders of the Preferred Stock that up to a specified percentage of the
outstanding shares of the Preferred Stock shall be redeemed on the date
specified in such notice (the "REDEMPTION DATE") at the applicable Redemption
Price, which shall equal the Original Issue Price per share, as adjusted for any
stock split, reverse or similar recapitalization with respect to such shares,
plus any declared and unpaid dividends on the Preferred Stock (the "REDEMPTION
PRICE"). The notice shall further call upon such holders to surrender to the
Company on or before the Redemption Date, at the place designated in the notice,
such holder's certificate or certificates representing the shares of Preferred
Stock to be redeemed. On or after the Redemption Date, each holder of shares of
Consenting Preferred called for redemption shall surrender the certificate or
certificates evidencing such shares to the Company, at the place designated in
such notice and shall thereupon be entitled to receive payment of the
appropriate Redemption Price. The Company shall be under no obligation to redeem
shares of Preferred Stock (i) for which no stock certificate or affidavit of
lost stock certificate is surrendered or (ii) to the extent that any such
redemption would be in violation of applicable law.
b. CESSATION OF RIGHTS. From and after the Redemption
Date, unless there shall have been a default in payment of the appropriate
Redemption Price, all rights of the holders of shares of the Preferred Stock
designated and called for redemption in the redemption notice (except the right
to receive the Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be outstanding for any purpose whatsoever. The
shares of Preferred Stock not redeemed shall remain outstanding and entitled to
all rights and preferences provided herein.
c. DEPOSIT OF REDEMPTION PRICE. Two days prior to the
Redemption Date, the Company shall deposit in cash the Redemption Price of all
outstanding shares of the Preferred Stock designated for redemption in the
redemption notice, and not yet redeemed or converted, with a bank or trust
company having aggregate capital and surplus in excess of $50,000,000 as a trust
fund for the benefit of the respective holders of the shares designated for
redemption and not yet redeemed. Simultaneously, the Company shall deposit
irrevocable instructions and authority to such bank or trust company to pay, on
and after the Redemption Date, the Redemption Price of the Preferred Stock to
the holders thereof upon surrender of their certificates. Any monies deposited
by the Company pursuant to this Section 5(c) for the redemption of shares that
are thereafter converted into shares of Common Stock pursuant to Section 4 above
no later than the close of business on the Redemption Date shall be returned to
the Company forthwith upon such conversion. The balance of any monies deposited
by the Company pursuant to this Subsection 5(c) remaining unclaimed at the
expiration of six (6) months following the Redemption Date shall thereafter be
returned to the Company, provided that the shareholder to which such monies
would be payable hereunder shall be entitled, upon proof of its ownership of the
Preferred Stock and payment of any bond requested by the Company, to receive
such monies but without interest from the Redemption Date.
13.
100
6. VOTING. Except as otherwise expressly provided herein or as
required by law, the holders of Preferred Stock and the holders of Common Stock
shall vote together and not as separate classes.
a. PREFERRED STOCK. Each holder of shares of Preferred
Stock shall be entitled to the number of votes equal to the number of shares of
Common Stock into which such shares of Preferred Stock held by such holder of
Preferred Stock could then be converted. The holders of shares of the Preferred
Stock shall be entitled to vote on all matters on which the Common Stock shall
be entitled to vote. The holders of the Preferred Stock shall be entitled to
notice of any shareholders' meeting in accordance with the Bylaws of the
Company. Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all shares
into which shares of Preferred Stock held by each holder could be converted),
shall be disregarded.
b. COMMON STOCK. Each holder of shares of Common Stock
shall be entitled to one vote for each share thereof held.
c. ELECTION OF DIRECTORS. The holders of the Series A
Preferred Stock, voting separately as a single class, shall be entitled to elect
two (2) directors. The holders of the Series B Preferred Stock, voting
separately as a single class, shall be entitled to elect three (3) directors.
The holders of the Series C Preferred Stock, voting separately as a single
class, shall be entitled to elect one (1) director. The holders of the Series D
Preferred Stock, voting separately as a single class, shall be entitled to elect
two (2) directors. The holders of Common Stock, voting separately as a single
class, shall be entitled to elect two (2) directors. Any vacancy among the
directors to be elected by any class or series of Preferred Stock or Common
Stock shall be filled, if by the Board of Directors, only at the written
direction of the holders of the class or series entitled to elect the directors
as to whom a vacancy has arisen, or, if by the shareholders, by the shareholders
of the class or series entitled to elect such directors. A meeting of
shareholders to fill any such vacancy shall promptly be called upon request of
holders of not less than 25% of the shares of such class or series (as
applicable) entitled to elect the directors as to whom a vacancy has arisen. In
the event the Bylaws of the Company provide for more than ten (10) directors to
be elected, such additional directors shall be elected by the holders of the
Common Stock and the Preferred Stock, voting together as a single class.
7. AMENDMENTS AND CHANGES.
a. NO SERIES VOTING. Other than as provided in these
Amended and Restated Articles of Incorporation or by law, there shall be no
series voting.
b. APPROVAL BY CLASS. As long as any of the Preferred
Stock shall be issued and outstanding, the Company shall not, without first
obtaining the approval (by vote or consent as provided by law) of the holders of
not less than a majority of the total number of shares of the Preferred Stock
then outstanding (considered together for such purpose as a single class):
(i) amend or repeal any provision of, or add any
provision to, the Company's Amended and Restated Articles of Incorporation or
Bylaws;
14.
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(ii) authorize, create or issue shares of any class
or series of stock having any preference or priority superior to or on a parity
with any such preference or priority of the Preferred Stock;
(iii) enter into any transaction or series of
related transactions, as a result of which voting control of the Company shall
have passed to another person or entity (or group of related persons or
entities);
(iv) increase or decrease (other than for decreases
resulting from conversion of the Preferred Stock) the number of authorized
shares of Preferred Stock;
(v) issue, at any time prior to the second
anniversary of the Original Issue Date of the Series E Preferred Stock, any
Additional Shares of Common if such issuance would result in an adjustment of
the Conversion Price of the Series E Preferred Stock pursuant to Section
4(d)(iv) above;
(vi) effect a fundamental change in the Company's
business strategy as set forth in the Company's Business Plan dated February
1999; or
(vii) amend this Subsection 7(b).
For purposes of clause (i) of this Section 7(b), such an amendment shall
be deemed to occur upon the conversion or exchange of the Preferred Stock in any
reorganization into or for securities of any other corporation or cash or
property other than preferred stock having like rights, preferences, privileges
and powers as, and like restrictions provided for the benefit of, the Preferred
Stock. Like preferences shall be deemed to include the right to convert such
preferred stock into the kind and amount of securities, cash or other property
receivable in such reorganization by a holder of the number of shares of Common
Stock into which such shares of Preferred Stock might have been converted
immediately prior to such reorganization. Notwithstanding anything herein to the
contrary, no separate series vote of the Preferred Stock shall be necessary to
approve any consolidation, merger or sale deemed to be, and treated as, a
liquidation, dissolution or winding up under Section 3(d).
8. NOTICES. Any notice required by the provisions of this Article
IV to be given to the holders of Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at such holder's address appearing on the books of the Company.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the
15.
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whole Board of Directors shall be fixed exclusively by one or more resolutions
adopted by the Board of Directors.
B. BOARD OF DIRECTORS.
1. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.
2. Notwithstanding the foregoing provisions of this section, each
director shall serve until his successor is duly elected and qualified or until
his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
C. VACANCIES.
1. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
2. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the
16.
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directors chosen by the directors then in offices as aforesaid, which election
shall be governed by Section 211 of the DGCL.
D. Subject to paragraph (h) of Section 42 of the Bylaws, the Bylaws may
be altered or amended or new Bylaws adopted by the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the voting stock of the corporation entitled to vote.
The Board of Directors shall also have the power to adopt, amend, or repeal
Bylaws.
E. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
F. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws or by written consent of stockholders in accordance with the Bylaws
prior to the closing of the Initial Public Offering and following the closing of
the Initial Public Offering no action shall be taken by the stockholders by
written consent.
G. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
* * * *
17.
104
FOUR: This Restated Certificate of Incorporation has been duly approved
by the Board of Directors of this Corporation.
FIVE: This Restated Certificate of Incorporation has been duly adopted
in accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and a
majority of the stockholders of the Corporation.
18.
105
IN WITNESS WHEREOF, THE LIGHTSPAN PARTNERSHIP, INC. has caused this
Restated Certificate of Incorporation to be signed by its Chief Executive
Officer in San Diego, California this ____ day of _______ 2000.
THE LIGHTSPAN PARTNERSHIP, INC.
________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chief Executive Officer
19.
106
EXHIBIT G
DELAWARE BYLAWS
107
BYLAWS
OF
THE LIGHTSPAN PARTNERSHIP, INC.
(A DELAWARE CORPORATION)
108
TABLE OF CONTENTS
PAGE
----
ARTICLE I OFFICES....................................................................1
Section 1. Registered Office......................................................1
Section 2. Other Offices..........................................................1
ARTICLE II CORPORATE SEAL.............................................................1
Section 3. Corporate Seal.........................................................1
ARTICLE III STOCKHOLDERS' MEETINGS.....................................................1
Section 4. Place Of Meetings......................................................1
Section 5. Annual Meetings........................................................1
Section 6. Special Meetings.......................................................3
Section 7. Notice Of Meetings.....................................................4
Section 8. Quorum.................................................................5
Section 9. Adjournment And Notice Of Adjourned Meetings...........................5
Section 10. Voting Rights..........................................................5
Section 11. Joint Owners Of Stock..................................................5
Section 12. List Of Stockholders...................................................6
Section 13. Action Without Meeting.................................................6
Section 14. Organization...........................................................7
ARTICLE IV DIRECTORS..................................................................7
Section 15. Number And Term Of Office..............................................7
Section 16. Powers.................................................................7
Section 17. Classes of Directors...................................................8
Section 18. Vacancies..............................................................8
Section 19. Resignation............................................................8
Section 20. Meetings...............................................................9
Section 21. Quorum And Voting.....................................................10
Section 22. Action Without Meeting................................................10
Section 23. Fees And Compensation.................................................10
Section 24. Committees............................................................10
Section 25. Organization..........................................................11
ARTICLE V OFFICERS..................................................................12
i.
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TABLE OF CONTENTS
(CONTINUED)
PAGE
----
Section 26. Officers Designated...................................................12
Section 27. Tenure And Duties Of Officers.........................................12
Section 28. Delegation Of Authority...............................................13
Section 29. Resignations..........................................................13
Section 30. Removal...............................................................13
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED
BY THE CORPORATION........................................................14
Section 31. Execution Of Corporate Instruments....................................14
Section 32. Voting Of Securities Owned By The Corporation.........................14
ARTICLE VII SHARES OF STOCK...........................................................14
Section 33. Form And Execution Of Certificates....................................14
Section 34. Lost Certificates.....................................................15
Section 35. Transfers.............................................................15
Section 36. Fixing Record Dates...................................................15
Section 37. Registered Stockholders...............................................16
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION.......................................17
Section 38. Execution Of Other Securities.........................................17
ARTICLE IX DIVIDENDS.................................................................17
Section 39. Declaration Of Dividends..............................................17
Section 40. Dividend Reserve......................................................17
ARTICLE X FISCAL YEAR...............................................................18
Section 41. Fiscal Year...........................................................18
ARTICLE XI INDEMNIFICATION...........................................................18
Section 42. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents..................................18
ARTICLE XII NOTICES...................................................................21
Section 43. Notices...............................................................21
ARTICLE XIII AMENDMENTS................................................................22
Section 44. Amendments............................................................22
ARTICLE XIV LOANS TO OFFICERS.........................................................23
Section 45. Loans To Officers.....................................................23
ii.
110
BYLAWS
OF
THE LIGHTSPAN PARTNERSHIP, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of New Castle, County of
Wilmington.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors. Nominations of persons
for election to the Board of Directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders: (i) pursuant to the corporation's notice of meeting of
stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by
any stockholder of the corporation who was a stockholder of record at the time
of giving of notice provided for in the following paragraph,
1.
111
who is entitled to vote at the meeting and who complied with the notice
procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii)
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whether either such stockholder or beneficial owner intends to deliver a proxy
statement and form of proxy to holders of, in the case of the proposal, at least
the percentage of the corporation's voting shares required under applicable law
to carry the proposal or, in the case of a nomination or nominations, a
sufficient number of holders of the corporation's voting shares to elect such
nominee or nominees (an affirmative statement of such intent, a "Solicitation
Notice").
(c) Notwithstanding anything in the second sentence of Section
5(b) of these Bylaws to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the corporation
at least one hundred (100) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 5 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5,
in order to include information with respect to a stockholder proposal in the
proxy statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow ▇▇▇▇▇ News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer or President, or (iii) the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in
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previously authorized directorships at the time any such resolution is presented
to the Board of Directors for adoption).
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
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bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period.
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SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented
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in writing. If the action which is consented to is such as would have required
the filing of a certificate under any section of the DGCL if such action had
been voted on by stockholders at a meeting thereof, then the certificate filed
under such section shall state, in lieu of any statement required by such
section concerning any vote of stockholders, that written consent has been given
in accordance with Section 228 of the DGCL.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote, present in person or
by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
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ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. CLASSES OF DIRECTORS.
Subject to the rights of the holders of any series of Preferred Stock to
elect additional directors under specified circumstances, following the closing
of the Initial Public Offering, the directors shall be divided into three
classes designated as Class I, Class II and Class III, respectively. Directors
shall be assigned to each class in accordance with a resolution or resolutions
adopted by the Board of Directors. At the first annual meeting of stockholders
following the closing of the Initial Public Offering, the term of office of the
Class I directors shall expire and Class I directors shall be elected for a full
term of three years. At the second annual meeting of stockholders following the
closing of the Initial Public Offering, the term of office of the Class II
directors shall expire and Class II directors shall be elected for a full term
of three years. At the third annual meeting of stockholders following the
closing of the Initial Public Offering, the term of office of the Class III
directors shall expire and Class III directors shall be elected for a full term
of three years. At each succeeding annual meeting of stockholders, directors
shall be elected for a full term of three years to succeed the directors of the
class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
SECTION 18. VACANCIES.
(a) Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
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until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Section 18 in the
case of the death, removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear
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each other, and participation in a meeting by such means shall constitute
presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 21. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 42 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
SECTION 22. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 23. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so
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approved, by resolution of the Board of Directors, a fixed sum and expenses of
attendance, if any, for attendance at each regular or special meeting of the
Board of Directors and at any meeting of a committee of the Board of Directors.
Nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity as an officer, agent, employee, or
otherwise and receiving compensation therefor.
SECTION 24. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 24 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings
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of any such committee may be held at any place which has been determined from
time to time by such committee, and may be called by any director who is a
member of such committee, upon written notice to the members of such committee
of the time and place of such special meeting given in the manner provided for
the giving of written notice to members of the Board of Directors of the time
and place of special meetings of the Board of Directors. Notice of any special
meeting of any committee may be waived in writing at any time before or after
the meeting and will be waived by any director by attendance thereat, except
when the director attends such special meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. A majority of the
authorized number of members of any such committee shall constitute a quorum for
the transaction of business, and the act of a majority of those present at any
meeting at which a quorum is present shall be the act of such committee
SECTION 25. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President (if a director), or if the President is absent, the
most senior Vice President (if a director), or, in the absence of any such
person, a chairman of the meeting chosen by a majority of the directors present,
shall preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
SECTION 26. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 27. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly
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incident to his office and shall also perform such other duties and have such
other powers, as the Board of Directors shall designate from time to time. If
there is no President, then the Chairman of the Board of Directors shall also
serve as the Chief Executive Officer of the corporation and shall have the
powers and duties prescribed in paragraph (c) of this Section 27.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
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SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 29. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 30. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION
SECTION 31. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
SECTION 32. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
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ARTICLE VII
SHARES OF STOCK
SECTION 33. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical
SECTION 34. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
SECTION 35. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
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(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the DGCL.
SECTION 36. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a
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record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty (60) days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
SECTION 37. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 38. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 39. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation and applicable law, if any, may be declared by the Board of
Directors pursuant to law at any regular or special meeting.
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Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation and applicable
law.
SECTION 40. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 42. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND OFFICERS. The corporation shall indemnify its
directors and officers (for the purposes of this Article XI, "officers" shall
have the meaning defined in Rule 3b-7 promulgated under the ▇▇▇▇ ▇▇▇) to the
fullest extent not prohibited by the DGCL or any other applicable law; provided,
however, that the corporation may modify the extent of such indemnification by
individual contracts with its directors and officers; and, provided, further,
that the corporation shall not be required to indemnify any director or officer
in connection with any proceeding (or part thereof) initiated by such person
unless (i) such indemnification is expressly required to be made by law, (ii)
the proceeding was authorized by the Board of Directors of the corporation,
(iii) such indemnification is provided by the corporation, in its sole
discretion, pursuant to the powers vested in the corporation under the DGCL or
any other applicable law or (iv) such indemnification is required to be made
under subsection (d).
(b) EMPLOYEES AND OTHER AGENTS. The corporation shall have power
to indemnify its employees and other agents as set forth in the DGCL or any
other applicable law. The Board of Directors shall have the power to delegate
the determination of whether indemnification shall be given to any such person
except officers to such other persons as the Board of Directors shall determine.
(c) EXPENSES. The corporation shall advance to any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
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other enterprise, prior to the final disposition of the proceeding, promptly
following request therefor, all expenses incurred by any director or officer in
connection with such proceeding upon receipt of an undertaking by or on behalf
of such person to repay said amounts if it should be determined ultimately that
such person is not entitled to be indemnified under this Section 42 or
otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 42, no advance shall be made by the corporation to
an officer of the corporation (except by reason of the fact that such officer is
or was a director of the corporation in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(d) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director or officer. Any right to indemnification or advances granted by
this Section 42 to a director or officer shall be enforceable by or on behalf of
the person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the DGCL or any other
applicable law for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such executive officer is or was a
director of the corporation) for advances, the corporation shall be entitled to
raise a defense as to any such action clear and convincing evidence that such
person acted in bad faith or in a manner that such person did not believe to be
in or not opposed to the best interests of the corporation, or with respect to
any criminal action or proceeding that such person acted without reasonable
cause to believe that his conduct was lawful. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the DGCL or
any other applicable law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct. In any suit brought by a director or
officer to enforce a right to indemnification or to an advancement of expenses
hereunder, the burden of proving that
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the director or officer is not entitled to be indemnified, or to such
advancement of expenses, under this Section 42 or otherwise shall be on the
corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the DGCL or any
other applicable law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 42.
(h) AMENDMENTS. Any repeal or modification of this Section 42
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Section 42 that
shall not have been invalidated, or by any other applicable law. If this Section
42 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full extent under any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and
shall include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses
of any nature or kind incurred in connection with any proceeding.
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(3) The term the "corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Section 42 with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(5) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 42.
ARTICLE XII
NOTICES
SECTION 43. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and
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addresses of the stockholder or stockholders, or director or directors, to whom
any such notice or notices was or were given, and the time and method of giving
the same, shall in the absence of fraud, be prima facie evidence of the facts
therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate shall state, if such is the fact and if
notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate need not state that notice was not given
to persons to whom notice was not required to be given pursuant to this
paragraph.
22.
132
ARTICLE XIII
AMENDMENTS
SECTION 44. AMENDMENTS. Subject to paragraph (h) of Section 42 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 45. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
23.
133
EXHIBIT H
POST-CLOSING CAPITALIZATION
The following table sets forth the post-closing capitalization of the Company,
assuming:
1. A $11 per share (post-split) price to the public in the IPO;
2. The conversion of all outstanding shares of preferred stock to
common stock;
3. No exercise of stock options after December 31, 1999;
4. No exercise of warrants after December 31, 1999;
5. The sale of 7,500,000 (post-split) shares in the IPO;
6. The sale of 909,091 (post-split) shares to CINAR Corporation
concurrent with the IPO;
7. The sale of 1,136,363 (post-split) shares to Cox concurrent with the
IPO; and
8. The sale of 272,727 (post-split) shares to Gateway concurrent with
the IPO.
All share numbers in the table are post-split.
TOTAL AUTHORIZED: 270,000,000
COMMON STOCK AUTHORIZED: 250,000,000
COMMON STOCK OUTSTANDING: 41,631,431
PREFERRED STOCK AUTHORIZED: 20,000,000
PREFERRED STOCK OUTSTANDING: 0
134
EXHIBIT I
FORM OF OPINION
135
[COOLEY GODWARD LLP LETTERHEAD]
____________, 2000
▇▇▇ Communications Holdings, Inc.
_________________________________
_________________________________
_________________________________
Ladies and Gentlemen:
We have acted as counsel for The Lightspan Partnership, Inc., a Delaware
corporation (the "COMPANY"), in connection with the issuance and sale of
__________ shares of the Company's Common Stock (the "COMMON SHARES") and a
warrant (the "WARRANT") to purchase 750,000 shares of the Company's Common Stock
(the "WARRANT SHARES") to ▇▇▇ Communications Holdings, Inc. (the "INVESTOR")
pursuant to that certain Stock Purchase Agreement dated ____________, 2000 (the
"AGREEMENT"). The Common Shares and the Warrant Shares are collectively referred
to herein as the "SHARES." We are rendering this opinion pursuant to Section 4.9
of the Agreement. Except as otherwise defined herein, capitalized terms used but
not defined herein have the respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the various parties and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement and the Warrant), where authorization, execution
and delivery are prerequisites to the effectiveness of such documents. We have
also assumed: that all individuals executing and delivering documents had the
legal capacity to so execute and deliver; that you have received all documents
you were to receive under the Agreement; that the Agreement and the Warrant are
obligations binding upon you; that you have filed any required California
franchise or income tax returns and have paid any required California franchise
or income taxes; and that
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there are no extrinsic agreements or understandings among the parties to the
Agreement and the Warrant that would modify or interpret the terms thereof or
the respective rights or obligations of the parties thereunder. We have also
assumed that the sale and issuance of the Shares will not be integrated with the
Company's previous sales and issuances of its Series E Preferred Stock.
Our opinion in paragraph 4 is subject to (a) the due reservation for issuance of
the Common Shares by the board of directors of the Company, (b) the
establishment of the price per share by the pricing committee of the board of
directors of the Company at a price per share greater than the par value of the
Company's Common Stock and (c) payment of the purchase price so established.
The Company's Amended and Restated Articles of Incorporation filed July 1, 1999
together with the Certificate of Amendment of the Articles of Incorporation
filed on October 29, 1999 are collectively referred to hereinafter as the
"AMENDED ARTICLES."
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the state of California and the corporate laws
of the state of Delaware. We express no opinion as to whether the laws of any
particular jurisdiction apply, and no opinion to the extent that the laws of any
jurisdiction other than those identified above are applicable to the subject
matter hereof. We are not rendering any opinion as to compliance with any
antifraud law, rule or regulation relating to securities, or, except as
expressly provided herein, to the sale or issuance thereof or any antitrust
laws, rule or regulation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own or lease its property
and assets and to conduct its business as it is currently being conducted.
3. Each of the Agreement and the Warrant has been duly and validly
authorized, executed and delivered by the Company and constitutes a valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, except as rights to indemnity under section
7.14 of the Agreement may be limited by applicable laws and except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to
limitations on availability of equitable relief, including specific
performance.
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4. The Common Shares have been duly authorized, and, upon issuance and
delivery against payment therefor in accordance with the terms of the
Agreement, will be validly issued, outstanding, fully paid and
nonassessable. The Warrant Shares have been duly authorized and reserved
and, upon the issuance and delivery upon exercise of the Warrant and
payment therefore under the terms of the Warrant, will be validly issued,
fully paid and nonassessable.
5. The execution and delivery and performance of the Agreement by the Company
and the issuance of the Shares pursuant thereto do not violate any
provision of the Amended Articles or the Company's Bylaws and do not
constitute a material default under provisions of, and do not violate or
contravene (a) any governmental statute, rule or regulation applicable to
the Company or (b) any order, writ, judgment, injunction, decree,
determination or award which has been entered against the Company and of
which we are aware, the violation or contravention of which would
materially and adversely affect the Company, its assets, financial
condition or operations.
6. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any
court or administrative agency that questions the validity of the
Agreement or that might result, either individually or in the aggregate,
in any material adverse change in the assets, financial condition, or
operations of the Company.
7. All consents, approvals, authorizations or orders of, and filings,
registrations and qualifications with, any regulatory authority or
governmental body in the United States required for the consummation at
the Closing by the Company of the transactions contemplated by the
Agreement, have been made or obtained, except (a) for the filing of a
Notice of Transaction Pursuant To Section 25102(f) of the California
Corporate Securities Law of 1968 and (b) for the filing of a Form D
pursuant to Securities and Exchange Commission Regulation D.
8. The offer and sale of the Shares and the Warrant are exempt from the
registration requirements of the Securities Act of 1933, as amended,
subject to the timely filing of a Form D pursuant to Securities and
Exchange Commission Regulation D.
This opinion is intended solely for your benefit and is not to be relied upon by
any other person, firm, or entity without our prior written consent.
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Very truly yours,
▇▇▇▇▇▇ GODWARD LLP
▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.
139
EXHIBIT J
FORM OF WARRANT
140
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
THE LIGHTSPAN PARTNERSHIP, INC.
WARRANT TO PURCHASE COMMON STOCK
750,000 SHARES
JANUARY __, 2000
THIS CERTIFIES THAT, for value received, ▇▇▇ COMMUNICATIONS HOLDINGS,
INC., a Delaware corporation, with its principal office at _____ ("COX"), or
assigns (the "HOLDER"), is entitled to subscribe for and purchase at the
Exercise Price (defined below) from THE LIGHTSPAN PARTNERSHIP, INC., a
California corporation, with its principal office at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("LIGHTSPAN" or the "CORPORATION") up to 750,000 (on a
post-split basis, assuming the Reverse Stock Split, defined below) shares of the
common stock of the Corporation (the "COMMON STOCK").
1. DEFINITIONS. As used herein, the following terms shall have the following
respective meanings:
(a) "EXERCISE PERIOD" shall mean, as to particular Exercise Shares, the
period beginning on the date such Exercise Shares become exercisable pursuant to
Section 2(c), and ending on the date 18 months from the date of the closing of
the IPO (defined below).
(b) "EXERCISE PRICE" shall initially mean $10.00 per share (on a
post-split basis, assuming the Reverse Stock Split, defined below), subject to
adjustment pursuant to Section 6 hereof.
(c) "EXERCISE SHARES" shall mean the shares of the Corporation's Common
Stock issuable upon exercise of this Warrant.
(d) "IPO" shall mean a firmly underwritten initial public offering of
Lightspan's Common Stock.
2. EXERCISE OF WARRANT.
(a) GENERAL. The rights represented by this Warrant may be exercised in
whole or in part at any time during the Exercise Period to the extent
exercisable by delivery of the following to the Corporation at its address set
forth above (or at such other address as it may designate by notice in writing
to the Holder):
1.
141
(i) An executed Notice of Exercise in the form attached hereto;
(ii) payment of the Exercise Price in cash, by check or wire
transfer, or other immediately available funds acceptable to the Corporation;
and
(iii) this Warrant.
Upon the exercise of the rights represented by this Warrant, a certificate
or certificates for the Exercise Shares so purchased, registered in the name of
the Holder or persons affiliated with the Holder, if the Holder so designates,
shall be issued and delivered to the Holder within a reasonable time after the
rights represented by this Warrant shall have been so exercised.
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Corporation are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
(b) NET EXERCISE. Notwithstanding any provisions herein to the contrary,
if the fair market value of one share of the Corporation's Common Stock is
greater than the Exercise Price (at the date of exercise), in lieu of exercising
this Warrant by payment of cash, the Holder may elect to receive shares equal to
the value (as determined below) of this Warrant (or the portion thereof being
exercised) by surrender of this Warrant at the principal office of the
Corporation together with the properly endorsed Notice of Exercise in which
event the Corporation shall issue to the Holder a number of shares of Common
Stock computed on the date of such exercise using the following formula;
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = The number of shares underlying the Warrant as to which the
Warrant is being exercised.
A = the fair market value of one share of the Corporation's
Common Stock (at the date of such exercise)
B = Exercise Price (as adjusted to the date of such exercise)
For purposes of the above calculation, the fair market value of one share
of Common Stock shall be determined as follows:
(i) If the Common Stock is traded on a national securities exchange
or admitted to unlisted trading privileges on such an exchange, or is listed on
the National Market
2.
142
System (the "National Market System") of the National Association of Securities
Dealers Automated Quotations System (the "NASDAQ"), the fair market value shall
be the average of the last reported sale prices of the Common Stock on such
exchange or on the National Market System on the last ten (10) trading days (or
all such trading days such Common Stock has been traded if fewer than 10 trading
days) before the effective date of exercise of the Conversion Right or if no
such sale is made on any such day, the mean of the closing bid and asked prices
for such day on such exchange or on the National Market System;
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the fair market value shall be the average of the means of
the last bid and asked prices reported on the last ten (10) trading days (or all
such trading days such Common Stock has been traded if fewer than 10 trading
days) before the date of the election (1) by the NASDAQ or (2) if reports are
unavailable under clause (1) above, by the National Quotation Bureau
Incorporated; and
(iii) If the Common Stock is not so listed or admitted to listed
trading privileges and bid and ask prices are not reported, the fair market
value shall be the price per share which the Corporation could obtain from a
willing buyer for shares sold by the Corporation from authorized but unissued
shares, as such price shall be determined by mutual agreement of the Corporation
and the holder of this Warrant.
(c) REVERSE STOCK SPLIT; EXERCISABILITY AND VESTING.
(i) This Warrant assumes the occurrence of a 1-for-2 reverse stock
split (the "Reverse Stock Split") of the Common Stock prior to the time any
Exercise Shares become exercisable. Consequently, if the Reverse Stock Split
does not occur, the number of Exercise Shares and the Exercise Price shall be
1,500,000 and $5.00, subject to further adjustment pursuant to Section 6 hereof;
and in the event a stock split or reverse stock split occurs but at other than a
1:2 ratio (reverse split), then the number of Exercise Shares and the Exercise
Price shall be appropriately fixed consistent with Section 6, subject to further
adjustment pursuant to Section 6.
(ii) The Exercise Shares shall vest, and the Warrant shall be
exercisable for such Exercise Shares, only if the IPO occurs and upon the
occurrence of the conditions as set forth in the vesting schedule in Exhibit A
("VESTING SCHEDULE"). Each of Cox and Lightspan understands and agrees that the
respective rights and obligations of Cox and Lightspan as to the arrangement
described in the Vesting Schedule remain to be defined in the agreement referred
to therein (the terms and provisions of which will be subject to approval by Cox
and Lightspan). Holder and the Corporation acknowledge that neither party is
bound or obligated by this Warrant to enter into any Trial Agreement except as
provided in Section 4 hereto.
3. COVENANTS OF THE CORPORATION.
(a) COVENANTS AS TO EXERCISE SHARES. The Corporation covenants and agrees
that all Exercise Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free
3.
143
from all taxes, liens and charges with respect to the issuance thereof. The
Corporation further covenants and agrees that the Corporation will at all times
during the Exercise Period, have authorized and reserved, free from preemptive
rights, a sufficient number of shares of its Common Stock to provide for the
exercise of the rights represented by this Warrant. If at any time during the
Exercise Period the number of authorized but unissued shares of Common Stock
shall not be sufficient to permit exercise of this Warrant, the Corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.
(b) NO IMPAIRMENT. Except and to the extent as waived or consented to by
the Holder, the Corporation will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the Holder against impairment.
(c) NOTICES OF RECORD DATE. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Corporation shall mail to the Holder, at
least ten (10) days prior to the date specified herein, a notice specifying the
date on which any such record is to be taken for the purpose of such dividend or
distribution.
4. COVENANTS OF THE CORPORATION AND COX.
(a) NEGOTIATION OF TRIAL AGREEMENT. Each of Lightspan and Cox shall use
good faith efforts to negotiate and enter into, on or before January __, 2001, a
written agreement requiring Cox to undertake and complete a one-school trial
(involving at least 300 students) involving Lightspan Achieve Now and
▇▇▇▇▇▇▇▇▇.▇▇▇ products (a "Trial") in a school within a geographic area
appropriately serviced by Cox and specifying, among other things, the scope,
intended objectives, timing and duration of the trial, the Lightspan products to
be used, and the remedies available to each party in case of non-performance
thereunder (the "TRIAL AGREEMENT"). Holder and the Corporation acknowledge that
neither party is bound or obligated by this Warrant to enter into any Trial
Agreement other than the good faith standard described above.
(b) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. As soon as practicable after the date hereof, the
Corporation and the Holder shall prepare and file the appropriate notifications,
if any, as may be required to be filed under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, (the "HSR ACT") with respect to this
Warrant and the transactions contemplated hereby, and after consultation with
the Corporation, the Investor and the Corporation shall promptly make any
additional filing required to be made under the HSR Act and promptly furnish the
appropriate governmental body such additional information as may be requested
under the HSR Act. All fees and expenses incurred by either the Holder or the
Corporation in connection with this section shall be paid by the Holder.
4.
144
5. REPRESENTATIONS OF HOLDER.
(a) ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder represents and
warrants that it is acquiring the Warrant solely for its account for investment
and not with a view to or for sale or distribution of said Warrant or any part
thereof in violation of any applicable securities laws. The Holder also
represents that the entire legal and beneficial interests of the Warrant and
Exercise Shares the Holder is acquiring is being acquired for, and will be held
for, its account only.
(b) SECURITIES ARE NOT REGISTERED.
(i) The Holder understands that the Warrant and the Exercise Shares
have not been registered under the Securities Act of 1933, as amended (the
"ACT") on the basis that no distribution or public offering of the stock of the
Corporation is to be effected. The Holder realizes that the basis for the
exemption may not be present if, notwithstanding its representations, the Holder
has a present intention of acquiring the securities for a fixed or determinable
period in the future, selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the securities. The
Holder has no such present intention.
(ii) The Holder recognizes that the Warrant and the Exercise Shares
must be held indefinitely unless they are subsequently registered under the Act
or an exemption from such registration is available.
(c) DISPOSITION OF WARRANT AND EXERCISE SHARES.
(i) The Holder further agrees not to make any disposition of all or
any part of the Warrant or Exercise Shares in any event unless and until:
(1) The Corporation shall have received a letter secured by
the Holder from the Securities and Exchange Commission stating that no action
will be recommended to the Commission with respect to the proposed disposition;
or
(2) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(3) The Holder shall have notified the Corporation of the
proposed disposition and shall have furnished the Corporation with a detailed
statement of the circumstances surrounding the proposed disposition, and if
reasonably requested by the Corporation, the Holder shall have furnished the
Corporation with an opinion of counsel, reasonably satisfactory to the
Corporation, for the Holder to the effect that such disposition will not require
registration of such Warrant or Exercise Shares under the Act or any applicable
state securities laws.
5.
145
(ii) The Holder understands and agrees that all certificates
evidencing the shares to be issued to the Holder may bear the following
legend(s):
(1) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE CORPORATION RECEIVES AN OPINION OF COUNSEL (WHICH MAY
BE COUNSEL FOR THE CORPORATION) REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT."
(2) any other legend reasonably determined by the corporation.
(iii) The Holder hereby agrees not to sell or otherwise transfer or
dispose of all or any part of this Warrant or the Exercise Shares during a
period specified by the representative of the underwriters of Common Stock (not
to exceed one hundred eighty (180) days) following the effective date of the
registration statement of the Corporation filed under the Act. Holder further
agrees that the Corporation may impose stop-transfer instructions with respect
to securities subject to the foregoing restrictions until the end of such
period. Notwithstanding the above, if permitted in writing by the underwriters,
the Holder may transfer such shares to any corporation or other entity which
controls, is controlled by, or is under common control with the Holder, all as
defined in the following sentence. A corporation or other entity will be
regarded as in control of another corporation or entity if it owns or directly
or indirectly controls 100% of the voting securities or other ownership interest
of the other corporation or entity.
6. ADJUSTMENT OF EXERCISE SHARES AND EXERCISE PRICE. The number of Exercise
Shares and the Exercise Price stated in this Warrant assume the Reverse Stock
Split. Neither the number of Exercise Shares nor the Exercise Price shall be
adjusted as a result of the Reverse Stock Split (but adjustments shall be made
if the Reverse Stock Split does not occur or if a stock split or reverse stock
split is effected at other than a 1:2 ratio (reverse split), as described in
Section 2(c)). In the event of changes in the outstanding Common Stock of the
Corporation other than the Reverse Stock Split, whether by reason of conversion,
stock dividends, split-ups, recapitalizations, reclassifications, combinations
or exchanges of shares, whether in a merger or otherwise, separations,
reorganizations, liquidations, or the like, the number and class of shares
available under the Warrant in the aggregate and the Exercise Price shall be
correspondingly adjusted to give the Holder of the Warrant, on exercise for the
same aggregate Exercise Price, the total number, class, and kind of shares as
the Holder would have owned had the Warrant been exercised prior to the event
and had the Holder continued to hold such shares until after the event requiring
adjustment. The form of this Warrant need not be changed because of any
adjustment in the Exercise Price or in the number or class of Exercise Shares
subject to this Warrant.
7. FRACTIONAL SHARES. No fractional shares shall be issued upon the exercise of
this Warrant as a consequence of any adjustment pursuant hereto. All Exercise
Shares (including fractions) issuable upon exercise of this Warrant may be
aggregated for purposes of determining whether the exercise would result in the
issuance of any fractional share. If, after aggregation,
6.
146
the exercise would result in the issuance of a fractional share, the Corporation
shall, in lieu of issuance of any fractional share, pay the Holder otherwise
entitled to such fraction a sum in cash equal to the product resulting from
multiplying the then current fair market value of an Exercise Share by such
fraction.
8. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not entitle the
Holder to any voting rights or other rights as a stockholder of the Corporation.
9. TRANSFER OF WARRANT. This Warrant and all rights hereunder are transferable
only with the written consent of the Corporation, which consent shall not be
unreasonably withheld; provided, however, that the Holder may transfer this
Warrant to an affiliate of the Holder without such consent on the condition that
the transferee agrees to be bound by all of the restrictions contained herein;
provided further that in all events Cox shall remain obligated pursuant to
Section 4 hereof, and vesting shall be determined thereby, no matter who is the
Holder, unless otherwise agreed by Lightspan and Cox.
10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Corporation may, on such terms as to
indemnity or otherwise as it may reasonably impose (which shall, in the case of
a mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Corporation, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
11. NOTICES, ETC. All notices and other communications required or permitted
hereunder shall be in writing and shall be sent by telex, telegram, express mail
or other form of rapid communications, if possible, and if not then such notice
or communication shall be mailed by first-class mail, postage prepaid, addressed
in each case to the party entitled thereto at the following addresses: (a) if to
the Corporation, to The Lightspan Partnership, Inc., Attention: President, at
the address shown on the first page hereof and (b) if to the Holder, to
President, at the address shown on the first page hereof, or at such other
address as one party may furnish to the other in writing. Notice shall be deemed
effective on the date dispatched if by personal delivery, telecopy, telex or
telegram, two days after mailing if by express mail, or three days after mailing
if by first-class mail.
12. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.
13. GOVERNING LAW. This Warrant and all rights, obligations and liabilities
hereunder shall be governed by the laws of the State of California.
7.
147
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
by its duly authorized officer as of January __, 2000.
THE LIGHTSPAN PARTNERSHIP, INC.
By:
----------------------------------
Title:
----------------------------------
COX ________________
By:
----------------------------------
Title:
----------------------------------
8.
148
NOTICE OF EXERCISE
TO: THE LIGHTSPAN PARTNERSHIP, INC.
(1) [ ] The undersigned hereby elects to purchase ________ shareS of the
Common Stock of The Lightspan Partnership, Inc. (the "CORPORATION") pursuant to
the terms of the attached Warrant, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.
[ ] The undersigned hereby elects to purchase ________ shareS of the
Common Stock of The Lightspan Partnership, Inc. (the "CORPORATION") pursuant to
the terms of the net exercise provisions set forth in Section 2(b) of the
attached Warrant, and shall tender payment of all applicable transfer taxes, if
any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
-------------------------------
(Name)
-------------------------------
-------------------------------
(Address)
(3) The undersigned represents that (i) the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares except in compliance with all applicable securities laws; (ii) the
undersigned is aware of the Corporation's business affairs and financial
condition and has acquired sufficient information about the Corporation to reach
an informed and knowledgeable decision regarding its investment in the
Corporation; (iii) the undersigned is experienced in making investments of this
type and has such knowledge and background in financial and business matters
that the undersigned is capable of evaluating the merits and risks of this
investment and protecting the undersigned's own interests; (iv) the undersigned
understands that the shares of Common Stock issuable upon exercise of this
Warrant have not been registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), by reason of a specific exemption from the registration
provisions of the Securities Act, which exemption depends upon, among other
things, the bona fide nature of the investment intent as expressed herein, and,
because such securities have not been registered under the Securities Act, they
must be held indefinitely unless subsequently registered under the Securities
Act or an exemption from such registration is available; and (v) the undersigned
agrees not to make any disposition of all or any part of the aforesaid shares of
Common Stock unless and until there is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with said registration statement, or the undersigned has
provided the Corporation with an opinion of counsel satisfactory to the
Corporation, stating that such registration is not required.
----------------------- -----------------------------------------
(Date) (Signature)
-----------------------------------------
(Print name)
149
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to
purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name:
-----------------------------------------------------------------------
(Please Print)
Address:
-----------------------------------------------------------------------
(Please Print)
Dated:
--------------------------------
Holder's
Signature:
--------------------------------
Holder's
Address:
--------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
150
EXHIBIT A
100% of the Exercise Shares shall vest upon either of the following dates:
(a) the date that Cox and Lightspan enter into the Trial Agreement;
provided that, such date is on or before January __, 2001 and that prior to such
date each of the following conditions shall have been satisfied:
(i) The waiting period applicable to the exercise of the Warrant
under the HSR Act shall have expired or been terminated; and
(ii) Cox shall have negotiated and entered into the Trial Agreement
in good faith in compliance with Section 4 of the Warrant; it being agreed by
the parties that Cox would not be deemed to be acting in good faith if Cox
agrees to terms in the Trial Agreement that, given ▇▇▇'▇ technology and
infrastructure position and other facts and circumstances, are not reasonably
expected to be able to be performed by Cox in a timely manner consistent with
industry standards.
OR
(b) On January __, 2001 if the IPO and the reincorporation of Lightspan
into the State of Delaware shall have occurred and the waiting period applicable
to the exercise of the Warrant under the HSR Act shall have expired or been
terminated and Lightspan and Cox have not entered into the Trial Agreement
because Cox reasonably determines that it cannot conduct a Trial in a manner
acceptable to the parties due to the fact that delays or other problems with the
development and production of Lightspan's products have resulted in Lightspan's
products not being suitable for such a Trial.
151
SCHEDULE OF EXCEPTIONS
This disclosure of exceptions is made and given pursuant to Section 2 of
the Stock Purchase Agreement dated as of January 11, 2000 (the "Agreement"), by
and between The Lightspan Partnership, Inc. (the "COMPANY") and the Investor
named therein. Unless the context otherwise requires, all capitalized terms are
used herein as defined in the Agreement. The numbers below correspond to the
section numbers of representations and warranties in the Agreement most directly
modified by the exceptions, but such exceptions are intended to modify all of
the Company's representations and warranties.
2.2 CAPITALIZATION. The Company has granted Comdisco Venture Leasing a
warrant to purchase 150,000 shares of Series A Preferred Stock at an exercise
price of $1.00 per share, warrants to purchase an aggregate of 150,000 shares of
Series B Preferred Stock at $3.00 per share and a warrant to purchase 26,625
shares of Series C Preferred Stock at $6.00 per share. The Company has also
granted Silicon Valley Bank a warrant to purchase 70,000 shares of Series C
Preferred Stock at $6.00 per share. In connection with that certain Loan
Agreement and related agreements dated March 26, 1997 (the "March Bridge Loan"),
May 9, 1997 (the "May Bridge Loan"), and June 6, 1997 (the "June Bridge Loan"),
the Company granted warrants to purchase Series D Preferred Stock, to each of
Accel IV L.P., Accel Investors `93 L.P., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Partners, Accel
Keiretsu L.P., Prosper Partners, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VI, KPCB VI
Founders Fund, Institutional Venture Partners V, Institutional Venture
Management V, Microsoft Corporation, Tribune Company, TCI Lightspan Holdings,
and SZ Investments, LLC. These warrants grant the recipients rights to purchase
an aggregate of 183,105 shares of Series D Preferred Stock at an exercise price
of $3.76. The Company has granted ▇▇▇▇▇▇▇▇▇▇ Securities a warrant to purchase
127,659 shares of Series D Preferred Stock at an exercise price of $4.70 per
share. The Company has granted warrants to purchase an aggregate of 42,216
shares of Series E Preferred Stock in connection with its merger with Academic
Systems Corporation. The pre-closing fully-diluted capitalization of the Company
is as set forth on EXHIBIT C attached to the Agreement.
Not included in the fully-diluted capitalization of the Company as set
forth on EXHIBIT C are the springing warrants issued as part of the Series D
Preferred Stock financing. Warrants to purchase up to 3,326,112 shares of the
Company's Common Stock (a maximum of approximately 1,131,012 shares of Common
Stock at an IPO price of $11 per share) at $0.01 per share could be issued upon
the earliest to occur of the following events: (i) a change of control of the
Company, (ii) the sale of the Company's Common Stock in an initial firm
commitment underwritten public offering, provided that the public offering price
per share is not less than $10.00 (subject to adjustment for stock splits, stock
dividends, combinations, recapitalizations and the like) and the aggregate gross
proceeds to the Company are not less than $20,000,000 on either (x) the closing
date of the offering or (y) the six month anniversary of the closing date of the
offering, or (iii) September 10, 2000.
The Company has committed to sell shares of its common stock to ▇▇▇
Communications Holdings, Inc. ($12.5 million at the IPO price), CINAR
Corporation ($10 million at the IPO price) and Gateway Companies, Inc. ($3
million at the IPO price) concurrent with the closing of
1.
152
the IPO. The Company has also issued a warrant to CINAR Corporation to purchase
500,000 shares of the Company's Series E Preferred Stock that will vest upon the
achievement of various agreed-to strategic goals. The Company has committed to
issue a warrant to ▇▇▇ Communications Holdings, Inc. to purchase 750,000 shares
(post-split) of the Company's Common Stock that will vest upon the achievement
of various agreed-to strategic goals.
The Company believes that a small number of former Academic Systems
Corporation shareholders may have rights to additional shares of its stock, or
other compensation in lieu of such shares. As a result, the Company intends to
issue 1,068,015 shares of its Series E Preferred Stock (which would covert into
534,008 shares of common stock upon the close of the IPO), subject to regulatory
approval, to these shareholders. Alternatively, the Company may pay them cash or
some other form of consideration.
2.3 SUBSIDIARIES
The Company has three wholly owned subsidiaries, each of which is a
California corporation: CTV Networks, Lightspan Entertainment, Inc. and Academic
Systems Corporation.
2.5 VALID ISSUANCE OF COMMON STOCK.
The Company's 2000 Equity Incentive Plan (the "2000 PLAN"), and the form
of Stock Option Agreement approved for use with the 2000 Plan, provide for
acceleration of vesting in certain circumstances as set forth in Section 11 of
the 2000 Plan and Section 13 of the form of Stock Option Agreement. None of the
Company's outstanding options are currently subject to the terms of the 2000
Plan or related Stock Option Agreement.
2.7 LITIGATION
No exception.
2.8 EMPLOYEES
Incentive compensation plans for sales people include commissions,
quarterly performance bonuses, annual bonuses, and Millenium stay bonuses for a
subset of the sales organization. Selected management personnel have bonus plans
which are based on the Company's and individual performance.
2.9 INTELLECTUAL PROPERTY
Certain entities have opposed registration applications of the Company.
They are as follows:
1. Time Warner opposed "Chaos in KazMania" and "KazMania." The
Company abandoned its application for these marks.
2. UC Regents opposed "Trail of Gems." The Company abandoned its
application for this ▇▇▇▇.
2.
153
2.10 COMPLIANCE WITH LAW AND OTHER INSTRUMENTS
No Exception.
2.14 REGISTRATION RIGHTS
The Company has granted registration rights to ▇▇▇ Communications
Holdings, Inc. and to Gateway Companies, Inc. as set forth in their respective
Stock Purchase Agreements.
2.15 TITLE TO PROPERTY AND ASSETS
Title to certain assets of the Company is held by Comdisco, TransAmerica
and Technology Credit Corporation and Pentech Financial Services under various
equipment leasing agreements. The Company has entered into a revolving credit
facility with Silicon Valley Bank ("SVB"). The Company's indebtedness to SVB is
secured by a security interest in substantially all of the Company's assets.
Copies of the agreements relating to these transactions have been provided to
the Investor.
Certain of Academic's equipment is subject to a security interest upon
default pursuant to the terms and conditions of Loan and Security Agreement at
Silicon Valley bank dated as of November 11, 1996.
Academic has entered into a Master Equipment Lease #9968 with Phoenix
Leasing dated as of April 10, 1995.
2.16 FINANCIAL STATEMENTS
The Company has delivered or made available to the Investor its audited
financial statements as of and for the fiscal year ended January 31, 1999 and as
of and for the nine-month period ended October 31, 1999. Since October 31, 1999,
the following employees received raises: ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇. Following such raises, each such employee
earns more than $60,000 per year.
2.17 OUTSTANDING INDEBTEDNESS; MATERIAL LIABILITIES
The Company has liabilities and obligations under procurement contracts
entered into in the normal course of business which exceed $100,000 in the
aggregate as follows: (i) Commitments to Sony for approximately $350,000 for
PlayStations(R) and (ii) $1,000,000 for CD's over the next nine months.
2.18 AGREEMENTS; ACTION
(b)(i) CONTRACTS
Line of credit with Silicon Valley Bank extension dated March
26, 1999.
Comdisco Agreements:
3.
154
Master lease dated February 1, 1994
Lease 18SL32154-00 dated July 1, 1996 (new term 7/1/99)
Lease 18SL32154-01 dated October 1, 1996 (new term
7/1/99)
Lease 18SL32154-02 dated January 1, 1996 (new term
7/1/99)
Lease 18SL32154-03 dated April 1, 1997 (new term 7/1/99)
Technology Credit Corporation:
Master Lease Agreement 3585 dated 2/23/94
Schedule #10 dated 11/8/96
Schedule #11 dated 11/4/96
Transamerica:
Master Lease Agreement dated August 14, 1997
Schedule #1 dated November 1, 1997
Schedule #2 dated April 1, 1998
Schedule #3 dated April 1, 1998
Schedule #4 dated November 1, 1998
Schedule #5 dated ▇▇▇▇▇ ▇, ▇▇▇▇
▇▇▇▇▇▇▇ Financial Services:
Master lease dated April 19, 1999
Schedule #300261 dated 4/19/99
Schedule #300261 Supplement 1 dated 6/25/99
Schedule #300261 Supplement 2 dated 9/1/99
Schedule #300261 Supplement 3 dated 7/1/99
Schedule #300261 Supplement 4 dated 12/1/99
Facilities Leases:
▇▇▇▇/▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ (Qualcomm sub-
lease)
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇
Operating Leases:
Tokai Financial Services - Mailing Equipment
IOS - Canon NP6060 Copier
IOS - Canon NP6060 Copier
IOS - Canon 7500 Fax Machine
IOS - OCE 2475 Copier
NMAC - Forklift
Pitney ▇▇▇▇▇ - Mailing Equipment
Santa ▇▇▇▇▇▇ operating leases for furniture and office
equipment
Manufacturing or Joint Development Agreements:
Sony Developer Agreement dated January 26, 1996
Sony PlayStation Development Tools letter dated 6/12/97
4.
155
Digex Server Contract dated June 30, 1997
Fulfillment Agreement between Academic and FGI
Management dated as of June 12, 1998, and purchase
order dated May 5, 1999.
License Agreements or Royalty Agreements:
Sony Sale and License Agreement dated January 26, 1996
Highlights for Children Agreement dated July 1997
Lycos Electronic Mail and Web Director Services
Agreement
The Learning Company Distribution Agreement dated April
1997
Agency for Institutional Technology Agreement dated
October 21, 1994
Multi-Active Education, Inc. (Brainium) License
Agreement dated September 28, 1999
Education World, Inc. Term Sheet dated July 13, 1999
Reseller Agreement between Academic and Oracle
Corporation dated as of October 8, 1998.
Other:
Blackboard / Academic Systems Corporation OEM Agreement
dates as of 17 December, 1999
Yahoo! co-branded distribution agreement dated January
13, 1999
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ Co-branded Development Agreement dated
July 12, 1999
Consulting Agreements (amounts accrued between February 1,
1999 and December 31, 1999):
Sales Consultants:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ($17,851)
Hap's Training and Consulting ($10,765)
▇▇▇ ▇▇▇▇▇▇ ($35,032)
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ($20,156)
▇▇▇▇▇ ▇▇▇▇▇▇ ($10,084)
Mo ▇▇▇▇▇▇▇ ($25,809)
▇▇▇▇▇▇▇ ▇▇▇▇ ($40,277)
Sales Training:
▇▇▇▇ ▇▇▇▇▇▇▇ ($47,500
Professional Development Management:
Quality Leadership Resources ($260,000)
Marketing:
DNA Studio ($36,000)
Flying Dutchgirl Communications ($24,020)
Launch Pad ($40,711)
MS&L ($10,429)
5.
156
▇▇▇▇▇▇▇ & Company ($28,738)
Interactive, Inc. ($16,000)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ($12,000)
New Image Media ($36,725)
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ($27,218)
Grants & Funding:
CRF and Associates ($23,177)
Program Evaluation:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ($20,634)
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ($55,463)
▇▇▇▇▇▇ ▇▇▇▇▇▇ ($49,627)
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ($77,550)
▇▇▇▇▇▇▇ ▇▇▇▇▇ ($30,990)
Product Development:
Commuwerks, Inc ($12,250)
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ($11,445)
Pacific Fusion Technology ($96,146)
▇▇▇▇▇▇ ▇▇▇▇▇▇ ($20,800)
▇▇▇ ▇▇▇▇▇ ($10,300)
▇▇▇▇▇ ▇▇▇▇▇▇▇ ($45,821)
▇▇▇▇▇ ▇▇▇▇ ($10,825)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ($197,050)
Artisan Creative ($28,785)
▇▇▇▇▇ ▇▇▇▇▇▇▇ ($10,612)
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ($11,400)
Nat Fast ($13,550)
Mutation Labs ($12,500)
▇▇▇▇ ▇▇▇▇▇▇▇ ($45,793)
▇▇▇ ▇▇▇▇▇ ($11,135)
Data Processing:
FMT ($10,412)
▇▇ ▇▇▇▇▇▇▇▇▇ ($19,300)
Tax Preparation:
▇▇▇▇▇ & ▇▇▇▇ ($28,000)
Auditors:
Ernst & Young ($361,248)
(c)(ii) The Company has entered into a Loan and Security Agreement
with Silicon Valley Bank and is not currently borrowing against it.
6.