**Exhibit 3.1**

 

**CERTIFICATEOF INCORPORATION**

**OF**

**EBIX, INC.,**

**ASAMENDED**

 

**I**

 

The name of the Corporation is Ebix, Inc.

 

**II**

 

The address of the registered office of theCorporation in the State of Delaware is 100 West Tenth Street in the City ofWilmington, County of New Castle, and the name of its registered agent at thataddress is The Corporation Trust Company.

 

**III**

 

The purpose of the Corporation is to engagein any lawful act or activity for which corporations may be organized under theGeneral Corporation Law of Delaware.

 

**IV**

 

The Corporation is authorized to issue twoclasses of stock designated “Preferred Stock” and “Common Stock,” respectively.The total number of shares of Preferred Stock authorized to be issued is500,000 and each of such shares shall have a par value of ten cents ($.10). Thetotal number of shares of Common Stock authorized to be issued is 10,000,000and each such share shall have a par value of ten cents ($.10).

 

The shares of Preferred Stock may be issuedfrom time to time in one or more series. The Board of Directors is herebyauthorized, by filing a certificate pursuant to the applicable law of the Stateof Delaware, to establish from time to time the number of shares to be includedin each such series, and to fix the designation, powers, preferences and rightsof the shares of each such series and the qualifications, limitations orrestrictions thereof, including but not limited to the fixing or alteration ofthe dividend rights, dividend rate, conversion rights, voting rights, rightsand terms of redemption (including sinking fund provisions), the redemptionprice or prices, and the liquidation preferences of any wholly unissued seriesor shares of Preferred Stock, or any of them; and to increase or decrease thenumber of shares of any series subsequent to the issue of the shares of thatseries, but not below the number of shares of such series then outstanding. Incase the number of shares of any series shall be so decreased, the sharesconstituting such decrease shall resume the status which they had prior to theadoption of the resolution originally fixing the number of shares of suchseries.

 

***Conversion of CommonStock.***

 

Effective at 12:01 a.m., New York Citytime, on October 1, 2002, (a) each eight (8) shares of issuedand outstanding Common Stock shall automatically, without the necessity of anyfurther action on the part of the holder thereof, be converted into andreclassified as one (1) share of Common Stock. Upon the occurrence of theconversion and reclassification effected by this Article IV (the “Conversion”),each

 

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certificate for outstanding shares of Common Stock dated prior to theeffective date of the Conversion (each an “Old Certificate”) shall evidence,and be deemed to evidence, the number of shares of Common Stock into which theshares previously evidenced by such Old Certificate shall have been convertedand reclassified in accordance with this Article IV, and the Conversionshall become effective in accordance with the terms hereof, whether or not anyor all of the Old Certificates shall have been surrendered or new certificatesevidencing the number of shares of Common Stock into which such shares havebeen converted and reclassified have been issued in accordance with Article IVhereof.

 

***SubsequentReissuance of Certificates.***

 

Following the occurrence of the Conversion,each holder of shares of Common Stock shall receive a letter of transmittalfrom the Corporation’s transfer agent and shall either (a) surrender eachOld Certificate evidencing any such shares pursuant to the instructions in suchletter of transmittal or (b) notify the Corporation that such OldCertificate has been lost, stolen or destroyed and execute an agreementsatisfactory to the Corporation to indemnify the Corporation from any lossincurred by it in connection with the reissuance of such lost, stolen ordestroyed Old Certificate. The Corporation shall thereupon issue and deliver,or cause to be issued and delivered, to such holder a certificate orcertificates, in the name shown on such Old Certificate, for the number ofwhole shares of Common Stock into which the shares of Common Stock evidenced bythe surrendered (or lost, stolen or destroyed) Old Certificate have beenconverted and reclassified, dated as of the date on which the Conversion becameeffective. The Corporation shall not be obligated to issue any certificateevidencing shares of Common Stock in connection with the Conversion except inaccordance with this Article IV.

 

***Fractional Shares.***

 

Notwithstanding the foregoing, no fraction ofa share of Common Stock shall be issued by virtue of the Conversion, but inlieu thereof, each holder of shares of Common Stock who would otherwise beentitled to a fraction of a share of Common Stock by virtue of the Conversion(after aggregating all fractional shares of Common Stock to be received by suchholder) shall receive from the Corporation the number of shares of Common Stockthe holder would otherwise be entitled to by virtue of the Conversion, roundedup to the next number of whole shares of Common Stock.

 

***Par Value of CommonStock.***

 

The par value of the Common Stock as setforth above shall remain unchanged by the Conversion.

 

**V**

 

The management of the business and theconduct of the affairs of the Corporation shall be vested in its Board ofDirectors. The number of directors which shall constitute the whole Board ofDirectors shall be fixed by, or in the manner provided in, the Bylaws of theCorporation.

 

**VI**

 

In furtherance and not in limitation of thepowers conferred by statute, the Board of Directors is expressly authorized tomake, repeal, alter, amend and rescind the Bylaws of the Corporation.

 

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**VII**

 

Election of directors at an annual or specialmeeting of shareholders need not be by written ballot.

 

**VIII**

 

Special meetings of the shareholders of theCorporation for any purpose or purposes may be called at any time by the Boardof Directors or by a committee of the Board of Directors which has been dulydesignated by the Board of Directors and whose powers and authority, asprovided in a resolution of the Board of Directors or in the Bylaws of theCorporation, include the power to call such meetings, but such special meetingsmay not be called by any other person or persons; provided, however, that ifand to the extent that any special meeting of stockholders may be called by anyother person or persons specified in any provisions of the Certificate ofIncorporation or any amendment thereto or any certificate filed under Section 151(g) ofthe General Corporation Law of Delaware (or its successor statute as in effectfrom time to time hereunder), then such special meeting may also be called bythe person or persons, in the manner, at the times and for the purposes sospecified.

 

**IX**

 

The Corporation reserves the right to amend,alter, change or repeal any provision contained in this Certificate ofIncorporation, in the manner now or hereafter prescribed by statute, and allrights conferred on stockholders herein are granted subject to thisreservation.

 

**X**

 

The name and mailing address of the incorporatorof the Corporation is:

 

Mr. Richard R. Janssen

c/o Alan J. Barton, Esq.

Paul, Hastings, Janofsky & Walker

1299 Ocean Avenue, Fifth Floor

Santa Monica, California 90401

 

**XI**

 

A director shall not be personally liable tothe Corporation or its stockholders for monetary damages for breach offiduciary duty as a director; provided that this sentence shall not eliminateor limit the liability of a director (i) for any breach of his duty ofloyalty to the Corporation or its stockholders, (ii) for acts or omissionsnot in good faith or which involve intentional misconduct or a knowingviolation of the law, (iii) under Section 174 of the GeneralCorporation Law, or (iv) for any transaction from which the directorderives an improper personal benefit. This Article XI shall not eliminateor limit the liability of a director for any act or omission occurring prior tothe date when this Article XI becomes effective.

 

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**CERTIFICATEOF DESIGNATIONS**

 

**of**

 

**SERIESC PREFERRED STOCK**

 

**of**

 

**DELPHIINFORMATION SYSTEMS, INC.**

 

(Pursuant to Section 151of the

General Corporation Law of theState of Delaware)

 

Delphi Information Systems, Inc., acorporation organized and existing under the General Corporation Law of theState of Delaware (hereinafter called the “Corporation”), DOES HEREBY CERTIFY:

 

That, pursuant to authority vested in theBoard of Directors of the Corporation by its Certificate of Incorporation, andpursuant to the provisions of Section 151 of the General Corporation Law,the Board of Directors of the Corporation on December 1, 1993 adopted thefollowing resolution providing for the issuance of a series of Preferred Stock:

 

RESOLVED, that pursuant to the authorityexpressly vested in the Board of Directors of the Corporation (hereinaftercalled the “Board of Directors” or the “Board”) by the Certificate ofIncorporation of the Corporation, a series of Preferred Stock, par value $.10per share (the “Preferred Stock”), of the Corporation be, and it hereby is,created, and that the designation and amount thereof and the powers,designations, preferences and relative, participating, optional and otherspecial rights of the shares of such series, and the qualifications,limitations or restrictions thereof are as follows:

 

**1. Designation and Amount.**

 

The shares of such series shall he designatedas “Series C Preferred Stock” (the “Series C Preferred Stock”) andthe number of shares constituting the Series C Preferred Stock shall be75,000.

 

**2. Dividends.**

 

(a)  Subject to the prior preferencesand other rights of any capital stock of the Corporation ranking senior to the Series CPreferred Stock, the holders of the Series C Preferred Stock shall beentitled to receive dividends only when, as, and if declared by the Board ofDirectors and such dividends shall be non-cumulative. No dividends (other thanthose payable solely in the Common Stock of the Corporation) shall be paid onany Common Stock or Series A or Series D Preferred Stock of theCorporation during any fiscal year of the Corporation unless a dividend(including the amount of any dividends paid pursuant to the above provisions ofthis Section 2) is paid with respect to all outstanding shares of Series CPreferred Stock in an amount for each such share of Series C PreferredStock equal to or greater than the dividends paid on each share of Series Aand Series D Preferred Stock and Common Stock. The equivalency ofdividends on the Series A, Series C and Series D Preferred Stockshall be determined by dividing the dividends paid on one share of each seriesby the number of shares of Common Stock into which such share could then beconverted and comparing the quotients, and the equivalency of dividends on the Series CPreferred Stock and the Common Stock shall be determined by dividing thedividends paid on one share of Series C Preferred Stock by the number ofshares of Common Stock into which such share could then be converted andcomparing the quotient with the dividends paid on one share of Common Stock.

 

(b)  In the event the Corporation shalldeclare a distribution (other than any distribution described in Section 3)payable in securities of other persons, evidences of indebtedness issued by theCorporation or other persons, assets (excluding cash dividends) or options orrights to purchase any such securities or evidences of indebtedness, then, ineach such case the holders of the Series C Preferred Stock shall be

 

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entitled to a proportionate share of any such distribution as thoughthe holders of the Series C Preferred Stock were the holders of the numberof shares of Common Stock of the Corporation into which their respective sharesof Series C Preferred Stock are convertible as of the record date fixedfor the determination of the holders of Common Stock of the Corporationentitled to receive such distribution.

 

**3. Liquidation Preference.**

 

(a)  In the event of any liquidation,dissolution or winding up of the Corporation, whether voluntary or involuntary,and subject to the prior preferences and other rights of any capital stock ofthe Corporation ranking senior to the Series C Preferred Stock, theholders of the Series C Preferred Stock shall be entitled to receive,prior and in preference to any distribution of any of the assets or surplusfunds of the Corporation to the holders of the Common Stock by reason of theirownership thereof, the amount of $100.00 per share (as adjusted for any stockdividends, combinations or splits with respect to such shares) plus alldeclared but unpaid dividends on such share for each share of Series CPreferred Stock then held by them. If upon the occurrence of such event, theassets and funds thus distributed among the holders of the Series A, B, Cand D Preferred Stock shall be insufficient to permit the payment to suchholders of each such series the full preferential amount to which they arerespectively entitled, then the entire assets and funds of the Corporationlegally available for distribution shall be distributed ratably among theholders of the Series A, B, C, and D Preferred Stock in proportion to thepreferential amount each such holder is otherwise entitled to receive.

 

(b)  After payment to the holders of theSeries C Preferred Stock of the amounts set forth in Section 3(a) above,and subject to the prior preferences and other rights of any capital stock ofthe Corporation ranking senior to the Series C Preferred Stock, the entireremaining assets and funds of the Corporation legally available fordistribution, if any, shall be distributed among the holders of the CommonStock and the holders of Series A, C and D Preferred Stock in proportionto the shares of Common Stock then held by them and the shares of Common Stockwhich they have the right to acquire upon conversion of the shares of Series A,C and D Preferred Stock then held by them.

 

(c)  For purposes of this Section 3,(i) any acquisition of the Corporation by means of merger or other form ofcorporate reorganization in which outstanding shares of the Corporation areexchanged for securities or other consideration issued, or caused to be issued,by the acquiring corporation or its subsidiary (other than a merereincorporation transaction) or (ii) a sale of all or substantially all ofthe assets of the Corporation, shall be treated as a liquidation, dissolutionor winding up of the Corporation and shall entitle the holders of Series A,C and D Preferred Stock and Common Stock to receive at the closing in cash,securities or other property (valued as provided in Section 3(d) below)amounts as specified in Sections 3(a) and 3(b) above.

 

(d)  Whenever the distribution providedfor in this Section 3 shall be payable in securities or property otherthan cash, the value of such distribution shall be the fair market value ofsuch securities or other property as determined in good faith by the Board ofDirectors.

 

**4. Voting Rights.**

 

(a)  Each holder of shares of the Series CPreferred Stock shall be entitled to the number of votes equal to the number ofshares of Common Stock into which such shares of Series C Preferred Stockcould be converted and shall have voting rights and powers equal to the votingrights and powers of the Common Stock (except as otherwise expressly providedherein or as required by law, voting together with the Common Stock as a singleclass) and shall be entitled to notice of any stockholders’ meeting in

 

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accordance with the Bylaws of the Corporation. Fractional votes shallnot, however, be permitted and any fractional voting rights resulting from theabove formula (after aggregating all shares into which shares of Series CPreferred Stock held by each holder could be converted) shall be rounded to thenearest whole number (with one-half being rounded upward).

 

**5. Conversion.**

 

The holders of the Series C PreferredStock shall have conversion rights as follows (the “Conversion Rights”):

 

(a) *RIGHT TO CONVERT.*  Each share of Series C Preferred Stockshall be convertible, at the option of the holder thereof, at any time afterthe date of issuance of such share, at the office of the Corporation or anytransfer agent for such stock, into such number of fully paid and nonassessableshares of Common Stock as is determined by dividing $100.00 by the ConversionPrice applicable to such share, determined as hereinafter provided, in effecton the date the certificate is surrendered for conversion. The price at whichshares of Common Stock shall be deliverable upon conversion of shares of the Series CPreferred Stock (the “Series C Conversion Price”) shall initially be anamount which is equal to 60% of the avenge of the closing prices of the CommonStock in the NASDAQ National Market System, as reported by THE WALL STREETJOURNAL, for those trading days which occur within a period of 120 calendardays ending on the date preceding the date of the first issuance of Series CPreferred Stock. Such initial Series C Conversion Price shall be adjustedas hereinafter provided.

 

(b) *AUTOMATIC CONVERSION.*  Each share or Series C Preferred Stockshall automatically be converted into shares of Common Stock at thethen-effective Series C Conversion Price, upon the earlier of (i) thedate specified by vote or written consent or agreement of holders of at leasttwo-thirds (2/3) of the shares of such series thenoutstanding, or (ii) the date all of the shares of Common Stock into whichthe Series C Preferred may be converted are registered with the UnitedStates Securities and Exchange Commission.

 

(c) *MECHANICS OF CONVERSION.*

 

(i)  Before any holder of Series CPreferred Stock shall be entitled to convert the same into shares of CommonStock, he shall surrender the certificate or certificates therefor, dulyendorsed, at the office of the Corporation or of any transfer agent for suchstock, and shall give written notice to the Corporation at such office that heelects to convert the same and shall state therein the name or names in whichhe wishes the certificate or certificates for shares of Common Stock to beissued. The Corporation shall, as soon as practicable thereafter, issue anddeliver at such office to such holder of Series C Preferred Stock, acertificate or certificates for the number of shares of Common Stock to whichhe shall be entitled as aforesaid. Such conversion shall be deemed to have beenmade immediately prior to the close of business on the date of surrender of theshares of Series C Preferred Stock to be converted, and the person orpersons entitled to receive the shares of Common Stock issuable upon suchconversion shall be treated for all purposes as the record holder or holders ofsuch shares of Common Stock on such date.

 

(d) *ADJUSTMENTS TO SERIES CCONVERSION PRICE FOR CERTAIN DILUTING ISSUES.*

 

(i) *SPECIAL DEFINITIONS.*  For purposes of this Section 5(d), thefollowing definitions apply:

 

(1)                                  “OPTIONS” shall meanrights, options, or warrants to subscribe for, purchase or otherwise acquireeither Common Stock or Convertible Securities (defined below).

 

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(2)                                  “ORIGINAL ISSUE DATE”shall mean the date on which a share of Series C Preferred Stock was firstissued.

 

(3)                                  “CONVERTIBLESECURITIES” shall mean any evidences of indebtedness, shares (other than CommonStock and Series A, B, C or D Preferred Stock) or other securitiesconvertible into or exchangeable for Common Stock.

 

(4)                                  “ADDITIONAL SHARES OFCOMMON STOCK” shall mean all shares of Common Stock issued (or, pursuant to Section 5(d)(iii),deemed to be issued) by the Corporation after the Original Issue Date, otherthan shares of Common Stock issued or issuable:

 

(A)                              upon conversion of sharesof Series A, B, C or D Preferred Stock;

 

(B)                                to officers, directorsor employees of, or consultants to, the Corporation pursuant to stock option orstock purchase plans or agreements on terms approved by the Board of Directors;

 

(C)                                as a dividend ordistribution on Series C Preferred Stock;

 

(D)                               for which adjustment ofthe Series C Conversion Price is made pursuant to Section 5(e);

 

(E)                                 upon exercise ofwarrants to purchase 250,000 shares of Common Stock issued to The InsuranceCompany of North America; or

 

(F)                                 upon exercise ofwarrants to purchase 75,000 shares of Common Stock issued to Silicon Valleyflank.

 

(ii) *NO ADJUSTMENT OFCONVERSION PRICE.*  Anyprovision herein to the contrary notwithstanding, no adjustment in theConversion Price for Series C Preferred Stock shall be made in respect ofthe issuance of Additional Shares of Common Stock unless the consideration pershare (determined pursuant to Section 5(d)(v) hereof) for anAdditional Share of Common Stock issued or deemed to be issued by theCorporation is less than the Series C Conversion Price in effect on thedate of, and immediately prior to, such issue.

 

(iii) *DEEMED ISSUE OFADDITIONAL SHARES OF COMMON STOCK.* In the event the Corporation at any time or from time to time after theoriginal Issue Date shall issue any Options or Convertible Securities or shallfix a record date for the determination of holders of any class of securitiesthen entitled to receive any such Options or Convertible Securities, then themaximum number of shares (as set forth in the instrument relating theretowithout regard to any provisions contained therein designed to protect againstdilution) of Common Stock issuable upon the exercise of such Options or, in thecase of Convertible Securities and Options therefor, the conversion or exchangeof such Convertible Securities, shall be deemed to be Additional Shares ofCommon Stock issued as of the time of such issue or, in case such a record dateshall have been fixed, as of the close of business on such record date,provided that in any such case in which Additional Shares of Common Stock aredeemed to be issued:

 

(1)                                  no further adjustmentsin the Series C Conversion Price shall be made upon the subsequent issueof Convertible Securities or shares of Common Stock upon the exercise of suchOptions or conversion or exchange of such Convertible Securities;

 

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(2)                                  if such Options or ConvertibleSecurities by their terms provide, with the passage of time or otherwise, forany increase or decrease in the consideration payable to the Corporation, ordecrease or increase in the number of shares of Common Stock issuable, upon theexercise, conversion or exchange thereof, the Series C Conversion Pricecomputed upon the original issue thereof (or upon the occurrence of a recorddate with respect thereto), and any subsequent adjustments based thereon,shall, upon any such increase or decrease becoming effective, be recomputed toreflect such increase or decrease insofar as it affects such Options or therights of conversion or exchange under such Convertible Securities (provided,however, that no such adjustment of the Series C Conversion Price shallaffect Common Stock previously issued upon conversion of the Series CPreferred Stock);

 

(3)                                  upon the expirationof any such Options or any rights of conversion or exchange under suchConvertible Securities which shall not have been exercised, the Series CConversion Price computed upon the original issue thereof (or upon theoccurrence of a record date with respect thereto), and any subsequentadjustments based thereon, shall, upon such expiration, be recomputed as if:

 

(A)                              in the case of ConvertibleSecurities or Options for Common Stock, the only Additional Shares of CommonStock issued were the shares of Common Stock, if any, actually issued upon theexercise of such Options or the conversion or exchange of such ConvertibleSecurities and the consideration received therefor or was the considerationactually received by the Corporation for the issue of all such Options, whetheror not exercised, plus the consideration actually received by the Corporationupon such exercise, or for the issue of all such Convertible Securities whichwere actually converted or exchanged, plus the additional consideration, ifany, actually received by the Corporation upon such conversion or exchange, and

 

(B)                                in the case of Optionsfor Convertible Securities, only the Convertible Securities, if any, actuallyissued upon the exercise thereof were issued at the time of issue of suchOptions, and the consideration received by the Corporation for the AdditionalShares of Common Stock deemed to have been then issued was the considerationactually received by the Corporation for the issue of all such Options, whetheror not exercised, plus the consideration deemed to have been received by theCorporation (determined pursuant to Section 5(d)(v)) upon the issue of theConvertible Securities with respect to which such options were actuallyexercised;

 

(4)                                  no readjustmentpursuant to clause (2) or (3) above shall have the effect ofincreasing the Series C Conversion Price to an amount which exceeds thelower of (a) the Series C Conversion Price on the original adjustmentdate (prior to adjustment), or (b) the Series C Conversion Price thatwould have resulted from any issuance of Additional Shares of Common Stockbetween the original adjustment date and such readjustment date; and

 

(5)                                  in the case of anyOptions which expire by their terms not more than 30 days after the dateof issue thereof, no adjustment of the Series C Conversion Price shall bemade until the expiration or exercise of all such options. whereupon suchadjustment shall be made in the same manner provided in clause (3) above.

 

(iv) *ADJUSTMENT OF CONVERSIONPRICE UPON ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.*  In the event the Corporation, at any timeafter the Original Issue Date, shall issue Additional Shares of Common Stock(including Additional Shares of Common Stock deemed to be issued pursuant to Section 5(d)(iii))without consideration or for a consideration per share less than the Series CConversion Price in effect on the date of and immediately prior to such issue,then and in such event, the Conversion Price for such Series C PreferredStock shall be reduced, concurrently with such issue, to a

 

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price (calculated to the nearest cent) at which such Additional Shareswere sold or at which Additional Shares are issuable.

 

(v) *DETERMINATION OFCONSIDERATION.*  For purposesof this Section C.4(d), the consideration received by the Corporation forthe issue of any Additional Shares of Common Stock shall be computed asfollows:

 

(1) *CASH AND PROEPRTY.*  Such considerationshall:

 

(A)                              insofar as it consists ofcash, be computed at the aggregate amount of cash received by the Corporationexcluding amounts paid or payable for accrued interest or accrued dividends;

 

(B)                                insofar as it consistsof property other than cash, be computed at the fair value thereof at the timeof such issue, as determined in good faith by the Board; and

 

(C)                                in the event AdditionalShares of Common Stock are issued together with other shares or securities orother assets of the Corporation for consideration which covers both, theproportion of such consideration so received, computed as provided in clauses (A) and(B) above, as determined in good faith by the Board.

 

(2) *OPTIONS AND CONVERTIBLE SECURITIES.* The consideration per share received by the Corporation for additionalshares of Common Stock deemed to have been issued pursuant to Section 5(d)(iii),relating to Options and Convertible Securities shall be determined by dividing:

 

(A)                              the total amount, if any,received or receivable by the Corporation as consideration for the issue ofsuch Options or Convertible Securities, plus the minimum aggregate amount ofadditional consideration (as set forth in the instruments relating thereto,without regard to any provision contained therein designed to protect againstdilution) payable to the Corporation upon the exercise of such Options or theconversion or exchange of such Convertible Securities, or in the case ofOptions for Convertible Securities, the exercise of such Options for ConvertibleSecurities and the conversion or exchange of such Convertible Securities by

 

(B)                                the maximum number ofshares of Common Stock (as set forth in the instruments relating thereto,without regard to any provision contained therein designed to protect against dilution)issuable upon the exercise of such Options or conversion or exchange of suchConvertible Securities.

 

(e) *ADJUSTMENTS TO CONVERSIONPRICES FOR STOCK DIVIDENDS AND FOR COMBINATIONS OR SUBDIVISIONS OF COMMONSTOCK.*  In the event that theCorporation at any time or from time to time after the Original Issue Dateshall declare or pay, without consideration, any dividend on the Common Stockpayable in Common Stock or in any right to acquire Common Stock for noconsideration, or shall effect a subdivision of the outstanding shares ofCommon Stock into a greater number of shares of Common Stock (by stock split,reclassification or otherwise than by payment of a dividend in Common Stock orin any right to acquire Common Stock), or in the event the outstanding sharesof Common Stock shall be combined or consolidated, by reclassification orotherwise, into a lesser number of shares of Common Stock, then the Series CConversion Price in effect immediately prior to such event shall, concurrentlywith the effectiveness of such event, be proportionately decreased orincreased, as appropriate. In the event that the Corporation shall declare orpay, without consideration, any dividend on the Common Stock payable in anyright to acquire Common Stock for no consideration, then the Corporation shallbe deemed to have made a dividend payable in Common Stock in an amount of

 

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shares equal to the maximum number of shares issuable upon exercise ofsuch rights to acquire Common Stock.

 

(f) *ADJUSTMENTS FORRECLASSIFICATION AND REORGANIZATION.* If the Common Stock issuable upon conversion of the Series CPreferred Stock shall be changed into the same or a different number of sharesof any other class or classes of stock, whether by capital reorganization,reclassification or otherwise (other than a subdivision or combination ofshares provided for in Section 5(e) above or a merger or otherreorganization referred to in Section 3(c) above), the Series CConversion Price then in effect shall, concurrently with the effectiveness ofsuch reorganization or reclassification, be proportionately adjusted so thatthe Series C Preferred Stock shall be convertible into, in lieu of thenumber of shares of Common Stock which the holders would otherwise have beenentitled to receive, a number of shares of such other class or classes of stockequivalent to the number of shares of Common Stock that would have been subjectto receipt by the holders upon conversion of the Series C Preferred Stockimmediately before that change.

 

(g) *NO IMPAIRMENT.*  The Corporation will not, by amendment of itsCertificate of Incorporation or through any reorganization, transfer of assets,consolidation, merger, dissolution, issue or sale of securities or any othervoluntary action, avoid or seek to avoid the observance or performance of anyof the terms to be observed or performed hereunder by the Corporation, but willat all times in good faith assist in the carrying out of all the provisions ofthis Section 5 and in the taking of all such action as may be necessary orappropriate in order to protect the Conversion Rights of the holders of the Series CPreferred Stock against impairment.

 

(h) *CERTIFICATES AS TOADJUSTMENTS.*  Upon theoccurrence of each adjustment or readjustment of any Conversion Price pursuantto this Section 5, the Corporation at its expense shall promptly computesuch adjustment or readjustment in accordance with the terms hereof and prepareand furnish to each holder of Series C Preferred Stock a certificateexecuted by the Corporation’s President or Chief Financial Officer settingforth such adjustment or readjustment and showing in detail the facts uponwhich such adjustment or readjustment is based. The Corporation shall, upon thewritten request at any time of the holder of Series C Preferred Stock,furnish or cause to be furnished to such holder a like certificate settingforth (i) such adjustments and readjustments, (ii) the Series CConversion Price in effect, and (iii) the number of shares of Common Stockand the amount, if any, of other property which at the time would be receivedupon the conversion of the Series C Preferred Stock.

 

(i) *NOTICES OF RECORD DATE.*  In the event that the Corporation shallpropose at any time: (i) to declare any dividend or distribution upon itsCommon Stock, whether in cash, property, stock or other securities, whether ornot a regular cash dividend and whether or not out of earnings or earnedsurplus (ii) to offer for subscription pro rata to the holders of theclass or series of its stock any additional shares of stock of any class orseries or other rights; (iii) to effect any reclassification orrecapitalization of its Common Stock outstanding involving a change in theCommon Stock; or (iv) to merge or consolidate with or into any othercorporation, or sell, lease or convey all or substantially all of its assets,or to liquidate, dissolve or wind up; then, in connection with each such event,the Corporation shall send to the holders of Series C Preferred Stock:

 

(i)                                     at least twenty(20) days’ prior written notice of the date on which a record shall betaken for such dividend, distribution or subscription rights (and specifyingthe date on which the holders of Common Stock shall be entitled thereto) or fordetermining rights to vote, if any, in respect of the matters referred to in (iii) and(iv) above; and

 

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(ii)                                  in the case of thematters referred to in (iii) and (iv) above, at least twenty(20) days’ prior written notice of the date when the same shall take place(and specifying the date on which the holders of Common Stock shall be entitledto exchange their Common Stock for securities or other property deliverableupon the occurrence of such event).

 

(j)* ISSUE TAXES.*  TheCorporation shall pay any and all issue and other taxes that may be payable in respectof any issue or delivery of shares of Common Stock on conversion of Series CPreferred Stock pursuant hereto; provided, however, that the Corporation shallnot be obligated to pay any transfer taxes resulting from any transfer requestby any holder in connection with any such conversion.

 

(k)* RESERVATION OF STOCK ISSUABLE UPON CONVERSION.*  The Corporation shall at all times reserveand keep available out of its authorized but unissued shares of Common Stock,solely for the purpose of effecting the conversion of the shares of the Series CPreferred Stock, such number of its shares of Common Stock as shall from timeto time be sufficient to effect the conversion of all outstanding shares of theSeries C Preferred Stock; and if at any time the number of authorized butunissued shares of Common Stock shall not be sufficient to effect theconversion of all then outstanding shares of the Series C Preferred Stock,the Corporation will take such corporate action as may, in the opinion of itscounsel, be necessary to increase its authorized but unissued shares of CommonStock to such number of shares as shall be sufficient for such purpose,including, without limitation, engaging in best efforts to obtain the requisitestockholder approval of any necessary amendment to this Certificate.

 

(l)* FRACTIONAL SHARES.*  Nofractional share shall be issued upon the conversion of any share or shares of Series CPreferred Stock. All shares of Common Stock (including fractions thereof)issuable upon conversion of more than one share of Series C PreferredStock by a holder thereof shall be aggregated for purposes of determiningwhether the conversion would result in the issuance of any fractional share.If, after the aforementioned aggregation, the conversion would result in theissuance of a fraction of a share of Common Stock, the Corporation shall, inlieu of issuing any fractional share, pay the holder otherwise entitled to suchfraction a sum in cash equal to the fair market value of such fraction on thedate of conversion (as determined by reference to the stock price quoted in THEWALL STREET JOURNAL or as reported on NASDAQ for the day immediately prior tosuch conversion).

 

(m)* NOTICES.*  Any noticerequired by the provisions of this Section 5 to be given to the holders ofshares of Series C Preferred Stock shall be deemed given if deposited inthe United States mail, postage prepaid, and addressed to each holder of recordat his address appearing on the books of the Corporation.

 

**6. Restrictions and Limitations.**

 

(a)  So long as any shares of Series CPreferred Stock remain outstanding, the Corporation shall not, without the voteor written consent by the holders of at least sixty-six and two-thirds (662¤3) ofthe then outstanding shares of the Series C Preferred Stock, voting as asingle class:

 

(i)                                     Redeem, purchaseor otherwise acquire for value (or pay into or set aside for a sinking fund forsuch purpose) any share or shares of Series C Preferred Stock otherwisethan by conversion in accordance with Section 5 hereof;

 

(ii)                                  Redeem, purchase orotherwise acquire (or pay into or set aside for sinking fund for such purpose)any of the Common Stock; provided, however, that this restriction shall notapply to the repurchase of shares of Common Stock from employees, officers,directors, consultants or other persons performing services for the Company orany subsidiary pursuant to agreements under which the Company

 

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has the option to repurchase such shares at cost or at cost plusinterest at a rate not to exceed nine percent (9%) per annum upon theoccurrence of certain events, such as the termination of employment, providedfurther, however, that the total amount applied to the repurchase of shares ofCommon Stock shall not exceed $100,000 during any twelve (12) month period;

 

(iii)                               Authorize or issue, orobligate itself to issue, any other equity security (including any securityconvertible into or exercisable for any equity security) senior to or on aparity with the Series C Preferred Stock as to voting rights, conversionrights (including antidilution), dividend rights, redemption rights, orliquidation preferences; provided however, that this restriction shall notapply to equity securities issued in connection with the company’s acquisitionof eighty percent (80%) or more of the shares or assets of another corporationand which have been approved by the Company’s Board of Directors.

 

(iv)                              Effect any sale, lease,assignment, transfer, or other conveyance of all or substantially all of theassets of the Corporation or any of its subsidiaries, or any consolidation ormerger involving the Corporation or any of its subsidiaries, or anyreclassification or other change of any stock, or any recapitalization of theCorporation if such action is substantially prejudicial to the holders of Series CPreferred Stock;

 

(b)  The Corporation shall not amend itsCertificate of Incorporation or Bylaws without the approval, by vote or writtenconsent, by the holders of 66 2¤3%of the Series C Preferred Stock if such amendment would change any of therights, preferences or privileges provided for herein for the benefit of anyshares of Series C Preferred Stock. Without limiting the generality of thepreceding sentence, the Corporation will not amend its Certificate ofIncorporation or Bylaws without the approval of the holders of 66 2¤3%of the Series C Preferred Stock if such amendment would:

 

(i)                                     Reduce thedividend rates on the Series C Preferred Stock provided for herein, or ifcumulative, make such dividends noncumulative, or defer the date from whichdividends will accrue, or cancel accrued and unpaid dividends, or change therelative seniority rights of the holders of the Series C Preferred Stockas to the payment of dividends in relation to the holders of any other capitalstock of the Corporation;

 

(ii)                                  Reduce the amountpayable to the holders of the Series C Preferred Stock upon the voluntaryor involuntary liquidation, dissolution, or winding up of the Corporation, orchange the relative seniority of the liquidation preferences of the holders ofthe Series C Preferred Stock to the rights upon liquidation of the holdersof any other capital stock of the Corporation;

 

(iii)                               Make the Series CPreferred Stock redeemable at the option of the Corporation; or

 

(iv)                              Cancel or modify the ConversionRights of the Series C Preferred Stock provided for in Section 5hereof.

 

**7. No Reissuance of Series C PreferredStock.**

 

No share or shares of Series C PreferredStock acquired by the Corporation by reason of redemption, purchase, conversionor otherwise shall be reissued, and all such shares shall be canceled, retiredand eliminated from the shares which the Corporation shall be authorized toissue.

 

IN WITNESS WHEREOF, this Certificate ofDesignations is executed on behalf of the Corporation by its President andattested by its Secretary as of this 13th day of December, 1993.

 

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|       | David J. Torrence          |
|------------|----------------------------|
|       | President                  |
| ** ** | **Attest:**                |
| ** ** | ** **                 |
| ** ** | ** **                 |
|       | Daniel F. Dunne  Secretary |

 

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**AMENDEDCERTIFICATE OF DESIGNATIONS**

 

**of**

 

**SERIESD PREFERRED STOCK**

 

**of**

 

**DELPHIINFORMATION SYSTEMS, INC.**

 

(pursuant to Section 151of the

General Corporation Law of theState of Delaware)

 

Delphi Information Systems, Inc. acorporation organized and existing under the General Corporation Law of theState of Delaware (hereinafter called the “Corporation”), DOES HEREBY CERTIFY:

 

That, no shares of the Corporation’s Series DPreferred Stock, par value $.10 per share (the “Series D Preferred Stock”),have been issued; and

 

That, pursuant to authority vested in theBoard of Directors of the Corporation by its Certificate of Incorporation, andpursuant to the provisions of Section 151 of the General Corporation Law,the Board of Directors of the Corporation on May     , 1994 adopted the following resolutionproviding for the Amended Certificate of Designations of Series DPreferred Stock:

 

RESOLVED, that pursuant to the authorityexpressly vested in the Board of Directors of the Corporation (hereinaftercalled the “Board of Directors” or the “Board”) by the Certificate ofIncorporation of the Corporation, the Corporation’s Certificate of Designationsof Series D Preferred Stock, par value $.10 per share (the “Series DPreferred Stock”), of the Corporation be, and it hereby is, amended andrestated to read as follows:

 

**1. Designation and Amount.**

 

The shares of such series shall be designatedas Series D Preferred Stock (the “Series D Preferred Stock”) and thenumber of shares constituting the Series D Preferred Stock shall be16,577.

 

**2. Dividends.**

 

(a)  Subject to the prior preferencesand other rights of any capital stock of the Corporation ranking senior to the Series DPreferred Stock, the holders of the Series D Preferred Stock shall beentitled to receive dividends only when, as, and if declared by the Board ofDirectors and such dividends shall be noncumulative. No dividends (other thanthose payable solely in the Common Stock of the Corporation) shall be paid onany Common Stock of the Corporation during any fiscal year of the Corporationunless a dividend (including the amount of any dividends paid pursuant to theabove provisions of this Section 2) is paid with respect to alloutstanding shares of Series D Preferred Stock in an amount for each suchshare of Series D Preferred Stock equal to or greater than the aggregateamount of such dividends for all shares of Common Stock into which each suchshare of Series D Preferred Stock could then be converted.

 

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(b)  In the event the Corporation shalldeclare a distribution (other than any distribution described in Section 3)payable in securities of other persons, evidences of indebtedness issued by theCorporation or other persons, assets (excluding cash dividends) or options orrights to purchase any such securities or evidences of Indebtedness, then, ineach such case the holders of the Series D Preferred Stock shall beentitled to a proportionate share of any such distribution as though theholders of the Series D Preferred Stock were the holders of the number ofshares of Common Stock of the Corporation into which their respective shares ofSeries D Preferred Stock are convertible as of the record date fixed forthe determination of the holders of Common Stock of the Corporation entitled toreceive such distribution.

 

**3. Liquidation Preference.**

 

(a)  In the event of any liquidation,dissolution or winding up of the corporation, whether voluntary or involuntary,and subject to the prior preferences and other rights of any senior class ofpreferred stock of the Corporation which the Board of Directors may designateor authorize from time to time (“Senior Preferred Stock”), if any, (i) theholders of the Series D Preferred Stock shall be entitled to receive,prior and in preference to any distribution of any of the assets or surplusfunds of the Corporation to the holders of any junior class of preferred stockwhich the Board may designate or authorize from time to time that is to bejunior in liquidation to any of the Series D Preferred Stock, the Series BPreferred Stock, the Series C Preferred Stock, any Senior Preferred Stockor any Parity Preferred Stock (as defined below) (“Junior Preferred Stock”), ifany, or to holders of Common Stock, by reason of their ownership thereof, theamount of $226.20 per share (as adjusted for any stock dividends, combinationsor splits with respect to such shares) plus all declared but unpaid dividendson such share for each share of Series D Preferred Stock then held bythem; (ii) the holders of the Series B Preferred Stock shall beentitled to receive, prior and in preference to any distribution of any of theassets or surplus funds of the Corporation to holders of Junior PreferredStock, if any, or to holders of Common Stock, by reason of their ownershipthereof, the amount of $84.745 per share (as adjusted for any stock dividends,combinations or splits with respect to such shares) plus all declared butunpaid dividends on such share for each share of Series B Preferred Stockthen held by them; (iii) the holders of the Series C Preferred Stockshall be entitled to receive, prior and in preference to any distribution ofany of the assets or surplus funds of the Corporation to holders of JuniorPreferred Stock, if any, or to holders of Common Stock, by reason of theirownership thereof, the amount of $100.00 per share (as adjusted for any stockdividends, combinations or splits with respect to such shares) plus alldeclared but unpaid dividends on such share for each share of Series CPreferred Stock then held by them; and (iv) the holders of any other classor series of preferred stock which the Board may designate or authorize fromtime to time that is to rank on parity in liquidation with the Series DPreferred Stock, the Series B Preferred Stock or the Series CPreferred Stock (“Parity Preferred Stock”), if any, shall be entitled toreceive, prior and in preference to any distribution of any of the assets orsurplus funds of the Corporation to holders of Junior Preferred Stock, if any,or to holders of Common Stock, by reason of their ownership thereof, the amountper share specified in the certificate of designations of such Parity PreferredStock (as adjusted for any stock dividends, combinations or splits with respectto such shares) plus all declared but unpaid dividends on such share for eachshare of Parity Preferred Stock then held by them. If upon the occurrence of suchevent and after distributions to holders of Senior Preferred Stock, if any, inaccordance with the terms set forth in the instrument or instrumentsdesignating or authorizing Senior Preferred Stock, if any, the assets and fundsthus distributed among the holders of the Series B, C and D PreferredStock and Parity Preferred Stock, if any, shall be insufficient to permit thepayment to such holders of the full aforesaid preferential amounts, then theentire assets and funds of the Corporation legally available for distributionshall be distributed ratably among the holders of the Series B, C and DPreferred Stock and Parity Preferred Stock, if any, in proportion to thepreferential amount each such holder is otherwise entitled to receive.

 

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(b)  After payment to the holders of Series B,C and D Preferred Stock and Parity Preferred Stock, if any, of the amounts setforth in Section 3(a) above, holders of Junior Preferred Stock, ifany, shall receive such amounts as they are entitled to receive as set forth inthe instrument or instruments designating such Junior Preferred Stock.

 

(c)  After payment to the holders ofSenior Preferred Stock, if any, and Series B, C and D Preferred Stock andParity Preferred Stock, if any, and the holders of Junior Preferred Stock ofthe amounts set forth in Section 3(a) and (b) above, the entireremaining assets and funds of the Corporation legally available fordistribution, if any, shall be distributed among the holders of the SeniorPreferred Stock, if any, (if so provided in the instrument or instrumentsdesignating or authorizing such Senior Preferred Stock), the holders of Series Cand D Preferred Stock and Parity Preferred Stock, if any, (if so provided inthe instrument or instruments designating such Parity Preferred Stock) inproportion to the shares of Common Stock which they have the right to acquireupon conversion of the shares of Series C and D Preferred Stock and ParityPreferred Stock, if any, then held by them, holders of Junior Preferred Stock,if any, (if so provided in the instrument or instruments designating suchJunior Preferred Stock) and the holders of Common Stock in proportion to theshares of Common Stock then held by such holders.

 

(d)  For purposes of this Section 3,(i) any acquisition of the Corporation by means of merger or other form ofcorporate reorganization in which outstanding shares of the corporation areexchanged for securities or other consideration issued, or caused to be issued,by the acquiring corporation or its subsidiary (other than a merereincorporation transaction) or (ii) a sale of all or substantially all ofthe assets of the Corporation, shall be treated as a liquidation, dissolutionor winding up of the Corporation and shall entitle holders of Senior PreferredStock, if any, holders of Series B, C and D Preferred Stock and ParityPreferred Stock, if any, holders of Junior Preferred Stock, (if so provided inthe instrument or instruments designating such Parity Preferred Stock) andholders of Common Stock to receive at the closing in cash, securities or otherproperty (valued as provided in Section 3(e) below) amounts asspecified in Sections 3(a) and 3(b) above.

 

(e)  Whenever the distribution providedfor in this Section 3 shall be payable in securities or property otherthan cash, the value of such distribution shall be the fair market value ofsuch securities or other property as determined in good faith by the Board ofDirectors.

 

**4. Voting Rights.**

 

Each holder of shares of the Series DPreferred Stock shall be entitled to the number of votes equal to the number ofshares of Common Stock into which such shares of Series D Preferred Stockcould be converted and shall have voting rights and powers equal to the votingrights and powers of the Common Stock (except as otherwise expressly providedherein or as required by law, voting together with the Common Stock as a singleclass) and shall be entitled to notice of any stockholders’ meeting inaccordance with the Bylaws of the Corporation. Fractional votes shall not,however, be permitted and any fractional voting rights resulting from the aboveformula (after aggregating all shares into which shares of Series DPreferred Stock held by each holder could be converted) shall be rounded to thenearest whole number (with one-half being rounded upward).

 

**5. Conversion.**

 

The holders of the Series D PreferredStock shall have conversion rights as follows (the “Conversion Rights”);

 

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a) *RIGHT TO CONVERT.*  Each share of Series D Preferred Stockshall be convertible, at the option of the holder thereof, at any time afterthe date of issuance of such share, at the office of the Corporation or anytransfer agent for such stock, into such number of fully paid and nonassessableshares of Common Stock as is determined by dividing $226.20 by the ConversionPrice applicable to such share, determined as hereinafter provided, in effecton the date the certificate is surrendered for conversion. The price at whichshares of Common Stock shall be deliverable upon conversion of shares of the Series DPreferred Stock (the “Series D Conversion Price”) shall initially be $2.00per share of Common Stock. Such initial Series D Conversion Price shall beadjusted as hereinafter provided.

 

(b) *AUTOMATIC CONVERSION.*  Each share of Series D Preferred stockshall automatically be converted into shares of Common Stock at the theneffective Series D Conversion Price, upon the earlier of (i) the datespecified by vote or written consent or agreement of holders of at leasttwo-thirds ( 2¤3)of the shares of such series then outstanding, or (ii) the date all of theshares of Common Stock into which the Series D Preferred may be convertedare registered with the United States Securities and Exchange Commission underthe Securities Act of 1933, as amended.

 

(c) *MECHANICS OF CONVERSION.*  Before any holder of Series D PreferredStock shall be entitled to convert the same into shares of Common Stock, heshall surrender the certificate or certificates therefor, duly endorsed, at theoffice of the Corporation or of any transfer agent for such stock, and shallgive written notice to the Corporation at such office that he elects to convertthe same and shall state therein the name or names in which he wishes thecertificate or certificates for shares of Common Stock to be issued. The Corporationshall, as soon as practicable thereafter, issue and deliver at such office tosuch holder of Series D Preferred Stock, a certificate or certificates forthe number of shares of Common Stock to which he shall be entitled asaforesaid. Such conversion shall be deemed to have been made immediately priorto the close of business on the date of surrender of the shares of Series DPreferred Stock to be converted, and the person or persons entitled to receivethe shares of Common Stock issuable upon such conversion shall be treated forall purposes as the record holder or holders of such shares of Common Stock onsuch date.

 

(d) *ADJUSTMENTS TO SERIES DCONVERSION PRICE FOR CERTAIN DILUTING ISSUES.*

 

(i) *SPECIAL DEFINITIONS.*  For purposes of this section 5(d), thefollowing definitions apply:

 

(1)                                  “OPTIONS” shall meanrights, options or warrants to subscribe for, purchase or otherwise acquireeither Common Stock or Convertible securities (defined below).

 

(2)                                  “ORIGINAL ISSUE DATE”shall mean the date on which a share of Series D Preferred Stock was firstissued.

 

(3)                                  “CONVERTIBLESECURITIES” shall mean any evidences of indebtedness, shares (other than CommonStock and Series D Preferred Stock) or other securities convertible intoor exchangeable for Common Stock.

 

(4)                                  “ADDITIONAL SHARES OFCOMMON STOCK” shall mean all shares of Common Stock issued (or, pursuant to Section 5(d)(iii),deemed to be issued) by the Corporation after the Original Issue Date, otherthan shares of Common Stock issued or issuable;

 

(A)                              upon conversion of sharesof Series A, B, C or D Preferred Stock or shares of Senior PreferredStock, Parity Preferred Stock or Junior Preferred Stock, if any;

 

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(B)                                to officers, directorsor employees of, or consultants to, the Corporation pursuant to stock option orstock purchase plans or agreements on terms approved by the Board of Directors;

 

(C)                                as a dividend ordistribution on Series D Preferred Stock;

 

(D)                               for which adjustment ofthe Series D Conversion Price is made pursuant to Section 5(e);

 

(E)                                 upon exercise ofwarrants to purchase 250,000 shares of Common Stock issued to The InsuranceCompany of North America; or

 

(F)                                 upon exercise ofwarrants to purchase 75,000 shares of Common Stock issued to Silicon ValleyBank.

 

(ii) *NO ADJUSTMENT OF CONVERSIONPRICE.*  Any provision hereinto the contrary notwithstanding, no adjustment in the Conversion Price for Series DPreferred Stock shall be made in respect of the issuance of Additional Sharesof Common Stock unless the consideration per share (determined pursuant to section 5(d)(v) hereof)for an Additional Share of Common Stock issued or deemed to be issued by theCorporation is less than the Conversion Price for such series of PreferredStock in effect on the date of, and immediately prior to, such issue.

 

(iii) *DEEMED ISSUE OFADDITIONAL SHARES OF COMMON STOCK.* In the event the Corporation at any time or from time to time after theOriginal Issue Date shall issue any Options or Convertible Securities or shallfix a record date for the determination of holders of any class of securitiesthen entitled to receive any such Options or Convertible Securities, then themaximum number of shares (as set forth in the instrument relating theretowithout regard to any provisions contained therein designed to protect againstdilution) of Common Stock issuable upon the exercise of such Options or, in thecase of Convertible Securities and options therefor, the conversion or exchangeof such Convertible Securities, shall be deemed to be Additional Shares of CommonStock issued as of the time of such issue or, in case such a record date shallhave been fixed, as of the close of business on such record date, provided thatin any such case in which Additional Shares of Common Stock are deemed to beissued:

 

(1)                                  no furtheradjustments in the Series D Conversion Price shall be made upon thesubsequent issue of Convertible Securities or shares of Common Stock upon theexercise of such Options or conversion or exchange of such ConvertibleSecurities;

 

(2)                                  if such Options orConvertible Securities by their terms provide, with the passage of time orotherwise, for any increase or decrease in the consideration payable to theCorporation, or decrease or increase in the number or shares of Common Stockissuable, upon the exercise, conversion or exchange thereof, the Series DConversion Price computed upon the original issue thereof (or upon theoccurrence of a record date with respect thereto), and any subsequentadjustments based thereon, shall, upon any such increase or decrease becomingeffective, be recomputed to reflect such increase or decrease insofar as itaffects such Options or the rights of conversion or exchange under suchConvertible Securities (provided, however, that no such adjustment of the Series DConversion Price shall affect Common Stock previously issued upon conversion ofthe Series D Preferred Stock);

 

(3)                                  upon the expirationof any such Options or any rights of conversion or exchange under suchConvertible Securities which shall not have been exercised, the Series Dconversion Price computed

 

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upon the original issue thereof (or upon the occurrence of a recorddate with respect thereto), and any subsequent adjustments based thereon,shall, upon such expiration, be recomputed as if:

 

(A)                              in the case of ConvertibleSecurities or Options for Common Stock, the only Additional Shares of CommonStock issued were the shares of Common Stock, if any, actually issued upon theexercise of such options or the conversion or exchange of such ConvertibleSecurities and the consideration received therefor was the considerationactually received by the Corporation for the issue of all such options, whetheror not exercised, plus the consideration actually received by the Corporationupon such exercise, or for the issue for all such Convertible Securities whichwere actually converted or exchanged plus the additional consideration, if any,actually received by the Corporation upon such conversion or exchange; and

 

(B)                                in the case of Optionsfor Convertible Securities, only the Convertible Securities, if any, actuallyissued upon the exercise thereof were issued at the time of issue of suchOptions, and the consideration received by the Corporation for the AdditionalShares of Common Stock deemed to have been then issued was the considerationactually received by the Corporation for the issue of such options, whether ornot exercised, plus the consideration deemed to have been received by theCorporation (determined pursuant to Section 5(d)(v) upon the issue ofthe Convertible Securities with respect to which such options were actuallyexercised;

 

(4)                                  no readjustmentpursuant to clause (2) or (3) above shall have the affect ofincreasing the Series D Conversion Price to an amount which exceeds thelower of (a) the Series D Conversion Price on the original adjustmentdate (prior to adjustment), or (b) the Series D Conversion Price thatwould have resulted from any issuance of Additional Shares of Common Stockbetween the original adjustment date and such readjustment date.

 

(5)                                  in the case of anyOptions which expire by their terms not more than 30 days after the dateof issue thereof, no adjustment of the Series D Conversion Price shall bemade until the expiration or exercise of all such Options, whereupon suchadjustment shall be made in the same manner provided in clause (3) above.

 

(iv) *ADJUSTMENT OF CONVERSIONPRICE UPON ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.*  In the event this Corporation, at any timeafter the Original Issue Date, shall issue Additional Shares of Common Stock(including Additional Shares of Common Stock deemed to be issued pursuant to Section 5(d)(iii))without consideration or for a consideration per share less than the ConversionPrice with respect to the Series D Preferred Stock in effect on the dateof and immediately prior to such issue, then and in such event, the ConversionPrice for such Series D Preferred Stock shall be reduced, concurrentlywith such issuer to a price (calculated to the nearest cent) at which suchAdditional Shares were sold or at which Additional Shares are issuable.

 

(v) *DETERMINATION OFCONSIDERATION.*  For purposesof this Section C.4(d), the consideration received by the Corporation forthe issue of any Additional Shares of Common Stock shall be computed asfollows:

 

(1) *CASH AND PROPERTY.*  Suchconsideration shall:

 

(A)                              insofar as it consists ofcash, be computed at the aggregate amount of cash received by the Corporationexcluding amounts paid or payable for accrued interest or accrued dividends;

 

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(B)                                insofar as it consistsof property other than cash, be computed at the fair value thereof at the timeof such issue, as determined in good faith by the Board; and

 

(C)                                in the event AdditionalShares of Common Stock are issued together with other shares or securities orother assets of the Corporation for consideration which covers both, theproportion of such consideration so received, computed as provided in clauses (A) and(B) above, as determined in good faith by the Board.

 

(2) *OPTIONS AND CONVERTIBLE SECURITIES.*  The consideration per share received by theCorporation for additional shares of Common Stock deemed to have been issuedpursuant to Section 5(d)(iii), relating to Options and ConvertibleSecurities shall be determined by dividing:

 

(A)                              the total amount, if any,received or receivable by the Corporation as consideration for the issue ofsuch Options or Convertible Securities, plus the minimum aggregate amount ofadditional consideration (as set forth in the instruments relating thereto,without regard to any provision contained therein designed to protect againstdilution) payable to the Corporation upon the exercise of such Options or theconversion or exchange of such Convertible Securities, or in the case ofOptions for Convertible Securities, the exercise of such Options forConvertible Securities and the conversion or exchange of such ConvertibleSecurities, by

 

(B)                                the maximum number ofshares of Common Stock (as set forth in the instruments relating thereto,without regard to any provision contained therein designed to protect againstthe dilution) issuable upon the exercise of such Options or conversion orexchange of such Convertible Securities.

 

(e) *ADJUSTMENTS TO CONVERSIONPRICES FOR STOCK DIVIDENDS AND FOR COMBINATION OR SUBDIVISION OF COMMON STOCK.*  In the event that this Corporation at anytime or from time to time after the Original Issue Date shall declare or pay,without consideration, any dividend on the Common Stock payable in Common Stockor in any right to acquire Common Stock for no consideration, or shall effect asubdivision of the outstanding shares of Common Stock into a greater number ofshares of Common Stock (by stock split, reclassification or otherwise than bypayment of a dividend in Common Stock or in any right to acquire Common Stock),or in the event the outstanding shares of Common Stock shall be combined orconsolidated, by reclassification or otherwise, into a lesser number of sharesof Common Stock, then the Conversion Price for the Series D PreferredStock in effect immediately prior to such event shall, concurrently with theeffectiveness of such event, be proportionately decreased or increased, asappropriate. In the event that this corporation shall declare or pay, withoutconsideration, any dividend on the Common Stock payable in any right to acquireCommon Stock for no consideration, then the Corporation shall be deemed to havemade a dividend payable in Common Stock in an amount of shares equal to themaximum number of shares issuable upon exercise of such rights to acquireCommon Stock.

 

(f) *ADJUSTMENTS FORRECLASSIFICATION AND REORGANIZATION.* If the Common Stock issuable upon conversion of the Series DPreferred Stock shall be changed into the same or a different number of sharesof any other class or classes of stock, whether by capital reorganization,reclassification or otherwise (other than a subdivision or combination ofshares provided for in Section 5(e) above or a merger or otherreorganization referred to in Section B(c) above), the Series DConversion Price then in effect shall, concurrently with the effectiveness ofsuch reorganization or reclassification, be proportionately adjusted so thatthe Series D Preferred Stock shall be convertible into, in lieu of thenumber of shares of Common

 

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Stock which the holders would otherwise have been entitled to receive,and number of shares of such other class or classes of stock equivalent to thenumber of shares of Common Stock, that would have been subject to receipt bythe holders upon conversion of the Series D Preferred Stock immediatelybefore that change.

 

(g) *NO IMPAIRMENT.*  The Corporation will not, by amendment of itsCertificate of Incorporation or through any reorganization, transfer of assets,consolidation, merger dissolution, issue or sale of securities or any othervoluntary action, avoid or seek to avoid the observance or performance of anyof the terms to be observed or performed hereunder by the Corporation, but willat all times in good faith assist in the carrying out of all the provisions ofthis Section 5 and in the taking of all such action as may be necessary orappropriate in order to protect the Conversion Rights of the holders of the Series DPreferred Stock against impairment.

 

(h) *CERTIFICATES AS TOADJUSTMENTS.*  Upon theoccurrence of each adjustment or readjustment of any Conversion Price pursuantto this Section 5, the Corporation at its expense shall promptly computesuch adjustment or readjustment in accordance with the terms hereof and prepareand furnish to each holder of Series D Preferred Stock a certificateexecuted by the Corporation’s President or Chief Financial Officer settingforth such adjustment or readjustment and showing in detail the facts uponwhich such adjustment or readjustment is based. The Corporation shall, upon thewritten request at any time of the holder of Series D Preferred Stock,furnish or cause to be furnished to such holder a like certificate settingforth (i) such adjustments and readjustments, (ii) the ConversionPrice for the Series D Preferred Stock at the time in affect, and (iii) thenumber of shares of Common Stock and the amount, if any, of other propertywhich at the time would be received upon the conversion of the Series DPreferred Stock.

 

(i) *NOTICES OF RECORD, ETC.*  In the event that the Corporation shallpropose at any time: (i) to declare any dividend or distribution upon itsCommon Stock, whether in cash, property, stock or other securities, whether ornot a regular cash dividend and whether or not out of earnings or earnedsurplus (ii) to offer for subscription pro rata to the holders of theclass or series of its stock any additional shares of stock or any class orseries or other rights (iii) to effect any reclassification orrecapitalization of its Common Stock outstanding involving a change in theCommon Stock; or (iv) to merge or consolidate with or into any othercorporation, or sell, lease or convey all or substantially all of its assets,or to liquidate, dissolve or wind up; then, in connection with each such event,the Corporation shall send to the holders of Series D Preferred Stock;

 

(1)                                  at least twenty(20) days” prior written notice of the date on which a record shall betaken for such dividend, distribution or subscription rights (and specifyingthe date on which the holders of Common Stock shall be entitled thereto) or fordetermining rights to vote, if any, in respect of the matters referred to in (iii) and(iv) above; and

 

(2)                                  in the case of thematters referred to in (iii) and (iv) above, at least twenty(20) days” prior written notice of the date when the same shall take place(and specifying the date on which the holders of Common Stock shall be entitledto exchange their Common Stock for securities or other property deliverableupon the occurrence of such event).

 

(j)* ISSUE TAXES.*  TheCorporation shall pay any and all issue and other taxes that may be payable inrespect of any issue or delivery of shares of Common Stock on conversion of Series APreferred Stock pursuant hereto; provided, however, that the Corporation shallnot be obligated to pay any transfer taxes resulting from any transfer requestby any holder in connection with any such conversion.

 

(k)* RESERVATION OF STOCK ISSUABLE UPON CONVERSION.*  The Corporation shall at all times reserveand keep available out of its authorized but unissued shares of Common Stock,solely for the

 

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purpose of affecting the conversion of the shares of the Series DPreferred Stock, such number of its shares of Common Stock as shall from timeto time be sufficient to effect the conversion of all outstanding shares of theSeries D Preferred Stock, and if at any time the number of authorized butunissued shares of Common Stock shall not be sufficient to effect theconversion of all then outstanding shares of the Series D Preferred Stock,the Corporation will take such corporate action as may, in the opinion of itscounsel, be necessary to increase its authorized but unissued shares of CommonStock to such number of shares as shall be sufficient for such purpose,including, without limitation, engaging in best efforts to obtain the requisitestockholder approval of any necessary amendment to this certificate.

 

(l)* FRACTIONAL SHARES.*  Nofractional share shall be issued upon the conversion of any share or shares of Series DPreferred Stock. All shares of Common Stock (including fractions thereof)issuable upon conversion of more than one share of Series D PreferredStock by a holder thereof shall be aggregated for purposes of determiningwhether the conversion would result in the issuance of any fractional share.If, after the aforementioned aggregation, the conversion would result in theissuance of a fraction of a share of Common Stock, the Corporation shall, inlieu of issuing any fractional share, pay the holder otherwise entitled to suchfraction a sum in cash equal to the fair market value of such fraction on thedate of conversion (as determined by reference to the stock price quoted in THEWALL STREET JOURNAL or as reported on NASDAQ for the day immediately prior tosuch conversion).

 

(m)* NOTICES.*  Any noticerequired by the provisions of this Section 5 to be given to the holders ofshares of Series D Preferred Stock shall be deemed given it deposited, inthe United States mail, postage prepaid, and addressed to each holder of recordat his address appearing on the books of the Corporation.

 

**6. Restrictions and Limitations.**

 

(a)  So long as any shares of Series DPreferred Stock remain outstanding, the Corporation shall not, without the voteor written consent by the holders of at least sixty-six and two-thirds (662¤3) ofthe then outstanding shares of the Series D Preferred Stock, voting as asingle class:

 

(i)                                     Redeem, purchaseor otherwise acquire for value (or pay into or set aside for a sinking fund forsuch purpose) any share or shares of Series D Preferred Stock otherwisethan by conversion in accordance with Section 5 hereof;

 

(ii)                                  Redeem, purchase orotherwise acquire (or pay into or set aside for sinking fund for such purpose)any of the Common Stock; provided, however, that this restriction shall notapply to the repurchase of shares of Common Stock from employees, officers,directors, consultants or other persons performing services for the Corporationor any subsidiary pursuant to agreements under which the Corporation has theoption to repurchase such shares at cost or at cost plus interest at a rate notto exceed nine percent (9%) per annum upon the occurrence of certain events,such as the termination of employment, provided further, however, that thetotal amount applied to the repurchase of shares of Common Stock shall notexceed $100,000 during any twelve (12) month period;

 

(iii)                               Authorize or issue, orobligate itself to issue, any other equity security (including any securityconvertible into or exercisable for any equity security) senior to or on aparity with the Series D Preferred Stock (including any Senior PreferredStock or Parity Preferred Stock) as to voting rights, conversion rights(including antidilution), dividend rights, redemption rights, or liquidationpreferences; provided however, that this restriction shall not apply to equitysecurities issued in connection with the Corporation’s acquisition of eightypercent (80%) or more of the shares or assets of another corporation and whichhave been approved by the Corporation’s Board of Directors; or

 

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(iv)                              Effect any sale, lease,assignment, transfer, or other conveyance of all or substantially all of theassets of the Corporation or any of its subsidiaries, or any consolidation ormerger involving the Corporation or any of its subsidiaries, or anyreclassification or other change of any stock, or any recapitalization of theCorporation if such action is substantially prejudicial to the holders of Series DPreferred Stock.

 

(b)  The Corporation shall not amend itsCertificate of Incorporation or Bylaws without the approval, by vote or writtenconsent, by the holders of 66 2¤3%of the Series D Preferred Stock if such amendment would change any of therights, preferences or privileges provided for herein for the benefit of anyshares of Series D Preferred Stock. Without limiting the generality of thepreceding sentence, the Corporation will not amend its Certificate ofIncorporation or Bylaws without the approval of the holders of 66 2¤3%of the Series D Preferred Stock if such amendment would;

 

(i)                                     Reduce thedividend rates on the Series D Preferred Stock provided for herein, or ifcumulative, make such dividends noncumulative, or defer the date from whichdividends will accrue, or cancel accrued and unpaid dividends, or change therelative seniority rights of the holders of the Series D Preferred Stockas to the payment of dividends in relation to the holders of any other capitalstock of the Corporation;

 

(ii)                                  Reduce the amountpayable to the holders of the Series D Preferred Stock upon the voluntaryor involuntary liquidation, dissolution, or winding up of the Corporation, orchange the relative seniority of the liquidation preferences of the holders ofthe Series D Preferred Stock to the rights upon liquidation of the holdersof any other capital stock of the Corporation;

 

(iii)                               Make the Series APreferred Stock redeemable at the option of the Corporation; or

 

(iv)                              Cancel or modify theConversion Rights of the Series D Preferred Stock provided for in Section 3hereof.

 

**7. No Reissuance of Series D PreferredStock.**

 

No share or shares of Series D PreferredStock acquired by the Corporation by reason of redemption, purchase, conversionor otherwise shall be reissued, and all such shares will be canceled, retired andeliminated from the shares which the Corporation shall be authorized to issue.

 

IN WITNESS WHEREOF, this Amended Certificateof Designation is executed on behalf of the Corporation by its President andattested by its Secretary as of this 20th day of May, 1994.

 

 
|       | David J. Torrence |
|------------|-------------------|
|       | President         |
| ** ** | **Attest:**       |
| ** ** | ** **        |
| ** ** | ** **        |
|       | Daniel F. Dunne   |
|       | Secretary         |

 

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**CERTIFICATEOF DESIGNATIONS**

 

**of**

 

**SERIESE PREFERRED STOCK**

 

**of**

 

**DELPHIINFORMATION SYSTEMS, INC**

 

(Pursuant to Section 151of the

General Corporation Law of theState of Delaware)

 

Delphi Information Systems, Inc., acorporation organized and existing under the General Corporation Law of theState of Delaware (hereinafter called the “Corporation”), DOES HEREBY CERTIFY:

 

That, pursuant to authority vested in theBoard of Directors of the Corporation by its Certificate of Incorporation, andpursuant to the provisions of Section 151 of the General Corporation Law,the Board of Directors of the Corporation on December 29, 1993 adopted thefollowing resolution providing for the issuance of a series of preferred Stock:

 

RESOLVED, that pursuant to the authorityexpressly vested in the Board of Directors of the Corporation (hereinaftercalled the “Board of Directors” or the “Board”) by the Certificate ofIncorporation of the Corporation, a series of Preferred Stock, par value $.10per share (the “Preferred Stock”), of the Corporation be, and it hereby is,created, and that the designation and amount thereof and the powers,designations, preferences and relative, participating, optional and otherspecial rights of the shares of such series, and the qualifications,limitations or restrictions thereof are as follows:

 

**1. Designation and Amount.**

 

The shares of such series shall be designatedas “Series E Preferred Stock” (the “Series E Preferred Stock”) andthe number of shares constituting the Series E Preferred Stock shall be67,851. The Series E Preferred Stock shall be junior to the Corporation’s Series APreferred Stock (the “Series A Preferred Stock”), the Corporation’s Series BPreferred Stock (the “Series B Preferred Stock”), the Corporation’s Series CPreferred Stock (the “Series C Preferred Stock”) and the Corporation’s Series DPreferred Stock (the “Series D Preferred Stock”) in all respects.

 

**2. Dividends.**

 

(a)  In the event of the exercise of theConversion Rights (as defined in Section 5 below), or any liquidation,dissolution or winding up of the Corporation (within the meaning of Section 3below), or redemption of the Series E Preferred Stock pursuant to Section 6(each a “Dividend Event”), subject to the prior preferences and other rights ofany capital stock of the Corporation ranking senior to the Series EPreferred Stock with respect to dividends, the holders of the Series EPreferred Stock shall he entitled to receive an annual dividend, in an amountper share (as adjusted proportionately for stock dividends, stock splits,combinations and similar corporate events) equal to $5.085 (the “AnnualDividend Amount’), on a cumulative basis for the period from the originalissuance of the Series E Preferred Stock to the Dividend

 

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Event (pro rated for any partial year), payable in shares of CommonStock, par value $.10 (the “Common Stock”) of the Corporation.

 

Such dividends on the Series E PreferredStock shall be cumulative and shall rank prior to the Common Stock and anyother shares of the capital stock of the Corporation that are junior to the Series EPreferred Stock so that if such dividends in respect of any previous or currentannual dividend period shall not have been paid or declared and a sumsufficient for the payment thereof set apart, the deficiency shall first befully paid before any dividend or other distribution shall be paid or declaredand set apart for the Common Stock. The number of shares of Common Stockpayable shall be determined by dividing the aggregate accrued but unpaid AnnualDividend Amounts by the average of the daily closing price per share of CommonStock, as reported on the NASDAQ National Market system, for the 30 tradingdays immediately prior to the Dividend Event and then multiplying that quotientby the number of shares of Series E Preferred Stock outstanding as of thedate of the Dividend Event. If the total number of shares of Common Stockpayable as a dividend to any holder of Series E Preferred Stock shallinclude a fraction, such number shall be rounded downward to the nearest wholeshare and the fraction shall be settled in cash. In the event that a dividendis paid at any time on the Common Stock, a like dividend shall be accrued onthe shares of Common Stock that, upon the occurrence of a Dividend Event, shallbe or become payable as a dividend pursuant to this Section 2(a), whichamount shall be paid when such Common Stock is or becomes payable as adividend.

 

(b)  No dividends (other than thosepayable solely in the Common Stock of the Corporation) shall be paid on anyCommon Stock, Series A Preferred Stock, Series B Preferred Stock, Series CPreferred Stock, Series D Preferred Stock or any other capital stock ofthe Corporation during any fiscal year of the Corporation unless a dividend(including the amount of any dividends paid currently pursuant to theprovisions of Section 2(a)) is paid with respect to all outstanding sharesof Series E Preferred Stock in an amount for each such share of Series EPreferred Stock equal to or greater than the aggregate amount of such dividendsfor all shares of Common Stock into which each such share of Series EPreferred Stock could then be converted (or, if such payment date is prior to June 30,1996 for all shares of Common Stock into which each share of Series EPreferred Stock would be convertible on such later date).

 

(c)  In the event the Corporation shalldeclare a distribution (other than any distribution described in Section 3)payable in securities of other persons, evidences of indebtedness issued by theCorporation or other persons, assets (excluding cash dividends) or options orrights to purchase any such securities or evidences of indebtedness, then, ineach such case the holders of the Series E Preferred Stock shall beentitled to a proportionate share of any such distribution as though theholders of the Series E Preferred Stock were the holders of the number ofshares of Common Stock of the Corporation into which their respective shares ofSeries E Preferred Stock are convertible (inclusive of Common Stockpayable as a dividend) as of the record date fixed for the determination of theholders of Common Stock of the Corporation entitled to receive suchdistribution (or, if such record date is prior to June 30, 1996, for allshares of Common Stock into which each share of Series E Preferred Stockwould be convertible on such later date).

 

**3. Liquidation Preference.**

 

(a)  In the event of any liquidation,dissolution or winding up of the Corporation, whether voluntary or involuntary,and subject to the prior preferences and other rights of any capital stock ofthe Corporation ranking senior to the Series E Preferred Stock, theholders of the Series E Preferred Stock shall be entitled to receive,prior and in preference to any distribution of any of the assets or funds ofthe Corporation to the holders of the Common Stock or any other Series orclass of stock which is junior to the

 

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Series E Preferred Stock by reason of their ownership thereof, theamount of $84.745 per share (as adjusted for any stock dividends, combinationsor splits with respect to such shares), plus (i) the Annual DividendAmounts then accrued (payable in shares of Common Stock pursuant to Section 2(a) hereof),and (ii) any other declared but unpaid dividends on such shares for eachshare of Series E Preferred Stock then held by them. If upon theoccurrence of such event, the assets and funds thus distributed among theholders of the Series A Preferred Stock, the Series B PreferredStock, the Series C Preferred Stock, the Series D Preferred Stock andthe Series E Preferred Stock shall be insufficient to permit the paymentto such holders of Series A Preferred Stock, the Series B PreferredStock, Series C Preferred Stock and Series D Preferred Stock of thepreferential amount due to them and to such holders of Series E PreferredStock of the full aforesaid preferential amount due to them, then the entireassets and funds of the Corporation legally available for distribution shall bedistributed ratably among the holders of the Series A Preferred Stock, theSeries B Preferred Stock, the Series C Preferred Stock and the Series DPreferred Stock in proportion to the preferential amount each such holder isotherwise entitled to receive; after payment to the holders of the Series APreferred Stock, the Series B Preferred Stock, the Series C PreferredStock and the Series D Preferred Stock of the preferential amount due tothem, then the entire remaining assets and funds of the Corporation legallyavailable for distribution shall be distributed ratably among the holders ofthe Series E Preferred Stock.

 

(b)  After payment to the holders of theSeries E Preferred Stock of the amounts set forth in Section 3(a) above,and subject to the prior preferences and other rights of any capital stock ofthe Corporation ranking senior to the Series E Preferred Stock, the entireremaining assets and funds of the Corporation legally available fordistribution, if any, shall he distributed among the holders of (i) theCommon Stock, (ii) any other Series or class of stock which is juniorto the Series E Preferred Stock, and (iii) the Series APreferred Stock, the Series C Preferred Stock and the Series DPreferred Stock in accordance with the respective terms and provisions thereof.

 

(c)  For purposes of this Section 3,(i) any acquisition of the Corporation by means of merger or consolidationwith or into another corporation or other form of corporate reorganization inwhich outstanding shares of the Corporation are exchanged for cash, securitiesor other consideration issued, or caused to be issued, by the acquiringcorporation or its parent or subsidiary and (ii) any sale of all orsubstantially all of the assets of the Corporation, shall, at the option of theholders of the Series E Preferred Stock, be treated as a liquidation,dissolution or winding up of the Corporation and each holder of Series EPreferred Stock shall have the right to exercise the Conversion Rights prior toany such event as provided in Section 5(a);

 

(d)  Whenever the distribution providedfor in this Section 3 shall be payable in securities or property otherthan cash, the value of such distribution shall be the fair market value ofsuch securities or other property as determined in good faith by the Board ofDirectors.

 

**4. Voting Rights: Restrictions andLimitations.**

 

(a)  The holders of Series EPreferred Stock shall have no voting rights, except for those matters on whicha vote of the holders of Series E Preferred Stock is required by law andexcept as set out below.

 

(b)  Without limiting the rights of theholders of Series E Preferred Stock to vote as a class, as required bylaw, the Corporation shall not, without first obtaining the approval of holdersof greater than sixty-six and two-thirds percent (66 2¤3%)of such shares of Series E Preferred Stock outstanding:

 

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(i)                                     amend or repealany provision of, add any provision to, or take any corporation actionotherwise altering the Corporation’s Certificate of Incorporation or Bylawswhich would alter or change the preferences, rights, privileges or powers of,or the restrictions provided for the benefit of, the holders of Series EPreferred Stock so as to affect such holders adversely;

 

(ii)                                  reclassify any CommonStock or any other Series or class of stock which is junior to the Series EPreferred Stock into shares having any preference or priority as to dividendsor assets superior to or on a parity with the Series E Preferred Stock;

 

(iii)                               apply any of its assetsto the redemption, retirement, purchase or other acquisition directly orindirectly, through subsidiaries or otherwise, of any shares of Common Stock orany other Series or class of stock which is junior to the Series EPreferred Stock, except upon conversion of any convertible security inaccordance with its terms or repurchases from employees of the Corporation upontermination of employment or pursuant to the Corporation’s rights of firstrefusal; or

 

(iv)                              increase the number ofshares of Series E Preferred Stock beyond those authorized by thisCertificate of Designations or issue any shares of Series E PreferredStock to any person other than pursuant to the Agreement for Purchase and Saleof Stock dated as of December 30, 1993 among the Corporation, The ContinentalCorporation, Pacific Insurance Company and Instrument, Incorporated (a copy ofwhich is on file at the offices of the Corporation); or

 

(v)                                 issue any shares ofany capital stock having any preference or priority as to dividends or assetssuperior to or on a parity with the Series E Preferred Stock (other thanthe issuance of up to 16,577 shares of Series D Preferred Stock inexchange, on a share for share basis, for the outstanding Series APreferred Stock, which shares of Series A Preferred Stock will then becanceled, retired and eliminated from the shares which the Corporation shall beauthorized to issue and other than up to 75,000 shares of Series CPreferred Stock) or amend the existing terms of any outstanding preferred stockso as to add any terms having such a preference or priority.

 

**5. Conversion.**

 

The holders of the Series E PreferredStock shall have conversion rights as follows (the “Conversion Rights”):

 

(a) *RIGHT TO CONVERT.*  Each share of Series E Preferred Stockshall be convertible, at the option of the holder thereof, at any time after June 30,1996, or at any time upon any liquidation, dissolution or winding up of theCorporation within the meaning of Section 3 above, or upon the occurrenceof any of the events specified in Section 3(c) above, at the officeof the Corporation or any transfer agent for such stock, into such number offully paid and nonassessable shares of Common Stock as is determined bydividing (L) $84.745, plus (1) an amount equal to the Annual DividendAmounts then accrued and unpaid thereon which are payable in shares of CommonStock pursuant to Section 2(a) hereof, and (2) any otherdeclared but unpaid dividends on such shares by (M) the Series EConversion Price applicable to such share, determined as hereinafter provided,in effect on the date the certificate is surrendered for conversion pursuant tothis Section 5(a) or automatically converted pursuant to Section 5(b),as the case may be. The price at which shares of Common Stock shall bedeliverable upon conversion of shares of the Series E Preferred Stock (the“Series E Conversion Price”) shall be based upon the average of the dailyclosing price per share, as reported on the NASDAQ National Market System, forthe thirty (30) trading days immediately prior to the date the certificateis surrendered for conversion; PROVIDED, HOWEVER, the maximum number of sharesof Common Stock into which each share of Series E Preferred Stock may be

 

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converted at any time (the “Maximum Conversion Rate”) is(P) $84.745 plus (1) an amount equal to the Annual Dividend Amountsthen accrued and unpaid thereon which are payable in shares of Common Stockpursuant to Section 2(a) hereof, and (2) any other declared butunpaid dividends on such shares divided by (Q) the Maximum Conversion RateTrigger Price, determined as hereinafter provided, on the date the certificateis surrendered for conversion pursuant to this Section 5(a) orautomatically converted pursuant to Section 5(b), as the case may be;FURTHER PROVIDED, that the minimum number of shares of Common Stock into whicheach share of Series E Preferred Stock may be converted at any time (the “MinimumConversion Rate”) is (s) $84.745 plus (1) an amount equal to theAnnual Dividend Amounts then accrued and unpaid thereon which are payable inshares of Common Stock pursuant to Section 2(a) hereof, and (2) anyother declared but unpaid dividends on such shares divided by (r) theMinimum Conversion Rate Trigger Price, as determined as hereinafter provided,on the date the certificate is surrendered for conversion pursuant to this Section 5(a) orautomatically converted pursuant to Section 5(b), as the case may be. The “MaximumConversion Rate Trigger Price,” as used herein, shall initially be $4.00, andshall be subject to adjustment as hereinafter provided. The “Minimum ConversionRate Trigger Price,” as used herein, shall initially be $8.00, and shall besubject to adjustment as hereinafter provided.

 

(b) *AUTOMATIC CONVERSION.*  Each share of Series E Preferred Stock,if not theretofore converted, shall automatically be converted on December 30,1998 (the “Automatic Conversion Date”) into such number of fully paid andnonassessable shares of Common Stock as is determined by dividing(X) $84.745 plus (1) an amount equal to the Annual Dividend Amountsthen accrued and unpaid thereon which are payable in shares of Common Stockpursuant to Section 2(a) hereof, and (2) any other declared butunpaid dividends on such shares by (Y) the average of the daily closingprice per share, as reported on the NASDAQ National Market System, for thethirty (30) trading days immediately prior to the Automatic ConversionDate, but not in excess of the Maximum Conversion Rate and not below theMinimum Conversion Rate.

 

(c) *MECHANICS OF CONVERSION.*  In the case of any conversion pursuant to Section 5(a) hereof,before any holder of Series E Preferred Stock shall he entitled to convertthe same into shares of Common Stock, he shall surrender the certificate orcertificates therefor, duly endorsed, at the office of the Corporation or ofany transfer agent for such stock, and shall give written notice to theCorporation at such office that he elects to convert the same and shall statetherein the name or names in which he wishes the certificate or certificates forshares of Common Stock to be issued. In the case of a conversion Pursuant to Section 5(b) hereof,the certificate for the shares of Common Stock to be issued shall be registeredin the name of the holder or in such other name or names as the holder otherwisenotifies the Corporation. The Corporation shall, as soon as practicable afterany conversion, issue and deliver at such office to such holder of Series EPreferred Stock, a certificate or certificates for the number of shares ofCommon Stock to which he shall be entitled as aforesaid and in payment of anydividends payable in Common Stock, together with any other dividends to whichsuch holder shall be entitled. Such conversion shall be deemed to have beenmade immediately prior to the close of business on the date of surrender of theshares of Series E Preferred Stock to be converted, in the case of aconversion pursuant to Section 5(a) hereof, and on the AutomaticConversion Date, in the case of a conversion pursuant to Section 5(b) hereof,and the person or persons entitled to receive the shares of Common Stockissuable upon any such conversion shall be treated for all purposes as therecord holder or holders of such shares of Common Stock on such date.

 

(d) *ADJUSTMENTS TO TRIGGERPRICES FOR STOCK DIVIDENDS: COMBINATIONS OR SUBDIVISIONS OR COMMON STOCK.*  In the event that the Corporation at any timeor from time to time after the date on which the Series E Preferred Stockis first issued shall declare or pay any dividend on the Common Stock (or onany other series or class of stock which is junior to the Series EPreferred

 

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Stock) payable in Common Stock or in any right to acquire Common Stockfor no consideration, or shall effect a subdivision of the outstanding sharesof Common Stock into a greater number of shares of Common Stock (by stocksplit, reclassification or otherwise than by payment of a dividend in CommonStock or in any right to acquire Common Stock), or in the event the outstandingshares of Common Stock shalt be combined or consolidated, by reclassificationor otherwise, into a lesser number of shares of Common Stock, then the Series EConversion Price, the Maximum Conversion Rate Trigger Price and the MinimumConversion Rate Trigger Price in effect immediately prior to such event shall,concurrently with the effectiveness of such event, be proportionately decreasedor increased, as appropriate. In the event that the Corporation shall declareor pay any dividend on the Common Stock (or on any other series or class ofstock which is junior to the Series E Preferred Stock) payable in anyright to acquire Common Stock for no consideration, then the Corporation shallbe deemed to have made a dividend payable in Common Stock in an amount ofshares equal to the maximum number of shares issuable upon exercise of suchrights to acquire Common Stock.

 

In the event the Corporation makes anyadjustment to the number of shares issuable upon conversion of the Series APreferred Stock, the Series B Preferred Stock, the Series C PreferredStock or the Series D Preferred Stock and is not otherwise required by thepreceding terms of this Section 5(d) to make correspondingadjustments to the Series E Conversion Price, the Maximum Conversion RateTrigger Price and the Minimum Conversion Rate Trigger Price, then the Series EConversion Price, the Maximum Conversion Rate Trigger Price and the MinimumConversion Rate Trigger Price in effect immediately prior to such adjustmentshall, concurrently with the effectiveness of such adjustment, beproportionately decreased or increased, as appropriate; provided. however thatno such adjustment pursuant to the terms of this sentence shall reduce theMaximum Conversion Rate Trigger Price to an amount less than $3.50 and providedfurther that no such adjustment shall be required as a result of the issuanceof the shares of Series C Preferred Stock and Series D PreferredStock permitted by Section 4(b)(v).

 

(e) *NO IMPAIRMENT.*  The Corporation will not, by amendment of itsCertificate of Incorporation or through any reorganization, transfer of assets,consolidation, merger, dissolution, issue or sale of securities or any othervoluntary action, avoid or seek to avoid the observance or performance of anyof the terms to be observed or performed hereunder by the Corporation, but willat all times in good faith assist in the carrying out of all the provisions ofthis Section 5 and in the taking of all such action as may be necessary orappropriate in order to protect the Conversion Rights of the holders of the Series EPreferred Stock against impairment.

 

(f) *CERTIFICATES AS TOADJUSTMENTS.*  Upon theoccurrence of each adjustment or readjustment of the Series E ConversionPrice, the Trigger Price (and Maximum Conversion Rate and Minimum ConversionRate) pursuant to this Section 5, the Corporation at its expense shallpromptly compute such adjustment or readjustment in accordance with the termshereof and prepare and furnish to each holder of Series E Preferred Stocka certificate executed by the Corporation’s President or Chief FinancialOfficer setting forth such adjustment or readjustment and showing in detail thefacts upon which such adjustment or readjustment is based. The Corporationshall, upon the written request at any time of a holder of Series EPreferred Stock, furnish or cause to be furnished to such holder a likecertificate setting forth (i) such adjustments and readjustments, (ii) theSeries E Conversion Price, the Maximum Conversion Rate Trigger Price, theMinimum Conversion Rate Trigger Price and Maximum Conversion Rate and MinimumConversion Rate for the Series E Preferred Stock at the time in effect,and (iii) the number of shares of Common Stock and the amount, if any, ofother property which at the time would be received upon the conversion of the Series EPreferred Stock.

 

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**6. Redemption**

 

(a)  All, or any part, of the Series EPreferred Stock may be redeemed at any time after the day on which such sharesare first issued, by payment in cash of $84.745 per share plus (1) anamount equal to the Annual Dividend Amounts then accrued and unpaid thereon and(2) any other declared but unpaid dividends on such shares.

 

(b)  The Corporation shall, not lessthan 30 nor more than 60 days prior to the date for the redemption of the Series EPreferred Stock (the “Redemption Date”), give written notice (the “RedemptionNotice”) to each holder of record of Series E Preferred Stock. TheRedemption Notice shall state:

 

(i)                                     The total numberof shares of Series E Preferred Stock being redeemed;

 

(ii)                                  The number of sharesof Series E Preferred Stock held by the holder which the Corporationintends to redeem;

 

(iii)                               The Redemption Date andthe amount payable pursuant to Section 6(a) (the “ApplicableRedemption Price”); and

 

(iv)                              The time and manner in,and place at which, the holder is to surrender to the Corporation itscertificate or certificates representing the shares of Series E PreferredStock to be redeemed.

 

(c)  On or before the Redemption Date,each holder of Series E Preferred Stock to he redeemed, unless the holderhas exercised its right to convert the shares to be redeemed as provided in Section 5prior to the giving of the Redemption Notice, shall surrender the certificateor certificates representing such shares to the Corporation, in the manner andat the place designated in the Redemption Notice, and thereupon the ApplicableRedemption Price for such shares shall be payable to the order of the personwhose name appears on such certificate or certificates as the owner thereof,and each surrendered certificate shall be cancelled and retired.

 

(d)  If the Redemption Notice is dulygiven, and if on the Redemption Date the Applicable Redemption Price is paid ormade available for payment, then, notwithstanding that the certificatesevidencing any of the shares of Series E Preferred Stock have not beensurrendered, the dividends with respect to such shares shall cease to accrueafter the Redemption Date and all rights with respect to such shares shallforthwith after the Redemption Date cease and terminate, except only for theright of the holders to receive the Applicable Redemption Price withoutinterest upon surrender of their certificates therefor as aforesaid.

 

(e)  If less than all outstanding sharesof Series E Preferred Stock are to be redeemed, the number or shares redeemedfrom each holder shall be pro rated based on the number of shares held by suchholder and the number of shares then outstanding.

 

**7. Miscellaneous.**

 

(a) *ISSUE TAXES.*  The Corporation shall pay any and all issueand other taxes that may be payable in respect of any issue or delivery ofshares of Common Stock on conversion of Series E Preferred Stock or onpayment of any dividend payable in shares of Common Stock pursuant hereto;provided, however, that the Corporation shall not be obligated to pay anytransfer taxes resulting from any transfer request by any holder in connectionwith any conversion or income taxes or taxes measured by income of a holder of Series EPreferred Stock.

 

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(b) *RESERVATION OF STOCK.*  The Corporation shall at all times reserveand keep available out of its authorized but unissued shares of Common Stock,solely for the purpose of effecting the conversion of the shares of the Series EPreferred Stock and to pay any dividend payable in shares of Common Stock, suchnumber of its shares of Common Stock as shall from time to time be sufficientto effect the conversion of all outstanding shares of the Series EPreferred Stock and to pay any dividend payable in shares of Common Stock; andif at any time the number of authorized but unissued shares of Common Stockshall not be sufficient to effect the conversion of all then outstanding sharesof the Series E Preferred Stock and to pay any dividend payable in sharesof Common Stock, the Corporation will take such corporate action as may, in theopinion of its counsel, be necessary to increase its authorized but unissuedshares of Common Stock to such number of shares as shall be sufficient for suchpurpose, including, without limitation, engaging in best efforts to obtain therequisite stockholder approval of any necessary amendment to this Certificate.

 

(c) *FRACTIONAL SHARES.*  No fractional share shall be issued upon theconversion of any share or shares of Series E Preferred Stock or paymentof any dividend payable in shares of Common Stock. All shares of Common Stock(including fractions thereof) issuable upon conversion of more than one shareof Series E Preferred Stock by a holder thereof or payable as a dividendto a holder of more than one share of Series E Preferred Stock shall beaggregated for purposes of determining whether the conversion or payment wouldresult in the issuance of any fractional share. If, after the aforementionedaggregation, the conversion or payment would result in the issuance of afraction of a share of Common Stock, the Corporation shall, in lieu of issuingany fractional share, pay the holder otherwise entitled to such fraction a sumin cash equal to the fair market value of such fraction on the date ofconversion or payment (as determined by reference to the average of the highand low stock price quoted in THE WALL STREET JOURNAL or as reported on NASDAQfor the day immediately prior to such conversion or payment).

 

(d) *PARTIAL CONVERSION ORREDEMPTION.*  In the event somebut not all of a holder’s shares represented by any certificate for Series EPreferred Stock are converted or redeemed, the Corporation shall execute anddeliver to such holder a certificate or certificates registered in such holder’sname or such name or names as such holder directs, for the number of shares of Series EPreferred Stock which was not converted or redeemed.

 

(e) *NOTICES.*  Any notice required by the provisions of thisCertificate of Designations to be given to the holders of shares of Series EPreferred Stock shall be deemed given if deposited in the United StatesCertified first class or express mail, postage prepaid, and addressed to eachholder of record at his address appearing on the books of the Corporation.

 

(f) *NOTICES OF RECORD DATE.*  In the event that the Corporation shallpropose at any time: (i) to declare any dividend or distribution upon itsCommon Stock, whether in cash, property, stock or other securities, whether ornot a regular cash dividend and whether or not out of earnings or earnedsurplus; (ii) to offer for subscription pro rata to the holders of anyclass or series of its stock any additional shares of stock of any class orseries or other rights; (iii) to effect any reclassification orrecapitalization of its Common Stock outstanding involving a change in theCommon Stock; or (iv) to merge or consolidate with or into any othercorporation, or sell, lease or convey all or substantially all of its assets,or to liquidate, dissolve or wind up; then, in connection with each such event,the Corporation shall send to the holders of Series E Preferred Stock:

 

(1)                                  at least twenty(20) days’ prior written notice of the date on which a record shall betaken for such dividend, distribution or subscription rights (and specifyingthe date on which the holders of

 

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Common Stock shall be entitled thereto) or for determining rights tovote, if any, in respect of the matters referred to in (iii) and (iv) above;and

 

(2)                                  in the case of thematters referred to in (iii) and (iv) above, at least twenty(20) days’ prior written notice of the date when the same shall take place(and specifying the date on which the holders of Common Stock shall be entitledto exchange their Common Stock for securities or other property deliverableupon the occurrence of such event).

 

**8. No Reissuance of Preferred Stock.**

 

No share or shares of Series E PreferredStock, Series A Preferred Stock, Series B Preferred Stock, Series CPreferred Stock or Series D Preferred Stock acquired by the Corporation byreason of redemption, purchase, conversion or otherwise shall be reissued, andall such shares shall be canceled, retired and eliminated from the shares whichthe Corporation shall be authorized to issue.

 

IN WITNESS WHEREOF, this Certificate ofDesignations is executed on behalf of the Corporation by its President andattested by its Secretary as of July 24, 1995.

 

 
|       | President   |
|------------|-------------|
| ** ** | **Attest:** |
| ** ** | ** **  |
| ** ** | ** **  |
|       | Secretary   |

 

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