**AMENDED AND RESTATED CERTIFICATE OF INCORPORATION**

**OF**

**AYSMETIX LEARNING SYSTEMS, INC.**

**ARTICLE I**

The name of the corporation is AsymetrixLearning Systems, Inc.

**ARTICLE II**

The address of the registered office of thecorporation in the State of Delaware is 1209 Orange Street, City of Wilmington,County of New Castle.  The name of itsregistered agent at that address is The Corporation Trust Company.

**ARTICLE III**

The purpose of the corporation is to engage inany lawful act or activity for which corporations may be organized under theGeneral Corporation Law of the State of Delaware.

**ARTICLE IV**

The total number of shares of all classes ofstock which the corporation has authority to issue is Forty-Two Million(42,000,000) shares, consisting of two classes:  Forty Million (40,000,000) shares of Common Stock, $0.01 parvalue per share, and Two Million (2,000,000) shares of Preferred Stock, $0.01par value per share.

The Board of Directors is authorized, subject toany limitations prescribed by the law of the State of Delaware, to provide forthe issuance of the shares of Preferred Stock in one or more series, and, byfiling a certificate of designation 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, to fix the designation, powers, preferences and rights ofthe shares of each such series and any qualifications, limitations orrestrictions thereof, and to increase or decrease the number of shares of anysuch series (but not below the number of shares of such series thenoutstanding).  The number of authorizedshares of Preferred Stock may also be increased or decreased (but not below thenumber of shares thereof then outstanding) by the affirmative vote of theholders of a majority of the stock of the corporation entitled to vote, unlessa vote of any other holders is required pursuant to a certificate orcertificates establishing a series of Preferred Stock.

Except asotherwise expressly provided in any certificate of designation designating anyseries of Preferred Stock pursuant to the foregoing provisions of this ArticleIV, any new series of Preferred Stock may be designated, fixed and determinedas provided herein by the Board of Directors without approval of the holders ofCommon Stock or the holders of Preferred Stock, or any series thereof, and anysuch new series may have powers, preferences and rights, including, withoutlimitation, voting rights, dividend rights, liquidation rights, redemptionrights and conversion rights, senior to, junior to or pari passu with therights of the Common Stock, the Preferred Stock, or any future class or seriesof Preferred Stock or Common Stock.

**ARTICLE V**

The Board of Directors of the corporation shallhave the power to adopt, amend or repeal Bylaws of the corporation.

**ARTICLE VI**

**A.**                Election of directors need notbe by written ballot unless the Bylaws of the corporation shall so provide.

**B.**                Any action required or permittedto be taken by the stockholders of the corporation must be effected at a dulycalled annual or special meeting of stockholders of the corporation and may notbe effected by any consent in writing by such stockholders.

**C.**                Special meetings of stockholdersof the corporation may be called only by either the Board of Directors pursuantto a resolution adopted by a majority of the total number of authorizeddirectors (whether or not there exist any vacancies in previously authorizeddirectorships at the time any such resolution is presented to the Board foradoption) or the Chief Executive Officer.

**ARTICLE VII**

**A.               **The directors,other than those who may be elected by the holders of Preferred Stock underspecified circumstances, shall be divided into three classes with the term ofoffice of the first class (Class I) to expire at the annual meeting of thestockholders held in 1998; the term of office of the second class (Class II) toexpire at the annual meeting of stockholders held in 1999; the term of officeof the third class (Class III) to expire at the annual meeting of stockholdersheld in 2000; and thereafter for each such term to expire at each thirdsucceeding annual meeting of stockholders after such election.  All directors shall hold office until theexpiration of the term for which elected, and until their respective successorsare elected, except in the case of the death, resignation, or removal of anydirector.

**B.               **Subject to therights of the holders of any series of Preferred Stock then outstanding, newlycreated directorships resulting from any increase in the authorized number ofdirectors or any vacancies in the Board of Directors resulting from death,resignation or other cause may be filled (a) by the stockholders at anymeeting, (b) by a majority of the directors, although less than a quorum, or(c) by a sole remaining director, and directors so chosen shall hold office fora term expiring at the next annual meeting of stockholders at which the term ofoffice of the class to which they have been elected expires, and until theirrespective successors are elected, except in the case of the death,resignation, or removal of any director. No decrease in the number of directors constituting the Board ofDirectors shall shorten the term of any incumbent director.

**ARTICLE VIII**

**A.               **To the fullestextent permitted by law, no director of the corporation shall be personallyliable for monetary damages for breach of fiduciary duty as a director.  Without limiting the effect of the precedingsentence, if the Delaware General Corporation Law is hereafter amended toauthorize the further elimination or limitation of the liability of a director,then the liability of a director of the corporation shall be eliminated orlimited to the fullest extent permitted by the Delaware General CorporationLaw, as so amended.

**B.**                To the extent permitted byapplicable law, this corporation is also authorized to provide indemnificationof (and advancement of expenses to) agents (and any other persons to whichDelaware law permits this corporation to provide indemnification) through bylawprovisions, agreements with such agents or other persons, vote of stockholdersor disinterested directors or otherwise, in excess of the indemnification andadvancement otherwise permitted by Section 145 of the Delaware GeneralCorporation Law, subject only to limits created by applicable Delaware law(statutory or non-statutory), with respect to actions for breach of duty to thecorporation, its stockholders, and others.

**C.**                Neither any amendment nor repealof any of the foregoing provisions of this Article VIII, nor the adoptionof any provision of this Certificate of Incorporation inconsistent with thisArticle VIII, shall eliminate, reduce or otherwise adversely affect anylimitation on the personal liability of a director of the corporation existingat the time of such amendment, repeal or adoption of such an inconsistentprovision.

**ARTICLE IX**

Pursuant to the provisions of Section 228 of theDelaware General Corporation Law, actions which are required to be or which maybe taken at taken at any annual or special meeting of stockholders may not betaken without a meeting by the consent in writing of the stockholders of thecorporation.

IN WITNESS WHEREOF,this Amended and Restated Certificate of Incorporation of Asymetrix LearningSystems, Inc. has been signed and attested as of this __________ day of_________, 1998.

 
|   |   |                    |
|--------|--------|-------------------------|
|   |   | James A. Billmaier,     |
|   |   | Chief Executive Officer |

 

 

 

 
| Attest:                 |   |
|-------------------------|--------|
|                    |   |
|                    |   |
|                    |   |
|                    |   |
|                    |   |
|                    |   |
| Steven  Esau, Secretary |   |

 

 

 

 

**CERTIFICATE OF DESIGNATIONS,**

**PREFERENCES AND RIGHTS**

 

**of the**

 

**SERIES A CONVERTIBLE PREFERRED STOCK**

 

**of**

 

**ASYMETRIX LEARNING SYSTEMS, INC.**

 

**Pursuant to Section 151 of the**

**Delaware General Corporation Law**

 

ASYMETRIXLEARNING SYSTEMS, INC., a Delaware corporation (the "Corporation"),hereby certifies that the following resolutions were adopted by the Board ofDirectors of the Corporation pursuant to the authority of the Board ofDirectors as required by Section 151 of the Delaware General Corporation Law.

 

RESOLVED, that pursuantto the authority granted to the Board of Directors in accordance with theprovisions of the Corporation's Certificate of Incorporation, the Board ofDirectors hereby authorizes a series of the Corporation's previously authorizedPreferred Stock, par value $.01 per share (the "Preferred Stock"),and hereby states the designation and number of shares, and fixes the relativerights, preferences, privileges and restrictions thereof as follows:

 

1.*                DESIGNATION AND AMOUNT*.

 

                Thedesignation of this series, which consists of ten thousand (10,000) shares ofPreferred Stock, is the "Series A Convertible Preferred Stock" (the"Series A Preferred Stock") and the face amount of each shareof Series A Preferred Stock (each, a “Preferred Share” and collectively,the “Preferred Shares”) shall be One Thousand Dollars ($1,000) per PreferredShare (the "Stated Value"). The date on which the PreferredShares are issued and sold, together with the related warrants (the “Warrants”),pursuant to the Securities Purchase Agreement, dated September 30, 1999,between the Corporation and the Purchasers named therein (the “SecuritiesPurchase Agreement”) is referred to herein as the "Issue Date".The Corporation has agreed to register the shares of Corporation’s CommonStock, par value $.01 per share (the “Common Stock”) pursuant to aRegistration Rights Agreement of even date with the Securities PurchaseAgreement (the “Registration Rights Agreement”). The holders ofPreferred Shares are each referred to as a "Holder" and,collectively, as the "Holders".

2.                *DIVIDENDS*.

 

                TheSeries A Preferred Stock will not bear dividends.

 

3.*                PRIORITY*.

 

                (a)                Payment upon Dissolution.

 

                                (i)                Upon the occurrence of (x) anyinsolvency or bankruptcy proceedings, or any receivership, liquidation,reorganization or other similar proceedings in connection therewith, commencedby the Corporation or by its creditors, as such, or relating to its assets or(y) the dissolution or other winding up of the Corporation whether total orpartial, whether voluntary or involuntary and whether or not involvinginsolvency or bankruptcy proceedings, or (z) any assignment for the benefit ofcreditors or any marshalling of the material assets or material liabilities ofthe Corporation (each, a "Liquidation Event"), no distributionshall be made to the holders of any shares of Junior Securities (as definedbelow) unless, following the payment of preferential amounts on all SeniorSecurities (as defined below), each Holder shall have received the LiquidationPreference (as defined below) with respect to each Preferred Share then held bysuch Holder.  In the event that upon theoccurrence of a Liquidation Event, and following the payment of preferentialamounts on all Senior Securities (as defined below), the assets available fordistribution to the Holders and the holders of Pari Passu Securities areinsufficient to pay the Liquidation Preference with respect to all of theoutstanding Preferred Shares and the preferential amounts payable to suchholders, the entire assets of the Corporation shall be distributed ratablyamong the Preferred Shares and the shares of Pari Passu Securities inproportion to the ratio that the preferential amount payable on each such share(which shall be the Liquidation Preference in the case of a Preferred Share)bears to the aggregate preferential amount payable on all such shares.

 

                                (ii)                 The "Liquidation Preference" withrespect to a Preferred Share shall mean an amount equal to the Stated Value ofsuch Preferred Share plus all unpaid Premium (as defined below) accrued on suchPreferred Share in accordance with the terms hereof.  "Junior Securities" shall mean the Common Stockand all other capital stock of the Corporation that are not Pari PassuSecurities or Senior Securities.  "PariPassu Securities" shall mean any securities ranking by their terms *pari passu*with the Series A Preferred Stock in respect of redemption or distribution uponliquidation. "Senior Securities" shall mean (i) any debtissued or assumed by the Corporation and (ii) any securities of the Corporationwhich by their terms have a preference over the Series A Preferred Stock inrespect of redemption or distribution upon liquidation.

 

4.*                CONVERSION*.

 

                (a)                Right to Convert.  Each Holder shall have the right to convert,at any time and from time to time after the Issue Date, all or any part of thePreferred Shares held by such Holder into such number of fully paid andnon-assessable shares ("Conversion Shares") of the CommonStock as is determined in accordance with the terms hereof (a "Conversion").

 

(b)                ConversionNotice.  In order to convert PreferredShares, a Holder shall send by facsimile transmission, at any time prior to11:59 p.m., eastern time, on the date on which such Holder wishes to effectsuch Conversion (the "Conversion Date"), (i) a notice ofconversion (a "Conversion Notice"), in substantially the formof Exhibit A hereto, to the Corporation stating the number of Preferred Sharesto be converted, the amount of Premium (as defined below) accrued (butremaining unpaid) thereon, the applicable Conversion Price (as defined below)and a calculation of the number of shares of Common Stock issuable upon suchConversion and (ii) a copy of the certificate or certificates representing thePreferred Shares being converted.  TheHolder shall thereafter send the original of the Conversion Notice and of suchcertificate or certificates to the Corporation.  The Corporation shall issue a new certificate for PreferredShares in the event that less than all of the Preferred Shares represented by acertificate delivered to the Corporation in connection with a Conversion areconverted. Except as otherwise provided herein, upon delivery of a ConversionNotice by a Holder in accordance with the terms hereof, such Holder shall, asof the applicable Conversion Date, be deemed for all purposes to be record ownerof the Common Stock to which such Conversion Notice relates.  In the case of a dispute between theCorporation and a Holder as to the calculation of the Conversion Price or thenumber of Conversion Shares issuable upon a Conversion (including without limitationthe calculation of any adjustment to the Conversion Price pursuant to Section 6below), the Corporation shall issue to such Holder the number of ConversionShares that are not disputed within the time periods specified in paragraph4(e) below and shall submit the disputed calculations to its independentaccountant within two (2) Business Days of receipt of such Holder's ConversionNotice.  The Corporation shall causesuch accountant to calculate the Conversion Price as provided herein and tonotify the Corporation and such Holder of the results in writing no later thanfive (5) Business Days following the Corporation's receipt of such Holder'sConversion Notice (such 5th Business Day being referred to herein asthe "Disputed Share Calculation Date").  Such accountant's calculation shall be deemedconclusive absent manifest error.  Thefees of any such accountant shall be borne by the party whose calculations weremost at variance with those of such accountant.

 

                (c)                Number of Conversion Shares;Conversion Price.  The number ofConversion Shares to be delivered by the Corporation pursuant to a Conversionshall be determined in accordance with the following formula:

 

SV + P

CP

 

 
| where  | SV represents the  aggregate Stated Value of the Preferred Shares to be converted,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | P represents the  aggregate unpaid Premium accrued on such Preferred Shares through the  Conversion Date, it being understood that the Corporation must pay Premium  that has accrued as of a Conversion Date in immediately available funds if  any Premium Share Condition (as defined in paragraph 4(g) below) has not been  satisfied or waived by the Holder of such Preferred Shares as of such  Conversion Date, in which case such Premium shall not be considered in  determining the number of Conversion Shares issuable pursuant to such  Conversion, and it being further understood that such Premium shall not be  included in such formula for any conversions that occur prior to the one  hundred and eightieth (180th) day following the Issue Date (but shall accrue  and be payable thereafter in accordance with the terms of this Certificate),  and |

 

 
|   | CP  represents the Conversion Price (as  defined below) in effect on the applicable Conversion Date. |
|--------|------------------------------------------------------------------------------------------------------|

 

 

“Premium” withrespect to a Preferred Share shall bedetermined in accordance with the following formula:

 

(SV)(.05)(N)

365

 
| where  | SV represents the  Stated Value of such Preferred Share, and                                                                              |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                      |
|   | N represents the  number of days elapsed from the Issue Date through and including the  Conversion Date relating to such Preferred Share. |

 

 

In addition to the payment of Premium upon theconversion of Preferred Shares as described above, the Corporation shall pay toeach Holder any Premium that has accrued on the Preferred Shares owned by suchHolder and that remains unpaid on the last day of each calendar quarterbeginning with the first calendar quarter to end after the one hundred andeightieth (180th) day following the Issue Date (a “QuarterlyPremium Payment Date”). The Corporation shall pay such accrued Premium ineither (at the Corporation’s option) cash or, if each Premium Share Condition(as defined below) has been satisfied or waived by such Holder as of suchQuarterly Premium Payment Date, in shares of Common Stock (the “PremiumShares”). In the event that the Corporation elects to pay Premium on thelast day of a quarter in Premium Shares, the number of such shares to bedelivered shall be equal to the dollar amount of such Premium divided by theMarket Price (as defined below). The Corporation shall pay such accrued Premiumwithin five (5) Business Days following such Quarterly Premium Payment Date (a“Premium Share Delivery Date”). Notwithstanding anything containedherein to the contrary, (i) in the event that date on which the RegistrationStatement (as defined below) is declared effective by the Securities andExchange Commission (the "Effective Date") occurs on or before theone hundred and eightieth (180th) day following the Issue Date, noPremium shall be payable with respect to any conversion or any QuarterlyPremium Payment Date and (ii) in the event that the Effective Date does notoccur on or before such 180th day, all Premium accrued since theIssue Date shall become payable on the next occurring Delivery Date (as definedin subparagraph (e) below).

 

"Conversion Price" shall be determined,subject to adjustment for the events specified in Section 6 below, as follows:(A) during the period beginning on the Issue Date and ending on the Trading Dayoccurring immediately prior to the Effective Date, the Conversion Price shallbe equal to $7.75 (the “Initial Conversion Price”), and (B) on theEffective date, the Conversion Price shall be equal to the lower of (x) theInitial Conversion Price and (y) the greater of (i) the average Closing TradePrice occurring during the period of twenty (20) consecutive Trading Daysoccurring immediately prior to (but not including) the Effective Date and (ii)$6.82.

 

                (d)                Certain Definitions.  "Trading Day" means any dayon which the Common Stock is purchased and sold on the principal securitiesexchange or market on which the Common Stock is then listed or traded. "ClosingBid Price" means, with respect to the Common Stock, the closing bidprice for the Common Stock occurring on a given Trading Day on the principalsecurities exchange or trading market where such security is listed or tradedas reported by Bloomberg Financial Markets or, if Bloomberg Financial Marketsis not then reporting such prices, by a comparable reporting service ofnational reputation selected by the Corporation and reasonably acceptable toeach Holder of the then outstanding Preferred Shares (collectively, "Bloomberg")or if the foregoing does not apply, the last reported bid price of suchsecurity in the over-the-counter market on the electronic bulletin board forsuch security as reported by Bloomberg, or, if no bid price is reported forsuch security by Bloomberg, the average of the bid prices of all market makersfor such security as reported in the "pink sheets" by the NationalQuotation Bureau, Inc. (collectively, the "Applicable ReportingEntity").  If the Closing BidPrice cannot be calculated for such security on any of the foregoing bases, theClosing Bid Price of such security shall be the fair market value as reasonablydetermined by an independent investment banking firm selected by all of theHolders of Preferred Shares, and reasonably acceptable to the Corporation, withthe costs of such appraisal to be borne by the Corporation. "ClosingTrade Price" means, with respect to the Common Stock, the last saleprice reported for the Common Stock on a given Trading Day on the principalsecurities exchange or trading market where such security is listed or tradedas reported by the Applicable Reporting Entity or if no sale price was reportedby the Applicable Reporting Entity on such Trading Day, the last sale pricereported by the Applicable Reporting Entity on the Trading Day on which suchprices were last reported immediately preceding such Trading Day. "BusinessDay" means any day on which the New York Stock Exchange and commercialbanks located in the City of New York are open for business.

 

                (e)                Delivery of ConversionShares, Premium Shares.  Uponreceipt of a Conversion Notice from a Holder, the Corporation shall, on orbefore the close of business on the later to occur of (i) the third (3rd)Business Day following the Conversion Date set forth in such Conversion Noticeand (ii) with respect to Conversion Shares that are the subject of a dispute asdescribed in paragraph 4(b) above, the Business Day immediately following theDisputed Share Calculation Date (the applicable such Business Day beingreferred to herein as a "Conversion Share Delivery Date"),issue and deliver or cause to be delivered to such Holder the number ofConversion Shares to which such Holder is entitled to receive as providedherein. A Conversion Share Delivery Date and a Premium Share Delivery Date areeach sometimes referred to herein as a “Delivery Date”. The Corporationshall effect delivery of Conversion Shares or Premium Shares to a Holder by, aslong as the transfer agent for the Corporation (the “Transfer Agent”)participates in the Depository Trust Company ("DTC") FastAutomated Securities Transfer program ("FAST"), crediting theaccount of such Holder or its nominee at DTC (as specified in the applicableConversion Notice or otherwise in writing) with the number of Conversion Sharesrequired to be delivered, no later than the close of business on such DeliveryDate. In the event that Transfer Agent is not a participant in FAST, or ifConversion Shares are not otherwise eligible for delivery through FAST,  or if a Holder so specifies in a ConversionNotice or otherwise in writing on or before the Conversion Date or PremiumShare Delivery Date, the Corporation shall effect delivery of Conversion Sharesor Premium Shares by delivering to the Holder or its nominee physicalcertificates representing such shares, no later than the close of business onsuch Delivery Date.  If any Conversionor payment of Premium would create a fractional Conversion Share or PremiumShare, such fractional share shall be disregarded and the number of ConversionShares or Premium Shares shall be the rounded to the nearest whole number ofshares.  Conversion Shares and PremiumShares delivered to a Holder shall not contain any restrictive legend as longas (A) the resale, transfer, pledge or other disposition of such shares iscovered by an effective registration statement and such Holder represents inwriting to the Corporation that such shares have been or are being soldpursuant to such registration statement, (B) such shares have been publiclysold pursuant to Rule 144 ("Rule 144"),  or (C) such shares can be sold pursuant toRule 144(k) under Securities Act of 1933, as amended (the "SecuritiesAct"), or any successor rule or provision.

 

                (f)                Failure to Deliver ConversionShares.

 

                                (i)                 In the event that, as aresult of any willful action or failure to act on the part of the Corporation(whether under this Certificate of Designation, under any other TransactionDocument (as defined in the Securities Purchase Agreement) or otherwise,including without limitation a failure by the Corporation to have a sufficientnumber of shares of Common Stock authorized and reserved for issuance pursuantto conversions of Preferred Shares), aHolder has not received certificates (without any restrictive legend in thecircumstances described in clause (A), (B) or (C) of paragraph 4(e) above)representing the number of Conversion Shares specified in the applicableConversion Notice on or before the Delivery Date therefor (a "ConversionDefault"), and such failure to deliver certificates continues for ten(10) Business Days following the delivery of written notice thereof from suchHolder (such tenth Business Day being referred to herein as the “ConversionDefault Date”), the Corporation shall pay to such Holder payments ("ConversionDefault Payments") in the amount of (i) “N” multiplied by (ii)the aggregate Stated Value of the Preferred Shares which are the subject ofsuch Conversion Default multiplied by (iii) one percent (1%),  where "N" equals the number ofdays elapsed between the Conversion Default Date and the earlier to occur of(i) the date on which all of the certificates (without any restrictive legendin the circumstances described in clause (A), (B) or (C) of paragraph 4(e)above) representing such Conversion Shares are issued and delivered to suchHolder, (ii) the date on which such Preferred Shares are redeemed pursuant tothe terms hereof and (iii) the date on which a Withdrawal Notice (as definedbelow) is delivered to the Corporation. Amounts payable hereunder shall be paid to the Holder in immediatelyavailable funds on or before the fifth (5th) Business Day of the calendar monthimmediately following the calendar month in which such amounts have accrued.

 

                                (ii)                 In the event that a Holder has not receivedcertificates (without any restrictive legend in the circumstances described inclause (A), (B) or (C) of paragraph 4(e) above) representing the ConversionShares by the tenth (10th) Business Day following a ConversionDefault as a result of any willful action or any failure to act on the part ofthe Corporation (whether under this Certificate ofDesignation, under any other Transaction Document (as defined in the SecuritiesPurchase Agreement) or otherwise, including without limitation a failure by theCorporation to have a sufficient number of shares of Common Stock authorizedand reserved for issuance pursuant to conversions of Preferred Shares), such Holder may, upon written notice (a "WithdrawalNotice") delivered to the Corporation on such Business Day or on anyBusiness Day thereafter (unless, prior to the delivery of such notice, suchConversion Shares are delivered to such Holder), withdraw its Conversion Noticewith respect to such Conversion Shares and regain its rights as a Holderof  the Preferred Shares that are thesubject of such Conversion Default.  Insuch event, the Conversion Price in effect when such Preferred Shares arethereafter converted shall be equal to the lowest Conversion Price occurring onor after the date of such Conversion Notice reduced by one percent (1%) foreach day occurring during the period immediately following such 10th BusinessDay until the day on which the such Holder delivers a Withdrawal Notice to theCorporation; *provided, however,*that the maximum percentage by which suchConversion Price may be reduced hereunder shall be fifty percent (50%).  (For example, if such Conversion Defaultwere to continue for five days following such 10th Business Day, suchConversion Price would be reduced by 5%; if for ten days, by 10%; and for fiftydays or more, 50%, so that the number of Conversion Shares deliverable uponconversion of such Preferred Shares would be increased proportionately).  Upon delivery by a Holder of a WithdrawalNotice, such Holder shall retain all of such Holder's rights and remedies withrespect to the Corporation's failure to deliver such Conversion Shares(including without limitation the right to receive the cash payments specifiedin subparagraph 4(f)(i) above).

 

                                (iii)                 In addition to any other remedies provided herein,each Holder shall have the right to pursue actual damages for the Corporation'sfailure to issue and deliver Conversion Shares on the applicable Delivery Date(including, without limitation, damages relating to any purchase of shares ofCommon Stock by such Holder to make delivery on a sale lawfully effected inanticipation of receiving Conversion Shares upon Conversion, such damages to bein an amount equal to (A) the aggregate amount paid by such Holder for theshares of Common Stock so purchased minus (B) the aggregate ConversionPrice for such Conversion Shares, and such Holder shall have the right topursue all other remedies available to it at law or in equity (including,without limitation, a decree of specific performance and/or injunctive relief).

 

                (g)                Premium Share Conditions.The Corporation’s right to pay accrued Premium in shares of Common Stock,whether pursuant to a Conversion or with respect to a Quarterly Premium PaymentDate, is conditioned upon the satisfaction of each of the following conditions(the “Premium Share Conditions”):

 

(i)              the number of shares of CommonStock authorized, unissued and unreserved for all other purposes, or held inthe Corporation's treasury, is sufficient to pay such Premium in ConversionShares or Premium Shares, as the case may be;

 

(ii)            theCorporation has, at least ten (10) days prior to any calendar month while anyPreferred Shares remain outstanding, delivered a written notice to each Holderstating that the Corporation will pay Premium that becomes payable in shares ofCommon Stock (whether pursuant to a Conversion or with respect to a QuarterlyPremium Payment Date) during such month or any calendar month that follows suchmonth other than any such calendar month with respect to which the Corporationhas delivered a notice in accordance with the terms hereof.  Each notice delivered by the Corporation hereunderto any Holder shall be irrevocable and binding on the Corporation upon suchdelivery;

 

(iii)            the Common Stock is authorized forquotation on the Nasdaq National Market or for listing on the New York StockExchange or the American Stock Exchange and trading in the Common Stock on suchmarket or exchange has not been suspended;

 

(iv)           the registration statement requiredto be maintained by the Corporation (the "Registration Statement”)pursuant to the Registration Rights Agreement is effective and available forthe sale of the maximum number of (a) Conversion Shares and Premium Sharesissuable pursuant to the Preferred Shares (assumingfor such purpose (i) the application of the minimum Conversion Price that mayoccur hereunder, (ii) the accrual of Premium under all of the Preferred Sharesissued hereunder from the Issue Date through the Maturity Date and payment ofsuch Premium in Conversion Shares or Premium Shares and (iii) that nolimitation set forth herein on such conversion or payment of Premium exists) and(b) Warrant Shares issuable upon exercise of all of the Warrants thenoutstanding (without regard to the limitations set forth in the Warrants), orsales of such shares may be made pursuant to Rule 144(k);

 

(v)            no Mandatory Redemption Event (asdefined herein) has occurred (or with the passage of time would be deemed tooccur) and is continuing; and

 

(vi)           such payment of Premium in shares ofCommon Stock will not violate the limitations set forth in Section 5 below.

 

(h)                In the event that any PremiumShare Condition is not satisfied as of any Conversion Date or Quarterly PremiumPayment Date, such Premium shall be payable by the Corporation to the Holderthereof in immediately available funds on the relevant Delivery Dateimmediately following such date. If theCorporation fails to deliver the amount of such Premium in immediatelyavailable funds to a Holder on or before the close of business on the DeliveryDate therefor, such amount will bear interest at an annual rate equal to thelower of (x) twenty four percent (24%) and (y) the highest interest ratepermitted by applicable law (the “Default Interest Rate”), accrued on a dailybasis from and after such Delivery Date until such amount is paid in full.

 

                (i)                Conversion at Maturity.  On the Effective Date (sometimes referred toherein as the "Maturity Date"), each Preferred Share thenoutstanding shall be automatically converted into the number of shares ofCommon Stock equal to the Liquidation Preference of such shares divided bythe Conversion Price then in effect (a "Conversion at Maturity");*provided,however,* that if, on the Maturity Date, (i) the number of shares ofCommon Stock authorized, unissued and unreserved for all other purposes, orheld in the Corporation's treasury, is not sufficient to effect the issuanceand delivery of the number of Conversion Shares into which all outstandingPreferred Shares are then convertible, (ii) the Common Stock is not designatedfor quotation or listed on the Nasdaq National Market or the New York StockExchange or the American Stock Exchange or trading in the Common Stock on suchmarket or exchange has been suspended, or (iii) a Mandatory Redemption Event(as defined herein) has occurred and is continuing, each Holder shall have theoption, upon written notice to the Corporation, to retain its rights as aholder of Preferred Shares, including without limitation, the right to convertsuch Preferred Shares in accordance with the terms of paragraphs 4(a) through4(f) hereof and, upon delivery of such notice, such Preferred Shares shall notbe subject to a Conversion at Maturity hereunder until the thirtieth (30th) dayfollowing the later of (a) the date on which the event specified (i), (ii) or(iii) is no longer continuing and (b) the date on which the Corporationdelivers to each Holder written notice to such effect, and in such event, suchthirtieth day shall be deemed to be the Maturity Date for purposes of thisCertificate of Designation. If a Conversion at Maturity occurs, the Corporationand each Holder shall follow the procedures for Conversion set forth in thisSection 4, with the Maturity Date deemed to be the Conversion Date, except thatthe Holder shall not be required to send a Conversion Notice as contemplated byparagraph 4(b).

 

5.*                CONVERSIONLIMITATIONS.*

 

                Inno event shall a Holder be permitted to convert any Preferred Shares in excessof the number of such shares, upon the Conversion of which (x) the number ofshares of Common Stock beneficially owned by such Holder (other than shares ofCommon Stock issuable upon conversion of such Preferred Shares or which wouldotherwise be deemed beneficially owned except for being subject to a limitationon conversion or exercise analogous to the limitation contained in thisparagraph 5 plus (y) the number of shares of Common Stock issuable uponthe Conversion of such Preferred Shares, would be equal to or exceed(z) 9.99% of the number of shares of Common Stock then issued andoutstanding.  As used herein, beneficialownership shall be determined in accordance with Section 13(d) of the SecuritiesExchange Act of 1934, as amended, and the rules thereunder. To the extent thatthe limitation contained in this paragraph applies (and without limiting any rights the Corporation may otherwisehave), the Corporation may rely on the Holder’s determination of whetherPreferred Shares are convertible pursuant to the terms hereof, the Corporation having no obligation whatsoeverto verify or confirm the accuracy of such determination, and the submission ofa Conversion Notice by the Holder shall be deemed to be the Holder'srepresentation that the Preferred Shares specified therein are convertiblepursuant to the terms hereof.  This paragraph may be amended  by all of the Holders of Preferred Sharesthen outstanding only with the consent of the holders of a majority of theshares of Common Stock then outstanding. Nothing contained herein shall be deemed to restrict the right of aHolder to convert Preferred Shares at such time as the Conversion thereof willnot violate the provisions of this paragraph 5. The limitation contained inthis paragraph 5 shall not apply (i) in the event of a Conversion at Maturityor (ii) with respect to any Preferred Shares that were purchased from theCorporation pursuant to the Securities Purchase Agreement by a purchaser that(A) has elected therein not to be subject to the limitation contained in thisparagraph 5 and (B) owns greater than ten percent (10%) of the Common Stockoutstanding immediately prior to the Issue Date.

 

6.*                ADJUSTMENTSTO CONVERSION PRICE***.**

 

                (a)                Adjustment to FixedConversion Price Due to Stock Split, Stock Dividend, Etc.  If, prior to the Conversion of all of thePreferred Shares, (A) the number of outstanding shares of Common Stock isincreased by a stock split, a stock dividend on the Common Stock, a reclassificationof the Common Stock, or other similar event, the Conversion Price shall beproportionately reduced, which reduction shall be effected on the date on whichthe Corporation announces such event; or (B) the Corporation issues CommonStock, whether upon the exercise of rights, warrants, securities convertible orexercisable into Common Stock or otherwise, at a price (the "IssuePrice") that is less than the current Market Price (as defined below)thereof at the time of such issuance, the Conversion Price that would otherwisebe in effect on a particular date following such issuance shall beproportionately reduced in order to account for the dilution to existingstockholders that occurs on the date of such issuance; provided, however, thatif the Issue Price is lower than the Conversion Price otherwise in effect onthe date of such issuance, such Conversion Price will be reduced to the lowerof the amount determined by this clause (B) and the amount determined by clause(D) below; (C) the number of outstanding shares of Common Stock is decreased bya reverse stock split, combination or reclassification of shares or othersimilar event, the Conversion Price shall be proportionately increased, whichincrease shall be effected on the date on which the Corporation announces suchevent; or (D) the Corporation issues Common Stock, whether upon the exercise ofrights, warrants, securities convertible or exercisable into Common Stock orotherwise, at a price that in any such case is lower than the Conversion Price, theConversion Price that would otherwise be in effect on a Conversion Datefollowing the date of the issuance of such Common Stock shall be reduced tosuch lower price.

Inno event shall any adjustment pursuant to clause (B) or clause (D) above resultin a Conversion Price that exceeds the Conversion Price that would otherwiseapply in the absence of such adjustment and provided further that no suchadjustment pursuant to clause (B) or (D) shall apply with respect to issuancesof Common Stock (i) pursuant to an employee stock purchase plan or upon theexercise of options issued under a stock option plan duly adopted by theCorporation, (ii) in connection with a merger,acquisition or strategic investment which, in any such case, is not effectedfor the primary purpose of raising equity capital or (iii) in connection with afirm-commitment underwritten secondary offering.

Forpurposes hereof, the “Market Price” per share of Common Stock on any date shallbe the average Closing Trade Price for the Common Stock as reported by Bloomberg on the five (5) consecutiveTrading Days (as defined below) immediately preceding such date. If such Market Price cannot be calculated on any of the foregoingbases, such Market Price shall bethe fair market value as reasonably determined by an investment banking firmselected by the Corporation and reasonably acceptable to the Holders, with thecosts of such appraisal to be borne by the Corporation.

                (b)                Adjustment to ConversionPrice During Reference Period.  If,prior to the Conversion of all of the Preferred Shares, the number ofoutstanding shares of Common Stock is increased or decreased by a stock split,a stock dividend on the Common Stock, a combination, a reclassification of theCommon Stock or other similar event, and such event takes place during thereference period for the determination of the Conversion Price for anyConversion thereof, the Conversion Price shall be calculated giving appropriateeffect to the stock split, stock dividend, combination, reclassification orother similar event for all Trading Days occurring during such referenceperiod.

 

                (c)                Adjustment Due to Merger,Consolidation, Etc.  If, prior tothe Conversion of all of the Preferred Shares, there shall be any merger,consolidation, business combination, tender offer, exchange of shares,recapitalization, reorganization, redemption or other similar event, as aresult of which shares of Common Stock shall be changed into the same or adifferent number of shares of the same or another class or classes of stock orsecurities of the Corporation or another entity (an "ExchangeTransaction"), then such Holder shall (A) upon the consummation ofsuch Exchange Transaction, have the right to receive, with respect to anyshares of Common Stock then held by such Holder, or which such Holder is thenentitled to receive pursuant to a Conversion Notice previously delivered bysuch Holder (and without regard to whether such shares contain a restrictivelegend or are freely-tradable), the same amount and type of consideration(including without limitation, stock, securities and/or other assets) and onthe same terms as a holder of shares of Common Stock would be entitled toreceive in connection with the consummation of such Exchange Transaction (the"Exchange Consideration"), and (B) upon the Conversion ofPreferred Shares occurring subsequent to the consummation of such ExchangeTransaction (a “Subsequent Conversion”), have the right to receive theExchange Consideration which such Holder would have been entitled to receive inconnection with such Exchange Transaction had such shares been convertedimmediately prior to such Exchange Transaction at the Conversion Priceapplicable on the Conversion Date relating to such Subsequent Conversion, andin any such case appropriate provisions shall be made with respect to therights and interests of such Holder to the end that the provisions hereof(including, without limitation, provisions for the adjustment of the ConversionPrice and of the number of shares of Common Stock issuable upon a Conversion)shall thereafter be applicable as nearly as may be practicable in relation toany securities thereafter deliverable upon the Conversion of such PreferredShares. The Corporation shall not effect any Exchange Transaction unless (i) itfirst gives to each Holder twenty (20) days prior written notice of suchExchange Transaction (an "Exchange Notice"), and makes apublic announcement of such event at the same time that it gives such notice(it being understood that the filing by the Corporation of a Form 8-K for thepurpose of disclosing the anticipated consummation of the Exchange Transactionshall constitute an Exchange Notice for purposes of this provision) and (ii)the resulting successor or acquiring entity (if not the Corporation) assumes bywritten instrument the obligations of the Corporation hereunder, including theterms of this subparagraph 6(c), and under the Securities Purchase Agreementand the Registration Rights Agreement.

 

                (d)                Distribution of Assets.  If the Corporation or any of itssubsidiaries shall declare or make any distribution of cash, evidences ofindebtedness or other securities or assets (other than cash dividends ordistributions payable out of earned surplus or net profits for the current orthe immediately preceding year), or any rights to acquire any of the foregoing,to holders of Common Stock (or to a holder, other than the Corporation, of thecommon stock of any such subsidiary) as a partial liquidating dividend, by wayof return of capital or otherwise, including any dividend or distribution inshares of capital stock of a subsidiary of the Corporation (collectively, a"Distribution"), then each Holder shall be entitled toreceive, at the same time as such assets are received by a holder of such stock,an amount and type of such Distribution as though such Holder were a holder onthe record date therefor of a number of shares of Common Stock determined bydividing the Liquidation Preference of the Preferred Shares held by such Holderon such record date by the lower of the Market Price and the Conversion Pricein effect on such record date (such number of shares to be determined withoutregard to any limitation on conversion of the Preferred Shares that may existpursuant to this Certificate of Designation or otherwise).

 

                (e)                Adjustment Pursuant to OtherAgreements. In addition to and without limiting in any way the adjustmentsprovided in this Section 6, the Conversion Price shall be adjusted as may berequired by the provisions of the Registration Rights Agreement and/or by theprovisions of the Securities Purchase Agreement.

 

                (f)                No Fractional Shares.  If any adjustment under this Section wouldcreate a fractional share of Common Stock or a right to acquire a fractionalshare of Common Stock, such fractional share shall be disregarded and thenumber of shares of Common Stock issuable upon Conversion shall be rounded tothe nearest whole number of shares.

 

7.*                REDEMPTION*.

 

                (a)                Mandatory Redemption.  In the event that a Mandatory RedemptionEvent (as defined below) occurs, each Holder shall have the right to requirethe Corporation to redeem all or any portion of the Preferred Shares held bysuch Holder (a "Mandatory Redemption") at the MandatoryRedemption Price (as defined herein). In order to exercise its right to effect a Mandatory Redemption, aHolder must deliver a written notice (a "Mandatory Redemption Notice")to the Corporation at any time on or before 11:59 p.m. (eastern time) on thethird (3rd) Business Day following the Business Day on which theMandatory Redemption Event to which such Mandatory Redemption Notice relates isno longer continuing. The Mandatory Redemption Notice shall specify theeffective date of such Mandatory Redemption (the "Mandatory RedemptionDate") and the number of such shares to be redeemed.

 

                (b)                Mandatory RedemptionEvent.  Each of the following eventsshall be deemed a "Mandatory Redemption Event":

 

                                (i)                the Corporation fails as a result of not having asufficient number of shares of Common Stock authorized and reserved forissuance, or as a result of the limitations contained in Section 5 hereof orfor any reason within the control of the Corporation to issue shares of CommonStock to a Holder and deliver certificates representing such shares to suchHolder as and when required by the provisions hereof upon conversion of anyPreferred Shares, and such failure continues for ten (10) Business Days;

 

                                (ii)                 the Corporation breaches, in a material respect, anycovenant or other material term or condition of this Certificate, theSecurities Purchase Agreement, the Registration Rights Agreement, or any otheragreement, document, certificate or other instrument delivered in connectionwith the transactions contemplated thereby, and such breach continues for aperiod of five (5) Business Days after written notice thereof to theCorporation from a Holder, and such breach has or could have a Material AdverseEffect;

 

                                (iii)                 any material representation or warranty made by theCorporation in the Securities Purchase Agreement, the Registration RightsAgreement or any other agreement, document, certificate or other instrumentdelivered in connection with the transactions contemplated hereby or thereby isinaccurate or misleading in any material respect as of the date such representationor warranty was made, and such breach has or could have a Material AdverseEffect;

 

                                (iv)                (x) the sale, conveyance or disposition ofall or substantially all of the assets of the Corporation,the effectuation of a transaction or series of transactions in which more than50% of the voting power of the Corporationis disposed of, or the consolidation, merger or other business combination ofthe Corporation with or into anyother entity, immediately following which the prior stockholders of the Corporation fail to own, directly orindirectly, at least fifty percent (50%) of the surviving entity or (y) atransaction or series of transactions in which any person (other than PaulAllen or entities affiliated with Paul Allen) acquires control of the Corporation(each a "Change of Control Transaction"). For purposes hereof, "control" shall mean, withrespect to the Corporation, the ability to direct the business, operations ormanagement of the Corporation, whether through an equity interest therein orotherwise; and

 

                                (v)                 the Common Stock is not quoted on the Nasdaq NationalMarket or listed on the New York Stock Exchange or the American Stock Exchange,or trading in the Common Stock on such market or exchange is suspended and suchsuspension is in effect for more than five consecutive (5) Trading Days, andsuch suspension or failure to be so quoted or listed occurs as a result of anywillful action or failure to act on the part of the Corporation.

 

                (c)                Mandatory Redemption Price.  The "Mandatory Redemption Price"shall be equal to the greater of (i) the Liquidation Preference of thePreferred Shares being redeemed multiplied by one hundred and fifteenpercent (115%) (or, with respect to a Change of Control Transaction, onehundred and ten percent (110%)) and (ii) an amount determined by dividing theLiquidation Preference of the Preferred Shares being redeemed by the ConversionPrice in effect on the Mandatory Redemption Date and multiplying the resultingquotient by the average Closing Trade Price for the Common Stock on the five (5) Trading Days immediatelypreceding (but not including) the Mandatory Redemption Date.

 

                (d)                Payment of MandatoryRedemption Price.

 

                                (i)                The Corporation shall pay theMandatory Redemption Price to the Holder exercising its right to redemption onthe later to occur of (i) the fifth (5th) Business Day following the MandatoryRedemption Date and (ii) the date on which the Preferred Shares being redeemedare delivered by the Purchaser to the Corporation for cancellation (the "MandatoryRedemption Payment Date").

 

                                (ii)                If Corporation fails to pay the Mandatory RedemptionPrice to the Holder on or before the Mandatory Redemption Date, the Holdershall be entitled to interest thereon, from and after the Mandatory RedemptionPayment Date until the Mandatory Redemption Price has been paid in full, at anannual rate equal to the Default Interest Rate.

 

                                 (iii)                If the Corporation failsto pay the Mandatory Redemption Price within ten (10) Business Days of theMandatory Redemption Date, then the Holder shall have the right to regain itsrights as a Holder of the Series A Preferred Stock and, upon written notice tosuch effect from the Holder, the Corporation shall return to such Holder thecertificates representing the Preferred Shares that were delivered to theCorporation in connection with such Mandatory Redemption; in such event, theConversion Price otherwise applicable to future Conversions of the PreferredShares shall be reduced by one percent (1%) for each day beyond such 10thBusiness Day in which the failure to pay the Mandatory Redemption Pricecontinued until the date of such notice; *provided, however,*that the maximumpercentage by which such Conversion Price may be reduced hereunder shall befifty percent (50%).

 

8.*                MISCELLANEOUS*.

 

                (a)                Transfer of Preferred Shares.  Upon notice to the Corporation, a Holder maysell or transfer all or any portion of the Preferred Shares to any person orentity as long as such sale or transfer is the subject of an effectiveregistration statement under the Securities Act or is exempt from registrationthereunder and otherwise is made in accordance with the terms of the SecuritiesPurchase Agreement.  Notwithstanding theforegoing, no Holder shall knowingly and voluntarily sell any Preferred Sharesto an entity that is a competitor of the Corporation. From and after the dateof such sale or transfer, the transferee thereof shall be deemed to be aHolder.  Upon any such sale or transfer,the Corporation shall, promptly following the return of the certificate orcertificates representing the Preferred Shares that are the subject of suchsale or transfer, issue and deliver to such transferee a new certificate in thename of such transferee.

 

                (b)                Notices.  Except as otherwise provided herein, anynotice, demand or request required or permitted to be given pursuant to theterms hereof, the form or delivery of which notice, demand or request is nototherwise specified herein, shall be in writing and shall be deemed delivered(i) when delivered personally or by verifiable facsimile transmission on orbefore 5:00 p.m., eastern time, on a Business Day or, if such day is not aBusiness Day, on the next succeeding Business Day, (ii) on the next BusinessDay after timely delivery to an overnight courier and (iii) on the day actuallyreceived if deposited in the U.S. mail (certified or registered mail, returnreceipt requested, postage prepaid), addressed to the parties as follows:

 
|   | *If to  the Corporation*:        |
|--------|----------------------------------|
|   |                             |
|   | Asymetrix Learning Systems, Inc. |
|   | 110 110th Avenue NE              |
|   | Bellevue, WA 98008               |
|   | Attn: General Counsel            |
|   | Tel: 425-637-5829                |
|   | Fax: 425-637-1540                |
|   |                             |
|   | *with a  copy to*:               |
|   |                             |
|   | Jeffrey R. Vetter, Esq.          |
|   | Fenwick & West, LLP          |
|   | Two Palo Alto Square             |
|   | Palo Alto, CA   94306       |
|   | Tel:   650-494-0600         |
|   | Fax: 650-494-1417                |

 

 

and if to any Holder, to such address for such Holder asshall be designated by such Holder in writing to the Corporation.

 

                (c)                Lost or StolenCertificate.  Upon receipt by theCorporation of evidence of the loss, theft, destruction or mutilation of acertificate representing Preferred Shares, and (in the case of loss, theft ordestruction) of indemnity or security reasonably satisfactory to theCorporation and the Transfer Agent, and upon surrender and cancellation of suchcertificate if mutilated, the Corporation shall execute and deliver to theHolder a new certificate identical in all respects to the original certificate.

 

                (d)                No Voting Rights.  Except as provided by applicable law andparagraph 8(g) below, the Holders of the Preferred Shares shall have no votingrights with respect to the business, management or affairs of the Corporation;provided that the Corporation shall provide each Holder with prior notificationof each meeting of stockholders (and copies of proxy statements and other informationsent to such stockholders).

 

                (e)                Remedies, Characterization,Other Obligations, Breaches and Injunctive Relief.  The remedies provided to a Holder in thisCertificate of Designation shall be cumulative and in addition to all otherremedies available to such Holder under this Certificate of Designation orunder any Transaction Document (as defined in the Securities PurchaseAgreement), at law or in equity (including without limitation a decree ofspecific performance and/or other injunctive relief), no remedy containedherein shall be deemed a waiver of compliance with the provisions giving riseto such remedy and nothing contained herein shall limit such Holder's right topursue actual damages for any failure by the Corporation to comply with the termsof this Certificate of Designation. The Corporation agrees with each Holderthat there shall be no characterization concerning this instrument other thanas specifically provided herein. Amounts set forth or provided for herein withrespect to payments, conversion and the like (and the computation thereof)shall be the amounts to be received by the Holder hereof and shall not, exceptas expressly provided herein, be subject to any other obligation of theCorporation (or the performance thereof). The Corporation acknowledges that amaterial breach by it of its obligations hereunder will cause irreparable harmto the Holders and that the remedy at law for any such breach may beinadequate. The Corporation agrees, in the event of any such breach orthreatened breach, each Holder shall be entitled, in addition to all otheravailable remedies, to an injunction restraining any breach, without thenecessity of showing economic loss and without any bond or other security beingrequired.

 

                (f)                Failure or Delay not Waiver.  No failure or delay on the part of a Holderin the exercise of any power, right or privilege hereunder shall operate as awaiver thereof, nor shall any single or partial exercise of any such power,right or privilege preclude other or further exercise thereof or of any otherright, power or privilege.

 

                (g)                Protective Provisions.

 

                                Solong as shares of Series A Preferred Stock are outstanding, the Corporationshall not, without first obtaining the approval of the Holders of at leasttwo-thirds (2/3) of outstanding shares of Series A Preferred Stock:

 

                                                (i)                alter, change, modify or amend (x) the terms of theSeries A Preferred Stock in any way or (y) the terms of any other capital stockof the Corporation so as to affect adversely the Series A Preferred Stock;

 

                                                (ii)                create any new class or series of capital stockhaving a preference over or ranking pari passu with the Series A PreferredStock as to redemption or distribution of assets upon a Liquidation Event orany other liquidation, dissolution or winding up of the Corporation;

 

                                                (iii)                increase the authorized number of shares of Series APreferred Stock;

 

                                                (iv)                 re-issue any shares of Series A Preferred Stock whichhave been converted or redeemed in accordance with the terms hereof;

 

                                                (v)                 issue any Pari Passu Securities or Senior Securities;

 

                                                (vi)                 redeem, or declare, pay or make any provision for anydividend or distribution with respect to, the Common Stock or any other capitalstock of the Corporation ranking junior to the Series A Preferred Stock as tothe distribution of assets upon liquidation, dissolution or winding up of theCorporation; or

 

                                                (vii)                issue any Series A Preferred Stock except pursuant tothe terms of the Securities Purchase Agreement.

 

                Inthe event that the Holders of at least two-thirds of the outstanding shares ofSeries A Preferred Stock agrees to allow the Corporation to alter or change therights, preferences or privileges of the shares of Series A Preferred Stockpursuant to the terms hereof, then the Corporation will deliver notice of suchapproved change to the holders of the Series A Preferred Stock that did notagree to such alteration or change (the "Dissenting Holders")and the Dissenting Holders shall have the right for a period of thirty (30)days following such delivery to convert their Preferred Shares pursuant to theterms hereof as they existed prior to such alteration or change, or to continueto hold such Preferred Shares.  No suchchange shall be effective to the extent that, by its terms, it applies to lessthan all of the Holders of Preferred Shares then outstanding.

 

 

[Remainderof Page Intentionally Left Blank]

 

                INWITNESS WHEREOF, the Corporation has executed this Certificate of Designationas of the ____ day of October, 1999.

 

 

 
| ASYMETRIX LEARNING  SYSTEMS, INC. |
|-----------------------------------|
|                              |   |
|                              |   |
| By:                               |   |
|                              | Name: |
|                              | Title: |

EXHIBITA

 

NOTICEOF CONVERSION

 

The undersigned hereby elects to convert shares of SeriesA Convertible Preferred Stock (the "Preferred Stock"), represented bystock certificate No(s).                 (the"Preferred Stock Certificates"), into shares of common stock("Common Stock") of ASYMETRIX LEARNING SYSTEMS, INC. according to the terms and conditions of theCertificate of Designation relating to the Preferred Stock (the"Certificate of Designation"), as of the date written below.  Capitalized terms used herein and nototherwise defined shall have the respective meanings set forth in theCertificate of Designation. Unless otherwise specified in writing to the Corporation,the undersigned represents to the Corporation that the shares of Common Stockcovered by this notice have been or will be sold pursuant to the terms of aneffective registration statement.

 

| Date of Conversion:                                        |   |
|------------------------------------------------------------|--------|
|                                                       |   |
| Number of Shares of Preferred  Stock to be Converted: |   |
|                                                       |   |
| Amount of Accrued Premium:                                 |   |
|                                                       |   |
| Applicable Conversion Price:                               |   |
|                                                       |   |
| Number of Shares of  Common Stock to be Issued:            |   |
|                                                       |   |
| Name of Holder:                                            |   |
|                                                       |   |
| Address:                                                   |   |
|                                                       |   |
|                                                       |   |
|                                                       |   |
|                                                       |   |
|                                                       |   |
|                                                       |   |
| Signature:                                                 |   |
|                                                       | Name:  |
|                                                       | Title: |

 

Holder Requests Delivery to be made: (check one)

 

**o**            By Delivery of PhysicalCertificates to the Above Address

 

**o**            Through DepositoryTrust Corporation

                (Account____________________________)

 

 

 

 

 

 

 

 

## **CERTIFICATEOF AMENDMENT**

 

**OF**

**AMENDED AND RESTATEDCERTIFICATE OF INCORPORATION**

 

**OF**

 

**ASYMETRIX LEARNING SYSTEMS,INC.**

 

 

 

**               **AsymetrixLearning Systems, Inc., a Delaware corporation, does hereby certify that thefollowing amendment to the corporation’s Amended and Restated Certificate ofIncorporation has been duly adopted by the corporation’s Board of Directors anda majority of the stockholders in accordance with Sections 242 and 245 of theDelaware General Corporation Law:

 

                ArticleI of the Amended and Restated Certificate of Incorporation, relating to thename of Asymetrix Learning Systems, Inc., is amended to read in its entirety asfollows:

 

                “Thename of the Corporation is click2learn.com, inc.”

 

                INWITNESS WHEREOF,  Said corporation hascaused this Certificate of Amendment to be signed by its duly authorizedofficer this 23rd day of November, 1999 and the foregoing facts statedherein are true and correct.

 
|   |   |   |   |   |   |   | ASYMETRIX LEARNING  SYSTEMS, INC.            |
|--------|--------|--------|--------|--------|--------|--------|----------------------------------------------|
|   |   |   |   |   |   |   |                                         |
|   |   |   |   |   |   |   |                                         |
|   |   |   |   |   |   |   |                                         |
|   |   |   |   |   |   | By:    | ___________________________________          |
|   |   |   |   |   |   |   | James A. Billmaier,  Chief Executive Officer |

**CERTIFICATE OFAMENDMENTOFAMENDED AND RESTATED CERTIFICATE OF INCORPORATION**

** **

click2learn.com,inc., a corporation organized and existing under the General Corporation Law ofthe State of Delaware, does hereby certify:

 

Thefollowing amendment to the corporation's Amended and Restated Certificate ofIncorporation was duly proposed by the corporation's Board of Directors andadopted by the corporation's stockholders in accordance with the provisions ofSection 242 of the General Corporation Law of the State of Delaware:

 

ArticleI of the Amended and Restated Certificate of Incorporation is amended to readin its entirety as follows:

 

ARTICLEI

 

Thename of the corporation is Click2learn, Inc.

 

 

IN WITNESS WHEREOF, saidcorporation has caused this Certificate to be signed by its duly authorizedofficer this 30th day of May, 2001.

 
|   | click2learn.com, inc. |
|--------|-----------------------|
|   |                  |   |
|   | By                    |   |
|   |                  | Steven Esau, Vice President, |
|   |                  | General Counsel, and Secretary |