EX-3.1 3 nws3aexhibit3-1.txt CERT OF INC, AS AMENDED Exhibit 3.1 RECEIPT OF DEPARTMENT OF STATE STATE OF NEW YORK_______DEPARTMENT OF STATE DIVISION OF CORPORATIONS AND STATE RECORDS ALBANY FILING RECEIPT TYPE OF CERTIFICATE Incorporation (Business) 0 CORPORATION NAME DATE FILED WATCHDOG PATROLS, INC. 1/5/70 DURATION & CO. CODE FILE NO. P 30 804780-4 NO. AND KIND OF SHARES 200 npv LOCATION OF PRIN. OFFICE COMMENT OYSTER BAY NASSAU CO ADDRESS FOR SERVICE OF PROCESS BERGER 22 WHITLOCK ST PLAINVIEW NY 11803 REGISTERED AGENT, IF ANY FILER AND ADDRESS PAUL BERGER 22 WHITLOCK ST PLAINVIEW NY 11803 6 DOLLAR FEE TO COUNTY FEES AND/OR TAX PAID AS FOLLOWS: [ ] CHK. [X ] M.O. [ ] CASH $ 60 $ 50 FILING $ 10 TAX $ CERTIFIED COPY $ CERTIFICATE TOTAL $ 60 REFUND OF $ TO FOLLOW JOHN P. LOMENZO SECRETARY OF STATE /S/ CO-518 (rev. 3/66) Certificate of Incorporation of 804780 WATCHDOG PATROLS, INC. under Section 402 of the Business Corporation Law IT IS HEREBY CERTIFIED THAT: (1) The name of the proposed corporation is WATCHDOG PATROLS, INC. (2) purpose or purposes for which this corporation is formed, are as follows, to wit: to train watchdogs in all phases: guard, protection, attack and obedience; to rent, lease and sell trained watchdogs for residential, commercial and industrial security purposes; to act as consultant in watchdog training and related security aspects; and to conduct and carry on any other similar business which may be capable of being profitably carried on in connection with this company's business, or to carry on any similar business that is adapted directly or indirectly to add to the value of the company's property and the profits of the authorized business. The corporation in furtherance of its corporate purposes above set forth, shall have all of the powers enumerated in Section 302 of the Business Corporation Law, subject to any limitations provided in the Business Corporation Law or any other statute of the State of New York. (3) The office of the corporation is to be located in the Town of Oyster Bay County of Nassau State of New York. (3) The office of the coproration is to be located in the Town of Oyster Bay County of Nassau State of New York. (4) The aggregate number of shares which the corporation shall have the authority to issue 200 of which all shall be without par value. (5) The Secretary of State is designated as agent of the corporation upon whom process against it may be served. The post office address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is c/o Berger, 22 Whitlock Street, Plainview, New York 11803. The undersigned incorporator, or each of them if there are more than one, is of the age of twenty-one years or over. IN WITNESS WHEREOF, this certificate has been subscribed this 23rd day of December 1969 by the undersigned who affirm(s) that the statements made herein are true under the penalties of perjury. Phyllis Berger /s/Phyllis Berger Type Name of Incorporator ------------------------- 22 Whitlock Street, Plainview, New York Helen Jaffee /s/Helen Jaffee Type Name of Incorporator ------------------------- 105-55 Flatlands 4th Street, Brooklyn, New York Certificate of Incorporation of WATCHDOG PATROLS, INC. under Section 402 of the Business Corporation Law Filed By: Paul Berger Office and Post Office Address 22 Whitlock Street Plainview, New York 11803 WE 8-1490 STATE OF NEW YORK DEPARTMENT OF STATE FILED JAN 5 1970 804780-4 TAX $ 10 FILING FEE $50 /S/ Secretary of State By: /s/ p 30 Nassau CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF WATCHDOG PATROLS, INC. Under Section 805 of the Business Corporation Law 1) The name of the corporation (hereinafter called Corporation) is WATCHDOG PATROLS, INC., and was incorporated on January 5, 1970 under the laws of the State of New York. 2) The Certificate of Incorporation of the Corporation is hereby amended by striking out Article Two thereof and by substituting in lieu of said Article the following New Article: Second: To train watchdogs in all phases: guard, protection, attack and obediance; to rent, lease and sell trained watchdogs for residential, commercial and industrial security purposes; to act as consultant in watchdog training and related security aspects; and to conduct and carry on any other similar business which may be capable of being profitably carried on in connection with this Company's business, or to carry on any similar business that is adapted directly or indirectly to add to the value of the company's property and the profits of the althorizcd business. To design, manufacture, buy and sell, and generally deal in automatic electric alarms for use in banks, stores, buildings, offices, houses, churches, and other places for protection against burglary and any other intrusion and to install, repair, inspect, and overhaul burglar alarms and other alarms of all kinds, makes, and description. To design, manufacture, buy, and sell watchmen's clocks and watches of all kinds. To furnish the services of watchmen, guards, escorts for women, messengers, ushers, bill collectors, investigators, and collectors of information. To devise, put into operation, and conduct ways, systems, and methods for the prevention and detection of crime and the apprehension and arrest of criminals, for the recovery of lost or stolen property, for the finding of missing persons, documents, or goods, for investigating and reporting upon the antecedents, habits, character, doings, reliability, credit, or financial condition of persons, firms, associations, or corporations. Generally to do all things commonly done by private and by credit and mercantile reporting agencies. To purchase, manufacture, produce, assemble, receive, lease or in any manner, acquire, hold, own, use, operate, install, maintain, service repair, process, alter, improve, import, export, sell, lease, assign, transfer. and generally to trade and deal in and with, raw materials, natural or manufactured articles or products, Machinery, equipment, devices, systems parts, supplies, apparatus and personal property of every kind, nature or description, tangible or intangible, used or capable of being used for any purpose whatsoever and to engage and participate in any mercantile, manufacturing or trading business of any kind or character. To purchase, receive, lease or otherwise acquire and to manage, hold, own, use, improve, convey, sell, mortgage, or otherwise deal in and with lands, buildings and real property of every description, or any interest therein. To adopt, apply for, obtain, register, purchase, lease or otherwise acquire and to maintain, protect, hold, use, own exercise, develop, manufacture under, operate and introduce, and to sell and grant licenses or other rights in respect of, assign, or otherwise dispose of, turn to account, or in any manner deal with and contract with reference to, any trade marks, trade names, patents, patent rights, concessions, franchises, designs, copyrights and distinctive marks and rights analogous thereto, and inventions, devices, improvements, processes, recipes, formulae and the like, including such thereof as may be covered by, used in connection with, or secured or received under, Letters Patent of the United States of America or elsewhere or otherwise, and any licenses in respect thereof and any or all rights connected therewith or appertaining thereto. In furtherance of its corporate business and subject to the limitations prescribed by statute, to acquire by purchase, exchange or otherwise, all or any part of, or any interest in, the properties, assets, business and good-will of any one or more corporations, associations partnerships, firms, syndicates or individuals and to pay for the same in cash, property or its own or other securities; to hold, operate, reorganize, liquidate, mortgage, pledge, sell, exchange, or in any manner dispose of the whole or any part thereof; and in connection therewith, to assume or guarantee performance of any liabilities, obligations or contracts of corporations, associations, partnerships, firms, syndicates or individuals, and to conduct in any lawful manner the whole or any part of any similar business thus acquired. To acquire or become interested in, whether by subscription, purchase, underwriting, loan, participation in syndicates or otherwise, to own, hold, to sell, assign or otherwise dispose of, or in any manner to deal in or with, stocks, bonds, debentures, warrants, rights, scrip, notes, evidences of indebtedness, or other .securities or obligations of any kind by whomsoever issued, to exercise in respect thereof all powers and privileges of individual ownership or interest therein, including the right to vote thereon for any and all purposes; to consent, or otherwise act with respect thereto, without limitations; and to issue in exchange therefor the corporation's stock, bonds, debentures, warrants, rights, scrip, notes, evidences of indebtedness or other securities or obligations of any kind. To borrow money for its corporate purposes, and to make, accept, endorse, execute and issue promissory notes, bills of exchange, bonds, debentures or other obligations from time to time, for the purchase of property, or for any purpose relating to the business of the company, and if decreed proper, to secure the payment of any such obligations by mortgage, pledge, guarantee, deed of trust or otherwise. To lend its uninvested funds from. time to time to such extent, on such terms and on such security, if any, as the Board of Director of the corporation may determine. In furtherance of its corporate business and subject to the limitations prescribed by statute, to be a promoter, partner, member, associate or manager of other business enterprises or ventures , or to the extent permitted in any other jurisdiction to be an incorporator of other corporations of any type or kind and to organize, or in any way participate in the organization, reorganization, merger or liquidation of any corporation, association or venture and the rnanagement thereof. Subject to the limitations prescribed by statute and in furtherance of its corporate business, to pay pensions, establish and carry out pension, profit sharing, share bonus, share purchase, share option, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions for any or all of its directors, officers and employees. To conduct its business in all or any of its branches, so far as permitted by law, in the State of New York and in all other states of the United States of America, in the territories and the District of Columbia and in any or all dependencies or possessions of the United States of America, and in foreign countries; and to hold possess, purchase, lease, .mortgage and convey real and personal property and to maintain offices and agencies either within or outside the State of New York. To carry out all or any part of the foregoing purposes as principal, factor, agent, broker, contractor or otherwise, either alone or in conjunction with any persons, firms, associations, corporations, or others in any part of the world; and in carrying on its business and for the purpose of attaining or furthering any of its purposes, to make and perform contracts of any kind and description, and to do anything and everything necessary, suitable, convenient or proper for the accomplishment of any of the purposes herein enumerated. For the accomplishment of the aforesaid purposes, and in furtherance thereof, the corporation shall have and may exercise all of the powers conferred by the Business Corporation Law upon corporations formed thereunder, subject to any limitations contained in Article 2 of said law or in accordance with the provisions of any other statute of the State of New York. 3) The Certificate of Incorporation of the Corporation is hereby amended by striking out Article Four thereof and by substituting in lieu of said Article the following New Article: Fourth: The aggregate number of shares which the corporation may have authority to issue is 2,000,000 shares of voting common stock each of $.01 par value. The holders of voting common stock of $.-01 par value of the corporation shall not have pre-emptive rights. 4) Article 6 is hereby added to the Certificate of Incorporation and states the following: Sixth: The duration of the Corporation is to be perpetual. 5) Article 7 is hereby added to the Certificate of Incorporation and states the following: Seventh: Except as may otherwise be specifically provided in this Certificate of Incorporation, no provision of this certificate of incorporation is intended by the corporation to be construed as limiting, prohibiting, denying, or abrogating any of the general or specific powers or rights, conferred under the business corporation law upon the corporation, upon its shareholders, bondholders and security holders and upon its directors, officers, and other corporate personnel including in particular, the power of the corporation to furnish indemnification to directors and officers in the capacities defined and prescribed by the business corporation law and the defined and prescribed rights of said persons to indemnification as the same are conferred by the Business Corporation Law. 6) The manner in which the aforesaid amendments to the Certificate of Incorporation were authorized are as follows: a) By unanimous written consent of the holders of all of the outstanding shares entitled to vote thereon. 7) The manner in which the common stock shall be changed by reason of the aforesaid amendment is as follows: a) The 200 common shares without par value are changed into 2,000,000 shares par value of $.01 per share. The rate of change is one share no par value to become 10,000 shares par value $.01 per share, there are 30 Issued and outstanding shares. 8) The effective date of the amendments herein certified shall be the date of filing. Dated: April 25, 1972 /s/ Paul Berger -------------------------- Paul Berger, President /s/ Phyllis Berger -------------------------- Phyllis Berger, Secretary (Corporate Seal) Jack Applebaum Attest: Notary Public, State of New York No. /s/ Phyllis Berger Qualified in Queens County Phyllis Berger Commission Expires March 30, 1973 City of Plainview County of Nassau State of New York April 27, 1972 STATE OF NEW YORK) ss. COUNTY OF QUEENS) PAUL BERGER and PHYLLIS BERGER, being duly sworn depose and say that they are the President and Secretary respectively of WATCHDOG PATROLS, INC. the corporation named, and described in the foregoing certificate. That they have read the foregoing certificate and know the contents thereof, and that the same is true of their own knowledge, except as to the matters therein stated to be alleged upon information and belief, and as to those matters they believe it to be true /s/ Paul Berger -------------------------- Paul Berger /s/ Phyllis Berger -------------------------- Phyllis Berger Sworn to before me this 21 day of April 1972. Jack Applebaum FILED BY: Notary Public, State of New York Loecher Solomon & Zukerman No. 666 Fifth Avenue Qualified in Queens County New York, New York 10019 Commission Expires March 30, 1973 City of Plainview County of Nassau State of New York 804780-4 986500 -6 1/5/70 Oyster Bay Nassau Co. 200 npv CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF WATCHDOG PATROLS, INC. STATE OF NEW YORK DEPARTMENT OF STATE FILED MAY 5 1972 TAX $ None FILING FEE $35 /s/ 30 Nassau LOECHER SOLOMON & ZUKERMAN ATTORNEYS AT LAW 666 FIFTH AVENUE NEW YORK, N Y 10019 NYS DEPARTMENT OF STATE FILING RECEIPT CHANGE OF PROVISIONS CORPORATION NAME WATCHDOG PATROLS, INC. DATE FILED DURATION & COUNTY CODE FILM NUMBER CASH NUMBER 07/25/88 NASS B666150-2 216943 NUMBER AND KIND OF SHARES LOCATION OF PRINCIPAL OFFICE *P-H ADDRESS FOR PROCESS REGISTERED AGENT FEES AND/OR TAX PAID AS FOLLOWS: AMOUNT OF CHECK $ AMOUNT OF MONEY ORDER $00080.00 AMOUNT OF CASH $ $6.00 DOLLAR FEE TO COUNTY $060.00 FILING $ TAX FILER NAME AND ADDRESS $10.00 CERTIFIED COPY $ CERTIFICATE RICHARD S. MISSAN 010.00 MISCELLNEOUS SUITE 2601 TOTAL PAYMENT $ 0000080.00 575 LEXINGTON AVENUE NEW YORK NY 10022 REFUND OF $ TO FOLLOW 380604-003 (8/84) GAIL S SHAFFER - SECRETARY OF STATE CERTIFICATE 0F INCORPORATION of WATCHDOG PATROLS, INC Under Section 805 of the Business Corporation Law -------- It is hereby certified that: FIRST: The name of the corporation is Watchdog Patrols, Inc. SECOND: The Certificate of incorporation of the corporation was filed by the Department of State on January 5, 1970. THIRD: The amendment of the Certificate of Incorporation of the corporation effected by this certificate of amendment is to add an article limiting the liability of directors of the corporaiton. FOURTH: To accomplish the foregoing amendment, the following new Article Eighth, relating to the limitation of the liability of the directors, is added to the certificate of incorporation of the corporation: "EIGHTH: The personal liability of the directors of the corporation is eliminated to the fullest extent permitted by the provisions of paragraph (b) of Section 402 of the Business Corporation Law of the State of New York, as the same may be amended and supplemented." FIFTH: The foregoing amendment of the certificate of incorporation of the corporation was authorized by the vote at a meeting of the Board of Directors of the corporation, followed by the vote of the holders of at least a majority of all of the outstanding shares of the corporation entitled to vote on the said amendment of the certificate of incorporation. IN WITNESS WHEREOF, we have subscribed this document on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained therein have been examined by us and are true and correct. Date: July 20, 1988 /s/_______________________ Earl T. Smith, President /s/_______________________ Phyllis Berger, Secretary P H 2 B666150 CERTIFICATE OF AMENDENT OF CERTIFICATE OF INCORPORATION OF WATCHDOG PATROLS, INC. (Under Section 805 of the Business Corporation Law) STATE OF NEW YORK DEPARTMENT OF STATE FILED JUL 25 1988 AMT. OF CHECK $ 80 FILING FEE $ 60 TAX $ COUNTY FEE $ COPY $ 10 CERT $ REFUND $ SPEC HANDLE $10 BY: Nassau Jul 22 11 06 AM'88 Richard S. Missan 216943 Filed Counselor at law July 25 6 50 AM'88 Suite 2601 575 Lexington Avenue New York, N.Y. 10022 BILLED NYS DEPARTMENT OF STATE FILING RECEIP'T AMENDMENT-CHANGE OF SHARES CORPORATION NAME WATCHDOG PATROLS, INC. DATE FILED DURATION & COUNTY CODE FILM NUMBER CASH NUMBER 08/14/89 NASS 0043949-3 455734 NUMBER AND KIND OF SHARES LOCATION OF PRINCIPAL OFFICE 10,000,000 PV $.0033 *P-H ADDRESS FOR PROCESS REGISTERED AGENT FEES AND/OR TAX PAID AS FOLLOWS: AMOUNT OF CHECK $ AMOUNT OF MONEY ORDER $00090.00 AMOUNT OF CASH $ $ 6.00 DOLLAR FEE TO COUNTY $060.00 FILING $00010.00 TAX FILER NAME AND ADDRESS $10.00 CERTIFIED COPY RICHARD S. MISSAN $ CERTIFICATE 575 LEXINGTON AVENUE $010.00 MISCELLANEOUS SUITE 2601 TOTAL PAYMENT $ 0000090.00 NEW YORK NY 10022 REFUND OF $ TO FOLLOW DOS-281 (8/84) GAIL S SHAFFER - SECRETARY OF STATE STATE OF NEW YORK : : ss: DEPARTMENT OF STATE: 056670 I hereby certify that I have compared the annexed copy with the original document filed by the Department of State and that the same is a correct transcript of said original. AUG 14 1989 Witness my hand and seal of the Department of State on /s/ Secretary of State 380507-004 (12/87) CERTIFICATE OF AMENDMENT PH of CERTIFICATE OF INCORPORATION of WATCHDOG PATROLS, INC. Under Section 805 of the Business Corporation Law C043949 ----------------- It is hereby certified that: FIRST: The name of the corporation is Watchdog Patrols, Inc. SECOND: The Certificate of Incorporation of the corporation was filed by the Department of State on January 5, 1970. THIRD: The amendments of the Certificate of Incorporation of the corporation effected by this Certificate are (1) to change the currently authorized and issued 1,674,000 common shares, par value $.01 each, into 1,674,000 issued common shares, par value $.0033 each, on a one for one basis , and to change the 326,000 currently authorized but unissued common shares, par value $.01 each, into 326,000 authorized but unissued common shares, par value $.0033 each; and (ii) to increase the authorized number of shares the corporation shall have authority to issue, by authorizing an additional 8,000,000 common shares, par value $.0033 each. In connection with the foregoing, the stated capital in respect of each issued common share is reduced from $,01 per share to $.0033 per share, so that the aggregate stated capital of the corporation is reduced from $16,740 to $5,524. FOURTH: To accomplish the foregoing amendments, Article Fourth of the Certificate of incorporation, relating to the authorized shares of the corporation, is amended to read as follows; "FOURTH: The aggregate number of shares which the corporation is authorized to issue is 10,000,000 shares of common stock, par value $.0033 per share. The holders of such common stock shall not have pre-emptive rights." FIFTH: The foregoing amendments of the Certificate of Incorporation of the corporation were authorized by the vote at a meeting of the Board of Directors of the corporation, followed by the vote of the holders of at least a majority of all of the outstanding shares of the corporation entitled to vote on the said amendments of the Certificate of Incorporation. IN WITNESS WHEREOF, we have subscribed this document on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained therein have been examined by us and are true and correct. Date: August 9, 1989 /s/ -------------------------- Earl T. Smith, President /s/ -------------------------- Phyllis Berger, Secretary Certificate of Amendment Of Certificate of Incorporation Of Watchdog Patrols, Inc. UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW CO43949 STATE OF NEW YORK DEPARTMENT OF STATE FILED AUG 14 1989 AMT. OF CHECK $90 FILING FEE $60 TAX $10 COUNTY FEE $ COPY $10 CERT $ REFUND $ SPEC HANDLE $10 BY: /s/_________________ Nassau 1/5/70 Nass BILLED 8047804 #B666150-2 2,000,000 PV1C Aug 11 9 15 AM'89 /s/ 455734 Richard S. Missan Suite 2601 575 Lexington Avenue New York, New York 10022 Aug 14 6 57 AM'89 N.Y.S. DEPARTMENT OF STATE 162 WASHINGTON AVENUE DIVISION OF CORPORATIONS AND STATE RECORDS ALBANY, NY 12231 FILING RECEIPT CORPORATION NAME: WATCHDOG PATROLS.. INC. DOCUMENT TYPE: CERTIFICATE OF CHANGE (DOM. BUSINESS COUNTY: NASS PROCESS SERVICE COMPANY : PRENTICE-HALL CORPORATION SYSTEM, INC. FILED: 02/24/1993 DURATION:********* CASH #: 930224000256 FILM #: 930224000237 ADDRESS FOR PROCESS THE: CORPORATION ATT: PHYLLIS BERGER 99 POWERHOUSE ROAD ROSLYN HEIGHTS, NY 11577 CASH ~ 930224000256 REGISTERED AGENT FILER FEES 65.00 PAYMENTS 65.00 RICHARD MISSAN, ESQ, FILING : 30.00 CASH: 0.00 75 LEXINGTON AVENUE TAX: 0.00 CHECK: 0.00 SUITE 2601 CERT: 0.00 BILLED: 65.00 NEW YORK. NY 10022 COPIES: 10.00 HANDLING: 25.00 REFUND STATE OF NEW YORK : : ss: DEPARTMENT OF STATE: 014151 I hereby certify that I have compared the annexed copy with the original document filed by the Department of State and that the same is a correct transcript of said original, FEB 24 l993 Witness my hand and seal of the Department of State on /s/ Secretary of State DOS-200 (12/87) PH F930224000237 CERTIFICATE OF CHANGE OF WATCHDOG PATROLS. INC. (Under Section 805-A of the Business Corporation Law) ------------------ FIRST: The name of the corporation is WATCHDOG PATROLS, INC SECOND: The certificate of incorporation of the corporation was filed by the Department of State on January 5, 1970. THIRD: The certificate of incorporation of the corporation is hereby) changed, pursuant to the authorization of the Board of Directors of the corporation, so as to change the post office address to which the Secretary of State shall mail a copy of an) process against the corporation served upon him and, to accomplish said change, the statement in the certificate of incorporation relating to said post office address is hereby stricken and the following statement is substituted in lieu thereof: "The post office address within the State of New York to which the Secretary of State shall mail a copy of any process against the corporation served upon him is 99 Powerhouse Road, Att: Phyllis Berger, Roslyn Heights, New York 11577." IN WITNESS WHEREOF, we have subscribed this document on the date hereinafter set forth and do hereby affirm, under the penalties of perjury, that the statements contained therein have been examined by us and are true and correct. Dated: February 19,1993 Name of (S) Phyllis Berger Signer: Phyilis Berger, Chairman of the Board Name of (S) Edward Cooperman Signer: Edward Cooperman, Assistant Secretary F930224000237 Feb 24 1 04PM'93 CERTIFICATE OF CHANGE PH OF WATCHDOG PATROLS. INC. ---------------------- (Under Section 805-A of the Business Corporation Law) ---------------------- Feb 24 10 50 PM '93 BILLED STATE OF NEW YORK DEPARTMENT OF STATE FILED FEB 24 1993 TAX$ - BY: /s/ ___________ Nass Richard Missan, Esq. 575 Lexington Avenue Suite 2601 New York, New York 10022 93022400256 N.Y.S. DEPARTMENT OF STATE DIVISION OF CORPORATIONS AND STATE RECORDS ALBANY, NY 12231-0001 FILING RECEIPT ENTITY NAME: NETWOLVES CORPORATION DOCUMENT TYPE: CERTIFICATE OF AMENDMENT (DOM. BUSINESS COUNTY: NASS NAME SERVICE COMPANY: ** NO SERVICE COMPANY ** SERVICE CODE: 00 FILED: 11/27/1998 DURATION:***** CASH#:981127000223 FILM #:981127000218 ADDRESS FOR PROCESS REGISTERED AGENT FILER FEES: 60.00 PAYMENTS 85.00 JERRY B. SELLMAN, ATTY. FILING: 60.00 CASH 0.00 WATCHDOG PATROLS, INC. CERT: 0.00 CHECK 85.00 85 EAST GAY STREET COPIES: 0.00 COLUMBUS, OH 43215 HANDLING: 0.00 REFUND: 25.00 CERTIFICATE OF AMENDMENT of CERTIFICATE OF INCORPORATION of WATCHDOG PATROLS, INC, Under Section 805 of the Business Corporation Law ------------------------- It is hereby certified that: FIRST: The name of the corporation is Watchdog Patrols, Inc, SECOND: The Certificate of Incorporation of the corporation was filed by the Department of State on January 5, 1970. THIRD: The amendment of the Certificate of Incorporation of the corporation effected by this Certificate is to change the name of the corporation to NetWolves Corporation. FOURTH: To accomplish the foregoing amendment. Article One of the Certificate of Incorporation, relating to the name of the corporation, is amended to read as follows: "FIRST: The name of the proposed corporation is NetWolves Corporation." FIFTH: The foregoing amendments of the Certificate of Incorporation of the corporation were authorized by the vote at a meeting of the Board of Directors of the corporation, followed by the vote of the holders of at least a majority of all of the outstanding shares of the corporation entitled to vote on the said amendments of the Certificate of Incorporation. IN WITNESS WHEREOF, we have subscribed this document on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained therein have been examined by us and are true and correct. November 23, 1998 /s/____________________________ Walter M. Groteke, CEO/President /s/_____________________________ Kevin F. Sherlock, Secretary 11 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION Under Section 805 of the Business Corporation Law WE, THE UNDERSIGNED, WALTER M. GROTEKE and PETER C. CASTLE, being respectively the Chairman of the Board and Vice President-Finance of NETWOLVES CORPORATION hereby certify: 1. The name of the corporation is: NETWOLVES CORPORATION. 2. The certificate of incorporation of said corporation was filed by the Department of State on January 5, 1970 under the original name of Watchdog Patrols, Inc. 3. (a) The certificate of incorporation is amended to: (i) authorize a series of the Company's authorized preferred stock, par value $.0033 per share (the "Preferred Stock"), to be known as the Series A Convertible Preferred Stock (the "Series A Convertible Preferred Stock"); and (ii) provide for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions of the Series A Convertible Preferred Stock. (b) To effect the foregoing, Article FOURTH of the Certificate of Incorporation relating to the authorized shares of the corporation, is amended to read as follows: "FOURTH: The total number of shares of all classes of stock which the corporation shall have the authority to issue is FIFTY TWO MILLION (52,000,000) shares, of which FIFTY MILLION (50,000,000) shares shall be shares of common stock of the par value of $.0033 per share and TWO MILLION (2,000,000) shares shall be shares of Preferred Stock of the par value of $.0033 per share. The Preferred Stock may be issued in series and the number, designation, relative rights, preferences and limitations of shares of each series of Preferred Stock $.0033 per share par value shall be fixed by the Board of Directors. Of the 2,000,000 shares of Preferred Stock, 1,000,000 shares shall be designated as Series A Convertible Preferred Stock, par value $.0033 per share, which shall have the following powers, designations, preferences and other special rights: 1. Certain Definitions. "Average Price" means, with respect to any shares of stock or securities, including the Common Stock (as defined below), on any date of determination, the average for the thirty (30) consecutive Trading Days (as defined below) preceding and including such date of determination of the reported last sale prices per share on the principal national securities exchange or inter-dealer quotation system on which such stock or security is listed or admitted to trading, or if not listed or admitted to trading on any national securities 1 exchange or inter-dealer quotation system or if last sale prices are not available, the average for the thirty (30) consecutive Trading Days preceding and including the date of determination of the average of the closing bid and asked prices per share or security in the over-the-counter market as published by the National Quotation Service or the OTC Bulletin Board or, if no such quotations are published or furnished, by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. "Common Stock" means the common stock, $.0033 par value, of the Company, including the stock into which the Series A Convertible Preferred Stock is convertible, and any capital stock of any class of the Company thereafter authorized that shall not be limited to a fixed sum in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company. "Current Market Price" shall mean, with respect to any shares of capital stock or other securities, (i) if such stock or securities are listed or admitted to trading on a national securities exchange or an inter-dealer quotation system or traded in the over-the-counter market, the Average Price per share or security, as the case may be, at the close of trading on the Trading Day on which the relevant determination is to be made or, if such day is not a Trading Day, the Trading Day immediately preceding such day and (ii) if such stock or security is not so listed, admitted or traded, the fair market value of such stock or security as determined by the Managing Directors of the Company or, if such parties cannot agree, as determined by an Independent Appraiser (as defined below). "Excluded Stock" means Common Stock issued or to be issued (i) pursuant to the conversion of the Series A Convertible Preferred Stock (ii) pursuant to the exercise of any stock options or warrants currently outstanding or options or warrants issued after the date hereof having an exercise price equal to or greater than the Conversion Price, or (iii) except as otherwise provided herein, and following any applicable adjustment in the Conversion Price provided for in Subsection 4D, upon the actual issue of Common Stock or securities convertible into Common Stock at the time of exercise of any rights, options or warrants to purchase Common Stock or any securities convertible into Common Stock, as appropriate, or upon conversion or exchange of securities convertible into Common Stock. "Independent Appraiser" means an investment banking firm, appraisal firm or any other financial expert of recognized national standing in the United States, selected by the holders of a majority of the Series A Convertible Preferred Stock and reasonably acceptable to the Company, that does not (or whose directors, officers, employees, affiliates or stockholders do not) have a direct or indirect material financial interest in the Company or a 5% or greater holder of Series A Convertible Preferred Stock, who has not been, and, at the time called upon to give independent financial advice to the Company or a holder of Series A Convertible Preferred Stock, is not (and none of its directors, officers, affiliates or stockholders are) a promoter, director or officer of the Company. "Trading Day" means (i) if the relevant stock or security is listed or admitted for trading on the New York Stock Exchange or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq National or SmallCap Markets or any other system of automated dissemination of quotation of securities prices, a day on which the relevant stock or security is traded in a regular way in the over-the-counter market and for which a closing bid and a closing asked price for such stock or security are available. 2 2. Dividends. 2A. The holders of the Series A Convertible Preferred Stock shall be entitled to receive dividends, which shall begin to accrue on and be cumulative from the date of issuance ("Issuance Date") of the Series A Convertible Preferred Stock (whether or not such dividends have been declared and whether or not there shall be net profits or net assets of the Company legally available for the payment of such dividends) in an annual amount equal to the issue price of such Series A Convertible Preferred Stock plus any accrued but unpaid dividends (the "Liquidation Preference") times eight percent (8%) (the "Dividend Amount"). The Dividend Amount shall be payable on July 1 of each year (the "Dividend Payment Dates") either in cash or in kind by issuance by the Company of additional shares of Series A Convertible Preferred Stock (the "PIK Shares") at the option of the Company. In the event that the applicable Dividend Amount is not paid in cash within thirty (30) days of the relevant Dividend Payment Date, the Company shall be deemed for all purposes to have elected to pay the relevant Dividend Amount in PIK Shares. If the Company elects or is deemed to have elected to pay any Dividend Amount in PIK Shares, each holder of Series A Convertible Preferred Stock shall be deemed to be the holder of record of such holder's pro rata share of the PIK Shares issuable with respect to the relevant Dividend Amount notwithstanding that the stock transfer books of the Company shall then be closed or that certificates evidencing such PIK Shares shall not have been actually delivered to such holder of Series A Convertible Preferred Stock. In the event that dividends on the Series A Convertible Preferred Stock are paid with PIK Shares, each such PIK Share (i) shall be valued at the then applicable Liquidation Preference per share and (ii) shall have the same Liquidation Preference as each share of Series A Convertible Preferred Stock with respect to which the PIK Share constituted a dividend. No dividends shall be paid on any Common Stock of the Company or any capital stock of the Company that ranks junior to or on parity with the Series A Convertible Preferred Stock during any fiscal year of the Company until dividends in the aggregate Dividend Amount per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series A Convertible Preferred Stock for the current and each prior Dividend Payment Date shall have been paid or declared and set apart for payment to the Series A Convertible Preferred Stock holders. 2B. The amount of dividends payable for any period shorter than a full year shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Series A Convertible Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. 2C. So long as any shares of the Series A Convertible Preferred Stock are outstanding, no dividends shall be declared or paid or set apart for payment on any other preferred stock of the Company of any series ranking, as to dividends, junior to or on a parity with the Series A Convertible Preferred Stock, unless a dividend shall be paid at the same time to each holder of Series A Convertible Preferred Stock, in an amount such that the holders of such other series of preferred stock, on the one hand, and the holders of Series A Convertible Preferred Stock, on the other, receive dividends in the same relative proportions that each would have received had all such shares of preferred stock been converted into Common Stock immediately prior to the declaration of a dividend on such preferred stock. 3 3. Liquidation. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the shares of Series A Convertible Preferred Stock shall be entitled, before any distributions shall be made to the holders of the Common Stock, or any other class of capital stock of the Company ranking junior to the Series A Convertible Preferred Stock, to be paid an amount (the "Series A Liquidation Amount") equal to greater of (i) the Liquidation Preference per share (appropriately adjusted to reflect the occurrence of any stock split, stock dividend, stock combination, stock subdivision or like occurrences) or (ii) the aggregate pro rata liquidating distribution per share payable to holders of Series A Convertible Preferred Stock on an as-converted basis. Written notice of such liquidation, dissolution or winding up, stating a payment date, the Series A Liquidation Amount and the place where said sums shall be payable shall be given by mail, postage prepaid, not less than 30 or more than 60 days prior to the payment date stated therein, to the holders of record of the Series A Convertible Preferred Stock, such notice to be addressed to each shareholder at his post office address as shown by the records of the Company. 4. Conversion. The shares of Series A Convertible Preferred Stock shall be (i) subject to the following conversion terms and (ii) the holders of the Series A Convertible Preferred Stock shall have the right to convert their shares of Series A Convertible Preferred Stock into shares of Common Stock as follows (the "Conversion Rights"): 4A. Right to Convert. Each Share of Series A Convertible Preferred Stock is convertible, without the payment of any additional consideration by the holder thereof, at any time at the option of the holder of such shares into the number of fully paid non-assessable shares of Common Stock equal to the quotient obtained by dividing (i) the product of the number of shares of Series A Convertible Preferred Stock being converted multiplied by $15.00, (ii) by the then current Conversion Price (the "Applicable Conversion Ratio"). The initial "Conversion Price" shall be $1.50. The Conversion Price is subject to adjustment pursuant to the anti-dilution provisions described in Section 4D, E, F, G and H below. 4B. Automatic Conversion. Each share of outstanding Series A Convertible Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Applicable Conversion Ratio, if, at any time following the Issuance Date and provided the Common Stock issuable upon conversion of the Preferred Stock is covered by a then current registration statement of the Company which has been declared effective by the Securities and Exchange Commission, (i) a closing takes place of a Public Offering (as defined below) at a price equal to or in excess of three times the Conversion Price. "Public Offering" shall mean a public offering of Common Stock subject to a firm commitment underwriting (an "Underwriting"), pursuant to an effective registration statement (other than a registration statement on Form S-4 or S-8) under the Securities Act of 1933, as amended (the "Act"), which registration statement and Underwriting cover the offer and the sale of Common Stock to the public for the account of the Company resulting in gross cash proceeds to the Company as seller of not less than $15,000,000, before deducting any underwriting commissions and other compensation, or (ii) the price of the Common Stock for any 30 consecutive trading days equals or exceeds three times the Conversion Price and the average daily trading volume for the Company's Common Stock for the 30 consecutive trading days exceeds 100,000 shares. 4 4C. Mechanics of Conversion. No fractional shares of Common Stock shall be issued upon conversion of the Series A Convertible Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash for any fractional share. Except in the case of a conversion pursuant to Section 4B hereof, before any holder of Series A Convertible Preferred Stock may convert the same into shares of Common Stock, each holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the principal office of the Company or of any transfer agent for the Series A Convertible Preferred Stock, and shall give written notice to the Company at such office that such holder elects to convert the same. On the date of a conversion pursuant to Section 4B, any party entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of all such shares of Common Stock on such date, whether or not such holder has surrendered the certificate or certificates for such holder's shares of Series A Convertible Preferred Stock. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Convertible Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which it or he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Except in the case of a conversion pursuant to Section 4(b), such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Convertible Preferred Stock to be converted, the then holders of record of Series A Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. 4D. Adjustment for Stock Splits and Combinations. If the Company, at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(b) hereof, effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Series A Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Issuance Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Series A Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before the effective date of the combination shall be proportionately increased. Any adjustment in the Applicable Conversion Ratio under this Section 4(d) shall become effective at the close of business on the date the subdivision or combination becomes effective. 4E. Adjustment for Common Stock Dividends and Distributions. If the Company at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(b) hereof makes, or fixes a record date for, determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock, in each such event, the Applicable Conversion Ratio then in effect shall be decreased as of the effective date of the issuance of such additional shares of Common Stock, or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Applicable Conversion Ratio then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or, the close of business on such record date as the case may be, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or 5 distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Applicable Conversion Ratio shall be recomputed accordingly as of the close of business on such record date and thereafter the Applicable Conversion Ratio shall be adjusted pursuant to this Section 4(e) to reflect the actual payment of such dividend or distribution. 4F. Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(b) hereof, the Common Stock issuable upon the conversion of the Series A Convertible Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Company, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer (as defined in sub-section (j) below) or a subdivision or combination of shares or stock dividend or a corporate reorganization, merger or consolidation provided for elsewhere in this Section 4, in any such event each holder of any shares of Series A Convertible Preferred Stock then outstanding shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and/or property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A Convertible Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. 4G. Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(b) hereof, there is a capital reorganization of the Common Stock other than (i) an Acquisition or Asset Transfer (as defined in section 4(j) below), or (ii) a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4 (each such transaction described in the foregoing clauses (i) and (ii), a "Reorganization Transaction") as a part of such Reorganization Transaction, provision shall be made so that the holders of the Series A Convertible Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A Convertible Preferred Stock the number of shares of stock or other securities or property of which they would be entitled to receive had they converted their shares of Series A Convertible Preferred Stock into shares of Common Stock on the date of (A) the first day immediately prior to the effective date of such Reorganization Transaction or (B) the record date for such Reorganization Transaction, whichever is applicable to the Reorganization Transaction. In any such case, all adjustments that otherwise would have been required to be made in the Applicable Conversion Ratio and the number of shares of Common Stock that the holders of Series A Convertible Preferred Stock are entitled to receive upon conversion of the Series A Convertible Preferred Stock pursuant to this Section 4 on or prior to such date shall be made prior to calculating the amount or number of securities and/or property receivable by such holders in connection with such Reorganization Transaction. 4H. Sale of Shares At Price Below The Initial Conversion Price. If at any time or from time to time, subsequent to the Issuance Date and prior to the closing of the Public Offering referenced in this Section 4, the Company issues or sells, or is deemed to have issued or sold shares of its capital stock for 6 consideration of a price of less than $1.76 per share, the Conversion Price shall be adjusted to be such lower price at which the Company issued or sold shares of its capital stock. For purposes of this Section 4H. sales or issuances of capital stock by the Company shall include options to acquire, or securities convertible into or exercisable for Common Stock, but shall not include Excluded Stock or stock dividends, stock splits or reclassifications. 4I. Certificate of Adjustment. In each case of an adjustment or readjustment of the Applicable Conversion Ratio and the number of shares of Common Stock or other securities thus issuable upon conversion of the Series A Convertible Preferred Stock, if the Series A Convertible Preferred Stock is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A Convertible Preferred Stock at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. 4J. Certain Definitions. "Acquisition" shall mean any transaction or series of related transactions to which the Corporation is a party in which in excess of fifty percent (50%) of the Company's voting power is transferred. "Asset Transfer" shall mean a sale, lease or other disposition of all or substantially all of the assets of the Company. 5. Voting Rights 5A. Number of Votes. Except as otherwise required by law, the holders of Series A Convertible Preferred Stock and the holders of the Common Stock shall be entitled to notice of any stockholders' meeting and to vote any matter submitted to a stockholder vote, as a single class on the following basis: (a) Each share of Common Stock issued and outstanding shall have one vote per share; and (b) Each share of Series A Convertible Preferred Stock issued and outstanding shall have 10 votes per share. 5B. Voting As a Class. Each share of Series A Convertible Preferred Stock issued and outstanding shall also be entitled to one vote on all matters as to which holders of Series A Convertible Preferred Stock are required to vote as a separate class pursuant to the New York Business Corporation Law, and the holders of a majority of the Series A Convertible Preferred Stock entitled to vote shall bind the entire class of Series A Convertible Preferred Stock. 5C. Notices. The Company shall give the holders of the Series A Convertible Preferred Stock the same prior notice as given to holders of Common Stock according to the By-laws of the Company of any matter to be submitted to such holders for a vote. 7 6. Optional Redemption. 6A. The Series A Convertible Preferred Stock will be redeemable in whole or in part at the option of any holder of the Series A Convertible Preferred Stock, at any time after July 1, 2004, subject to the limitations set forth below, at 100% of its principal amount plus, in each case, all dividends accrued and unpaid on the Series A Convertible Preferred Stock up to the date of notice, upon giving notice as provided hereinbelow. 6B. A written notice shall be mailed to the Company notifying the Company of the election by the holder of any outstanding Series A Convertible Preferred Stock to redeem such shares. Each holder of shares of Series A Convertible Preferred Stock to be redeemed shall present and surrender his certificate or certificates for such shares to the Company at the Company's principal offices and within 45 days thereafter the redemption price of such shares shall be paid to or on the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled. From and after the notice by the holder (unless the Company defaults in payment of the redemption price) all dividends on the shares of Series A Convertible Preferred Stock designated for redemption in such notice shall cease to accrue, and all rights of the holders thereof as stockholders of the Company, except the right to receive the redemption price thereof (including all accrued and unpaid dividends up to the date of notice) upon the surrender of certificates representing the same, shall cease and terminate and such shares shall not thereafter be transferred (except with the consent of the Company) on the books of the Company, and such shares shall not be deemed to be outstanding for any purposes whatsoever. 7. Principal Office; Notices The address of the principal office of the Company is located at 4002 Eisenhower Boulevard, Tampa, Florida 33634. Any notice or certificate required by the Certificate of Incorporation of the Company, as amended, or this Certificate of Designations to be delivered to any holder of Series A Convertible Preferred Stock shall be deemed given when personally delivered to such holder or upon deposit in the United States Mail, certified mail, return receipt requested and addressed to such holder at his or its address appearing on the books of the Company. 8. Cancellation of Series A Convertible Preferred Stock In the event any shares of Series A Convertible Preferred Stock shall be converted, liquidated or redeemed, the shares so converted, liquidated or redeemed shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Company as Series A Convertible Preferred Stock. 9. Reservation of Shares Commencing on the Issuance Date, the Company shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Convertible Preferred Stock into shares of Common Stock, the full number of shares of Common Stock deliverable upon conversion of all of the shares of Series A Convertible Preferred Stock from time to time outstanding, taking into 8 account all adjustments required herein in the Applicable Conversion Ratio. If at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversation of all of the then outstanding shares of Series A Convertible Preferred Stock pursuant to this Certificate of Designations, the Company shall take such corporate action as may, in the opinion of counsel to the Company, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 10. Amendments and Other Actions As long as any shares of Series A Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent) of the holders of all of the then outstanding shares of Series A Convertible Preferred Stock, voting as a separate class: in any manner alter or change the rights, preferences or privileges of the Series A Convertible Preferred Stock so as to affect adversely the Series A Convertible Preferred Stock; or in any manner create any new class or series of capital stock senior to the Series A Convertible Preferred Stock with respect to the right to receive dividends, or distributions upon liquidation, winding up or dissolution of the Company. Notwithstanding the foregoing, when authorized by resolutions of the Board of Directors, the Company may amend or supplement this Certificate without the consent of any holder of Series A Convertible Preferred Stock to cure any ambiguity, defect or inconsistency herein or make any other change herein, provided that each such amendments or supplements shall not adversely affect the interests of the holders thereof. 11. Registration and Transfer The Company shall maintain at its principal executive offices (or at the offices of its transfer agent or such other office or agency of the Company as it may designate by notice to the holders of the Series A Convertible Preferred Stock) a stock register for the Series A Convertible Preferred Stock in which the Company shall record the names and addresses of person in whose name the shares of Series A Convertible Preferred Stock are issued, as well as the name and address of each permitted transferee thereof. Prior to due presentment for registration of any transferee of any Series A Convertible Preferred Stock, the Company may deem and treat the person in whose name any Series A Convertible Preferred Stock is registered as the absolute owner of such Series A Convertible Preferred Stock and the Company shall not be affected by notice to the contrary. All transfers of Series A Convertible Preferred Stock must be made pursuant to the applicable rules and regulations of federal and state securities laws. No service charge shall be made to a holder of Series A Convertible Preferred Stock for any registration, transfer or exchange." 4. The amendment was authorized by a vote at a meeting of the Board of Directors of the corporation. /s/ Walter M. Groteke ----------------------------- Walter M. Groteke Chairman of the Board /s/ Peter C. Castle ----------------------------- Peter C. Castle Vice President-Finance CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION Under Section 805 of the Business Corporation Law Blau, Kramer, Wactlar & Lieberman, P. C. 100 Jericho Quadrangle Jericho, New York 11753 State of New York : : SS: Department of State : I hereby certify that the annexed copy has been compared with the original document in the custody of the Secretary of State and that the same is a true copy of said original. Witness my had and seal of the Department of State on July 14, 2000. [SEAL] State of New York Department of State /s/________________________________ Special Deputy Secretary of State CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION --------------------- Under Section 805 of the Business Corporation Law WE, THE UNDERSIGNED, WALTER M. GROTEKE and PETER C. CASTLE, being respectively the Chairman of the Board and Secretary of NETWOLVES CORPORATION hereby certify: 1. The name of the corporation is: NETWOLVES CORPORATION. 2. The certificate of incorporation of said corporation was filed by the Department of State on January 5,1970 under the Original Name of Watchdog Patrols, Inc. 3. (a) The certificate of incorporation is amended to: (i) increase the total number of shares of common stock which the corporation has authority to issue from 10,000,000 shares to 50,000,000 shares, par value $.0033; and (ii) to authorize 2,000,000 shares of preferred stock, par value $.0033 per share. (b) To effect the foregoing, Article FOURTH of the Certificate of Incorporation relating to the authorized shares of the corporation, is amended to read as follows: "FOURTH: The total number of shares of all classes of stock which the corporation shall have the authority to issue is FIFTY TWO MILLION (52,000,000) shares, of which FIFTY MILLION (50,000,000) shares shall be shares of common stock of the par value of $.0033 per share and TWO MILLION (2,000,000) shares shall be shares of Preferred Stock of the par value of $.0033 per share. The Preferred Stock may be issued in series and the number, designation, relative rights, preferences and limitations of shares of each series of Preferred Stock $.0033 per share par value shall be fixed by the Board of Directors." 4. The amendment was authorized by a vote at a meeting of the Board of Directors of the corporation, followed by a vote of the holders of at least a majority of all of the outstanding shares of the corporation entitled to vote on the said amendment of the certificate of incorporation. /s/ Walter M. Groteke ------------------------- Walter M. Groteke Chairman of the Board /s/ Peter C. Castle ------------------------- Peter C. Castle Secretary 1 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION --------------------- Under Section 805 of the Business Corporation Law Blau, Kramer, Wactlar & Lieberman, P. C. 100 Jericho Quadrangle Jericho, New York 11753 2 State of New York : : SS: Department of State : I hereby certify that the annexed copy has been compared with the original document in the custody of the Secretary of State and that the same is a true copy of said original. Witness my had and seal of the Department of State on July 22, 2002. [SEAL] State of New York Department of State /s/__________________ Special Deputy Secretary of State CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION Under Section 805 of the Business Corporation Law WE, THE UNDERSIGNED, WALTER M. GROTEKE and PETER C. CASTLE, being respectively the Chairman of the Board and Vice President-Finance of NETWOLVES CORPORATION hereby certify: 1. The name of the corporation is: NETWOLVES CORPORATION. 2. The certificate of incorporation of said corporation was filed by the Department of State on January 5, 1970 under the original name of Watchdog Patrols, Inc. 3. (a) The certificate of incorporation is amended to: (i) authorize a series of the Company's authorized preferred stock, par value $.0033 per share (the "Preferred Stock"), to be known as the Series A Convertible Preferred Stock (the "Series A Convertible Preferred Stock"); and (ii) provide for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions of the Series A Convertible Preferred Stock. (b) To effect the foregoing, Article FOURTH of the Certificate of Incorporation relating to the authorized shares of the corporation, is amended to read as follows: "FOURTH: The total number of shares of all classes of stock which the corporation shall have the authority to issue is FIFTY TWO MILLION (52,000,000) shares, of which FIFTY MILLION (50,000,000) shares shall be shares of common stock of the par value of $.0033 per share and TWO MILLION (2,000,000) shares shall be shares of Preferred Stock of the par value of $.0033 per share. The Preferred Stock may be issued in series and the number, designation, relative rights, preferences and limitations of shares of each series of Preferred Stock $.0033 per share par value shall be fixed by the Board of Directors. Of the 2,000,000 shares of Preferred Stock, 1,000,000 shares shall be designated as Series A Convertible Preferred Stock, par value $.0033 per share, which shall have the following powers, designations, preferences and other special rights: 1. Certain Definitions. "Average Price" means, with respect to any shares of stock or securities, including the Common Stock (as defined below), on any date of determination, the average for the thirty (30) consecutive Trading Days (as defined below) preceding and including such date of determination of the reported last sale prices per share on the principal national securities exchange or inter-dealer quotation system on which such stock or security is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange or inter-dealer quotation system or if last sale prices are not available, the average for the thirty (30) consecutive Trading Days preceding and including the date of determination of the average of the closing bid and asked prices per share or security in the over-the-counter market as published by the National Quotation Service or the OTC Bulletin Board or, if no such quotations are published or furnished, by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. "Common Stock" means the common stock, $.0033 par value, of the Company, including the stock into which the Series A Convertible Preferred Stock is convertible, and any capital stock of any class of the Company thereafter authorized that shall not be limited to a fixed sum in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company. "Current Market Price" shall mean, with respect to any shares of capital stock or other securities, (i) if such stock or securities are listed or admitted to trading on a national securities exchange or an inter-dealer quotation system or traded in the over-the-counter market, the Average Price per share or security, as the case may be, at the close of trading on the Trading Day on which the relevant determination is to be made or, if such day is not a Trading Day, the Trading Day immediately preceding such day and (ii) if such stock or security is not so listed, admitted or traded, the fair market value of such stock or security as determined by the Managing Directors of the Company or, if such parties cannot agree, as determined by an Independent Appraiser (as defined below). "Excluded Stock" means Common Stock issued or to be issued (i) pursuant to the conversion of the Series A Convertible Preferred Stock (ii) pursuant to the exercise of any stock options or warrants currently outstanding or options or warrants issued after the date hereof having an exercise price equal to or greater than the Conversion Price, or (iii) except as otherwise provided herein, and following any applicable adjustment in the Conversion Price provided for in Subsection 4D, upon the actual issue of Common Stock or securities convertible into Common Stock at the time of exercise of any rights, options or warrants to purchase Common Stock or any securities convertible into Common Stock, as appropriate, or upon conversion or exchange of securities convertible into Common Stock. "Independent Appraiser" means an investment banking firm, appraisal firm or any other financial expert of recognized national standing in the United States, selected by the holders of a majority of the Series A Convertible Preferred Stock and reasonably acceptable to the Company, that does not (or whose directors, officers, employees, affiliates or stockholders do not) have a direct or indirect material financial interest in the Company or a 5% or greater holder of Series A Convertible Preferred Stock, who has not been, and, at the time called upon to give independent financial advice to the Company or a holder of Series A Convertible Preferred Stock, is not (and none of its directors, officers, affiliates or stockholders are) a promoter, director or officer of the Company. "Trading Day" means (i) if the relevant stock or security is listed or admitted for trading on the New York Stock Exchange or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq National or SmallCap Markets or any other system of automated dissemination of quotation of securities prices, a day on which the relevant stock or security is traded in a regular way in the over-the-counter market and for which a closing bid and a closing asked price for such stock or security are available. 2 2. Dividends. 2A. The holders of the Series A Convertible Preferred Stock shall be entitled to receive dividends, which shall begin to accrue on and be cumulative from the date of issuance ("Issuance Date") of the Series A Convertible Preferred Stock (whether or not such dividends have been declared and whether or not there shall be net profits or net assets of the Company legally available for the payment of such dividends) in an annual amount equal to the issue price of such Series A Convertible Preferred Stock plus any accrued but unpaid dividends (the "Liquidation Preference") times eight percent (8%) (the "Dividend Amount"). The Dividend Amount shall be payable on July 1 of each year (the "Dividend Payment Dates") either in cash or in kind by issuance by the Company of additional shares of Series A Convertible Preferred Stock (the "PIK Shares") at the option of the Company. In the event that the applicable Dividend Amount is not paid in cash within thirty (30) days of the relevant Dividend Payment Date, the Company shall be deemed for all purposes to have elected to pay the relevant Dividend Amount in PIK Shares. If the Company elects or is deemed to have elected to pay any Dividend Amount in PIK Shares, each holder of Series A Convertible Preferred Stock shall be deemed to be the holder of record of such holder's pro rata share of the PIK Shares issuable with respect to the relevant Dividend Amount notwithstanding that the stock transfer books of the Company shall then be closed or that certificates evidencing such PIK Shares shall not have been actually delivered to such holder of Series A Convertible Preferred Stock. In the event that dividends on the Series A Convertible Preferred Stock are paid with PIK Shares, each such PIK Share (i) shall be valued at the then applicable Liquidation Preference per share and (ii) shall have the same Liquidation Preference as each share of Series A Convertible Preferred Stock with respect to which the PIK Share constituted a dividend. No dividends shall be paid on any Common Stock of the Company or any capital stock of the Company that ranks junior to or on parity with the Series A Convertible Preferred Stock during any fiscal year of the Company until dividends in the aggregate Dividend Amount per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series A Convertible Preferred Stock for the current and each prior Dividend Payment Date shall have been paid or declared and set apart for payment to the Series A Convertible Preferred Stock holders. 2B. The amount of dividends payable for any period shorter than a full year shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Series A Convertible Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. 2C. So long as any shares of the Series A Convertible Preferred Stock are outstanding, no dividends shall be declared or paid or set apart for payment on any other preferred stock of the Company of any series ranking, as to dividends, junior to or on a parity with the Series A Convertible Preferred Stock, unless a dividend shall be paid at the same time to each holder of Series A Convertible Preferred Stock, in an amount such that the holders of such other series of preferred stock, on the one hand, and the holders of Series A Convertible Preferred Stock, on the other, receive dividends in the same relative proportions that each would have received had all such shares of preferred stock been converted into Common Stock immediately prior to the declaration of a dividend on such preferred stock. 3 3. Liquidation. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the shares of Series A Convertible Preferred Stock shall be entitled, before any distributions shall be made to the holders of the Common Stock, or any other class of capital stock of the Company ranking junior to the Series A Convertible Preferred Stock, to be paid an amount (the "Series A Liquidation Amount") equal to greater of (i) the Liquidation Preference per share (appropriately adjusted to reflect the occurrence of any stock split, stock dividend, stock combination, stock subdivision or like occurrences) or (ii) the aggregate pro rata liquidating distribution per share payable to holders of Series A Convertible Preferred Stock on an as-converted basis. Written notice of such liquidation, dissolution or winding up, stating a payment date, the Series A Liquidation Amount and the place where said sums shall be payable shall be given by mail, postage prepaid, not less than 30 or more than 60 days prior to the payment date stated therein, to the holders of record of the Series A Convertible Preferred Stock, such notice to be addressed to each shareholder at his post office address as shown by the records of the Company. 4. Conversion. The shares of Series A Convertible Preferred Stock shall be (i) subject to the following conversion terms and (ii) the holders of the Series A Convertible Preferred Stock shall have the right to convert their shares of Series A Convertible Preferred Stock into shares of Common Stock as follows (the "Conversion Rights"): 4A. Right to Convert. Each Share of Series A Convertible Preferred Stock is convertible, without the payment of any additional consideration by the holder thereof, at any time at the option of the holder of such shares into the number of fully paid non-assessable shares of Common Stock equal to the quotient obtained by dividing (i) the product of the number of shares of Series A Convertible Preferred Stock being converted multiplied by $15.00, (ii) by the then current Conversion Price (the "Applicable Conversion Ratio"). The initial "Conversion Price" shall be $1.50. The Conversion Price is subject to adjustment pursuant to the anti-dilution provisions described in Section 4D, E, F, G and H below. 4B. Automatic Conversion. Each share of outstanding Series A Convertible Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Applicable Conversion Ratio, if, at any time following the Issuance Date and provided the Common Stock issuable upon conversion of the Preferred Stock is covered by a then current registration statement of the Company which has been declared effective by the Securities and Exchange Commission, (i) a closing takes place of a Public Offering (as defined below) at a price equal to or in excess of three times the Conversion Price. "Public Offering" shall mean a public offering of Common Stock subject to a firm commitment underwriting (an "Underwriting"), pursuant to an effective registration statement (other than a registration statement on Form S-4 or S-8) under the Securities Act of 1933, as amended (the "Act"), which registration statement and Underwriting cover the offer and the sale of Common Stock to the public for the account of the Company resulting in gross cash proceeds to the Company as seller of not less than $15,000,000, before deducting any underwriting commissions and other compensation, or (ii) the price of the Common Stock for any 30 consecutive trading days equals or exceeds three times the Conversion Price and the average daily trading volume for the Company's Common Stock for the 30 consecutive trading days exceeds 100,000 shares. 4 4C. Mechanics of Conversion. No fractional shares of Common Stock shall be issued upon conversion of the Series A Convertible Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash for any fractional share. Except in the case of a conversion pursuant to Section 4B hereof, before any holder of Series A Convertible Preferred Stock may convert the same into shares of Common Stock, each holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the principal office of the Company or of any transfer agent for the Series A Convertible Preferred Stock, and shall give written notice to the Company at such office that such holder elects to convert the same. On the date of a conversion pursuant to Section 4B, any party entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of all such shares of Common Stock on such date, whether or not such holder has surrendered the certificate or certificates for such holder's shares of Series A Convertible Preferred Stock. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Convertible Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which it or he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Except in the case of a conversion pursuant to Section 4(b), such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Convertible Preferred Stock to be converted, the then holders of record of Series A Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. 4D. Adjustment for Stock Splits and Combinations. If the Company, at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(b) hereof, effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Series A Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Issuance Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Series A Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before the effective date of the combination shall be proportionately increased. Any adjustment in the Applicable Conversion Ratio under this Section 4(d) shall become effective at the close of business on the date the subdivision or combination becomes effective. 4E. Adjustment for Common Stock Dividends and Distributions. If the Company at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(b) hereof makes, or fixes a record date for, determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock, in each such event, the Applicable Conversion Ratio then in effect shall be decreased as of the effective date of the issuance of such additional shares of Common Stock, or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Applicable Conversion Ratio then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or, the close of business on such record date as the case may be, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on 5 such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Applicable Conversion Ratio shall be recomputed accordingly as of the close of business on such record date and thereafter the Applicable Conversion Ratio shall be adjusted pursuant to this Section 4(e) to reflect the actual payment of such dividend or distribution. 4F. Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(b) hereof, the Common Stock issuable upon the conversion of the Series A Convertible Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Company, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer (as defined in sub-section (j) below) or a subdivision or combination of shares or stock dividend or a corporate reorganization, merger or consolidation provided for elsewhere in this Section 4, in any such event each holder of any shares of Series A Convertible Preferred Stock then outstanding shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and/or property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A Convertible Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. 4G. Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(b) hereof, there is a capital reorganization of the Common Stock other than (i) an Acquisition or Asset Transfer (as defined in section 4(j) below), or (ii) a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4 (each such transaction described in the foregoing clauses (i) and (ii), a "Reorganization Transaction") as a part of such Reorganization Transaction, provision shall be made so that the holders of the Series A Convertible Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A Convertible Preferred Stock the number of shares of stock or other securities or property of which they would be entitled to receive had they converted their shares of Series A Convertible Preferred Stock into shares of Common Stock on the date of (A) the first day immediately prior to the effective date of such Reorganization Transaction or (B) the record date for such Reorganization Transaction, whichever is applicable to the Reorganization Transaction. In any such case, all adjustments that otherwise would have been required to be made in the Applicable Conversion Ratio and the number of shares of Common Stock that the holders of Series A Convertible Preferred Stock are entitled to receive upon conversion of the Series A Convertible Preferred Stock pursuant to this Section 4 on or prior to such date shall be made prior to calculating the amount or number of securities and/or property receivable by such holders in connection with such Reorganization Transaction. 4H. Sale of Shares At Price Below The Initial Conversion Price. If at any time or from time to time, subsequent to the Issuance Date and prior to the closing of the Public Offering referenced in this Section 4, the Company issues or sells, or is deemed to have issued or sold shares of its capital stock for consideration of a price of less than $1.76 per share, 6 the Conversion Price shall be adjusted to be such lower price at which the Company issued or sold shares of its capital stock. For purposes of this Section 4H. sales or issuances of capital stock by the Company shall include options to acquire, or securities convertible into or exercisable for Common Stock, but shall not include Excluded Stock or stock dividends, stock splits or reclassifications. 4I. Certificate of Adjustment. In each case of an adjustment or readjustment of the Applicable Conversion Ratio and the number of shares of Common Stock or other securities thus issuable upon conversion of the Series A Convertible Preferred Stock, if the Series A Convertible Preferred Stock is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A Convertible Preferred Stock at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. 4J. Certain Definitions. "Acquisition" shall mean any transaction or series of related transactions to which the Corporation is a party in which in excess of fifty percent (50%) of the Company's voting power is transferred. "Asset Transfer" shall mean a sale, lease or other disposition of all or substantially all of the assets of the Company. 5. Voting Rights 5A. Number of Votes. Except as otherwise required by law, the holders of Series A Convertible Preferred Stock and the holders of the Common Stock shall be entitled to notice of any stockholders' meeting and to vote any matter submitted to a stockholder vote, as a single class on the following basis: (a) Each share of Common Stock issued and outstanding shall have one vote per share; and (b) Each share of Series A Convertible Preferred Stock issued and outstanding shall have 10 votes per share. 5B. Voting As a Class. Each share of Series A Convertible Preferred Stock issued and outstanding shall also be entitled to one vote on all matters as to which holders of Series A Convertible Preferred Stock are required to vote as a separate class pursuant to the New York Business Corporation Law, and the holders of a majority of the Series A Convertible Preferred Stock entitled to vote shall bind the entire class of Series A Convertible Preferred Stock. 5C. Notices. The Company shall give the holders of the Series A Convertible Preferred Stock the same prior notice as given to holders of Common Stock according to the By-laws of the Company of any matter to be submitted to such holders for a vote. 7 6. Optional Redemption. 6A. The Series A Convertible Preferred Stock will be redeemable in whole or in part at the option of any holder of the Series A Convertible Preferred Stock, at any time after July 1, 2004, subject to the limitations set forth below, at 100% of its principal amount plus, in each case, all dividends accrued and unpaid on the Series A Convertible Preferred Stock up to the date of notice, upon giving notice as provided hereinbelow. 6B. A written notice shall be mailed to the Company notifying the Company of the election by the holder of any outstanding Series A Convertible Preferred Stock to redeem such shares. Each holder of shares of Series A Convertible Preferred Stock to be redeemed shall present and surrender his certificate or certificates for such shares to the Company at the Company's principal offices and within 45 days thereafter the redemption price of such shares shall be paid to or on the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled. From and after the notice by the holder (unless the Company defaults in payment of the redemption price) all dividends on the shares of Series A Convertible Preferred Stock designated for redemption in such notice shall cease to accrue, and all rights of the holders thereof as stockholders of the Company, except the right to receive the redemption price thereof (including all accrued and unpaid dividends up to the date of notice) upon the surrender of certificates representing the same, shall cease and terminate and such shares shall not thereafter be transferred (except with the consent of the Company) on the books of the Company, and such shares shall not be deemed to be outstanding for any purposes whatsoever. 7. Principal Office; Notices The address of the principal office of the Company is located at 4002 Eisenhower Boulevard, Tampa, Florida 33634. Any notice or certificate required by the Certificate of Incorporation of the Company, as amended, or this Certificate of Designations to be delivered to any holder of Series A Convertible Preferred Stock shall be deemed given when personally delivered to such holder or upon deposit in the United States Mail, certified mail, return receipt requested and addressed to such holder at his or its address appearing on the books of the Company. 8. Cancellation of Series A Convertible Preferred Stock In the event any shares of Series A Convertible Preferred Stock shall be converted, liquidated or redeemed, the shares so converted, liquidated or redeemed shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Company as Series A Convertible Preferred Stock. 9. Reservation of Shares Commencing on the Issuance Date, the Company shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Convertible Preferred Stock into shares of Common Stock, the full number of shares of Common Stock deliverable upon conversion of all of the shares of Series A Convertible Preferred Stock from time to time outstanding, taking into account all adjustments required herein in the Applicable Conversion Ratio. If 8 at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversation of all of the then outstanding shares of Series A Convertible Preferred Stock pursuant to this Certificate of Designations, the Company shall take such corporate action as may, in the opinion of counsel to the Company, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 10. Amendments and Other Actions As long as any shares of Series A Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent) of the holders of all of the then outstanding shares of Series A Convertible Preferred Stock, voting as a separate class: in any manner alter or change the rights, preferences or privileges of the Series A Convertible Preferred Stock so as to affect adversely the Series A Convertible Preferred Stock; or in any manner create any new class or series of capital stock senior to the Series A Convertible Preferred Stock with respect to the right to receive dividends, or distributions upon liquidation, winding up or dissolution of the Company. Notwithstanding the foregoing, when authorized by resolutions of the Board of Directors, the Company may amend or supplement this Certificate without the consent of any holder of Series A Convertible Preferred Stock to cure any ambiguity, defect or inconsistency herein or make any other change herein, provided that each such amendments or supplements shall not adversely affect the interests of the holders thereof. 11. Registration and Transfer The Company shall maintain at its principal executive offices (or at the offices of its transfer agent or such other office or agency of the Company as it may designate by notice to the holders of the Series A Convertible Preferred Stock) a stock register for the Series A Convertible Preferred Stock in which the Company shall record the names and addresses of person in whose name the shares of Series A Convertible Preferred Stock are issued, as well as the name and address of each permitted transferee thereof. Prior to due presentment for registration of any transferee of any Series A Convertible Preferred Stock, the Company may deem and treat the person in whose name any Series A Convertible Preferred Stock is registered as the absolute owner of such Series A Convertible Preferred Stock and the Company shall not be affected by notice to the contrary. All transfers of Series A Convertible Preferred Stock must be made pursuant to the applicable rules and regulations of federal and state securities laws. No service charge shall be made to a holder of Series A Convertible Preferred Stock for any registration, transfer or exchange." 4. The amendment was authorized by a vote at a meeting of the Board of Directors of the corporation. /s/ Walter M. Groteke ----------------------------------- Walter M. Groteke Chairman of the Board /s/ Peter C. Castle ----------------------------------- Peter C. Castle Vice President-Finance 9 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION Under Section 805 of the Business Corporation Law Blau, Kramer, Wactlar & Lieberman, P. C. 100 Jericho Quadrangle Jericho, New York 11753 10 State of New York : : SS: Department of State : I hereby certify that the annexed copy has been compared with the original document filed by the Department of State and that the same is a true copy of said original. Witness my had and seal of the Department of State on November 14, 2002. [SEAL] State of New York Department of State /s/__________________ Secretary of State CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION Under Section 805 of the Business Corporation Law WE, THE UNDERSIGNED, WALTER M. GROTEKE and PETER C. CASTLE, being respectively the Chairman of the Board and Vice President-Finance of NETWOLVES CORPORATION hereby certify: 1. The name of the corporation is: NETWOLVES CORPORATION. 2. The certificate of incorporation of said corporation was filed by the Department of State on January 5, 1970 under the original name of Watchdog Patrols, Inc. 3. (a) The certificate of incorporation is amended to: (i) authorize a series of the Company's authorized preferred stock, par value $.0033 per share (the "Preferred Stock"), to be known as the Series A Convertible Preferred Stock (the "Series A Convertible Preferred Stock"); and (ii) provide for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions of the Series A Convertible Preferred Stock. (b) To effect the foregoing, Article FOURTH of the Certificate of Incorporation relating to the authorized shares of the corporation, is amended to read as follows: "FOURTH: The total number of shares of all classes of stock which the corporation shall have the authority to issue is FIFTY TWO MILLION (52,000,000) shares, of which FIFTY MILLION (50,000,000) shares shall be shares of common stock of the par value of $.0033 per share and TWO MILLION (2,000,000) shares shall be shares of Preferred Stock of the par value of $.0033 per share. The Preferred Stock may be issued in series and the number, designation, relative rights, preferences and limitations of shares of each series of Preferred Stock $.0033 per share par value shall be fixed by the Board of Directors. Of the 2,000,000 shares of Preferred Stock, 1,000,000 shares shall be designated as Series A Convertible Preferred Stock, par value $.0033 per share, which shall have the following powers, designations, preferences and other special rights: 1. Certain Definitions. "Average Price" means, with respect to any shares of stock or securities, including the Common Stock (as defined below), on any date of determination, the average for the thirty (30) consecutive Trading Days (as defined below) preceding and including such date of determination of the reported last sale prices per share on the principal national securities exchange or inter-dealer quotation system on which such stock or security is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange or inter-dealer quotation system or if last sale prices are not available, the average for the thirty (30) consecutive Trading Days preceding and including the date of determination of the average of the closing bid and asked prices per share or security in the over-the-counter market as published by the National Quotation Service or the OTC Bulletin Board or, if no such quotations are published or furnished, by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. "Common Stock" means the common stock, $.0033 par value, of the Company, including the stock into which the Series A Convertible Preferred Stock is convertible, and any capital stock of any class of the Company thereafter authorized that shall not be limited to a fixed sum in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company. "Current Market Price" shall mean, with respect to any shares of capital stock or other securities, (i) if such stock or securities are listed or admitted to trading on a national securities exchange or an inter-dealer quotation system or traded in the over-the-counter market, the price per share or security, as the case may be, at the close of trading on the Trading Day on which the relevant determination is to be made or, if such day is not a Trading Day, the Trading Day immediately preceding such day and (ii) if such stock or security is not so listed, admitted or traded, the fair market value of such stock or security as determined by the Managing Directors of the Company or, if such parties cannot agree, as determined by an Independent Appraiser (as defined below). "Excluded Stock" means (a) the Series A Convertible Preferred Stock; (b) any Common Stock issued or to be issued (i) pursuant to the conversion of the Series A Convertible Preferred Stock (ii) pursuant to the exercise of any stock options or warrants currently outstanding or options or warrants issued after the date hereof having an exercise price equal to or greater than the Current Market Price, or (iii) except as otherwise provided herein, upon the actual issue of Common Stock or securities convertible into Common Stock at the time of exercise of any rights, options or warrants to purchase Common Stock or any securities convertible into Common Stock, as appropriate, or upon conversion or exchange of securities convertible into Common Stock; and (c) in addition to (a) and (b) hereof, an aggregate of 4,000,000 shares of Common Stock to be issued on or after January 1, 2003 at less than the Conversion Price either directly or on the conversion of any convertible securities issued after the date hereof. "Independent Appraiser" means an investment banking firm, appraisal firm or any other financial expert of recognized national standing in the United States, selected by the holders of a majority of the Series A Convertible Preferred Stock and reasonably acceptable to the Company, that does not (or whose directors, officers, employees, affiliates or stockholders do not) have a direct or indirect material financial interest in the Company or a 5% or greater holder of Series A Convertible Preferred Stock, who has not been, and, at the time called upon to give independent financial advice to the Company or a holder of Series A Convertible Preferred Stock, is not (and none of its directors, officers, affiliates or stockholders are) a promoter, director or officer of the Company. "Trading Day" means (i) if the relevant stock or security is listed or admitted for trading on the New York Stock Exchange or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq National or SmallCap Markets or any other system of automated dissemination of quotation of securities prices, a day on which the relevant stock or security is traded in a regular way in the over-the-counter market and for which a closing bid and a closing asked price for such stock or security are available. 2 2. Dividends. 2A. The holders of the Series A Convertible Preferred Stock shall be entitled to receive dividends, which shall begin to accrue on and be cumulative from the date of issuance ("Issuance Date") of the Series A Convertible Preferred Stock (whether or not such dividends have been declared and whether or not there shall be net profits or net assets of the Company legally available for the payment of such dividends) in an annual amount equal to the issue price of such Series A Convertible Preferred Stock plus any accrued but unpaid dividends (the "Liquidation Preference") times eight percent (8%) through June 30, 2004 and thereafter times twelve (12%) (the "Dividend Amount"). The Dividend Amount shall be payable on July 1 of each year (the "Dividend Payment Dates") either in cash or in kind by issuance by the Company of additional shares of Series A Convertible Preferred Stock (the "PIK Shares") at the option of the Company. In the event that the applicable Dividend Amount is not paid in cash within thirty (30) days of the relevant Dividend Payment Date, the Company shall be deemed for all purposes to have elected to pay the relevant Dividend Amount in PIK Shares. If the Company elects or is deemed to have elected to pay any Dividend Amount in PIK Shares, each holder of Series A Convertible Preferred Stock shall be deemed to be the holder of record of such holder's pro rata share of the PIK Shares issuable with respect to the relevant Dividend Amount notwithstanding that the stock transfer books of the Company shall then be closed or that certificates evidencing such PIK Shares shall not have been actually delivered to such holder of Series A Convertible Preferred Stock. In the event that dividends on the Series A Convertible Preferred Stock are paid with PIK Shares, each such PIK Share (i) shall be valued at the then applicable Liquidation Preference per share and (ii) shall have the same Liquidation Preference as each share of Series A Convertible Preferred Stock with respect to which the PIK Share constituted a dividend. No dividends shall be paid on any Common Stock of the Company or any capital stock of the Company that ranks junior to or on parity with the Series A Convertible Preferred Stock during any fiscal year of the Company until dividends in the aggregate Dividend Amount per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series A Convertible Preferred Stock for the current and each prior Dividend Payment Date shall have been paid or declared and set apart for payment to the Series A Convertible Preferred Stock holders. 2B. The amount of dividends payable for any period shorter than a full year shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Series A Convertible Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. 2C. So long as any shares of the Series A Convertible Preferred Stock are outstanding, no dividends shall be declared or paid or set apart for payment on any other preferred stock of the Company of any series ranking, as to dividends, junior to or on a parity with the Series A Convertible Preferred Stock, unless a dividend shall be paid at the same time to each holder of Series A Convertible Preferred Stock, in an amount such that the holders of such other series of preferred stock, on the one hand, and the holders of Series A Convertible Preferred Stock, on the other, receive dividends in the same relative proportions that each would have received had all such shares of preferred stock been converted into Common Stock immediately prior to the declaration of a dividend on such preferred stock. 3 3. Liquidation. (a) Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the shares of Series A Convertible Preferred Stock shall be entitled, before any distributions shall be made to the holders of the Common Stock, or any other class of capital stock of the Company ranking junior to the Series A Convertible Preferred Stock, to be paid an amount (the "Series A Liquidation Amount") equal to greater of (i) twice the Liquidation Preference per share (appropriately adjusted to reflect the occurrence of any stock split, stock dividend, stock combination, stock subdivision or like occurrences) or (ii) the aggregate pro rata liquidating distribution per share payable to holders of Series A Convertible Preferred Stock on an as-converted basis. Written notice of such liquidation, dissolution or winding up, stating a payment date, the Series A Liquidation Amount and the place where said sums shall be payable shall be given by mail, postage prepaid, not less than 30 or more than 60 days prior to the payment date stated therein, to the holders of record of the Series A Convertible Preferred Stock, such notice to be addressed to each shareholder at his post office address as shown by the records of the Company. (b) Any Acquisition or Asset Transfer may be regarded as a liquidation, dissolution or winding up of the Company for purposes of this Section 3 upon the election of the holders of at least a majority of the outstanding shares of Series A Convertible Preferred Stock (voting together as a single class). The Company will not enter into any transaction which provides for an Acquisition Asset Transfer without providing for the ability of the holders of the Series A Convertible Preferred Stock upon the affirmative vote of a majority as described in the preceding sentence) to receive consideration in connection with such transaction in an amount not less than the amount they would have received had the consideration payable by any third party in connection with such transaction been paid to the Company, which then completed a liquidation in accordance with this Section 3 (provided that for the purpose of calculating the pro forma Series A Liquidation Amount for purposes of such deemed liquidation, the word "twice" set forth in the preceding paragraph concerning the calculation fo the Series A Liquidation Amount shall be deemed to be replaced with the words "one and a half times"). Nothing in this Section 3 shall be construed to prevent the holders of the Series A Convertible Preferred Stock ,in lieu of any other rights described in this paragraph, from exercising their Conversion Rights at any time up to or simultaneous with any Acquisition or Asset Transfer. 4. Conversion. The shares of Series A Convertible Preferred Stock shall be (i) subject to the following conversion terms and (ii) the holders of the Series A Convertible Preferred Stock shall have the right to convert their shares of Series A Convertible Preferred Stock into shares of Common Stock as follows (the "Conversion Rights"): 4A. Right to Convert. Each Share of Series A Convertible Preferred Stock is convertible, without the payment of any additional consideration by the holder thereof, at any time at the option of the holder of such shares into the number of fully paid non-assessable shares of Common Stock equal to the quotient obtained by dividing (i) the product of the number of shares of Series A Convertible Preferred Stock being converted multiplied by $15.00, (ii) by the then current Conversion Price (the "Applicable Conversion Ratio"). The initial "Conversion Price" shall be $1.50. The Conversion Price is subject to further adjustment pursuant to the anti-dilution provisions described in Section 4D, E, F, G and H below. 4 4B. Automatic Conversion. Each share of outstanding Series A Convertible Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Applicable Conversion Ratio, if, at any time following the Issuance Date and provided the Common Stock issuable upon conversion of the Preferred Stock is covered by a then current registration statement of the Company which has been declared effective by the Securities and Exchange Commission, (i) a closing takes place of a Public Offering (as defined below) at a price equal to or in excess of three times the Conversion Price. "Public Offering" shall mean a public offering of Common Stock subject to a firm commitment underwriting (an "Underwriting"), pursuant to an effective registration statement (other than a registration statement on Form S-4 or S-8) under the Securities Act of 1933, as amended (the "Act"), which registration statement and Underwriting cover the offer and the sale of Common Stock to the public for the account of the Company resulting in gross cash proceeds to the Company as seller of not less than $15,000,000, before deducting any underwriting commissions and other compensation, or (ii) the price of the Common Stock for any 30 consecutive trading days equals or exceeds three times the Conversion Price and the average daily trading volume for the Company's Common Stock for the 30 consecutive trading days exceeds 100,000 shares. 4C. Mechanics of Conversion. No fractional shares of Common Stock shall be issued upon conversion of the Series A Convertible Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash for any fractional share. Except in the case of a conversion pursuant to Section 4B hereof, before any holder of Series A Convertible Preferred Stock may convert the same into shares of Common Stock, each holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the principal office of the Company or of any transfer agent for the Series A Convertible Preferred Stock, and shall give written notice to the Company at such office that such holder elects to convert the same. On the date of a conversion pursuant to Section 4B, any party entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of all such shares of Common Stock on such date, whether or not such holder has surrendered the certificate or certificates for such holder's shares of Series A Convertible Preferred Stock. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Convertible Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which it or he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Except in the case of a conversion pursuant to Section 4(b), such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Convertible Preferred Stock to be converted, the then holders of record of Series A Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. 4D. Adjustment for Stock Splits and Combinations. If the Company, at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof, effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Series A Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Issuance Date combine the outstanding shares of 5 Common Stock into a smaller number of shares without a corresponding combination of the Series A Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before the effective date of the combination shall be proportionately increased. Any adjustment in the Applicable Conversion Ratio under this Section 4(d) shall become effective at the close of business on the date the subdivision or combination becomes effective. 4E. Adjustment for Common Stock Dividends and Distributions. If the Company at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof makes, or fixes a record date for, determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock, in each such event, the Applicable Conversion Ratio then in effect shall be decreased as of the effective date of the issuance of such additional shares of Common Stock, or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Applicable Conversion Ratio then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or, the close of business on such record date as the case may be, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Applicable Conversion Ratio shall be recomputed accordingly as of the close of business on such record date and thereafter the Applicable Conversion Ratio shall be adjusted pursuant to this Section 4(e) to reflect the actual payment of such dividend or distribution. 4F. Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof, the Common Stock issuable upon the conversion of the Series A Convertible Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Company, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer (as defined in sub-section (j) below) or a subdivision or combination of shares or stock dividend or a corporate reorganization, merger or consolidation provided for elsewhere in this Section 4, in any such event each holder of any shares of Series A Convertible Preferred Stock then outstanding shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and/or property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A Convertible Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. 4G. Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof, there is a capital reorganization of the Common Stock other than (i) an Acquisition or Asset Transfer (as defined in section 4(j) below), or (ii) a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4 (each such transaction described in the foregoing clauses (i) and (ii), a "Reorganization Transaction") as a part of such Reorganization Transaction, provision shall be made so that the holders of the Series A Convertible Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A Convertible Preferred Stock the number of shares of stock or other securities or property of which they would be entitled to receive had they converted their shares of Series A Convertible Preferred Stock into shares of Common Stock on the date of (A) the first day immediately prior to the effective date of such Reorganization 6 Transaction or (B) the record date for such Reorganization Transaction, whichever is applicable to the Reorganization Transaction. In any such case, all adjustments that otherwise would have been required to be made in the Applicable Conversion Ratio and the number of shares of Common Stock that the holders of Series A Convertible Preferred Stock are entitled to receive upon conversion of the Series A Convertible Preferred Stock pursuant to this Section 4 on or prior to such date shall be made prior to calculating the amount or number of securities and/or property receivable by such holders in connection with such Reorganization Transaction. 4H. Sale of Shares At Price Below The Initial Conversion Price. If at any time or from time to time, subsequent to the Issuance Date and prior to the closing of the Public Offering referenced in this Section 4, the Company issues or sells, or is deemed to have issued or sold shares of its capital stock for consideration of a price of less than $1.00 per share, the Conversion Price shall be adjusted to be such lower price at which the Company issued or sold shares of its capital stock. For purposes of this Section 4H. sales or issuances of capital stock by the Company shall not include Excluded Stock or stock dividends, stock splits or reclassifications. 4I. Certificate of Adjustment. In each case of an adjustment or readjustment of the Applicable Conversion Ratio and the number of shares of Common Stock or other securities thus issuable upon conversion of the Series A Convertible Preferred Stock, if the Series A Convertible Preferred Stock is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A Convertible Preferred Stock at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. 4J. Certain Definitions. "Acquisition" shall mean any transaction or series of related transactions to which the Corporation is a party in which in excess of fifty percent (50%) of the Company's voting power is transferred. "Asset Transfer" shall mean a sale, lease or other disposition of all or substantially all of the assets of the Company. 5. Voting Rights 5A. Number of Votes. Except as otherwise required by law, the holders of Series A Convertible Preferred Stock and the holders of the Common Stock shall be entitled to notice of any stockholders' meeting and to vote any matter submitted to a stockholder vote, as a single class on the following basis: (a) Each share of Common Stock issued and outstanding shall have one vote per share; and 7 (b) Each share of Series A Convertible Preferred Stock issued and outstanding shall have 10 votes per share. 5B. Voting As a Class. Each share of Series A Convertible Preferred Stock issued and outstanding shall also be entitled to one vote on all matters as to which holders of Series A Convertible Preferred Stock are required to vote as a separate class pursuant to the New York Business Corporation Law, and the holders of a majority of the Series A Convertible Preferred Stock entitled to vote shall bind the entire class of Series A Convertible Preferred Stock. 5C. Notices. The Company shall give the holders of the Series A Convertible Preferred Stock the same prior notice as given to holders of Common Stock according to the By-laws of the Company of any matter to be submitted to such holders for a vote. 6. Principal Office; Notices The address of the principal office of the Company is located at 4002 Eisenhower Boulevard, Tampa, Florida 33634. Any notice or certificate required by the Certificate of Incorporation of the Company, as amended, or this Certificate of Designations to be delivered to any holder of Series A Convertible Preferred Stock shall be deemed given when personally delivered to such holder or upon deposit in the United States Mail, certified mail, return receipt requested and addressed to such holder at his or its address appearing on the books of the Company. 7. Cancellation of Series A Convertible Preferred Stock In the event any shares of Series A Convertible Preferred Stock shall be converted, liquidated or redeemed, the shares so converted, liquidated or redeemed shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Company as Series A Convertible Preferred Stock. 8. Reservation of Shares Commencing on the Issuance Date, the Company shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Convertible Preferred Stock into shares of Common Stock, the full number of shares of Common Stock deliverable upon conversion of all of the shares of Series A Convertible Preferred Stock from time to time outstanding, taking into account all adjustments required herein in the Applicable Conversion Ratio. If at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversation of all of the then outstanding shares of Series A Convertible Preferred Stock pursuant to this Certificate of Designations, the Company shall take such corporate action as may, in the opinion of counsel to the Company, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 9. Amendments and Other Actions As long as any shares of Series A Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent) of the holders of all of the then outstanding shares of Series A Convertible Preferred Stock, voting as a separate class: in any manner alter or change the rights, preferences or privileges of the Series A Convertible Preferred Stock so as to affect adversely the Series A Convertible 8 Preferred Stock; or in any manner create any new class or series of capital stock senior to the Series A Convertible Preferred Stock with respect to the right to receive dividends, or distributions upon liquidation, winding up or dissolution of the Company. Notwithstanding the foregoing, when authorized by resolutions of the Board of Directors, the Company may amend or supplement this Certificate without the consent of any holder of Series A Convertible Preferred Stock to cure any ambiguity, defect or inconsistency herein or make any other change herein, provided that each such amendments or supplements shall not adversely affect the interests of the holders thereof. 10. Registration and Transfer The Company shall maintain at its principal executive offices (or at the offices of its transfer agent or such other office or agency of the Company as it may designate by notice to the holders of the Series A Convertible Preferred Stock) a stock register for the Series A Convertible Preferred Stock in which the Company shall record the names and addresses of person in whose name the shares of Series A Convertible Preferred Stock are issued, as well as the name and address of each permitted transferee thereof. Prior to due presentment for registration of any transferee of any Series A Convertible Preferred Stock, the Company may deem and treat the person in whose name any Series A Convertible Preferred Stock is registered as the absolute owner of such Series A Convertible Preferred Stock and the Company shall not be affected by notice to the contrary. All transfers of Series A Convertible Preferred Stock must be made pursuant to the applicable rules and regulations of federal and state securities laws. No service charge shall be made to a holder of Series A Convertible Preferred Stock for any registration, transfer or exchange." 4. The amendment was authorized by a vote at a meeting of the Board of Directors of the corporation. /s/ Walter M. Groteke ------------------------------------ Walter M. Groteke Chairman of the Board /s/ Peter C. Castle ------------------------------------ Peter C. Castle Vice President-Finance 9 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION Under Section 805 of the Business Corporation Law Blau, Kramer, Wactlar & Lieberman, P.C . 100 Jericho Quadrangle Suite 225 Jericho, New York 11753 10 State of New York : : SS: Department of State : I hereby certify that the annexed copy has been compared with the original document filed by the Department of State and that the same is a true copy of said original. Witness my had and seal of the Department of State on February 06, 2003. [SEAL] State of New York Department of State /s/__________________ Secretary of State CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION --------------------- Under Section 805 of the Business Corporation Law WE, THE UNDERSIGNED, WALTER M. GROTEKE and PETER C. CASTLE, being respectively the Chairman of the Board and Vice President-Finance of NETWOLVES CORPORATION hereby certify: 1. The name of the corporation is: NETWOLVES CORPORATION. 2. The certificate of incorporation of said corporation was filed by the Department of State on January 5, 1970 under the original name of Watchdog Patrols, Inc. 3. (a) The certificate of incorporation is amended to: (i) authorize a series of the Company's authorized preferred stock, par value $.0033 per share (the "Preferred Stock"), to be known as the Series A Convertible Preferred Stock (the "Series A Convertible Preferred Stock"); and (ii) provide for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions of the Series A Convertible Preferred Stock. (b) To effect the foregoing, Article FOURTH of the Certificate of Incorporation relating to the authorized shares of the corporation, is amended to read as follows: "FOURTH: The total number of shares of all classes of stock which the corporation shall have the authority to issue is FIFTY TWO MILLION (52,000,000) shares, of which FIFTY MILLION (50,000,000) shares shall be shares of common stock of the par value of $.0033 per share and TWO MILLION (2,000,000) shares shall be shares of Preferred Stock of the par value of $.0033 per share. The Preferred Stock may be issued in series and the number, designation, relative rights, preferences and limitations of shares of each series of Preferred Stock $.0033 per share par value shall be fixed by the Board of Directors. Of the 2,000,000 shares of Preferred Stock, 1,000,000 shares shall be designated as Series A Convertible Preferred Stock, par value $.0033 per share, and 500,000 shares shall be designated as Series B Convertible Preferred Stock, par value $.0033 per share. The Series A Convertible Preferred Stock shall have the following powers, designations, preferences and other special rights: 1. Certain Definitions. "Average Price" means, with respect to any shares of stock or securities, including the Common Stock (as defined below), on any date of determination, the average for the thirty (30) consecutive Trading Days (as defined below) preceding and including such date of determination of the reported last sale prices per share on the principal national securities exchange or inter-dealer quotation system on which such stock or security is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange or inter-dealer quotation system or if last sale prices are not available, the average for the thirty (30) consecutive Trading Days preceding and including the date of determination of the average of the closing bid and asked prices per share or security in the over-the-counter market as published by the National Quotation Service or the OTC Bulletin Board or, if no such quotations are published or furnished, by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. "Common Stock" means the common stock, $.0033 par value, of the Company, including the stock into which the Series A Convertible Preferred Stock is convertible, and any capital stock of any class of the Company thereafter authorized that shall not be limited to a fixed sum in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company. "Current Market Price" shall mean, with respect to any shares of capital stock or other securities, (i) if such stock or securities are listed or admitted to trading on a national securities exchange or an inter-dealer quotation system or traded in the over-the-counter market, the price per share or security, as the case may be, at the close of trading on the Trading Day on which the relevant determination is to be made or, if such day is not a Trading Day, the Trading Day immediately preceding such day and (ii) if such stock or security is not so listed, admitted or traded, the fair market value of such stock or security as determined by the Managing Directors of the Company or, if such parties cannot agree, as determined by an Independent Appraiser (as defined below). "Excluded Stock" means (a) the Series A Convertible Preferred Stock; (b) any Common Stock issued or to be issued (i) pursuant to the conversion of the Series A Convertible Preferred Stock (ii) pursuant to the exercise of any stock options or warrants currently outstanding or options or warrants issued after the date hereof having an exercise price equal to or greater than the Current Market Price, or (iii) except as otherwise provided herein, upon the actual issue of Common Stock or securities convertible into Common Stock at the time of exercise of any rights, options or warrants to purchase Common Stock or any securities convertible into Common Stock, as appropriate, or upon conversion or exchange of securities convertible into Common Stock; and (c) in addition to (a) and (b) hereof, an aggregate of 4,000,000 shares of Common Stock to be issued on or after January 1, 2003 at less than the Conversion Price either directly or on the conversion of any convertible securities issued after the date hereof. "Independent Appraiser" means an investment banking firm, appraisal firm or any other financial expert of recognized national standing in the United States, selected by the holders of a majority of the Series A Convertible Preferred Stock and reasonably acceptable to the Company, that does not (or whose directors, officers, employees, affiliates or stockholders do not) have a direct or indirect material financial interest in the Company or a 5% or greater holder of Series A Convertible Preferred Stock, who has not been, and, at the time called upon to give independent financial advice to the Company or a holder of Series A Convertible Preferred Stock, is not (and none of its directors, officers, affiliates or stockholders are) a promoter, director or officer of the Company. 2 "Trading Day" means (i) if the relevant stock or security is listed or admitted for trading on the New York Stock Exchange or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq National or SmallCap Markets or any other system of automated dissemination of quotation of securities prices, a day on which the relevant stock or security is traded in a regular way in the over- the-counter market and for which a closing bid and a closing asked price for such stock or security are available. 2. Dividends. 2A. The holders of the Series A Convertible Preferred Stock shall be entitled to receive dividends, which shall begin to accrue on and be cumulative from the date of issuance ("Issuance Date") of the Series A Convertible Preferred Stock (whether or not such dividends have been declared and whether or not there shall be net profits or net assets of the Company legally available for the payment of such dividends) in an annual amount equal to the issue price of such Series A Convertible Preferred Stock plus any accrued but unpaid dividends (the "Liquidation Preference") times eight percent (8%) through June 30, 2004 and thereafter times twelve (12%) (the "Dividend Amount"). The Dividend Amount shall be payable on July 1 of each year (the "Dividend Payment Dates") either in cash or in kind by issuance by the Company of additional shares of Series A Convertible Preferred Stock (the "PIK Shares") at the option of the Company. In the event that the applicable Dividend Amount is not paid in cash within thirty (30) days of the relevant Dividend Payment Date, the Company shall be deemed for all purposes to have elected to pay the relevant Dividend Amount in PIK Shares. If the Company elects or is deemed to have elected to pay any Dividend Amount in PIK Shares, each holder of Series A Convertible Preferred Stock shall be deemed to be the holder of record of such holder's pro rata share of the PIK Shares issuable with respect to the relevant Dividend Amount notwithstanding that the stock transfer books of the Company shall then be closed or that certificates evidencing such PIK Shares shall not have been actually delivered to such holder of Series A Convertible Preferred Stock. In the event that dividends on the Series A Convertible Preferred Stock are paid with PIK Shares, each such PIK Share (i) shall be valued at the then applicable Liquidation Preference per share and (ii) shall have the same Liquidation Preference as each share of Series A Convertible Preferred Stock with respect to which the PIK Share constituted a dividend. No dividends shall be paid on any Common Stock of the Company or any capital stock of the Company that ranks junior to or on parity with the Series A Convertible Preferred Stock during any fiscal year of the Company until dividends in the aggregate Dividend Amount per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series A Convertible Preferred Stock for the current and each prior Dividend Payment Date shall have been paid or declared and set apart for payment to the Series A Convertible Preferred Stock holders. 2B. The amount of dividends payable for any period shorter than a full year shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Series A Convertible Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by- share basis among all such shares at the time outstanding. 3 2C. So long as any shares of the Series A Convertible Preferred Stock are outstanding, no dividends shall be declared or paid or set apart for payment on any other preferred stock of the Company of any series ranking, as to dividends, junior to or on a parity with the Series A Convertible Preferred Stock, unless a dividend shall be paid at the same time to each holder of Series A Convertible Preferred Stock, in an amount such that the holders of such other series of preferred stock, on the one hand, and the holders of Series A Convertible Preferred Stock, on the other, receive dividends in the same relative proportions that each would have received had all such shares of preferred stock been converted into Common Stock immediately prior to the declaration of a dividend on such preferred stock. 3. Liquidation. (a) Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the shares of Series A Convertible Preferred Stock shall be entitled, before any distributions shall be made to the holders of the Common Stock, or any other class of capital stock of the Company ranking junior to the Series A Convertible Preferred Stock, to be paid an amount (the "Series A Liquidation Amount") equal to greater of (i) twice the Liquidation Preference per share (appropriately adjusted to reflect the occurrence of any stock split, stock dividend, stock combination, stock subdivision or like occurrences) or (ii) the aggregate pro rata liquidating distribution per share payable to holders of Series A Convertible Preferred Stock on an as-converted basis. Written notice of such liquidation, dissolution or winding up, stating a payment date, the Series A Liquidation Amount and the place where said sums shall be payable shall be given by mail, postage prepaid, not less than 30 or more than 60 days prior to the payment date stated therein, to the holders of record of the Series A Convertible Preferred Stock, such notice to be addressed to each shareholder at his post office address as shown by the records of the Company. (b) Any Acquisition or Asset Transfer may be regarded as a liquidation, dissolution or winding up of the Company for purposes of this Section 3 upon the election of the holders of at least a majority of the outstanding shares of Series A Convertible Preferred Stock (voting together as a single class). The Company will not enter into any transaction which provides for an Acquisition Asset Transfer without providing for the ability of the holders of the Series A Convertible Preferred Stock upon the affirmative vote of a majority as described in the preceding sentence) to receive consideration in connection with such transaction in an amount not less than the amount they would have received had the consideration payable by any third party in connection with such transaction been paid to the Company, which then completed a liquidation in accordance with this Section 3 (provided that for the purpose of calculating the pro forma Series A Liquidation Amount for purposes of such deemed liquidation, the word "twice" set forth in the preceding paragraph concerning the calculation fo the Series A Liquidation Amount shall be deemed to be replaced with the words "one and a half times"). Nothing in this Section 3 shall be construed to prevent the holders of the Series A Convertible Preferred Stock ,in lieu of any other rights described in this paragraph, from exercising their Conversion Rights at any time up to or simultaneous with any Acquisition or Asset Transfer. 4. Conversion. The shares of Series A Convertible Preferred Stock shall be (i) subject to the following conversion terms and (ii) the holders of the Series A Convertible Preferred Stock shall have the right to convert their 4 shares of Series A Convertible Preferred Stock into shares of Common Stock as follows (the "Conversion Rights"): 4A. Right to Convert. Each Share of Series A Convertible Preferred Stock is convertible, without the payment of any additional consideration by the holder thereof, at any time at the option of the holder of such shares into the number of fully paid non-assessable shares of Common Stock equal to the quotient obtained by dividing (i) the product of the number of shares of Series A Convertible Preferred Stock being converted multiplied by $15.00, (ii) by the then current Conversion Price (the "Applicable Conversion Ratio"). The initial "Conversion Price" shall be $1.50. The Conversion Price is subject to further adjustment pursuant to the anti-dilution provisions described in Section 4D, E, F, G and H below. 4B. Automatic Conversion. Each share of outstanding Series A Convertible Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Applicable Conversion Ratio, if, at any time following the Issuance Date and provided the Common Stock issuable upon conversion of the Preferred Stock is covered by a then current registration statement of the Company which has been declared effective by the Securities and Exchange Commission, (i) a closing takes place of a Public Offering (as defined below) at a price equal to or in excess of three times the Conversion Price. "Public Offering" shall mean a public offering of Common Stock subject to a firm commitment underwriting (an "Underwriting"), pursuant to an effective registration statement (other than a registration statement on Form S-4 or S-8) under the Securities Act of 1933, as amended (the "Act"), which registration statement and Underwriting cover the offer and the sale of Common Stock to the public for the account of the Company resulting in gross cash proceeds to the Company as seller of not less than $15,000,000, before deducting any underwriting commissions and other compensation, or (ii) the price of the Common Stock for any 30 consecutive trading days equals or exceeds three times the Conversion Price and the average daily trading volume for the Company's Common Stock for the 30 consecutive trading days exceeds 100,000 shares. 4C. Mechanics of Conversion. No fractional shares of Common Stock shall be issued upon conversion of the Series A Convertible Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash for any fractional share. Except in the case of a conversion pursuant to Section 4B hereof, before any holder of Series A Convertible Preferred Stock may convert the same into shares of Common Stock, each holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the principal office of the Company or of any transfer agent for the Series A Convertible Preferred Stock, and shall give written notice to the Company at such office that such holder elects to convert the same. On the date of a conversion pursuant to Section 4B, any party entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of all such shares of Common Stock on such date, whether or not such holder has surrendered the certificate or certificates for such holder's shares of Series A Convertible Preferred Stock. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Convertible Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which it or he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Except in the case of a conversion pursuant to Section 4(b), such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Convertible Preferred Stock to be converted, the then holders of record of Series A Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. 5 4D. Adjustment for Stock Splits and Combinations. If the Company, at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof, effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Series A Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Issuance Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Series A Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before the effective date of the combination shall be proportionately increased. Any adjustment in the Applicable Conversion Ratio under this Section 4(d) shall become effective at the close of business on the date the subdivision or combination becomes effective. 4E. Adjustment for Common Stock Dividends and Distributions. If the Company at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof makes, or fixes a record date for, determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock, in each such event, the Applicable Conversion Ratio then in effect shall be decreased as of the effective date of the issuance of such additional shares of Common Stock, or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Applicable Conversion Ratio then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or, the close of business on such record date as the case may be, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Applicable Conversion Ratio shall be recomputed accordingly as of the close of business on such record date and thereafter the Applicable Conversion Ratio shall be adjusted pursuant to this Section 4(e) to reflect the actual payment of such dividend or distribution. 4F. Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof, the Common Stock issuable upon the conversion of the Series A Convertible Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Company, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer (as defined in sub-section (j) below) or a subdivision or combination of shares or stock dividend or a corporate reorganization, merger or consolidation provided for elsewhere in this Section 4, in any such event each holder of any shares of Series A Convertible Preferred Stock then outstanding shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and/or property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares 6 of Common Stock into which such shares of Series A Convertible Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. 4G. Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof, there is a capital reorganization of the Common Stock other than (i) an Acquisition or Asset Transfer (as defined in section 4(j) below), or (ii) a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4 (each such transaction described in the foregoing clauses (i) and (ii), a "Reorganization Transaction") as a part of such Reorganization Transaction, provision shall be made so that the holders of the Series A Convertible Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A Convertible Preferred Stock the number of shares of stock or other securities or property of which they would be entitled to receive had they converted their shares of Series A Convertible Preferred Stock into shares of Common Stock on the date of (A) the first day immediately prior to the effective date of such Reorganization Transaction or (B) the record date for such Reorganization Transaction, whichever is applicable to the Reorganization Transaction. In any such case, all adjustments that otherwise would have been required to be made in the Applicable Conversion Ratio and the number of shares of Common Stock that the holders of Series A Convertible Preferred Stock are entitled to receive upon conversion of the Series A Convertible Preferred Stock pursuant to this Section 4 on or prior to such date shall be made prior to calculating the amount or number of securities and/or property receivable by such holders in connection with such Reorganization Transaction. 4H. Sale of Shares At Price Below The Initial Conversion Price. If at any time or from time to time, subsequent to the Issuance Date and prior to the closing of the Public Offering referenced in this Section 4, the Company issues or sells, or is deemed to have issued or sold shares of its capital stock for consideration of a price of less than $1.50 per share, the Conversion Price shall be adjusted to be such lower price at which the Company issued or sold shares of its capital stock. For purposes of this Section 4H. sales or issuances of capital stock by the Company shall not include Excluded Stock or stock dividends, stock splits or reclassifications. 4I. Certificate of Adjustment. In each case of an adjustment or readjustment of the Applicable Conversion Ratio and the number of shares of Common Stock or other securities thus issuable upon conversion of the Series A Convertible Preferred Stock, if the Series A Convertible Preferred Stock is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A Convertible Preferred Stock at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. 4J. Certain Definitions. "Acquisition" shall mean any transaction or series of related transactions to which the Corporation is a party in which in excess of fifty percent (50%) of the Company's voting power is 7 transferred. "Asset Transfer" shall mean a sale, lease or other disposition of all or substantially all of the assets of the Company. 5. Voting Rights 5A. Number of Votes. Except as otherwise required by law, the holders of Series A Convertible Preferred Stock and the holders of the Common Stock shall be entitled to notice of any stockholders' meeting and to vote any matter submitted to a stockholder vote, as a single class on the following basis: (a) Each share of Common Stock issued and outstanding shall have one vote per share; and (b) Each share of Series A Convertible Preferred Stock issued and outstanding shall have 10 votes per share. 5B. Voting As a Class. Each share of Series A Convertible Preferred Stock issued and outstanding shall also be entitled to one vote on all matters as to which holders of Series A Convertible Preferred Stock are required to vote as a separate class pursuant to the New York Business Corporation Law, and the holders of a majority of the Series A Convertible Preferred Stock entitled to vote shall bind the entire class of Series A Convertible Preferred Stock. 5C. Notices. The Company shall give the holders of the Series A Convertible Preferred Stock the same prior notice as given to holders of Common Stock according to the By- laws of the Company of any matter to be submitted to such holders for a vote. 6. Principal Office; Notices The address of the principal office of the Company is located at 4002 Eisenhower Boulevard, Tampa, Florida 33634. Any notice or certificate required by the Certificate of Incorporation of the Company, as amended, or this Certificate of Designations to be delivered to any holder of Series A Convertible Preferred Stock shall be deemed given when personally delivered to such holder or upon deposit in the United States Mail, certified mail, return receipt requested and addressed to such holder at his or its address appearing on the books of the Company. 7. Cancellation of Series A Convertible Preferred Stock In the event any shares of Series A Convertible Preferred Stock shall be converted, liquidated or redeemed, the shares so converted, liquidated or redeemed shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Company as Series A Convertible Preferred Stock. 8. Reservation of Shares Commencing on the Issuance Date, the Company shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Convertible Preferred Stock into shares of Common Stock, the full number of shares of Common Stock deliverable upon conversion of all of the shares of Series A Convertible Preferred Stock from time to time outstanding, taking into account all adjustments required herein in the 8 Applicable Conversion Ratio. If at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversation of all of the then outstanding shares of Series A Convertible Preferred Stock pursuant to this Certificate of Designations, the Company shall take such corporate action as may, in the opinion of counsel to the Company, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 9. Amendments and Other Actions As long as any shares of Series A Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent) of the holders of all of the then outstanding shares of Series A Convertible Preferred Stock, voting as a separate class: in any manner alter or change the rights, preferences or privileges of the Series A Convertible Preferred Stock so as to affect adversely the Series A Convertible Preferred Stock; or in any manner create any new class or series of capital stock senior to the Series A Convertible Preferred Stock with respect to the right to receive dividends, or distributions upon liquidation, winding up or dissolution of the Company. Notwithstanding the foregoing, when authorized by resolutions of the Board of Directors, the Company may amend or supplement this Certificate without the consent of any holder of Series A Convertible Preferred Stock to cure any ambiguity, defect or inconsistency herein or make any other change herein, provided that each such amendments or supplements shall not adversely affect the interests of the holders thereof. 10. Registration and Transfer The Company shall maintain at its principal executive offices (or at the offices of its transfer agent or such other office or agency of the Company as it may designate by notice to the holders of the Series A Convertible Preferred Stock) a stock register for the Series A Convertible Preferred Stock in which the Company shall record the names and addresses of person in whose name the shares of Series A Convertible Preferred Stock are issued, as well as the name and address of each permitted transferee thereof. Prior to due presentment for registration of any transferee of any Series A Convertible Preferred Stock, the Company may deem and treat the person in whose name any Series A Convertible Preferred Stock is registered as the absolute owner of such Series A Convertible Preferred Stock and the Company shall not be affected by notice to the contrary. All transfers of Series A Convertible Preferred Stock must be made pursuant to the applicable rules and regulations of federal and state securities laws. No service charge shall be made to a holder of Series A Convertible Preferred Stock for any registration, transfer or exchange. 9 The Series B Convertible Preferred Stock shall have the following powers, designations, preferences and other special rights: 1. Certain Definitions. "Average Price" means, with respect to any shares of stock or securities, including the Common Stock (as defined below), on any date of determination, the average for the thirty (30) consecutive Trading Days (as defined below) preceding and including such date of determination of the reported last sale prices per share on the principal national securities exchange or inter-dealer quotation system on which such stock or security is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange or inter-dealer quotation system or if last sale prices are not available, the average for the thirty (30) consecutive Trading Days preceding and including the date of determination of the average of the closing bid and asked prices per share or security in the over-the-counter market as published by the National Quotation Service or the OTC Bulletin Board or, if no such quotations are published or furnished, by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. "Common Stock" means the common stock, $.0033 par value, of the Company, including the stock into which the Series B Convertible Preferred Stock is convertible, and any capital stock of any class of the Company thereafter authorized that shall not be limited to a fixed sum in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company. "Current Market Price" shall mean, with respect to any shares of capital stock or other securities, (i) if such stock or securities are listed or admitted to trading on a national securities exchange or an inter-dealer quotation system or traded in the over-the-counter market, the price per share or security, as the case may be, at the close of trading on the Trading Day on which the relevant determination is to be made or, if such day is not a Trading Day, the Trading Day immediately preceding such day and (ii) if such stock or security is not so listed, admitted or traded, the fair market value of such stock or security as determined by the Managing Directors of the Company or, if such parties cannot agree, as determined by an Independent Appraiser (as defined below). "Excluded Stock" means (a) the Series B Convertible Preferred Stock; (b) any Common Stock issued or to be issued (i) pursuant to the conversion of the Series B Convertible Preferred Stock (ii) pursuant to the exercise of any stock options or warrants currently outstanding or options or warrants issued after the date hereof having an exercise price equal to or greater than the Current Market Price, or (iii) except as otherwise provided herein, upon the actual issue of Common Stock or securities convertible into Common Stock at the time of exercise of any rights, options or warrants to purchase Common Stock or any securities convertible into Common Stock, as appropriate, or upon conversion or exchange of securities convertible into Common Stock; and (c) in addition to (a) and (b) hereof, an aggregate of 4,000,000 shares of Common Stock to be issued on or after January 1, 2003 at less than the Conversion Price either directly or on the conversion of any convertible securities issued after the date hereof. "Independent Appraiser" means an investment banking firm, appraisal firm or any other financial expert of recognized national standing in the United States, selected by the holders of a majority of the Series B Convertible Preferred Stock and reasonably acceptable to the Company, that does not (or whose directors, officers, employees, affiliates or stockholders do not) have a direct or indirect material financial interest 10 in the Company or a 5% or greater holder of Series B Convertible Preferred Stock, who has not been, and, at the time called upon to give independent financial advice to the Company or a holder of Series B Convertible Preferred Stock, is not (and none of its directors, officers, affiliates or stockholders are) a promoter, director or officer of the Company. "Trading Day" means (i) if the relevant stock or security is listed or admitted for trading on the New York Stock Exchange or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq National or SmallCap Markets or any other system of automated dissemination of quotation of securities prices, a day on which the relevant stock or security is traded in a regular way in the over- the-counter market and for which a closing bid and a closing asked price for such stock or security are available. 2. Dividends. 2A. The holders of the Series B Convertible Preferred Stock shall be entitled to receive dividends, which shall begin to accrue on and be cumulative from the date of issuance ("Issuance Date") of the Series B Convertible Preferred Stock (whether or not such dividends have been declared and whether or not there shall be net profits or net assets of the Company legally available for the payment of such dividends) in an annual amount equal to the issue price of such Series B Convertible Preferred Stock plus any accrued but unpaid dividends (the "Liquidation Preference") times eight percent (8%) through January 31, 2005 and thereafter times twelve (12%) (the "Dividend Amount"). The Dividend Amount shall be payable on February 1 of each year commencing 2004 (the "Dividend Payment Dates") either in cash or in kind by issuance by the Company of additional shares of Series B Convertible Preferred Stock (the "PIK Shares") at the option of the Company. In the event that the applicable Dividend Amount is not paid in cash within thirty (30) days of the relevant Dividend Payment Date, the Company shall be deemed for all purposes to have elected to pay the relevant Dividend Amount in PIK Shares. If the Company elects or is deemed to have elected to pay any Dividend Amount in PIK Shares, each holder of Series B Convertible Preferred Stock shall be deemed to be the holder of record of such holder's pro rata share of the PIK Shares issuable with respect to the relevant Dividend Amount notwithstanding that the stock transfer books of the Company shall then be closed or that certificates evidencing such PIK Shares shall not have been actually delivered to such holder of Series B Convertible Preferred Stock. In the event that dividends on the Series B Convertible Preferred Stock are paid with PIK Shares, each such PIK Share (i) shall be valued at the then applicable Liquidation Preference per share and (ii) shall have the same Liquidation Preference as each share of Series B Convertible Preferred Stock with respect to which the PIK Share constituted a dividend. No dividends shall be paid on any Common Stock of the Company or any capital stock of the Company that ranks junior to or on parity with the Series B Convertible Preferred Stock during any fiscal year of the Company until dividends in the aggregate Dividend Amount per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series B Convertible Preferred Stock for the current and each prior Dividend Payment Date shall have been paid or declared and set apart for payment to the Series B Convertible Preferred Stock holders. 11 2B. The amount of dividends payable for any period shorter than a full year shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Series B Convertible Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by- share basis among all such shares at the time outstanding. 2C. So long as any shares of the Series B Convertible Preferred Stock are outstanding, no dividends shall be declared or paid or set apart for payment on any other preferred stock of the Company of any series ranking, as to dividends, junior to or on a parity with the Series B Convertible Preferred Stock, unless a dividend shall be paid at the same time to each holder of Series B Convertible Preferred Stock, in an amount such that the holders of such other series of preferred stock, on the one hand, and the holders of Series B Convertible Preferred Stock, on the other, receive dividends in the same relative proportions that each would have received had all such shares of preferred stock been converted into Common Stock immediately prior to the declaration of a dividend on such preferred stock. 3. Liquidation. (a) Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the shares of Series B Convertible Preferred Stock shall be entitled, before any distributions shall be made to the holders of the Common Stock, or any other class of capital stock of the Company ranking junior to the Series B Convertible Preferred Stock, to be paid an amount (the "Series B Liquidation Amount") equal to greater of (i) twice the Liquidation Preference per share (appropriately adjusted to reflect the occurrence of any stock split, stock dividend, stock combination, stock subdivision or like occurrences) or (ii) the aggregate pro rata liquidating distribution per share payable to holders of Series B Convertible Preferred Stock on an as-converted basis. Written notice of such liquidation, dissolution or winding up, stating a payment date, the Series B Liquidation Amount and the place where said sums shall be payable shall be given by mail, postage prepaid, not less than 30 or more than 60 days prior to the payment date stated therein, to the holders of record of the Series B Convertible Preferred Stock, such notice to be addressed to each shareholder at his post office address as shown by the records of the Company. (b) Any Acquisition or Asset Transfer may be regarded as a liquidation, dissolution or winding up of the Company for purposes of this Section 3 upon the election of the holders of at least a majority of the outstanding shares of Series B Convertible Preferred Stock (voting together as a single class). The Company will not enter into any transaction which provides for an Acquisition Asset Transfer without providing for the ability of the holders of the Series B Convertible Preferred Stock upon the affirmative vote of a majority as described in the preceding sentence) to receive consideration in connection with such transaction in an amount not less than the amount they would have received had the consideration payable by any third party in connection with such transaction been paid to the Company, which then completed a liquidation in accordance with this Section 3 (provided that for the purpose of calculating the pro forma Series B Liquidation Amount for purposes of such deemed liquidation, the word "twice" set forth in the preceding paragraph concerning the calculation fo the Series B Liquidation Amount shall be deemed to be replaced with the words "one and a half times"). Nothing in this Section 3 shall be construed to prevent the holders of the Series B Convertible Preferred Stock ,in lieu of any other rights described in this paragraph, from exercising their Conversion Rights at any time up to or simultaneous with any Acquisition or Asset Transfer. 12 (c) Holders of Series B Convertible Preferred Stock shall rank pari passu to the holders of Series A Convertible Preferred Stock under this paragraph 3. 4. Conversion. The shares of Series B Convertible Preferred Stock shall be (i) subject to the following conversion terms and (ii) the holders of the Series B Convertible Preferred Stock shall have the right to convert their shares of Series B Convertible Preferred Stock into shares of Common Stock as follows (the "Conversion Rights"): 4A. Right to Convert. Each Share of Series B Convertible Preferred Stock is convertible, without the payment of any additional consideration by the holder thereof, at any time at the option of the holder of such shares into the number of fully paid non-assessable shares of Common Stock equal to the quotient obtained by dividing (i) the product of the number of shares of Series B Convertible Preferred Stock being converted multiplied by $16.00, (ii) by the then current Conversion Price (the "Applicable Conversion Ratio"). The initial "Conversion Price" shall be $.80. The Conversion Price is subject to further adjustment pursuant to the anti-dilution provisions described in Section 4D, E, F, G and H below. 4B. Automatic Conversion. Each share of outstanding Series B Convertible Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Applicable Conversion Ratio, if, at any time following the Issuance Date and provided the Common Stock issuable upon conversion of the Preferred Stock is covered by a then current registration statement of the Company which has been declared effective by the Securities and Exchange Commission, (i) a closing takes place of a Public Offering (as defined below) at a price equal to or in excess of three times the Conversion Price. "Public Offering" shall mean a public offering of Common Stock subject to a firm commitment underwriting (an "Underwriting"), pursuant to an effective registration statement (other than a registration statement on Form S-4 or S-8) under the Securities Act of 1933, as amended (the "Act"), which registration statement and Underwriting cover the offer and the sale of Common Stock to the public for the account of the Company resulting in gross cash proceeds to the Company as seller of not less than $15,000,000, before deducting any underwriting commissions and other compensation, or (ii) the price of the Common Stock for any 30 consecutive trading days equals or exceeds three times the Conversion Price and the average daily trading volume for the Company's Common Stock for the 30 consecutive trading days exceeds 100,000 shares. 4C. Mechanics of Conversion. No fractional shares of Common Stock shall be issued upon conversion of the Series B Convertible Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash for any fractional share. Except in the case of a conversion pursuant to Section 4B hereof, before any holder of Series B Convertible Preferred Stock may convert the same into shares of Common Stock, each holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the principal office of the Company or of any transfer agent for the Series B Convertible Preferred Stock, and shall give written notice to the Company at such office that such holder elects to convert the same. On the date of a conversion pursuant to Section 4B, any party entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of all such shares of Common Stock on such date, whether 13 or not such holder has surrendered the certificate or certificates for such holder's shares of Series B Convertible Preferred Stock. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series B Convertible Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which it or he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Except in the case of a conversion pursuant to Section 4(b), such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Convertible Preferred Stock to be converted, the then holders of record of Series B Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. 4D. Adjustment for Stock Splits and Combinations. If the Company, at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series B Convertible Preferred Stock pursuant to Section 4(B) hereof, effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Series B Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Issuance Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Series B Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before the effective date of the combination shall be proportionately increased. Any adjustment in the Applicable Conversion Ratio under this Section 4(d) shall become effective at the close of business on the date the subdivision or combination becomes effective. 4E. Adjustment for Common Stock Dividends and Distributions. If the Company at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series B Convertible Preferred Stock pursuant to Section 4(B) hereof makes, or fixes a record date for, determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock, in each such event, the Applicable Conversion Ratio then in effect shall be decreased as of the effective date of the issuance of such additional shares of Common Stock, or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Applicable Conversion Ratio then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or, the close of business on such record date as the case may be, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Applicable Conversion Ratio shall be recomputed accordingly as of the close of business on such record date and thereafter the Applicable Conversion Ratio shall be adjusted pursuant to this Section 4(e) to reflect the actual payment of such dividend or distribution. 4F. Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series B Convertible Preferred Stock pursuant to Section 4(B) hereof, the Common Stock issuable upon the conversion of the Series B Convertible Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Company, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer (as defined in sub-section (j) below) or a subdivision or combination of shares or stock dividend or a corporate reorganization, merger or consolidation provided for elsewhere in this Section 4, in any such event each holder of any shares of Series B Convertible Preferred Stock then outstanding shall have the right 14 thereafter to convert such stock into the kind and amount of stock and other securities and/or property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series B Convertible Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. 4G. Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series B Convertible Preferred Stock pursuant to Section 4(B) hereof, there is a capital reorganization of the Common Stock other than (i) an Acquisition or Asset Transfer (as defined in section 4(j) below), or (ii) a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4 (each such transaction described in the foregoing clauses (i) and (ii), a "Reorganization Transaction") as a part of such Reorganization Transaction, provision shall be made so that the holders of the Series B Convertible Preferred Stock shall thereafter be entitled to receive upon conversion of the Series B Convertible Preferred Stock the number of shares of stock or other securities or property of which they would be entitled to receive had they converted their shares of Series B Convertible Preferred Stock into shares of Common Stock on the date of (A) the first day immediately prior to the effective date of such Reorganization Transaction or (B) the record date for such Reorganization Transaction, whichever is applicable to the Reorganization Transaction. In any such case, all adjustments that otherwise would have been required to be made in the Applicable Conversion Ratio and the number of shares of Common Stock that the holders of Series B Convertible Preferred Stock are entitled to receive upon conversion of the Series B Convertible Preferred Stock pursuant to this Section 4 on or prior to such date shall be made prior to calculating the amount or number of securities and/or property receivable by such holders in connection with such Reorganization Transaction. 4H. Sale of Shares At Price Below The Initial Conversion Price. If at any time or from time to time, subsequent to the Issuance Date and prior to the closing of the Public Offering referenced in this Section 4, the Company issues or sells, or is deemed to have issued or sold shares of its capital stock for consideration of a price of less than $.80 per share, the Conversion Price shall be adjusted to be such lower price at which the Company issued or sold shares of its capital stock. For purposes of this Section 4H. sales or issuances of capital stock by the Company shall not include Excluded Stock or stock dividends, stock splits or reclassifications. 4I. Certificate of Adjustment. In each case of an adjustment or readjustment of the Applicable Conversion Ratio and the number of shares of Common Stock or other securities thus issuable upon conversion of the Series B Convertible Preferred Stock, if the Series B Convertible Preferred Stock is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series B Convertible Preferred Stock at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. 4J. Certain Definitions. "Acquisition" shall mean any transaction or series of related transactions to which the Corporation is a party in which in excess of fifty percent (50%) of the Company's voting power is 15 transferred. "Asset Transfer" shall mean a sale, lease or other disposition of all or substantially all of the assets of the Company. 5. Voting Rights 5A. Number of Votes. Except as otherwise required by law, the holders of Series B Convertible Preferred Stock and the holders of the Common Stock shall be entitled to notice of any stockholders' meeting and to vote any matter submitted to a stockholder vote, as a single class on the following basis: (a) Each share of Common Stock issued and outstanding shall have one vote per share; and (b) Each share of Series B Convertible Preferred Stock issued and outstanding shall have 10 votes per share. 5B. Voting As a Class. Each share of Series B Convertible Preferred Stock issued and outstanding shall also be entitled to one vote on all matters as to which holders of Series B Convertible Preferred Stock are required to vote as a separate class pursuant to the New York Business Corporation Law, and the holders of a majority of the Series B Convertible Preferred Stock entitled to vote shall bind the entire class of Series B Convertible Preferred Stock. 5C. Notices. The Company shall give the holders of the Series B Convertible Preferred Stock the same prior notice as given to holders of Common Stock according to the By- laws of the Company of any matter to be submitted to such holders for a vote. 6. Principal Office; Notices The address of the principal office of the Company is located at 4002 Eisenhower Boulevard, Tampa, Florida 33634. Any notice or certificate required by the Certificate of Incorporation of the Company, as amended, or this Certificate of Designations to be delivered to any holder of Series B Convertible Preferred Stock shall be deemed given when personally delivered to such holder or upon deposit in the United States Mail, certified mail, return receipt requested and addressed to such holder at his or its address appearing on the books of the Company. 7. Cancellation of Series B Convertible Preferred Stock In the event any shares of Series B Convertible Preferred Stock shall be converted, liquidated or redeemed, the shares so converted, liquidated or redeemed shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Company as Series B Convertible Preferred Stock. 8. Reservation of Shares Commencing on the Issuance Date, the Company shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series B Convertible Preferred Stock into shares of Common Stock, the full number of shares of Common Stock deliverable upon conversion of all of the shares of Series B Convertible Preferred Stock from time to time 16 outstanding, taking into account all adjustments required herein in the Applicable Conversion Ratio. If at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversation of all of the then outstanding shares of Series B Convertible Preferred Stock pursuant to this Certificate of Designations, the Company shall take such corporate action as may, in the opinion of counsel to the Company, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 9. Amendments and Other Actions As long as any shares of Series B Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent) of the holders of all of the then outstanding shares of Series B Convertible Preferred Stock, voting as a separate class: in any manner alter or change the rights, preferences or privileges of the Series B Convertible Preferred Stock so as to affect adversely the Series B Convertible Preferred Stock; or in any manner create any new class or series of capital stock senior to the Series B Convertible Preferred Stock with respect to the right to receive dividends, or distributions upon liquidation, winding up or dissolution of the Company. Notwithstanding the foregoing, when authorized by resolutions of the Board of Directors, the Company may amend or supplement this Certificate without the consent of any holder of Series B Convertible Preferred Stock to cure any ambiguity, defect or inconsistency herein or make any other change herein, provided that each such amendments or supplements shall not adversely affect the interests of the holders thereof. 10. Registration and Transfer The Company shall maintain at its principal executive offices (or at the offices of its transfer agent or such other office or agency of the Company as it may designate by notice to the holders of the Series B Convertible Preferred Stock) a stock register for the Series B Convertible Preferred Stock in which the Company shall record the names and addresses of person in whose name the shares of Series B Convertible Preferred Stock are issued, as well as the name and address of each permitted transferee thereof. Prior to due presentment for registration of any transferee of any Series B Convertible Preferred Stock, the Company may deem and treat the person in whose name any Series B Convertible Preferred Stock is registered as the absolute owner of such Series B Convertible Preferred Stock and the Company shall not be affected by notice to the contrary. All transfers of Series B Convertible Preferred Stock must be made pursuant to the applicable rules and regulations of federal and state securities laws. No service charge shall be made to a holder of Series B Convertible Preferred Stock for any registration, transfer or exchange. 17 4. The amendment was authorized by a vote at a meeting of the Board of Directors of the corporation. /s/ Walter M. Groteke ------------------------------------ Walter M. Groteke Chairman of the Board /s/ Peter C. Castle ------------------------------------ Peter C. Castle Vice President-Finance 18 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION Under Section 805 of the Business Corporation Law Beckman, Lieberman & Barandes, LLP 100 Jericho Quadrangle Suite 225 Jericho, New York 11753 19 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION --------------------- Under Section 805 of the Business Corporation Law WE, THE UNDERSIGNED, WALTER M. GROTEKE and PETER C. CASTLE, being respectively the Chairman of the Board and Vice President-Finance of NETWOLVES CORPORATION hereby certify: 1. The name of the corporation is: NETWOLVES CORPORATION. 2. The certificate of incorporation of said corporation was filed by the Department of State on January 5, 1970 under the original name of Watchdog Patrols, Inc. 3. (a) The certificate of incorporation is amended to: (i) authorize series of the Company's authorized preferred stock, par value $.0033 per share (the "Preferred Stock"), and (ii) provide for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions of each series of Preferred Stock. (b) To effect the foregoing, Article FOURTH of the Certificate of Incorporation relating to the authorized shares of the corporation, is amended to read as follows: "FOURTH: The total number of shares of all classes of stock which the corporation shall have the authority to issue is FIFTY TWO MILLION (52,000,000) shares, of which FIFTY MILLION (50,000,000) shares shall be shares of common stock of the par value of $.0033 per share and TWO MILLION (2,000,000) shares shall be shares of Preferred Stock of the par value of $.0033 per share. The Preferred Stock may be issued in series and the number, designation, relative rights, preferences and limitations of shares of each series of Preferred Stock $.0033 per share par value shall be fixed by the Board of Directors. Of the 2,000,000 shares of Preferred Stock, 1,000,000 shares shall be designated as Series A Convertible Preferred Stock, par value $.0033 per share, 500,000 shares shall be designated as Series B Convertible Preferred Stock, par value $.0033 per share, and 100,000 shares shall be designated as Series C Convertible Preferred Stock, par value $.0033 per share. The Series A Convertible Preferred Stock shall have the following powers, designations, preferences and other special rights: 1. Certain Definitions. "Average Price" means, with respect to any shares of stock or securities, including the Common Stock (as defined below), on any date of determination, the average for the thirty (30) consecutive Trading Days (as defined below) preceding and including such date of determination of the reported last sale prices per share on the principal national securities exchange or inter-dealer quotation system on which such stock or security is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange or inter-dealer quotation system or if last sale prices are not available, the average for the thirty (30) consecutive Trading Days preceding and including the date of determination of the average of the closing bid and asked prices per share or security in the over-the-counter market as published by the National Quotation Service or the OTC Bulletin Board or, if no such quotations are published or furnished, by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. "Common Stock" means the common stock, $.0033 par value, of the Company, including the stock into which the Series A Convertible Preferred Stock is convertible, and any capital stock of any class of the Company thereafter authorized that shall not be limited to a fixed sum in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company. "Current Market Price" shall mean, with respect to any shares of capital stock or other securities, (i) if such stock or securities are listed or admitted to trading on a national securities exchange or an inter-dealer quotation system or traded in the over-the-counter market, the price per share or security, as the case may be, at the close of trading on the Trading Day on which the relevant determination is to be made or, if such day is not a Trading Day, the Trading Day immediately preceding such day and (ii) if such stock or security is not so listed, admitted or traded, the fair market value of such stock or security as determined by the Managing Directors of the Company or, if such parties cannot agree, as determined by an Independent Appraiser (as defined below). "Excluded Stock" means (a) the Series A Convertible Preferred Stock; (b) any Common Stock issued or to be issued (i) pursuant to the conversion of the Series A Convertible Preferred Stock (ii) pursuant to the exercise of any stock options or warrants currently outstanding or options or warrants issued after the date hereof having an exercise price equal to or greater than the Current Market Price, or (iii) except as otherwise provided herein, upon the actual issue of Common Stock or securities convertible into Common Stock at the time of exercise of any rights, options or warrants to purchase Common Stock or any securities convertible into Common Stock, as appropriate, or upon conversion or exchange of securities convertible into Common Stock; and (c) in addition to (a) and (b) hereof, an aggregate of 4,000,000 shares of Common Stock to be issued on or after January 1, 2003 at less than the Conversion Price either directly or on the conversion of any convertible securities issued after the date hereof. "Independent Appraiser" means an investment banking firm, appraisal firm or any other financial expert of recognized national standing in the United States, selected by the holders of a majority of the Series A Convertible Preferred Stock and reasonably acceptable to the Company, that does not (or whose directors, officers, employees, affiliates or stockholders do not) have a direct or indirect material financial interest in the Company or a 5% or greater holder of Series A Convertible Preferred Stock, who has not been, and, at the time called upon to give independent financial advice to the Company or a holder of Series A Convertible Preferred Stock, is not (and none of its directors, officers, affiliates or stockholders are) a promoter, director or officer of the Company. 2 "Trading Day" means (i) if the relevant stock or security is listed or admitted for trading on the New York Stock Exchange or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq National or SmallCap Markets or any other system of automated dissemination of quotation of securities prices, a day on which the relevant stock or security is traded in a regular way in the over- the-counter market and for which a closing bid and a closing asked price for such stock or security are available. 2. Dividends. 2A. The holders of the Series A Convertible Preferred Stock shall be entitled to receive dividends, which shall begin to accrue on and be cumulative from the date of issuance ("Issuance Date") of the Series A Convertible Preferred Stock (whether or not such dividends have been declared and whether or not there shall be net profits or net assets of the Company legally available for the payment of such dividends) in an annual amount equal to the issue price of such Series A Convertible Preferred Stock plus any accrued but unpaid dividends (the "Liquidation Preference") times eight percent (8%) through June 30, 2004 and thereafter times twelve (12%) (the "Dividend Amount"). The Dividend Amount shall be payable on July 1 of each year (the "Dividend Payment Dates") either in cash or in kind by issuance by the Company of additional shares of Series A Convertible Preferred Stock (the "PIK Shares") at the option of the Company. In the event that the applicable Dividend Amount is not paid in cash within thirty (30) days of the relevant Dividend Payment Date, the Company shall be deemed for all purposes to have elected to pay the relevant Dividend Amount in PIK Shares. If the Company elects or is deemed to have elected to pay any Dividend Amount in PIK Shares, each holder of Series A Convertible Preferred Stock shall be deemed to be the holder of record of such holder's pro rata share of the PIK Shares issuable with respect to the relevant Dividend Amount notwithstanding that the stock transfer books of the Company shall then be closed or that certificates evidencing such PIK Shares shall not have been actually delivered to such holder of Series A Convertible Preferred Stock. In the event that dividends on the Series A Convertible Preferred Stock are paid with PIK Shares, each such PIK Share (i) shall be valued at the then applicable Liquidation Preference per share and (ii) shall have the same Liquidation Preference as each share of Series A Convertible Preferred Stock with respect to which the PIK Share constituted a dividend. No dividends shall be paid on any Common Stock of the Company or any capital stock of the Company that ranks junior to or on parity with the Series A Convertible Preferred Stock during any fiscal year of the Company until dividends in the aggregate Dividend Amount per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series A Convertible Preferred Stock for the current and each prior Dividend Payment Date shall have been paid or declared and set apart for payment to the Series A Convertible Preferred Stock holders. 2B. The amount of dividends payable for any period shorter than a full year shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Series A Convertible Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by- share basis among all such shares at the time outstanding. 3 2C. So long as any shares of the Series A Convertible Preferred Stock are outstanding, no dividends shall be declared or paid or set apart for payment on any other preferred stock of the Company of any series ranking, as to dividends, junior to or on a parity with the Series A Convertible Preferred Stock, unless a dividend shall be paid at the same time to each holder of Series A Convertible Preferred Stock, in an amount such that the holders of such other series of preferred stock, on the one hand, and the holders of Series A Convertible Preferred Stock, on the other, receive dividends in the same relative proportions that each would have received had all such shares of preferred stock been converted into Common Stock immediately prior to the declaration of a dividend on such preferred stock. 3. Liquidation. (a) Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the shares of Series A Convertible Preferred Stock shall be entitled, before any distributions shall be made to the holders of the Common Stock, or any other class of capital stock of the Company ranking junior to the Series A Convertible Preferred Stock, to be paid an amount (the "Series A Liquidation Amount") equal to greater of (i) twice the Liquidation Preference per share (appropriately adjusted to reflect the occurrence of any stock split, stock dividend, stock combination, stock subdivision or like occurrences) or (ii) the aggregate pro rata liquidating distribution per share payable to holders of Series A Convertible Preferred Stock on an as-converted basis. Written notice of such liquidation, dissolution or winding up, stating a payment date, the Series A Liquidation Amount and the place where said sums shall be payable shall be given by mail, postage prepaid, not less than 30 or more than 60 days prior to the payment date stated therein, to the holders of record of the Series A Convertible Preferred Stock, such notice to be addressed to each shareholder at his post office address as shown by the records of the Company. (b) Any Acquisition or Asset Transfer may be regarded as a liquidation, dissolution or winding up of the Company for purposes of this Section 3 upon the election of the holders of at least a majority of the outstanding shares of Series A Convertible Preferred Stock (voting together as a single class). The Company will not enter into any transaction which provides for an Acquisition Asset Transfer without providing for the ability of the holders of the Series A Convertible Preferred Stock upon the affirmative vote of a majority as described in the preceding sentence) to receive consideration in connection with such transaction in an amount not less than the amount they would have received had the consideration payable by any third party in connection with such transaction been paid to the Company, which then completed a liquidation in accordance with this Section 3 (provided that for the purpose of calculating the pro forma Series A Liquidation Amount for purposes of such deemed liquidation, the word "twice" set forth in the preceding paragraph concerning the calculation fo the Series A Liquidation Amount shall be deemed to be replaced with the words "one and a half times"). Nothing in this Section 3 shall be construed to prevent the holders of the Series A Convertible Preferred Stock ,in lieu of any other rights described in this paragraph, from exercising their Conversion Rights at any time up to or simultaneous with any Acquisition or Asset Transfer. 4. Conversion. The shares of Series A Convertible Preferred Stock shall be (i) subject to the following conversion terms and (ii) the holders of the 4 Series A Convertible Preferred Stock shall have the right to convert their shares of Series A Convertible Preferred Stock into shares of Common Stock as follows (the "Conversion Rights"): 4A. Right to Convert. Each Share of Series A Convertible Preferred Stock is convertible, without the payment of any additional consideration by the holder thereof, at any time at the option of the holder of such shares into the number of fully paid non-assessable shares of Common Stock equal to the quotient obtained by dividing (i) the product of the number of shares of Series A Convertible Preferred Stock being converted multiplied by $15.00, (ii) by the then current Conversion Price (the "Applicable Conversion Ratio"). The initial "Conversion Price" shall be $1.50. The Conversion Price is subject to further adjustment pursuant to the anti-dilution provisions described in Section 4D, E, F, G and H below. 4B. Automatic Conversion. Each share of outstanding Series A Convertible Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Applicable Conversion Ratio, if, at any time following the Issuance Date and provided the Common Stock issuable upon conversion of the Preferred Stock is covered by a then current registration statement of the Company which has been declared effective by the Securities and Exchange Commission, (i) a closing takes place of a Public Offering (as defined below) at a price equal to or in excess of three times the Conversion Price. "Public Offering" shall mean a public offering of Common Stock subject to a firm commitment underwriting (an "Underwriting"), pursuant to an effective registration statement (other than a registration statement on Form S-4 or S-8) under the Securities Act of 1933, as amended (the "Act"), which registration statement and Underwriting cover the offer and the sale of Common Stock to the public for the account of the Company resulting in gross cash proceeds to the Company as seller of not less than $15,000,000, before deducting any underwriting commissions and other compensation, or (ii) the price of the Common Stock for any 30 consecutive trading days equals or exceeds three times the Conversion Price and the average daily trading volume for the Company's Common Stock for the 30 consecutive trading days exceeds 100,000 shares. 4C. Mechanics of Conversion. No fractional shares of Common Stock shall be issued upon conversion of the Series A Convertible Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash for any fractional share. Except in the case of a conversion pursuant to Section 4B hereof, before any holder of Series A Convertible Preferred Stock may convert the same into shares of Common Stock, each holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the principal office of the Company or of any transfer agent for the Series A Convertible Preferred Stock, and shall give written notice to the Company at such office that such holder elects to convert the same. On the date of a conversion pursuant to Section 4B, any party entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of all such shares of Common Stock on such date, whether or not such holder has surrendered the certificate or certificates for such holder's shares of Series A Convertible Preferred Stock. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Convertible Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which it or he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Except in the case of a conversion pursuant to Section 4(b), such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A 5 Convertible Preferred Stock to be converted, the then holders of record of Series A Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. 4D. Adjustment for Stock Splits and Combinations. If the Company, at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof, effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Series A Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Issuance Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Series A Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before the effective date of the combination shall be proportionately increased. Any adjustment in the Applicable Conversion Ratio under this Section 4(d) shall become effective at the close of business on the date the subdivision or combination becomes effective. 4E. Adjustment for Common Stock Dividends and Distributions. If the Company at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof makes, or fixes a record date for, determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock, in each such event, the Applicable Conversion Ratio then in effect shall be decreased as of the effective date of the issuance of such additional shares of Common Stock, or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Applicable Conversion Ratio then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or, the close of business on such record date as the case may be, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Applicable Conversion Ratio shall be recomputed accordingly as of the close of business on such record date and thereafter the Applicable Conversion Ratio shall be adjusted pursuant to this Section 4(e) to reflect the actual payment of such dividend or distribution. 4F. Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof, the Common Stock issuable upon the conversion of the Series A Convertible Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Company, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer (as defined in sub-section (j) below) or a subdivision or combination of shares or stock dividend or a corporate reorganization, merger or consolidation provided for elsewhere in this Section 4, in any such event each holder of any shares of Series A Convertible Preferred Stock then outstanding shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and/or property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A Convertible Preferred 6 Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. 4G. Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series A Convertible Preferred Stock pursuant to Section 4(B) hereof, there is a capital reorganization of the Common Stock other than (i) an Acquisition or Asset Transfer (as defined in section 4(j) below), or (ii) a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4 (each such transaction described in the foregoing clauses (i) and (ii), a "Reorganization Transaction") as a part of such Reorganization Transaction, provision shall be made so that the holders of the Series A Convertible Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A Convertible Preferred Stock the number of shares of stock or other securities or property of which they would be entitled to receive had they converted their shares of Series A Convertible Preferred Stock into shares of Common Stock on the date of (A) the first day immediately prior to the effective date of such Reorganization Transaction or (B) the record date for such Reorganization Transaction, whichever is applicable to the Reorganization Transaction. In any such case, all adjustments that otherwise would have been required to be made in the Applicable Conversion Ratio and the number of shares of Common Stock that the holders of Series A Convertible Preferred Stock are entitled to receive upon conversion of the Series A Convertible Preferred Stock pursuant to this Section 4 on or prior to such date shall be made prior to calculating the amount or number of securities and/or property receivable by such holders in connection with such Reorganization Transaction. 4H. Sale of Shares At Price Below The Initial Conversion Price. If at any time or from time to time, subsequent to the Issuance Date and prior to the closing of the Public Offering referenced in this Section 4, the Company issues or sells, or is deemed to have issued or sold shares of its capital stock for consideration of a price of less than $1.50 per share, the Conversion Price shall be adjusted to be such lower price at which the Company issued or sold shares of its capital stock. For purposes of this Section 4H. sales or issuances of capital stock by the Company shall not include Excluded Stock or stock dividends, stock splits or reclassifications. 4I. Certificate of Adjustment. In each case of an adjustment or readjustment of the Applicable Conversion Ratio and the number of shares of Common Stock or other securities thus issuable upon conversion of the Series A Convertible Preferred Stock, if the Series A Convertible Preferred Stock is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A Convertible Preferred Stock at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. 4J. Certain Definitions. "Acquisition" shall mean any transaction or series of related transactions to which the Corporation is a party in which in excess of fifty percent (50%) of the Company's voting power is 7 transferred. "Asset Transfer" shall mean a sale, lease or other disposition of all or substantially all of the assets of the Company. 5. Voting Rights 5A. Number of Votes. Except as otherwise required by law, the holders of Series A Convertible Preferred Stock and the holders of the Common Stock shall be entitled to notice of any stockholders' meeting and to vote any matter submitted to a stockholder vote, as a single class on the following basis: (a) Each share of Common Stock issued and outstanding shall have one vote per share; and (b) Each share of Series A Convertible Preferred Stock issued and outstanding shall have 10 votes per share. 5B. Voting As a Class. Each share of Series A Convertible Preferred Stock issued and outstanding shall also be entitled to one vote on all matters as to which holders of Series A Convertible Preferred Stock are required to vote as a separate class pursuant to the New York Business Corporation Law, and the holders of a majority of the Series A Convertible Preferred Stock entitled to vote shall bind the entire class of Series A Convertible Preferred Stock. 5C. Notices. The Company shall give the holders of the Series A Convertible Preferred Stock the same prior notice as given to holders of Common Stock according to the By- laws of the Company of any matter to be submitted to such holders for a vote. 6. Principal Office; Notices The address of the principal office of the Company is located at 4002 Eisenhower Boulevard, Tampa, Florida 33634. Any notice or certificate required by the Certificate of Incorporation of the Company, as amended, or this Certificate of Designations to be delivered to any holder of Series A Convertible Preferred Stock shall be deemed given when personally delivered to such holder or upon deposit in the United States Mail, certified mail, return receipt requested and addressed to such holder at his or its address appearing on the books of the Company. 7. Cancellation of Series A Convertible Preferred Stock In the event any shares of Series A Convertible Preferred Stock shall be converted, liquidated or redeemed, the shares so converted, liquidated or redeemed shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Company as Series A Convertible Preferred Stock. 8. Reservation of Shares Commencing on the Issuance Date, the Company shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Convertible Preferred Stock into shares of Common Stock, the full number of shares of Common Stock deliverable upon conversion of 8 all of the shares of Series A Convertible Preferred Stock from time to time outstanding, taking into account all adjustments required herein in the Applicable Conversion Ratio. If at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversation of all of the then outstanding shares of Series A Convertible Preferred Stock pursuant to this Certificate of Designations, the Company shall take such corporate action as may, in the opinion of counsel to the Company, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 9. Amendments and Other Actions As long as any shares of Series A Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent) of the holders of all of the then outstanding shares of Series A Convertible Preferred Stock, voting as a separate class: in any manner alter or change the rights, preferences or privileges of the Series A Convertible Preferred Stock so as to affect adversely the Series A Convertible Preferred Stock; or in any manner create any new class or series of capital stock senior to the Series A Convertible Preferred Stock with respect to the right to receive dividends, or distributions upon liquidation, winding up or dissolution of the Company. Notwithstanding the foregoing, when authorized by resolutions of the Board of Directors, the Company may amend or supplement this Certificate without the consent of any holder of Series A Convertible Preferred Stock to cure any ambiguity, defect or inconsistency herein or make any other change herein, provided that each such amendments or supplements shall not adversely affect the interests of the holders thereof. 10. Registration and Transfer The Company shall maintain at its principal executive offices (or at the offices of its transfer agent or such other office or agency of the Company as it may designate by notice to the holders of the Series A Convertible Preferred Stock) a stock register for the Series A Convertible Preferred Stock in which the Company shall record the names and addresses of person in whose name the shares of Series A Convertible Preferred Stock are issued, as well as the name and address of each permitted transferee thereof. Prior to due presentment for registration of any transferee of any Series A Convertible Preferred Stock, the Company may deem and treat the person in whose name any Series A Convertible Preferred Stock is registered as the absolute owner of such Series A Convertible Preferred Stock and the Company shall not be affected by notice to the contrary. All transfers of Series A Convertible Preferred Stock must be made pursuant to the applicable rules and regulations of federal and state securities laws. No service charge shall be made to a holder of Series A Convertible Preferred Stock for any registration, transfer or exchange. 9 The Series B Convertible Preferred Stock shall have the following powers, designations, preferences and other special rights: 1. Certain Definitions. "Average Price" means, with respect to any shares of stock or securities, including the Common Stock (as defined below), on any date of determination, the average for the thirty (30) consecutive Trading Days (as defined below) preceding and including such date of determination of the reported last sale prices per share on the principal national securities exchange or inter-dealer quotation system on which such stock or security is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange or inter-dealer quotation system or if last sale prices are not available, the average for the thirty (30) consecutive Trading Days preceding and including the date of determination of the average of the closing bid and asked prices per share or security in the over-the-counter market as published by the National Quotation Service or the OTC Bulletin Board or, if no such quotations are published or furnished, by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. "Common Stock" means the common stock, $.0033 par value, of the Company, including the stock into which the Series B Convertible Preferred Stock is convertible, and any capital stock of any class of the Company thereafter authorized that shall not be limited to a fixed sum in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company. "Current Market Price" shall mean, with respect to any shares of capital stock or other securities, (i) if such stock or securities are listed or admitted to trading on a national securities exchange or an inter-dealer quotation system or traded in the over-the-counter market, the price per share or security, as the case may be, at the close of trading on the Trading Day on which the relevant determination is to be made or, if such day is not a Trading Day, the Trading Day immediately preceding such day and (ii) if such stock or security is not so listed, admitted or traded, the fair market value of such stock or security as determined by the Managing Directors of the Company or, if such parties cannot agree, as determined by an Independent Appraiser (as defined below). "Excluded Stock" means (a) the Series B Convertible Preferred Stock; (b) any Common Stock issued or to be issued (i) pursuant to the conversion of the Series B Convertible Preferred Stock (ii) pursuant to the exercise of any stock options or warrants currently outstanding or options or warrants issued after the date hereof having an exercise price equal to or greater than the Current Market Price, or (iii) except as otherwise provided herein, upon the actual issue of Common Stock or securities convertible into Common Stock at the time of exercise of any rights, options or warrants to purchase Common Stock or any securities convertible into Common Stock, as appropriate, or upon conversion or exchange of securities convertible into Common Stock; and (c) in addition to (a) and (b) hereof, an aggregate of 4,000,000 shares of Common Stock to be issued on or after January 1, 2003 at less than the Conversion Price either directly or on the conversion of any convertible securities issued after the date hereof. "Independent Appraiser" means an investment banking firm, appraisal firm or any other financial expert of recognized national standing in the United States, selected by the holders of a majority of the Series B Convertible Preferred Stock and reasonably acceptable to the Company, that does not (or whose directors, officers, employees, affiliates or 10 stockholders do not) have a direct or indirect material financial interest in the Company or a 5% or greater holder of Series B Convertible Preferred Stock, who has not been, and, at the time called upon to give independent financial advice to the Company or a holder of Series B Convertible Preferred Stock, is not (and none of its directors, officers, affiliates or stockholders are) a promoter, director or officer of the Company. "Trading Day" means (i) if the relevant stock or security is listed or admitted for trading on the New York Stock Exchange or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq National or SmallCap Markets or any other system of automated dissemination of quotation of securities prices, a day on which the relevant stock or security is traded in a regular way in the over- the-counter market and for which a closing bid and a closing asked price for such stock or security are available. 2. Dividends. 2A. The holders of the Series B Convertible Preferred Stock shall be entitled to receive dividends, which shall begin to accrue on and be cumulative from the date of issuance ("Issuance Date") of the Series B Convertible Preferred Stock (whether or not such dividends have been declared and whether or not there shall be net profits or net assets of the Company legally available for the payment of such dividends) in an annual amount equal to the issue price of such Series B Convertible Preferred Stock plus any accrued but unpaid dividends (the "Liquidation Preference") times eight percent (8%) through January 31, 2005 and thereafter times twelve (12%) (the "Dividend Amount"). The Dividend Amount shall be payable on February 1 of each year commencing 2004 (the "Dividend Payment Dates") either in cash or in kind by issuance by the Company of additional shares of Series B Convertible Preferred Stock (the "PIK Shares") at the option of the Company. In the event that the applicable Dividend Amount is not paid in cash within thirty (30) days of the relevant Dividend Payment Date, the Company shall be deemed for all purposes to have elected to pay the relevant Dividend Amount in PIK Shares. If the Company elects or is deemed to have elected to pay any Dividend Amount in PIK Shares, each holder of Series B Convertible Preferred Stock shall be deemed to be the holder of record of such holder's pro rata share of the PIK Shares issuable with respect to the relevant Dividend Amount notwithstanding that the stock transfer books of the Company shall then be closed or that certificates evidencing such PIK Shares shall not have been actually delivered to such holder of Series B Convertible Preferred Stock. In the event that dividends on the Series B Convertible Preferred Stock are paid with PIK Shares, each such PIK Share (i) shall be valued at the then applicable Liquidation Preference per share and (ii) shall have the same Liquidation Preference as each share of Series B Convertible Preferred Stock with respect to which the PIK Share constituted a dividend. No dividends shall be paid on any Common Stock of the Company or any capital stock of the Company that ranks junior to or on parity with the Series B Convertible Preferred Stock during any fiscal year of the Company until dividends in the aggregate Dividend Amount per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series B Convertible Preferred Stock for the current and each prior Dividend Payment Date shall have been paid or declared and set apart for payment to the Series B Convertible Preferred Stock holders. 11 2B. The amount of dividends payable for any period shorter than a full year shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Series B Convertible Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by- share basis among all such shares at the time outstanding. 2C. So long as any shares of the Series B Convertible Preferred Stock are outstanding, no dividends shall be declared or paid or set apart for payment on any other preferred stock of the Company of any series ranking, as to dividends, junior to or on a parity with the Series B Convertible Preferred Stock, unless a dividend shall be paid at the same time to each holder of Series B Convertible Preferred Stock, in an amount such that the holders of such other series of preferred stock, on the one hand, and the holders of Series B Convertible Preferred Stock, on the other, receive dividends in the same relative proportions that each would have received had all such shares of preferred stock been converted into Common Stock immediately prior to the declaration of a dividend on such preferred stock. 3. Liquidation. (a) Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the shares of Series B Convertible Preferred Stock shall be entitled, before any distributions shall be made to the holders of the Common Stock, or any other class of capital stock of the Company ranking junior to the Series B Convertible Preferred Stock, to be paid an amount (the "Series B Liquidation Amount") equal to greater of (i) twice the Liquidation Preference per share (appropriately adjusted to reflect the occurrence of any stock split, stock dividend, stock combination, stock subdivision or like occurrences) or (ii) the aggregate pro rata liquidating distribution per share payable to holders of Series B Convertible Preferred Stock on an as-converted basis. Written notice of such liquidation, dissolution or winding up, stating a payment date, the Series B Liquidation Amount and the place where said sums shall be payable shall be given by mail, postage prepaid, not less than 30 or more than 60 days prior to the payment date stated therein, to the holders of record of the Series B Convertible Preferred Stock, such notice to be addressed to each shareholder at his post office address as shown by the records of the Company. (b) Any Acquisition or Asset Transfer may be regarded as a liquidation, dissolution or winding up of the Company for purposes of this Section 3 upon the election of the holders of at least a majority of the outstanding shares of Series B Convertible Preferred Stock (voting together as a single class). The Company will not enter into any transaction which provides for an Acquisition Asset Transfer without providing for the ability of the holders of the Series B Convertible Preferred Stock upon the affirmative vote of a majority as described in the preceding sentence) to receive consideration in connection with such transaction in an amount not less than the amount they would have received had the consideration payable by any third party in connection with such transaction been paid to the Company, which then completed a liquidation in accordance with this Section 3 (provided that for the purpose of calculating the pro forma Series B Liquidation Amount for purposes of such deemed liquidation, the word "twice" set forth in the preceding paragraph concerning the calculation fo the Series B Liquidation Amount shall be deemed to be replaced with the words "one and a half times"). Nothing in this Section 3 shall be construed to prevent the holders of the Series B Convertible Preferred Stock ,in lieu of any other rights described in this paragraph, from exercising their Conversion Rights at any time up to or simultaneous with any Acquisition or Asset Transfer. 12 (c) Holders of Series B Convertible Preferred Stock shall rank pari passu to the holders of Series A Convertible Preferred Stock under this paragraph 3. 4. Conversion. The shares of Series B Convertible Preferred Stock shall be (i) subject to the following conversion terms and (ii) the holders of the Series B Convertible Preferred Stock shall have the right to convert their shares of Series B Convertible Preferred Stock into shares of Common Stock as follows (the "Conversion Rights"): 4A. Right to Convert. Each Share of Series B Convertible Preferred Stock is convertible, without the payment of any additional consideration by the holder thereof, at any time at the option of the holder of such shares into the number of fully paid non-assessable shares of Common Stock equal to the quotient obtained by dividing (i) the product of the number of shares of Series B Convertible Preferred Stock being converted multiplied by $16.00, (ii) by the then current Conversion Price (the "Applicable Conversion Ratio"). The initial "Conversion Price" shall be $.80. The Conversion Price is subject to further adjustment pursuant to the anti-dilution provisions described in Section 4D, E, F, G and H below. 4B. Automatic Conversion. Each share of outstanding Series B Convertible Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Applicable Conversion Ratio, if, at any time following the Issuance Date and provided the Common Stock issuable upon conversion of the Preferred Stock is covered by a then current registration statement of the Company which has been declared effective by the Securities and Exchange Commission, (i) a closing takes place of a Public Offering (as defined below) at a price equal to or in excess of three times the Conversion Price. "Public Offering" shall mean a public offering of Common Stock subject to a firm commitment underwriting (an "Underwriting"), pursuant to an effective registration statement (other than a registration statement on Form S-4 or S-8) under the Securities Act of 1933, as amended (the "Act"), which registration statement and Underwriting cover the offer and the sale of Common Stock to the public for the account of the Company resulting in gross cash proceeds to the Company as seller of not less than $15,000,000, before deducting any underwriting commissions and other compensation, or (ii) the price of the Common Stock for any 30 consecutive trading days equals or exceeds three times the Conversion Price and the average daily trading volume for the Company's Common Stock for the 30 consecutive trading days exceeds 100,000 shares. 4C. Mechanics of Conversion. No fractional shares of Common Stock shall be issued upon conversion of the Series B Convertible Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash for any fractional share. Except in the case of a conversion pursuant to Section 4B hereof, before any holder of Series B Convertible Preferred Stock may convert the same into shares of Common Stock, each holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the principal office of the Company or of any transfer agent for the Series B Convertible Preferred Stock, and shall give written notice to the Company at such office that such holder elects to convert the same. On the date of a conversion pursuant to Section 4B, any party entitled to receive the shares of Common 13 Stock issuable upon such conversion shall be treated for all purposes as the record holder of all such shares of Common Stock on such date, whether or not such holder has surrendered the certificate or certificates for such holder's shares of Series B Convertible Preferred Stock. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series B Convertible Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which it or he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Except in the case of a conversion pursuant to Section 4(b), such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Convertible Preferred Stock to be converted, the then holders of record of Series B Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. 4D. Adjustment for Stock Splits and Combinations. If the Company, at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series B Convertible Preferred Stock pursuant to Section 4(B) hereof, effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Series B Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Issuance Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Series B Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before the effective date of the combination shall be proportionately increased. Any adjustment in the Applicable Conversion Ratio under this Section 4(d) shall become effective at the close of business on the date the subdivision or combination becomes effective. 4E. Adjustment for Common Stock Dividends and Distributions. If the Company at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series B Convertible Preferred Stock pursuant to Section 4(B) hereof makes, or fixes a record date for, determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock, in each such event, the Applicable Conversion Ratio then in effect shall be decreased as of the effective date of the issuance of such additional shares of Common Stock, or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Applicable Conversion Ratio then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or, the close of business on such record date as the case may be, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Applicable Conversion Ratio shall be recomputed accordingly as of the close of business on such record date and thereafter the Applicable Conversion Ratio shall be adjusted pursuant to this Section 4(e) to reflect the actual payment of such dividend or distribution. 4F. Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series B Convertible Preferred Stock pursuant to Section 4(B) hereof, the Common Stock issuable upon the conversion of the Series B Convertible Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Company, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer (as defined in sub-section (j) below) or a subdivision or combination of shares or stock dividend or a corporate reorganization, merger or consolidation provided for elsewhere in this 14 Section 4, in any such event each holder of any shares of Series B Convertible Preferred Stock then outstanding shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and/or property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series B Convertible Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. 4G. Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series B Convertible Preferred Stock pursuant to Section 4(B) hereof, there is a capital reorganization of the Common Stock other than (i) an Acquisition or Asset Transfer (as defined in section 4(j) below), or (ii) a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4 (each such transaction described in the foregoing clauses (i) and (ii), a "Reorganization Transaction") as a part of such Reorganization Transaction, provision shall be made so that the holders of the Series B Convertible Preferred Stock shall thereafter be entitled to receive upon conversion of the Series B Convertible Preferred Stock the number of shares of stock or other securities or property of which they would be entitled to receive had they converted their shares of Series B Convertible Preferred Stock into shares of Common Stock on the date of (A) the first day immediately prior to the effective date of such Reorganization Transaction or (B) the record date for such Reorganization Transaction, whichever is applicable to the Reorganization Transaction. In any such case, all adjustments that otherwise would have been required to be made in the Applicable Conversion Ratio and the number of shares of Common Stock that the holders of Series B Convertible Preferred Stock are entitled to receive upon conversion of the Series B Convertible Preferred Stock pursuant to this Section 4 on or prior to such date shall be made prior to calculating the amount or number of securities and/or property receivable by such holders in connection with such Reorganization Transaction. 4H. Sale of Shares At Price Below The Initial Conversion Price. If at any time or from time to time, subsequent to the Issuance Date and prior to the closing of the Public Offering referenced in this Section 4, the Company issues or sells, or is deemed to have issued or sold shares of its capital stock for consideration of a price of less than $.80 per share, the Conversion Price shall be adjusted to be such lower price at which the Company issued or sold shares of its capital stock. For purposes of this Section 4H. sales or issuances of capital stock by the Company shall not include Excluded Stock or stock dividends, stock splits or reclassifications. 4I. Certificate of Adjustment. In each case of an adjustment or readjustment of the Applicable Conversion Ratio and the number of shares of Common Stock or other securities thus issuable upon conversion of the Series B Convertible Preferred Stock, if the Series B Convertible Preferred Stock is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series B Convertible Preferred Stock at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. 4J. Certain Definitions. "Acquisition" shall mean any transaction or series of related transactions to which the Corporation is a party in which 15 in excess of fifty percent (50%) of the Company's voting power is transferred. "Asset Transfer" shall mean a sale, lease or other disposition of all or substantially all of the assets of the Company. 5. Voting Rights 5A. Number of Votes. Except as otherwise required by law, the holders of Series B Convertible Preferred Stock and the holders of the Common Stock shall be entitled to notice of any stockholders' meeting and to vote any matter submitted to a stockholder vote, as a single class on the following basis: (a) Each share of Common Stock issued and outstanding shall have one vote per share; and (b) Each share of Series B Convertible Preferred Stock issued and outstanding shall have 10 votes per share. 5B. Voting As a Class. Each share of Series B Convertible Preferred Stock issued and outstanding shall also be entitled to one vote on all matters as to which holders of Series B Convertible Preferred Stock are required to vote as a separate class pursuant to the New York Business Corporation Law, and the holders of a majority of the Series B Convertible Preferred Stock entitled to vote shall bind the entire class of Series B Convertible Preferred Stock. 5C. Notices. The Company shall give the holders of the Series B Convertible Preferred Stock the same prior notice as given to holders of Common Stock according to the By- laws of the Company of any matter to be submitted to such holders for a vote. 6. Principal Office; Notices The address of the principal office of the Company is located at 4002 Eisenhower Boulevard, Tampa, Florida 33634. Any notice or certificate required by the Certificate of Incorporation of the Company, as amended, or this Certificate of Designations to be delivered to any holder of Series B Convertible Preferred Stock shall be deemed given when personally delivered to such holder or upon deposit in the United States Mail, certified mail, return receipt requested and addressed to such holder at his or its address appearing on the books of the Company. 7. Cancellation of Series B Convertible Preferred Stock In the event any shares of Series B Convertible Preferred Stock shall be converted, liquidated or redeemed, the shares so converted, liquidated or redeemed shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Company as Series B Convertible Preferred Stock. 8. Reservation of Shares Commencing on the Issuance Date, the Company shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series B Convertible Preferred Stock into shares of Common Stock, the full number of shares of Common Stock deliverable upon conversion of all of the shares of Series B Convertible Preferred Stock from time to time outstanding, taking into account all adjustments required herein in the Applicable Conversion Ratio. If at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the 16 conversation of all of the then outstanding shares of Series B Convertible Preferred Stock pursuant to this Certificate of Designations, the Company shall take such corporate action as may, in the opinion of counsel to the Company, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 9. Amendments and Other Actions As long as any shares of Series B Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent) of the holders of all of the then outstanding shares of Series B Convertible Preferred Stock, voting as a separate class: in any manner alter or change the rights, preferences or privileges of the Series B Convertible Preferred Stock so as to affect adversely the Series B Convertible Preferred Stock; or in any manner create any new class or series of capital stock senior to the Series B Convertible Preferred Stock with respect to the right to receive dividends, or distributions upon liquidation, winding up or dissolution of the Company. Notwithstanding the foregoing, when authorized by resolutions of the Board of Directors, the Company may amend or supplement this Certificate without the consent of any holder of Series B Convertible Preferred Stock to cure any ambiguity, defect or inconsistency herein or make any other change herein, provided that each such amendments or supplements shall not adversely affect the interests of the holders thereof. 10. Registration and Transfer The Company shall maintain at its principal executive offices (or at the offices of its transfer agent or such other office or agency of the Company as it may designate by notice to the holders of the Series B Convertible Preferred Stock) a stock register for the Series B Convertible Preferred Stock in which the Company shall record the names and addresses of person in whose name the shares of Series B Convertible Preferred Stock are issued, as well as the name and address of each permitted transferee thereof. Prior to due presentment for registration of any transferee of any Series B Convertible Preferred Stock, the Company may deem and treat the person in whose name any Series B Convertible Preferred Stock is registered as the absolute owner of such Series B Convertible Preferred Stock and the Company shall not be affected by notice to the contrary. All transfers of Series B Convertible Preferred Stock must be made pursuant to the applicable rules and regulations of federal and state securities laws. No service charge shall be made to a holder of Series B Convertible Preferred Stock for any registration, transfer or exchange. 17 The Series C Convertible Preferred Stock shall have the following powers, designations, preferences and other special rights: 1. Certain Definitions. "Average Price" means, with respect to any shares of stock or securities, including the Common Stock (as defined below), on any date of determination, the average for the thirty (30) consecutive Trading Days (as defined below) preceding and including such date of determination of the reported last sale prices per share on the principal national securities exchange or inter-dealer quotation system on which such stock or security is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange or inter-dealer quotation system or if last sale prices are not available, the average for the thirty (30) consecutive Trading Days preceding and including the date of determination of the average of the closing bid and asked prices per share or security in the over-the-counter market as published by the National Quotation Service or the OTC Bulletin Board or, if no such quotations are published or furnished, by any New York Stock Exchange member firm selected from time to time by the Company for that purpose. "Common Stock" means the common stock, $.0033 par value, of the Company, including the stock into which the Series C Convertible Preferred Stock is convertible, and any capital stock of any class of the Company thereafter authorized that shall not be limited to a fixed sum in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company. "Current Market Price" shall mean, with respect to any shares of capital stock or other securities, (i) if such stock or securities are listed or admitted to trading on a national securities exchange or an inter-dealer quotation system or traded in the over-the-counter market, the price per share or security, as the case may be, at the close of trading on the Trading Day on which the relevant determination is to be made or, if such day is not a Trading Day, the Trading Day immediately preceding such day and (ii) if such stock or security is not so listed, admitted or traded, the fair market value of such stock or security as determined by the Managing Directors of the Company or, if such parties cannot agree, as determined by an Independent Appraiser (as defined below). "Excluded Stock" means (a) the Series C Convertible Preferred Stock; (b) any Common Stock issued or to be issued (i) pursuant to the conversion of the Series C Convertible Preferred Stock (ii) pursuant to the exercise of any stock options or warrants currently outstanding or options or warrants issued after the date hereof having an exercise price equal to or greater than the Current Market Price, or (iii) except as otherwise provided herein, upon the actual issue of Common Stock or securities convertible into Common Stock at the time of exercise of any rights, options or warrants to purchase Common Stock or any securities convertible into Common Stock, as appropriate, or upon conversion or exchange of securities convertible into Common Stock; and (c) in addition to (a) and (b) hereof, an aggregate of 4,000,000 shares of Common Stock to be issued on or after January 1, 2003 at less than the Conversion Price either directly or on the conversion of any convertible securities issued after the date hereof. "Independent Appraiser" means an investment banking firm, appraisal firm or any other financial expert of recognized national standing in the United States, selected by the holders of a majority of the Series C Convertible Preferred Stock and reasonably acceptable to the Company, that does not (or whose directors, officers, employees, affiliates or stockholders do not) have a direct or indirect material financial interest 18 in the Company or a 5% or greater holder of Series C Convertible Preferred Stock, who has not been, and, at the time called upon to give independent financial advice to the Company or a holder of Series C Convertible Preferred Stock, is not (and none of its directors, officers, affiliates or stockholders are) a promoter, director or officer of the Company. "Trading Day" means (i) if the relevant stock or security is listed or admitted for trading on the New York Stock Exchange or any other national securities exchange, a day on which such exchange is open for business; (ii) if the relevant stock or security is quoted on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, a day on which trades may be effected through such system; or (iii) if the relevant stock or security is not listed or admitted for trading on any national securities exchange or quoted on the Nasdaq National or SmallCap Markets or any other system of automated dissemination of quotation of securities prices, a day on which the relevant stock or security is traded in a regular way in the over- the-counter market and for which a closing bid and a closing asked price for such stock or security are available. 2. Dividends. 2A. The holders of the Series C Convertible Preferred Stock shall be entitled to receive dividends, which shall begin to accrue on and be cumulative from the date of issuance ("Issuance Date") of the Series C Convertible Preferred Stock (whether or not such dividends have been declared and whether or not there shall be net profits or net assets of the Company legally available for the payment of such dividends) in an annual amount equal to the issue price of such Series C Convertible Preferred Stock plus any accrued but unpaid dividends (the "Liquidation Preference") times seven percent (7%) through April 30, 2005 and thereafter times nine (9%) (the "Dividend Amount"). The Dividend Amount shall be payable on May 1 of each year commencing 2004 (the "Dividend Payment Dates") either in cash or in kind by issuance by the Company of additional shares of Series C Convertible Preferred Stock (the "PIK Shares") at the option of the Company. In the event that the applicable Dividend Amount is not paid in cash within thirty (30) days of the relevant Dividend Payment Date, the Company shall be deemed for all purposes to have elected to pay the relevant Dividend Amount in PIK Shares. If the Company elects or is deemed to have elected to pay any Dividend Amount in PIK Shares, each holder of Series C Convertible Preferred Stock shall be deemed to be the holder of record of such holder's pro rata share of the PIK Shares issuable with respect to the relevant Dividend Amount notwithstanding that the stock transfer books of the Company shall then be closed or that certificates evidencing such PIK Shares shall not have been actually delivered to such holder of Series C Convertible Preferred Stock. In the event that dividends on the Series C Convertible Preferred Stock are paid with PIK Shares, each such PIK Share (i) shall be valued at the then applicable Liquidation Preference per share and (ii) shall have the same Liquidation Preference as each share of Series C Convertible Preferred Stock with respect to which the PIK Share constituted a dividend. No dividends shall be paid on any Common Stock of the Company or any capital stock of the Company that ranks junior to or on parity with the Series C Convertible Preferred Stock during any fiscal year of the Company until dividends in the aggregate Dividend Amount per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series C Convertible Preferred Stock for the current and each prior Dividend Payment Date shall have been paid or declared and set apart for payment to the Series C Convertible Preferred Stock holders. 19 2B. The amount of dividends payable for any period shorter than a full year shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Series C Convertible Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. 2C. So long as any shares of the Series C Convertible Preferred Stock are outstanding, no dividends shall be declared or paid or set apart for payment on any other preferred stock of the Company of any series ranking, as to dividends, junior to or on a parity with the Series C Convertible Preferred Stock, unless a dividend shall be paid at the same time to each holder of Series C Convertible Preferred Stock, in an amount such that the holders of such other series of preferred stock, on the one hand, and the holders of Series C Convertible Preferred Stock, on the other, receive dividends in the same relative proportions that each would have received had all such shares of preferred stock been converted into Common Stock immediately prior to the declaration of a dividend on such preferred stock. 3. Liquidation. (a) Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the shares of Series C Convertible Preferred Stock shall be entitled, before any distributions shall be made to the holders of the Common Stock, or any other class of capital stock of the Company ranking junior to the Series C Convertible Preferred Stock, to be paid an amount (the "Series C Liquidation Amount") equal to greater of (i) the Liquidation Preference per share (appropriately adjusted to reflect the occurrence of any stock split, stock dividend, stock combination, stock subdivision or like occurrences) or (ii) the aggregate pro rata liquidating distribution per share payable to holders of Series C Convertible Preferred Stock on an as-converted basis. Written notice of such liquidation, dissolution or winding up, stating a payment date, the Series C Liquidation Amount and the place where said sums shall be payable shall be given by mail, postage prepaid, not less than 30 or more than 60 days prior to the payment date stated therein, to the holders of record of the Series C Convertible Preferred Stock, such notice to be addressed to each shareholder at his post office address as shown by the records of the Company. (b) Any Acquisition or Asset Transfer may be regarded as a liquidation, dissolution or winding up of the Company for purposes of this Section 3 upon the election of the holders of at least a majority of the outstanding shares of Series C Convertible Preferred Stock (voting together as a single class). The Company will not enter into any transaction which provides for an Acquisition Asset Transfer without providing for the ability of the holders of the Series C Convertible Preferred Stock upon the affirmative vote of a majority as described in the preceding sentence) to receive consideration in connection with such transaction in an amount not less than the amount they would have received had the consideration payable by any third party in connection with such transaction been paid to the Company, which then completed a liquidation in accordance with this Section 3. Nothing in this Section 3 shall be construed to prevent the holders of the Series C Convertible Preferred Stock ,in lieu of any other rights described in this paragraph, from exercising their Conversion Rights at any time up to or simultaneous with any Acquisition or Asset Transfer. 20 (c) Holders of Series C Convertible Preferred Stock shall rank pari passu to the holders of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock under this paragraph 3. 4. Conversion. The shares of Series C Convertible Preferred Stock shall be (i) subject to the following conversion terms and (ii) the holders of the Series C Convertible Preferred Stock shall have the right to convert their shares of Series C Convertible Preferred Stock into shares of Common Stock as follows (the "Conversion Rights"): 4A. Right to Convert. Each Share of Series C Convertible Preferred Stock is convertible, without the payment of any additional consideration by the holder thereof, at any time at the option of the holder of such shares into the number of fully paid non-assessable shares of Common Stock equal to the quotient obtained by dividing (i) the product of the number of shares of Series C Convertible Preferred Stock being converted multiplied by $60.00, (ii) by the then current Conversion Price (the "Applicable Conversion Ratio"). The initial "Conversion Price" shall be $1.00. The Conversion Price is subject to further adjustment pursuant to the anti-dilution provisions described in Section 4D, E, F, G and H below. 4B. Automatic Conversion. Each share of outstanding Series C Convertible Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Applicable Conversion Ratio, if, at any time following the Issuance Date and provided the Common Stock issuable upon conversion of the Preferred Stock is covered by a then current registration statement of the Company which has been declared effective by the Securities and Exchange Commission, (i) a closing takes place of a Public Offering (as defined below) at a price equal to or in excess of three times the Conversion Price. "Public Offering" shall mean a public offering of Common Stock subject to a firm commitment underwriting (an "Underwriting"), pursuant to an effective registration statement (other than a registration statement on Form S-4 or S-8) under the Securities Act of 1933, as amended (the "Act"), which registration statement and Underwriting cover the offer and the sale of Common Stock to the public for the account of the Company resulting in gross cash proceeds to the Company as seller of not less than $15,000,000, before deducting any underwriting commissions and other compensation, or (ii) the price of the Common Stock for any 30 consecutive trading days equals or exceeds three times the Conversion Price and the average daily trading volume for the Company's Common Stock for the 30 consecutive trading days exceeds 100,000 shares. 4C. Mechanics of Conversion. No fractional shares of Common Stock shall be issued upon conversion of the Series C Convertible Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash for any fractional share. Except in the case of a conversion pursuant to Section 4B hereof, before any holder of Series C Convertible Preferred Stock may convert the same into shares of Common Stock, each holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the principal office of the Company or of any transfer agent for the Series C Convertible Preferred Stock, and shall give written notice to the Company at such office that such holder elects to convert the same. On the date of a conversion pursuant to Section 4B, any party entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of all such shares of Common Stock on such date, whether 21 or not such holder has surrendered the certificate or certificates for such holder's shares of Series C Convertible Preferred Stock. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series C Convertible Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which it or he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Except in the case of a conversion pursuant to Section 4(b), such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series C Convertible Preferred Stock to be converted, the then holders of record of Series C Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. 4D. Adjustment for Stock Splits and Combinations. If the Company, at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series C Convertible Preferred Stock pursuant to Section 4(B) hereof, effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Series C Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Issuance Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Series C Convertible Preferred Stock, the Applicable Conversion Ratio in effect immediately before the effective date of the combination shall be proportionately increased. Any adjustment in the Applicable Conversion Ratio under this Section 4(d) shall become effective at the close of business on the date the subdivision or combination becomes effective. 4E. Adjustment for Common Stock Dividends and Distributions. If the Company at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series C Convertible Preferred Stock pursuant to Section 4(B) hereof makes, or fixes a record date for, determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock, in each such event, the Applicable Conversion Ratio then in effect shall be decreased as of the effective date of the issuance of such additional shares of Common Stock, or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Applicable Conversion Ratio then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or, the close of business on such record date as the case may be, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Applicable Conversion Ratio shall be recomputed accordingly as of the close of business on such record date and thereafter the Applicable Conversion Ratio shall be adjusted pursuant to this Section 4(e) to reflect the actual payment of such dividend or distribution. 4F. Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series C Convertible Preferred Stock pursuant to Section 4(B) hereof, the Common Stock issuable upon the conversion of the Series C Convertible Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Company, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer (as defined in sub-section (j) below) or a subdivision or combination of shares or stock dividend or a corporate reorganization, merger or consolidation provided for elsewhere in this Section 4, in any such event each holder of any shares of Series C 22 Convertible Preferred Stock then outstanding shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and/or property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series C Convertible Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. 4G. Reorganizations, Mergers, Consolidations or Sales of Assets. If at any time or from time to time after the Issuance Date and prior to the automatic conversion of the Series C Convertible Preferred Stock pursuant to Section 4(B) hereof, there is a capital reorganization of the Common Stock other than (i) an Acquisition or Asset Transfer (as defined in section 4(j) below), or (ii) a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4 (each such transaction described in the foregoing clauses (i) and (ii), a "Reorganization Transaction") as a part of such Reorganization Transaction, provision shall be made so that the holders of the Series C Convertible Preferred Stock shall thereafter be entitled to receive upon conversion of the Series C Convertible Preferred Stock the number of shares of stock or other securities or property of which they would be entitled to receive had they converted their shares of Series C Convertible Preferred Stock into shares of Common Stock on the date of (A) the first day immediately prior to the effective date of such Reorganization Transaction or (B) the record date for such Reorganization Transaction, whichever is applicable to the Reorganization Transaction. In any such case, all adjustments that otherwise would have been required to be made in the Applicable Conversion Ratio and the number of shares of Common Stock that the holders of Series C Convertible Preferred Stock are entitled to receive upon conversion of the Series C Convertible Preferred Stock pursuant to this Section 4 on or prior to such date shall be made prior to calculating the amount or number of securities and/or property receivable by such holders in connection with such Reorganization Transaction. 4H. Sale of Shares At Price Below The Initial Conversion Price. If at any time or from time to time, subsequent to the Issuance Date and prior to the closing of the Public Offering referenced in this Section 4, the Company issues or sells, or is deemed to have issued or sold shares of its capital stock for consideration of a price of less than $1.00 per share, the Conversion Price shall be adjusted to be such lower price at which the Company issued or sold shares of its capital stock. For purposes of this Section 4H. sales or issuances of capital stock by the Company shall not include Excluded Stock or stock dividends, stock splits or reclassifications. 4I. Certificate of Adjustment. In each case of an adjustment or readjustment of the Applicable Conversion Ratio and the number of shares of Common Stock or other securities thus issuable upon conversion of the Series C Convertible Preferred Stock, if the Series C Convertible Preferred Stock is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series C Convertible Preferred Stock at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. 23 4J. Certain Definitions. "Acquisition" shall mean any transaction or series of related transactions to which the Corporation is a party in which in excess of fifty percent (50%) of the Company's voting power is transferred. "Asset Transfer" shall mean a sale, lease or other disposition of all or substantially all of the assets of the Company. 5. Voting Rights 5A. Number of Votes. Except as otherwise required by law, the holders of Series C Convertible Preferred Stock and the holders of the Common Stock shall be entitled to notice of any stockholders' meeting and to vote any matter submitted to a stockholder vote, as a single class on the following basis: (a) Each share of Common Stock issued and outstanding shall have one vote per share; and (b) Each share of Series C Convertible Preferred Stock issued and outstanding shall have 15 votes per share. 5B. Voting As a Class. Each share of Series C Convertible Preferred Stock issued and outstanding shall also be entitled to one vote on all matters as to which holders of Series C Convertible Preferred Stock are required to vote as a separate class pursuant to the New York Business Corporation Law, and the holders of a majority of the Series C Convertible Preferred Stock entitled to vote shall bind the entire class of Series C Convertible Preferred Stock. 5C. Notices. The Company shall give the holders of the Series C Convertible Preferred Stock the same prior notice as given to holders of Common Stock according to the By- laws of the Company of any matter to be submitted to such holders for a vote. 6. Principal Office; Notices The address of the principal office of the Company is located at 4002 Eisenhower Boulevard, Tampa, Florida 33634. Any notice or certificate required by the Certificate of Incorporation of the Company, as amended, or this Certificate of Designations to be delivered to any holder of Series C Convertible Preferred Stock shall be deemed given when personally delivered to such holder or upon deposit in the United States Mail, certified mail, return receipt requested and addressed to such holder at his or its address appearing on the books of the Company. 7. Cancellation of Series C Convertible Preferred Stock In the event any shares of Series C Convertible Preferred Stock shall be converted, liquidated or redeemed, the shares so converted, liquidated or redeemed shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Company as Series C Convertible Preferred Stock. 8. Reservation of Shares Commencing on the Issuance Date, the Company shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series C Convertible Preferred Stock into shares of Common Stock, 24 the full number of shares of Common Stock deliverable upon conversion of all of the shares of Series C Convertible Preferred Stock from time to time outstanding, taking into account all adjustments required herein in the Applicable Conversion Ratio. If at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversation of all of the then outstanding shares of Series C Convertible Preferred Stock pursuant to this Certificate of Designations, the Company shall take such corporate action as may, in the opinion of counsel to the Company, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 9. Amendments and Other Actions As long as any shares of Series C Convertible Preferred Stock are outstanding, the Company shall not, without first obtaining the approval (by vote or written consent) of the holders of all of the then outstanding shares of Series C Convertible Preferred Stock, voting as a separate class: in any manner alter or change the rights, preferences or privileges of the Series C Convertible Preferred Stock so as to affect adversely the Series C Convertible Preferred Stock; or in any manner create any new class or series of capital stock senior to the Series C Convertible Preferred Stock with respect to the right to receive dividends, or distributions upon liquidation, winding up or dissolution of the Company. Notwithstanding the foregoing, when authorized by resolutions of the Board of Directors, the Company may amend or supplement this Certificate without the consent of any holder of Series C Convertible Preferred Stock to cure any ambiguity, defect or inconsistency herein or make any other change herein, provided that each such amendments or supplements shall not adversely affect the interests of the holders thereof. 10. Registration and Transfer The Company shall maintain at its principal executive offices (or at the offices of its transfer agent or such other office or agency of the Company as it may designate by notice to the holders of the Series C Convertible Preferred Stock) a stock register for the Series C Convertible Preferred Stock in which the Company shall record the names and addresses of person in whose name the shares of Series C Convertible Preferred Stock are issued, as well as the name and address of each permitted transferee thereof. Prior to due presentment for registration of any transferee of any Series C Convertible Preferred Stock, the Company may deem and treat the person in whose name any Series C Convertible Preferred Stock is registered as the absolute owner of such Series C Convertible Preferred Stock and the Company shall not be affected by notice to the contrary. All transfers of Series C Convertible Preferred Stock must be made pursuant to the applicable rules and regulations of federal and state securities laws. No service charge shall be made to a holder of Series C Convertible Preferred Stock for any registration, transfer or exchange. 25 4. The amendment was authorized by a vote at a meeting of the Board of Directors of the corporation. /s/ Walter M. Groteke Walter M. Groteke Chairman of the Board /s/ Peter C. Castle Peter C. Castle Vice President-Finance 26 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NETWOLVES CORPORATION --------------------- Under Section 805 of the Business Corporation Law Beckman, Lieberman & Barandes, LLP 100 Jericho Quadrangle Suite 225 Jericho, New York 11753 27