EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
KINZAN, INC.
Kinzan, Inc. (the "CORPORATION"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"DGCL"), does hereby certify as follows:
FIRST: The name of the Corporation is Kinzan, Inc..
SECOND: The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on May 10, 2000.
THIRD: Article FOURTH of the Corporation's Certificate of
Incorporation, is hereby amended in its entirety to read as follows:
"FOURTH:
A. CLASSES OF STOCK. The Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares that the Corporation is
authorized to issue is eighty three million three hundred forty seven
thousand eight hundred ninety five (83,347,895) shares. Seventy million
(70,000,000) shares shall be Common Stock, par value $0.001 per share, and
thirteen million three hundred forty seven thousand eight hundred ninety five
(13,347,895) shares shall be Preferred Stock, par value $0.001 per share.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by this Certificate of Incorporation may be issued
from time to time in one or more series. The rights, preferences, privileges,
and restrictions granted to and imposed on the Series A Preferred Stock,
which series shall consist of five million eight hundred forty seven thousand
eight hundred ninety five (5,847,895) shares (the "Series A Preferred
Stock"), the Series B Preferred Stock, which series shall consist of five
million (5,000,000) shares (the "Series B Preferred Stock"), and the Series C
Preferred Stock, which series shall consist of two million five hundred
thousand (2,500,000) shares (the "Series C Preferred Stock"), are as set
forth below in this Article FOURTH (B). The Board of Directors is hereby
authorized to fix or alter the rights, preferences, privileges and
restrictions granted to or imposed upon additional series of Preferred Stock,
and the number of shares constituting any such series and the designation
thereof, or of any of them. Subject to compliance with applicable protective
voting rights that have been or may be granted to the Preferred Stock or
series thereof in Certificates of Designation or the Corporation's
Certificate of Incorporation ("Protective Provisions"), but notwithstanding
any other rights of the Preferred Stock or any series thereof, the rights,
privileges, preferences and restrictions of any such additional series may be
subordinated to, PARI PASSU with (including, without limitation, inclusion in
provisions with respect to
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liquidation and acquisition preferences, redemption and/or approval of
matters by vote or written consent), or senior to any of those of any present
or future class or series of Preferred or Common Stock. Subject to compliance
with applicable Protective Provisions, the Board of Directors is also
authorized to increase or decrease the number of shares of any series (other
than the Series A, Series B and Series C Preferred Stock), prior or
subsequent to the issue of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
1. DIVIDEND PROVISIONS.
Subject to the rights of any series of
Preferred Stock that may from time to time come into existence, the holders
of shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock shall be entitled to receive dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other
securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of the
Corporation) on the Common Stock of the Corporation, at the rate of 8% of the
Original Issue Price (as hereinafter defined) with respect to each such
series per annum, payable when, as, and if declared by the Board of
Directors. Such dividends shall not be cumulative. The holders of the
outstanding Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock can waive any dividend preference that such holders shall be
entitled to receive under this Section 1 upon the affirmative vote or written
consent of the holders of at least two-thirds of the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock then
outstanding, voting together as a single class and on an as-converted basis.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or
involuntary, subject to the rights of series of Preferred Stock that may from
time to time come into existence, the holders of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of
the Corporation to the holders of Common Stock by reason of their ownership
thereof, an amount per share equal to the sum of (i) $0.90 for each
outstanding share of Series A Preferred Stock (the "Original Series A Issue
Price"), $4.00 for each outstanding share of Series B Preferred Stock (the
"Original Series B Issue Price") or $12.30 for each outstanding share of
Series C Preferred Stock (the "Original Series C Issue Price"), as the case
may be, plus (ii) an amount equal to declared but unpaid dividends on each
such share of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, as the case may be (subject to adjustment of such fixed
dollar amounts for any stock splits, stock dividends, combinations,
recapitalizations or the like). If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series A, Series B
and Series C Preferred Stock shall be insufficient to permit the payment to
such holders of the full aforesaid preferential amounts, then, subject to the
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rights of series of Preferred Stock that may from time to time come into
existence, the entire assets and funds of the Corporation legally available
for distribution shall be distributed ratably among the holders of the Series
A, Series B and Series C Preferred Stock in proportion to the full
preferential amount each such holder is otherwise entitled to receive under
this subsection.
Upon the completion of the distribution required by subsection (a) of
this Section 2 and any other distribution that may be required with respect
to series of Preferred Stock that may from time to time come into existence,
the remaining assets of the Corporation available for distribution to
stockholders shall be distributed among the holders of Common Stock pro rata
based on the number of shares of Common Stock held by each.
(i) For purposes of this Section 2, a liquidation, dissolution or
winding up of the Corporation shall be deemed to be occasioned by, or to
include (unless the holders of at least two-thirds of the Series A, Series B
and Series C Preferred Stock then outstanding, voting together as a single
class and on an as-converted basis, shall determine otherwise), (A) the
acquisition of the Corporation by another entity by means of any transaction
or series of related transactions (including, without limitation, any
reorganization, merger or consolidation) that results in the transfer of
fifty percent (50%) or more of the outstanding voting power of the
Corporation; or (B) a sale of all or substantially all of the assets of the
Corporation.
(ii) In any of such events,
if the consideration received by the Corporation is other than cash, its
value will be deemed its fair market value. Any securities shall be valued as
follows:
(A) Securities not
subject to investment letter or other similar restrictions on free
marketability covered by (B) below:
(1) If traded on a
securities exchange or through the Nasdaq National Market, the value
shall be deemed to be the average of the closing prices of the securities on
such exchange or system over the thirty (30) day period ending three (3) days
prior to the closing;
(2) If actively
traded over-the-counter, the value shall be deemed to be the average of the
closing bid or sale prices (whichever is applicable) over the thirty (30) day
period ending three (3) days prior to the closing; and
(3) If there is no
active public market, the value shall be the fair market value thereof, as
mutually determined by the Corporation and the holders of at least two-thirds
of the voting power of all then outstanding shares of Preferred Stock.
(B) The method of
valuation of securities subject to investment letter or other restrictions
on free marketability (other than restrictions arising solely by virtue of a
stockholder's status as an affiliate or former affiliate) shall be to make an
appropriate discount from the market value determined as above in (A) (1),
(2) or (3) to reflect the approximate fair market value thereof, as
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mutually determined by the Corporation and the holders of at least a majority
of the voting power of all then outstanding shares of such Preferred Stock.
(iii) In the event the
requirements of this subsection 2(c) are not complied with, the Corporation
shall forthwith either:
(A) cause such
closing to be postponed until such time as the requirements of this Section
2 have been complied with; or
(B) cancel such
transaction, in which event the rights, preferences and privileges of the
holders of the Series A, Series B and Series C Preferred Stock shall revert
to and be the same as such rights, preferences and privileges existing
immediately prior to the date of the first notice referred to in subsection
2(c)(iv) hereof.
(iv) The Corporation shall
give each holder of record of Series A, Series B and Series C Preferred Stock
written notice of such impending transaction not later than ten (10) days
prior to the stockholders' meeting called to approve such transaction, or ten
(10) days prior to the closing of such transaction, whichever is earlier, and
shall also notify such holders in writing of the final approval of such
transaction. The first of such notices shall describe the material terms and
conditions of the impending transaction and the provisions of this Section 2,
and the Corporation shall thereafter give such holders prompt notice of any
material changes. The transaction shall in no event take place sooner than
ten (10) days after the Corporation has given the first notice provided for
herein or sooner than ten (10) days after the Corporation has given notice of
any material changes provided for herein; provided, however, that such
periods may be shortened upon the written consent of the holders of Preferred
Stock that are entitled to such notice rights or similar notice rights and
that represent at least a majority of the voting power of all then
outstanding shares of such Preferred Stock.
3. REDEMPTION
(a) At any time after April 1, 2005, but within
ninety (90) days after the receipt by the Corporation of a written request
from the holders of not less than two-thirds of the then outstanding Series
A, Series B and Series C Preferred Stock, voting together as a single class,
that all or, if less than all, a specified percentage of such holders' shares
of Series A, Series B and/or Series C Preferred Stock be redeemed, and
concurrently with surrender by such holders of the certificates representing
such shares, the Corporation shall, to the extent it may lawfully do so,
redeem in three (3) annual installments (each payment date being referred to
herein as a "Redemption Date") the shares specified in such request by paying
in cash therefor a sum per share equal to $0.90 per share of Series A
Preferred Stock (as adjusted for any stock splits, stock dividends,
recapitalizations or the like) plus all declared but unpaid dividends on such
share (the "Series A Redemption Price"), a sum per share equal to $4.00 per
share of Series B Preferred Stock (as adjusted for any stock splits, stock
dividends, recapitalizations or the like) plus all declared but unpaid
dividends on such share (the "Series B Redemption
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Price") and a sum per share equal to $12.30 per share of Series C Preferred
Stock (as adjusted for any stock splits, stock dividends, recapitalizations
or the like) plus all accrued but unpaid dividends on such share (the "Series
C Redemption Price"). The number of shares of Series A, Series B and/or
Series C Preferred Stock that the Corporation shall be required to redeem on
any one Redemption Date shall be equal to the amount determined by dividing
(i) the aggregate number of shares of Series A, Series B and/or Series C
Preferred Stock outstanding immediately prior to such Redemption Date that
have been requested to be redeemed pursuant to this Section 3(a) by (ii) the
number of remaining Redemption Dates (including the Redemption Date to which
such calculation applies). Any redemption of Series A, Series B and/or Series
C Preferred Stock effected pursuant to this subsection 3(a) shall be made on
a pro rata basis among the holders of the Series A, Series B and/or Series C
Preferred Stock in proportion to the number of shares of Series A, Series B
and/or Series C Preferred Stock proposed to be redeemed by such holders.
(b) At least fifteen (15) but no more than
thirty (30) days prior to each Redemption Date, written notice shall be
mailed, first class postage prepaid, to each holder of record (at the close
of business on the business day next preceding the day on which notice is
given) of the Series A, Series B and/or Series C Preferred Stock to be
redeemed, at the address last shown on the records of the Corporation for
such holder, notifying such holder of the redemption to be effected on the
applicable Redemption Date, specifying the number of shares to be redeemed
from such holder, the Redemption Date, the Redemption Price, the place at
which payment may be obtained and calling upon such holder to surrender to
the Corporation, in the manner and at the place designated, his, her or its
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). Except as provided in subsection (3)(c), on or after
each Redemption Date, each holder of Series A, Series B or Series C Preferred
Stock to be redeemed on such Redemption Date shall surrender to the
Corporation the certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and thereupon
the applicable Redemption Price of such shares shall be payable to the order
of the person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be cancelled. In the
event less than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed
shares.
(c) From and after each Redemption Date, unless
there shall have been a default in payment of the Redemption Price, all
rights of the holders of shares of Series A, Series B and Series C Preferred
Stock designated for redemption on such Redemption Date in the Redemption
Notice as holders of Series A, Series B or Series C Preferred Stock (except
the right to receive the applicable Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with respect to
such shares, and such shares shall not thereafter be transferred on the books
of the Corporation or be deemed to be outstanding for any purpose whatsoever.
If the funds of the Corporation legally available for redemption of shares of
Series A, Series B and/or Series C Preferred Stock on a Redemption Date are
insufficient to redeem the total number of shares of Series A, Series B
and/or Series C Preferred Stock to be redeemed
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on such date, those funds that are legally available will be used to redeem
the maximum possible number of such shares ratably among the holders of such
shares to be redeemed in accordance with Section 3(a) hereof. The shares of
Series A, Series B and/or Series C Preferred Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein.
At any time thereafter when additional funds of the Corporation are legally
available for the redemption of shares of Series A, Series B and/or Series C
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares that the Corporation has become obliged to redeem on any
Redemption Date but that it has not redeemed.
4. CONVERSION. The holders of the Series A, Series B and
Series C Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of
Series A, Series B and Series C Preferred Stock shall be convertible, at
the option of the holder thereof, at any time after the date of issuance of
such share, at the principal office of the Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the applicable Original Issue Price
with respect to each series by the Conversion Price applicable to such
series, determined as hereafter provided, in effect on the date the
certificate is surrendered for conversion. The initial Conversion Price per
share for shares of Series A Preferred Stock shall be the Original Series A
Issue Price, the initial Conversion Price per share for shares of Series B
Preferred Stock shall be the Original Series B Issue Price and the initial
Conversion Price per share for shares of Series C Preferred Stock shall be
the Original Series C Issue Price; provided, however, that the Conversion
Prices for each of the Series A, Series B and Series C Preferred Stock shall
be subject to adjustment as set forth in subsection 4(d).
(b) AUTOMATIC CONVERSION. Each share of
Series A, Series B and Series C Preferred Stock shall automatically be
converted into shares of Common Stock at the Conversion Price at the time in
effect for each such series immediately upon the earlier of (i) the
Corporation's sale of its Common Stock in a firm commitment underwritten
public offering pursuant to a registration statement on Form S-1 or Form SB-2
under the Securities Act of 1933, as amended, the public offering price of
which is not less than $15.00 per share (as adjusted for any stock splits,
stock dividends, recapitalizations or the like) and $20,000,000 in the
aggregate or (ii) the date specified by written consent or agreement of the
holders of at least a majority of the then outstanding shares of Series A
Preferred Stock, voting as a separate class, at least two-thirds (2/3) of the
then outstanding shares of Series B Preferred Stock, voting as a separate
class, and at least two-thirds (2/3) of the then outstanding shares of Series
C Preferred Stock.
(c) MECHANICS OF CONVERSION. Before any
holder of Preferred Stock shall be entitled to convert the same into shares
of Common Stock, he or she shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Preferred Stock, and shall give written notice to the
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for
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shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock, or to the nominee or nominees of such holder, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender
of the shares of Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock as of such date. If the conversion is in connection
with an underwritten offering of securities registered pursuant to the
Securities Act of 1933, the conversion may, at the option of any holder
tendering Preferred Stock for conversion, be conditioned upon the closing
with the underwriters of the sale of securities pursuant to such offering, in
which event the persons entitled to receive the Common Stock upon conversion
of the Preferred Stock shall not be deemed to have converted such Preferred
Stock until immediately prior to the closing of such underwritten sale of
securities.
(d) CONVERSION PRICE ADJUSTMENTS OF
PREFERRED STOCK FOR CERTAIN DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The
Conversion Prices of the Preferred Stock shall be subject to adjustment from
time to time as follows:
(i) (A) If the Corporation shall issue,
at any time after the date upon which any shares of Series C Preferred Stock
were first issued (the "Purchase Date"), any Additional Stock (as defined
below) without consideration or for a consideration per share less than the
Conversion Price for the Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock, as applicable, in effect immediately prior to
the issuance of such Additional Stock, the Conversion Price for such series
of Preferred Stock, as applicable, in effect immediately prior to each such
issuance shall forthwith (except as otherwise provided in this clause (i)) be
adjusted to a price determined by multiplying the applicable Conversion Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issuance (including shares of
Common Stock deemed to be issued pursuant to subsection 4(d)(i)(E)(1) or (2))
plus the number of shares of Common Stock that the aggregate consideration
received by the Corporation for such issuance would purchase at the
applicable Conversion Price; and the denominator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issuance
(including shares of Common Stock deemed to be issued pursuant to subsection
4(d)(i)(E)(1) or (2)) plus the number of shares of such Additional Stock.
(B) No adjustment of the
Conversion Price for any series of Preferred Stock shall be made in an
amount less than one cent per share, provided that any adjustments that are
not required to be made by reason of this sentence shall be carried forward
and shall be either taken into account in any subsequent adjustment made
prior to three (3) years from the date of the event giving rise to the
adjustment being carried forward, or shall be made at the end of three (3)
years from the date of the event giving rise to the adjustment being carried
forward. Except to the limited extent provided for in subsections (E)(3) and
(E)(4), no adjustment of such Conversion Price pursuant to this subsection
4(d)(i) shall have the effect of increasing the
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Conversion Price above the Conversion Price in effect immediately prior to
such adjustment.
(C) In the case of the issuance of
Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the Corporation for any
underwriting or otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of
the Common Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the fair value
thereof as determined by the Board of Directors irrespective of any
accounting treatment.
(E) In the case of the issuance (whether
before, on or after the Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe
for such convertible or exchangeable securities, the following provisions
shall apply for all purposes of this subsection 4(d)(i) and subsection
4(d)(ii):
(1) The aggregate maximum
number of shares of Common Stock deliverable upon exercise (assuming the
satisfaction of any conditions to exercisability, including without
limitation, the passage of time, but without taking into account potential
antidilution adjustments) of such options to purchase or rights to subscribe
for Common Stock shall be deemed to have been issued at the time such options
or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)),
if any, received by the Corporation upon the issuance of such options or
rights plus the minimum exercise price provided in such options or rights
(without taking into account potential antidilution adjustments) for the
Common Stock covered thereby.
(2) The aggregate maximum
number of shares of Common Stock deliverable upon conversion of, or in
exchange (assuming the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time, but
without taking into account potential antidilution adjustments) for, any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof shall be deemed to
have been issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration, if
any, received by the Corporation for any such securities and related options
or rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the minimum additional consideration, if any, to be
received by the Corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities
or the exercise of any
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related options or rights (the consideration in each case to be determined in
the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)).
(3) In the
event of any change in the number of shares of Common Stock deliverable
or in the consideration payable to the Corporation upon exercise of such
options or rights or upon conversion of or in exchange for such convertible
or exchangeable securities, including, but not limited to, a change resulting
from the antidilution provisions thereof (unless such options or rights or
convertible or exchangeable securities were merely deemed to be included in
the numerator and denominator for purposes of determining the number of
shares of Common Stock outstanding for purposes of subsection 4(d)(i)(A)),
the Conversion Price for each series of Preferred Stock, to the extent in any
way affected by or computed using such options, rights or securities, shall
be recomputed to reflect such change, but no further adjustment shall be made
for the actual issuance of Common Stock or any payment of such consideration
upon the exercise of any such options or rights or the conversion or exchange
of such securities.
(4) Upon the
expiration of any such options or rights, the termination of any such
rights to convert or exchange or the expiration of any options or rights
related to such convertible or exchangeable securities, the Conversion Price
of each series of Preferred Stock, to the extent in any way affected by or
computed using such options, rights or securities or options or rights
related to such securities (unless such options or rights were merely deemed
to be included in the numerator and denominator for purposes of determining
the number of shares of Common Stock outstanding for purposes of subsection
4(d)(i)(A)), shall be recomputed to reflect the issuance of only the number
of shares of Common Stock (and convertible or exchangeable securities that
remain in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the
exercise of the options or rights related to such securities.
(5) The number of
shares of Common Stock deemed issued and the consideration deemed paid
therefor pursuant to subsections 4(d)(i)(E)(1) and (2) shall be appropriately
adjusted to reflect any change, termination or expiration of the type
described in either subsection 4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean
any shares of Common Stock issued (or deemed to have been issued pursuant to
subsection 4(d)(i)(E)) by the Corporation after the Purchase Date other than:
(A) shares of
Common Stock issued pursuant to a transaction described in subsection
4(d)(iii) hereof;
(B) up to 6,300,000
shares of Common Stock issuable or issued to employees, consultants,
directors or vendors (if in transactions with primarily non-financing
purposes) of the Corporation directly or pursuant to a stock option plan or
restricted stock plan approved by the Board of Directors of the Corporation;
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(C) shares of Common
Stock issued or issuable (i) in a bona fide, firmly underwritten public
offering of shares of Common Stock before or in connection with which all
outstanding shares of Preferred Stock are converted to Common Stock, or (ii)
upon exercise of warrants or rights granted to underwriters in connection
with such a public offering;
(D) shares of
Common Stock issued pursuant to the conversion or exercise of
convertible or exercisable securities;
(E) shares of Common
Stock issued in connection with a bona fide business acquisition of or by
the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise; or
(F) shares of Common
Stock issued or issuable upon exercise of warrants or other securities or
rights to persons or entities with which the Company has business
relationships, provided such issuances are for other than primarily equity
financing purposes.
(iii) In the event the
Corporation should at any time or from time to time after the Purchase Date
fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or other securities or rights convertible
into, or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "Common Stock
Equivalents") without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the
Conversion Price of each series of Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion
of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents with the number of
shares issuable with respect to Common Stock Equivalents determined from time
to time in the manner provided for deemed issuances in subsection 4(d)(i)(E).
(iv) If the number of shares
of Common Stock outstanding at any time after the Purchase Date is
decreased by a combination of the outstanding shares of Common Stock, then,
following the record date of such combination, the Conversion Price for each
series of Preferred Stock shall be appropriately increased so that the number
of shares of Common Stock issuable on conversion of each share of such series
shall be decreased in proportion to such decrease in outstanding shares.
(e) OTHER DISTRIBUTIONS. In the
event the Corporation shall declare a distribution payable in securities
of other persons, evidences of indebtedness issued by the Corporation or
other persons, assets (excluding cash dividends) or options
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or rights not referred to in subsection 4(d)(iv), then, in each such case for
the purpose of this subsection 4(e), the holders of the Preferred Stock shall
be entitled to a proportionate share of any such distribution as though they
were the holders of the number of shares of Common Stock of the Corporation
into which their shares of Preferred Stock are convertible as of the record
date fixed for the determination of the holders of Common Stock of the
Corporation entitled to receive such distribution.
(f) RECAPITALIZATIONS. If at any time or
from time to time there shall be a recapitalization of the Common Stock
(other than a subdivision, combination or merger or sale of assets
transaction provided for elsewhere in this Section 4 or Section 2) provision
shall be made so that the holders of the Preferred Stock shall thereafter be
entitled to receive upon conversion of the Preferred Stock the number of
shares of stock or other securities or property of the Corporation or
otherwise, to which a holder of Common Stock deliverable upon conversion
would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the holders of the Preferred
Stock after the recapitalization to the end that the provisions of this
Section 4 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of the Preferred Stock)
shall be applicable after that event as nearly equivalent as may be
practicable.
(g) NO IMPAIRMENT. The Corporation
will not, by amendment of its Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 4
and in the taking of all such action as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of the Preferred Stock
against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued
upon the conversion of any share or shares of the Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the nearest
whole share. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Preferred Stock the holder is at the time converting into Common Stock and
the number of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment
or readjustment of the Conversion Price with respect to a series of
Preferred Stock pursuant to this Section 4, the Corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of a series of Preferred
Stock, for which an adjustment is being made, a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which
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such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (A)
such adjustment and readjustment, (B) the Conversion Price for each series of
Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property that at the time would be
received upon the conversion of a share of each series of Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event
of any taking by the Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to
receive any other right, the Corporation shall mail to each holder of
Preferred Stock, at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON
CONVERSION. The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of Preferred Stock; and if
at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding
shares of Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including, without
limitation, engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to this Certificate of Incorporation.
(k) NOTICES. Any notice required by the
provisions of this Section 4 to be given to the holders of Preferred Stock
shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on
the books of the Corporation.
5. VOTING RIGHTS; ELECTION OF DIRECTORS. The holder of each
share of Preferred Stock shall have the right to one vote for each share of
Common Stock into which such Preferred Stock could then be converted, and
with respect to such vote, such holder shall have full voting rights and
powers equal to the voting rights and powers of the holders of Common Stock,
and shall be entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the bylaws of the Corporation, and
shall be entitled to vote, together with holders of Common Stock, with
respect to any question upon which holders of Common Stock have the right to
vote. Fractional votes shall not, however, be permitted and any fractional
voting rights available on an as-converted basis (after aggregating all
shares into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest
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whole number (with one-half being rounded upward). With respect to the
election of directors of the Corporation, (i) the holders of Common Stock,
voting together as a single class, shall be entitled to elect three (3)
directors, (ii) the holders of Series A Preferred Stock, voting together as a
single class, shall be entitled to elect one (1) director, and (iii) the
holders of Series B Preferred Stock, voting together as a single class, shall
be entitled to elect two (2) directors. Any remaining directors shall be
elected by the Common Stock and Preferred Stock, voting together as a single
class and on an as-converted basis.
6. PROTECTIVE PROVISIONS.
Subject to the rights of series of Preferred Stock that may
from time to time come into existence, so long as at least two hundred
thousand (200,000) shares of Series B or Series C Preferred Stock are
outstanding, the Corporation shall not without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least
two-thirds of the then outstanding shares of Series A, Series B and Series C
Preferred Stock voting together as a single class:
(i) sell, convey, or otherwise
dispose of all or substantially all of its property or business or merge
into or consolidate with any other corporation (other than a wholly-owned
subsidiary corporation) or effect any transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of
the Corporation is disposed of;
(ii) alter or change the
rights, preferences or privileges of the shares of Preferred Stock so as
to affect adversely the shares;
(iii) authorize or issue, or
obligate itself to issue, any other equity security, including any other
security convertible into or exercisable for any equity security having a
preference over, or being on a parity with, the Preferred Stock with respect
to dividends, liquidation, redemption or voting;
(iv) increase or decrease the
authorized number of shares of Common Stock or Preferred Stock;
(v) take any action which would
result in the redemption of any shares of Common Stock (other than pursuant
to equity incentive agreements with service providers giving the Company the
right to repurchase shares upon the termination of services),
(vi) amend or waive any provision
of this Certificate of Incorporation which relates to the Series A, Series B
or Series C Preferred Stock;
(vii) increase the authorized
size of the Board of Directors; or
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(viii) take any action which would
result in the payment or declaration of any dividend on any shares of Common
or Preferred Stock.
7. STATUS OF CONVERTED STOCK. In the event any shares of
Preferred Stock shall be converted pursuant to Section 4 hereof, the shares
so converted shall be cancelled and shall not be issuable by the Corporation.
The Certificate of Incorporation of the Corporation shall be appropriately
amended to effect the corresponding reduction in the Corporation's authorized
capital stock.
C. COMMON STOCK. The rights, preferences, privileges and
restrictions granted to and imposed on the Common Stock are as set forth
below in this Article FOURTH(C).
1. DIVIDEND RIGHTS. Subject to the prior rights of holders
of all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the
Corporation legally available therefor, such dividends as may be declared
from time to time by the Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 2 of Article III(B) hereof.
3. VOTING RIGHTS. The holder of each share of Common Stock
shall have the right to one vote for each such share, and shall be entitled
to notice of any stockholders' meeting in accordance with the bylaws of the
Corporation, and shall be entitled to vote upon such matters and in such
manner as may be provided by law.
FOURTH: The sole stockholder of the Corporation executed a
written consent adopting the above-stated proposed amendment in accordance
with the provisions of Section 228(a) of the DGCL.
FIFTH: Said amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment as of the 23rd day of May, 2000.
KINZAN, INC.
By: /s/ Jeffrey P. Higgins
--------------------------
Jeffrey P. Higgins
Vice President and General
Counsel
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