CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER RIGHTS
OF THE SERIES A PREFERRED STOCK
OF XIOX CORPORATION
Pursuant to Section 151(g) of the
Delaware General Corporations Law
It is hereby certified that:
I. The name of the corporation is Xiox Corporation (the "Corporation"),
a Delaware corporation.
II. Set forth hereinafter is a statement of the voting powers,
preferences, limitations, restrictions, and relative rights of shares of Series
A Convertible Preferred Stock hereinafter designated as contained in a
resolution of the Board of Directors of the Corporation (the "Board of
Directors") pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, as amended (the
"Certificate of Incorporation"), and in accordance with Section 151(g) of the
Delaware General Corporations Law, which resolution was duly adopted by the
Board of Directors on September 10, 1998, and remains in full force and effect
as of the date hereof:
SERIES A PREFERRED STOCK
Section 1. Designation. The series of Preferred Stock hereby created
shall be designated and known as the "Series A Preferred Stock." The number of
shares constituting such series shall be 1,907,989.
Section 2. Liquidation Rights.
2.1 In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, each
holder of shares of Series A Preferred Stock shall be entitled to receive, prior
and in preference to the payment of any liquidation amount to the holders of the
Corporation's common stock, par value $0.01 per share ("Common Stock"), a
payment equal to the purchase price originally paid for the Series A Preferred
Stock upon issuance (the "Purchase Price") together with any declared but unpaid
dividends thereon, before any payment is made to the holders of common stock
(the "Preference Amount"). After the full Preference Amount on all outstanding
shares of the Series A Preferred Stock has been paid, any remaining funds and
assets of the Corporation legally available for distribution to stockholders
shall be distributed pro rata among the holders of the Common Stock. If the
Corporation has insufficient assets to permit payment of the Preference Amount
in full to all Series A Preferred Stock stockholders, then the assets of the
Corporation shall be distributed ratably to the holders of the Series A
Preferred Stock and the holders of shares of any other series of Preferred Stock
on a parity with the Series A Preferred Stock in proportion to the Preference
Amount each such holder would otherwise be entitled to receive.
2.2 A merger or consolidation of the Corporation, or
sale of the Corporation's Common Stock (including, without limitation, pursuant
to a tender offer) in any single transaction or series of related transactions,
in any such case in which its stockholders do not retain a majority of the
voting power in the surviving corporation, or a sale of all or substantially all
the Corporation's assets, shall each be deemed to be a liquidation, dissolution
or winding up of the Corporation.
Section 3. Conversion.
3.1 Voluntary Conversion. Each share of Series A
Preferred Stock will be convertible, at the option of the holder thereof, at the
office of the Corporation or any transfer agent for such shares, into Common
Stock. The number of shares of Common Stock into which each share of Series A
Preferred Stock will be converted will be equal to the Purchase Price of such
share divided by the Conversion Price (as hereinafter defined) of such share.
The initial Conversion Price for each share of Series A Preferred Stock shall be
an amount equal to the Purchase Price of such share. The Conversion Price shall
be subject to adjustment as provided in Section 3.3.
3.2 Mechanics of Conversion. No fractional shares of
Common Stock shall be issued upon conversion of Series A Preferred Stock. In
lieu of any fractional shares to which the holder would otherwise be entitled,
the Corporation shall pay cash equal to such fraction multiplied by the then
fair market value of one share of Common Stock, as reasonably determined in good
faith by the Board of Directors. Before any holder of Series A Preferred Stock
shall be entitled to receive certificates for the shares of Common Stock issued
upon conversion, such holder shall surrender the certificate or certificates for
the shares of Series A Preferred Stock being converted, duly endorsed, at the
principal office of the Corporation and shall state therein its name or the
name, or names, of its nominees in which it wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Series A Preferred Stock or to such holder's nominee or nominees, a
certificate or certificates for the number of shares of Common Stock to which
such holder or such holder's nominee shall be entitled as aforesaid, together
with cash in lieu of any fraction of a share of Common Stock. Subject to the
foregoing, such conversion shall be deemed to have been made immediately and
upon surrender of the certificate representing the shares of Series A Preferred
Stock to be converted in the case of a voluntary conversion pursuant to Section
3.1. The Person or Persons entitled to receive the shares of Common Stock
issuable upon conversion shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on such date.
3.3 Adjustments to Conversion Price. The Conversion
Price shall be subject to adjustment from time to time as follows:
(a) If the Corporation shall issue shares of
Common Stock to the holders of Common Stock as a dividend or stock split, or in
the event that the Corporation reduces the number of outstanding shares of
Common Stock in a reverse stock split or stock combination, then the Conversion
Price shall be adjusted such that the holders of shares of Series A Preferred
Stock shall receive, upon conversion of the Series A Preferred Stock, that
number of shares of Common Stock that such holder would have owned following
such dividend, stock split, reverse stock split or stock
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combination if such conversion had occurred immediately prior to the record date
for such stock split, stock dividend, reverse stock split or stock combination
of the Common Stock, as the case may be. If the Corporation shall issue shares
of Series A Preferred Stock to the holders of Series A Preferred Stock as a
stock dividend or stock split, or in the event that the Corporation reduces the
number of outstanding shares of Series A Preferred Stock in a reverse stock
split or stock combination, then the Conversion Price shall be adjusted such
that the holder of shares of Series A Preferred Stock shall receive, upon
conversion of the Series A Preferred Stock, the number of shares of Common Stock
that such holder would have owned if such conversion had occurred immediately
prior to the record date for such stock split, stock dividend, reverse stock
split or stock combination of the Series A Preferred Stock, as the case may be.
In the event of a reclassification or other similar transaction as a result of
which shares of Common Stock are converted into another security, then the
Conversion Price shall be determined such that the holders of shares of Series A
Preferred Stock shall receive, upon conversion of such Series A Preferred Stock,
the number of such securities that such holder would have owned following such
conversion of the Common Stock into another security if such conversion had
occurred immediately prior to the record date of such reclassification or other
similar transaction. No adjustments with respect to dividends (other than stock
dividends) shall be made upon conversion of any share of Series A Preferred
Stock; provided, however, that if a share of Series A Preferred Stock shall be
converted subsequent to the record date for the payment of a dividend (other
than a stock dividend) or other distribution on shares of Series A Preferred
Stock but prior to such payment, then the registered holder of such share at the
close of business on such record date shall be entitled to receive the dividend
(other than a stock dividend) or other distribution payable on such share on
such date notwithstanding the conversion thereof or the Corporation's default in
payment of the dividend (other than a stock dividend) due on such date.
(b) Upon the issuance by the Corporation of
Equity Securities (as defined in Section 3.3(b)(ii)(A) below) at a consideration
per share less than the Conversion Price of the Series A Preferred Stock in
effect immediately prior to the time of such issue or sale, other than an
issuance of stock or securities pursuant to Section 3.3(a) above or the issuance
of shares of Common Stock upon conversion of any shares of Series A Preferred
Stock, then forthwith upon such issue or sale, such Conversion Price shall be
reduced to a price (calculated to the nearest hundredth of a cent) determined by
dividing:
(i) an amount equal to the sum of
(x) the number of shares of Common Stock outstanding immediately prior to such
issue or sale multiplied by the Conversion Price in effect immediately prior to
such adjustment, (y) the number of shares of Common Stock issuable upon
conversion or exchange of any obligations or securities of the Corporation
outstanding immediately prior to such adjustment multiplied by the Conversion
Price in effect immediately prior to such adjustment, and (z) an amount equal to
the aggregate "consideration actually received" by the Corporation upon such
issue or sale; by
(ii) the sum of the number of
shares of Common Stock outstanding immediately after such issue or sale and the
number of shares of Common Stock issuable upon conversion or exchange of any
such obligations or securities of the Corporation outstanding
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immediately after such issue or sale.
For purposes of this Section 3.3(b), the follow provisions
shall be applicable:
(A) The term "Equity
Securities" as used in this Section 3.3(b) shall mean any shares of Common
Stock, or any obligation, or any share of stock or other security of the
Corporation convertible into or exchangeable for Common Stock, except for shares
of Common Stock or options to purchase Common Stock issued or granted to
officers, directors or employees of the Corporation and its subsidiaries either
pursuant to any stock purchase or stock option plan or other incentive stock
arrangement approved by the Corporation's Board of Directors.
(B) The case of an issue
or sale for cash of shares of Common Stock, the "consideration actually
received" by the Corporation therefor shall be deemed to be the amount of cash
received, before deducting therefrom any commissions or expenses paid by the
Corporation.
(C) In case of the
issuance (otherwise than upon conversion or exchange of obligations or
securities of the Corporation) of additional shares of Common Stock for a
consideration other than cash or a consideration partly other than cash, the
amount of consideration other than cash received by the Corporation for such
shares shall be deemed to be the value of such consideration as determined in
good faith by the Board of Directors.
(D) In case of the
issuance by the Corporation in any manner of any rights to subscribe for or to
purchase shares of Common Stock, or any options for the purchase of shares of
Common Stock or stock convertible into Common Stock, all shares of Common Stock
or stock convertible into Common Stock to which the holders of such rights or
options shall be entitled to subscribe for or purchase pursuant to such rights
or options shall be deemed "outstanding" as of the date of the offering of such
rights or the granting of such options, as the case may be, and the minimum
aggregate consideration named in such rights or options for the shares of Common
Stock or stock convertible into Common Stock covered thereby, plus the
consideration, if any, received by the Corporation for such rights or options,
shall be deemed to be the "consideration actually received" by the Corporation
(as of the date of the offering of such rights or the granting of such options,
as the case may be) for the issuance of such shares.
(E) In case of the
issuance or issuances by the Corporation in any manner of any obligations or of
any securities of the Corporation that shall be convertible into or exchangeable
for Common Stock, all shares of Common Stock issuable upon the conversion or
exchange of such obligations or securities shall be deemed issued as of the date
such obligations or securities are issued, and the amount of the "consideration
actually received" by the Corporation for such additional shares of Common Stock
shall be deemed to be the total of (x) the amount of consideration received by
the Corporation upon the issuance of such obligations or securities, plus (y)
the minimum aggregate consideration, if any, other than such obligations or
shares, receivable by the Corporation upon such conversion or exchange, except
in adjustment of dividends.
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(F) The amount of the
"consideration actually received" by the Corporation upon issuance of any rights
or options referred to in subsection (D) above or upon the issuance of any
obligations or securities that are convertible or exchangeable as described in
subsection (E) above, and the amount of the consideration, if any, other than
such obligations or securities so convertible or exchangeable, receivable by the
Corporation upon the exercise, conversion or exchange thereof shall be
determined in the same manner provided in subsections (B) and (C) above with
respect to the consideration received by the Corporation in case of the issuance
of additional shares of Common Stock; provided, however, that if such
obligations or securities so convertible or exchangeable are issued in payment
or satisfaction of any dividend upon any stock of the Corporation other than
Common Stock, the amount of the "consideration actually received" by the
Corporation upon the original issuance of such obligations or securities so
convertible or exchangeable shall be deemed to be the value of such obligations
or securities as of the date of the adoption of the resolution declaring such
dividend as determined by the Board of Directors at or as of that date. On the
expiration of any rights or options referred to in subsection (D), or the
termination of any right of conversion or exchange referred to in subsection
(E), or any change in the number of shares of Common Stock deliverable upon
exercise of such options or rights or upon conversion or exchange of such
convertible or exchangeable securities, the Conversion Price then in effect
shall forthwith be readjusted to such Conversion Price as would have obtained
had the adjustments made upon the basis of the delivery of only the number of
shares of Common Stock actually delivered or to be delivered upon the exercise
of such rights or options or upon the conversion or exchange of such securities.
(G) 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 or
options or rights not referred to in this Section 3.3(b), then, in each such
case, the holders of the Series A Preferred Stock shall be entitled to the
distributions provided for in Section 4 below, and no adjustment to the
Conversion Price provided for in this Section 3.3(b) shall be applicable.
3.4 Common Stock Reserved. The Corporation shall
reserve and keep available out of its authorized but unissued Common Stock such
number of shares of Common Stock as shall, at all times, be sufficient for
conversion of all outstanding Series A Preferred Stock.
Section 4. Dividend Rights.
4.1 Generally. The holders of shares of Series A
Preferred Stock will be entitled to receive, if, when and as declared by the
Board of Directors, out of any funds legally available therefor, noncumulative
dividends at the rate of 6% of the Purchase Price per share per annum
(appropriately adjusted for stock splits and combinations) for each share of
Series A Preferred Stock then held by them. Such dividends may be payable
quarterly or otherwise as the Board of Directors may from time to time
determine. Dividends may be declared and paid upon shares of Common Stock in any
fiscal year of the Corporation, only if dividends shall have been paid to or
declared and set apart upon all shares of Series A Preferred Stock, and all
shares of any other series of Preferred Stock on a parity with the Series A
Preferred Stock, at its annual rate for each quarter of such fiscal year of the
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Corporation, including the quarter in which such dividends upon shares of Common
Stock are declared. No right shall accrue to holders of Series A Preferred Stock
by reason of the fact that dividends on said shares are not declared in any
prior year, nor shall any undeclared or unpaid dividends bear or accrue
interest.
4.2 Participation with Common. If any dividend or
other distribution payable in property other than cash is declared on the Common
Stock (excluding any dividend or other distribution for which adjustment to the
Conversion Price is provided by Section 3.3), each holder of Series A Preferred
Stock on the record date for such dividend or distribution shall be entitled to
receive on the date of payment or distribution of such dividend or other
distribution the same property that such holder would have received if on such
record date such holder was the holder of record of the number (including for
purposes of this Section 4 any fraction) of shares of Common Stock into which
the shares of Series A Preferred Stock then held by such holder are convertible.
Section 5. Voting Rights.
5.1 Generally. Each holder of shares of Series A
Preferred Stock shall be entitled to the number of votes equal to the number of
shares of Common Stock into which such shares of Series A Preferred Stock could
be converted on the record date for the vote or consent of stockholders and
shall have voting rights and powers equal to the voting rights and powers of the
Common Stock. The holders of shares of Series A Preferred Stock shall be
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation and, except as provided in Section 5.2 below, shall vote with
holders of the Common Stock upon any matter submitted to a vote of stockholders,
except those matters required by law to be submitted to a class vote.
5.2 Series Vote. So long as any shares of Series A
Preferred Stock are outstanding, the Corporation shall not, without first
obtaining the approval by vote or written consent, in the manner provided by
law, of the holders of at least two-thirds of the total number of shares of
Series A Preferred Stock outstanding, voting separately as a single class: (1)
alter or change any of the powers, preferences, privileges or rights of the
Series A Preferred Stock; (2) create any new class or series of shares having
preferences prior to the Series A Preferred Stock in any manner, including,
without limitation, as to dividends or liquidation; (3) take any action that
reclassifies any outstanding shares into shares having preferences prior to the
Series A Preferred Stock in any manner, including, without limitation, as to
dividends or liquidation; or (4) alter or change the Company's Certificate of
Incorporation in a manner that adversely affected the rights of the Series A
Preferred Stock.
Section 6. Redemption.
6.1 Redemption Upon Certain Events. Subject to any
legal restrictions on the Corporation's redemption of shares, beginning on the
date of completion of the earlier of the following events (a) the consummation
of the closing of a public offering of the Corporation's Common Stock,
registered under the Securities Act of 1933, as amended, with gross proceeds to
the Corporation in excess of $15 million or (b) the date on which the closing
price of the Corporation's Common Stock on the Nasdaq SmallCap Market exceeds
$15/share each day for a period of 15
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consecutive trading days, the Corporation may elect to redeem all of the Series
A Preferred Stock then outstanding, provided, however, that if any such event
shall occur prior to the first anniversary of the first closing date, the
Corporation shall not be entitled to exercise its redemption rights under this
Section 6 until after such date. The redemption price for each share of Series A
Preferred Stock shall be the Purchase Price for such share plus all declared but
unpaid dividends thereon to the date of redemption, as adjusted for stock
splits, stock dividends, recapitalizations and the like. Notwithstanding
anything in the foregoing to the contrary, the holder of any share of Series A
Preferred Stock may elect to convert such share prior to the date of redemption
in accordance with Section 3 hereof.
6.2 Notice. The Corporation shall give notice of any
redemption of the Series A Preferred Stock pursuant to Section 6.1 by mailing a
copy of such notice not less than twenty (20) business days prior to the
redemption date to the holders of record of the Series A Preferred Stock (the
"Redemption Notice"). The Corporation shall mail such notice to the holders'
respective addresses appearing on the books of the Corporation or to the
addresses given by the holders to the Corporation for the purpose of such
notice.
6.3 Effect of Redemption. From and after the
redemption, unless there has been a default in payment of the redemption price,
all dividends, if any, on the Series A Preferred Stock redeemed shall cease to
accrue, all rights of the holders of such shares (except the right to receive
the redemption price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the Corporation legally
available for redemption of shares on the redemption date are insufficient to
redeem the total number of shares of Series A Preferred Stock to be redeemed on
such date, then those funds that are legally available shall be used to redeem
the maximum possible number of the shares ratably among the holders of the
shares to be redeemed. Series A Preferred Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein.
Section 7. Reservation of Rights. Pursuant to the authority vested in
it by the Certificate of Incorporation, the Board of Directors reserves the
right to designate from time to time one or more additional series of Preferred
Stock with powers, designations, preferences, and rights on a parity with or
junior to the Series A Preferred Stock.
Section 8. Notices. In addition to any other notices to which the
holders of Series A Preferred Stock may be entitled pursuant to the Certificate
of Incorporation, the Bylaws of the Corporation, law, contract or otherwise, the
Corporation shall cause to be sent to each holder all written communications
sent generally to the holders of Common Stock. The Corporation shall cause such
communications to be sent to holders of Series A Preferred Stock concurrently
with, and in the same manner as, the sending of such communications to the
holders of Common Stock.
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Signed on this 17 day of September, 1998.
XIOX CORPORATION
By: /s/ William H. Welling
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William H. Welling
Chief Executive Officer and
President
ATTEST:
/s/ Melanie D. Reid
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Melanie D. Reid
Chief Financial Officer
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