EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION OF
INTERNATIONAL NETWORK SERVICES
Donald K. McKinney and Kevin J. Laughlin hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of International Network Services, a California corporation (the
"Corporation" or the "Company").
2. The Articles of Incorporation of this corporation are hereby amended
and restated to read as follows:
"I.
The name of the Corporation is International Network Services.
II.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a professional permitted to be incorporated by the California
Corporations Code.
III.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is forty-seven million
(47,000,000) shares, thirty million (30,000,000) shares of which shall be Common
Stock (the "Common Stock") and seventeen million (17,000,000) shares of which
shall be Preferred Stock.
B. Two million eight hundred forty-eight thousand (2,848,000) of the
authorized shares of Preferred Stock are hereby designated "Series A Preferred
Stock" (the "Series A Preferred"), six million eight hundred forty-eight
thousand nine hundred twenty-two (6,848,922) of the authorized shares of
Preferred Stock are hereby designated "Series B Preferred Stock" (the "Series B
Preferred"), and six million four hundred sixty-eight thousand three hundred
forty-six (6,468,346) shares of the authorized Preferred Stock are hereby
designated "Series C Preferred Stock" (the "Series C Preferred"). The Series A
Preferred, the Series B Preferred and the Series C Preferred are hereinafter
collectively referred to as the "Series Preferred."
C. The rights, preferences, privileges, restrictions and other matters
relating to the Series Preferred are as follows:
1. Dividend Rights.
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(a) Holders of Series Preferred, in preference to the holders of
any other stock of the Company ("Junior Stock"), shall be entitled to receive,
when and as declared by the Board of Directors, but only out of funds that are
legally available therefor, cash dividends at the rate of eight percent (8%) of
the "Original Issue Price" of each such series of Preferred Stock per annum on
each outstanding share of Series Preferred. The Original Issue Price of the
Series A Preferred shall be equal to $0.602738, the Original Issue Price of the
Series B Preferred shall be equal to $0.335819, and the Original Issue Price of
the Series C Preferred shall be equal to $0.79. Such dividends shall not be
cumulative.
(b) So long as any shares of Series Preferred shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Company be purchased, redeemed, or
otherwise acquired for value by the Company (except for acquisitions of common
stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of employment or in exercise of the
Company's right of first refusal upon a proposed transfer) until all dividends
on the Series Preferred shall have been paid or declared and set apart. In the
event dividends are paid on any share of Common Stock, an additional dividend
shall be paid with respect to all outstanding shares of Series Preferred in an
amount equal per share of Series Preferred (on an as-if-converted to Common
Stock basis) to the amount paid or set aside for each share of Common Stock. The
provisions of this Section 1(b) shall not, however, apply to (i) a dividend
payable in Common Stock, (ii) the acquisition of shares of any Junior Stock in
exchange for shares of any other Junior Stock, or (iii) any repurchase of any
outstanding securities of the Company that is unanimously approved by the
Company's Board of Directors. The holders of the Series Preferred expressly
waive their rights, if any, as described in California Corporations Code
Sections 503 and 506 as they relate to repurchase of shares upon termination of
employment.
2. Voting Rights.
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(a) Except as otherwise provided herein or as required by law,
the Series Preferred shall be voted equally with the shares of the Common Stock
of the Company and not as a separate class, at any annual or special meeting of
shareholders of the Company, and may act by written consent in the same manner
as the Common Stock, in either
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case upon the following basis: each holder of shares of Series Preferred shall
be entitled to such number of votes as shall be equal to the whole number of
shares of Common Stock into which such holder's aggregate number of shares of
Series Preferred are convertible (pursuant to Section 5 hereof) immediately
after the close of business on the record date fixed for such meeting or the
effective date of such written consent.
(b) The Company's Board of Directors shall consist of six
members, elected as follows: (i) so long as at least four million (4,000,000)
shares of Series B Preferred are outstanding, holders of the Series B Preferred,
voting as a separate class, shall be entitled to elect two (2) members of the
Board of Directors at or pursuant to each meeting or consent of the Company's
shareholders for the election of directors, and to remove from office such
directors and to fill any vacancy caused by the resignation, death or removal of
such directors; (ii) holders of the Common Stock, voting as a separate class,
shall be entitled to elect one (1) member of the Board of Directors at or
pursuant to each meeting or consent of the Company's shareholders for the
election of directors, and to remove from office such director and to fill any
vacancy caused by the resignation, death or removal of such director; (iii) so
long as at least one million five hundred thousand (1,500,000) shares of Series
A Preferred are outstanding, holders of the Series A Preferred, voting as a
separate class, shall be entitled to elect one (1) member of the Board of
Directors at or pursuant to each meeting or consent of the Company's
shareholders for the election of directors, and to remove from office such
director and to fill any vacancy caused by the resignation, death or removal of
such director; and (iv) the remaining directors authorized for election at such
election of directors shall be elected by the holders of the Common Stock and
the Series Preferred voting together in accordance with Section 2(a) hereof.
(c) In addition to any other vote or consent required herein or
by law, so long as at least three million four hundred twenty-four thousand four
hundred sixty-one (3,424,461) shares of Series B Preferred remain outstanding,
the vote or written consent of the holders of at least two-thirds (2/3) of the
outstanding Series B Preferred shall be necessary for effecting or validating
the following actions:
(i) Any increase or decrease, whether by reclassification
or otherwise, in the authorized shares of Series A Preferred or Series B
Preferred;
(ii) Any redemption of, or payment of dividends with respect
to, Junior Stock, other than a repurchase of Junior Stock pursuant to the
exercise of any contractual or other legal rights of
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first refusal or repurchase, or any repurchase of any outstanding securities of
the Company that is approved by the Company's Board of Directors; or
(iii) Any action to change the authorized number of directors
of the Company's Board of Directors.
(d) In addition to any other vote or consent required herein or
by law, so long as at least two million five hundred thirty-one thousand six
hundred forty-five (2,531,645) shares of Series C Preferred remain outstanding,
the vote or written consent of the holders of at least a majority of the
outstanding Series C Preferred shall be necessary for effecting or validating
the following actions:
(i) Any increase or decrease, whether by reclassification
or otherwise, in the authorized shares of Series C Preferred; or
(ii) Any redemption of, or payment of dividends with respect
to, Junior Stock, other than a repurchase of Junior Stock pursuant to the
exercise of any contractual or other legal rights of first refusal or
repurchase, or any repurchase of any outstanding securities of the Company that
is approved by the Company's Board of Directors.
(e) In addition to any other vote or consent required herein or
by law, so long as at least three million four hundred twenty-four thousand four
hundred sixty-one (3,424,461) shares of Series B Preferred and two million five
hundred thirty-one thousand six hundred forty-five (2,531,645) shares of Series
C Preferred remain outstanding, the vote or written consent of the holders of at
least a majority of the outstanding Series B Preferred and Series C Preferred
voting together as a single class, shall be necessary for effecting or
validating the following actions:
(i) Any amendment, alteration, or repeal of any provision
of the Articles of Incorporation or the Bylaws of the Company (including any
filing of a Certificate of Determination), that adversely affects the rights,
preferences or privileges of the Series B Preferred or Series C Preferred;
(ii) Any creation, whether by reclassification or otherwise,
of any new class or series of shares having rights, preferences or privileges
senior to or on parity with the Series B Preferred or Series C Preferred; or
(iii) Any agreement to sell, lease or otherwise dispose of
all or substantially all of the assets, property or busi-
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ness of the Company, or to merge or consolidate the Company with any person, or
permit any other person to merge into it, or any other reorganization except for
mergers, consolidations or reorganizations in which the Company is the surviving
corporation and, after giving effect to the merger, consolidation, or
reorganization, the holders of the Company's outstanding capital stock
immediately preceding such event own more than fifty percent (50%) of the
outstanding capital stock of the surviving corporation.
3. Liquidation Rights.
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(a) Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock, the holders of Series
Preferred shall be entitled to be paid out of the assets of the Company an
amount per share of Series Preferred equal to the sum of (i) the Original Issue
Price, and (ii) all declared but unpaid dividends on such shares to the date of
such payment.
(b) After the payment of the full liquidation preference of the
Series Preferred as set forth in Section 3(a) above, the remaining assets of the
Company legally available for distri bution, if any, shall be distributed
ratably to the holders of the Common Stock and Series Preferred on an as-if-
converted basis until such time as the holders of the Series A Preferred, Series
B Preferred and Series C Preferred have received a total liquidation amount of
$1.007457 per share, $1.007457 per share and $1.14 per share, respectively (as
adjusted for stock splits, recapitalization and the like). The remaining assets
of the Company legally available for distribution, if any, shall be distributed
ratably to the holders of Common Stock.
(c) The following events shall be considered a liquidation under
Section 3(a):
(i) (A) any consolidation or merger of the Company with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the Company shall not be the continuing or surviving
entity of such consolidation, merger or reorganization and the holders of the
Company's outstanding capital stock immediately preceding such event own less
than fifty percent (50%) of the outstanding capital stock of the surviving
corporation; or (B) any transaction or series of related transactions by the
Company in which in excess of fifty percent (50%) of the Company's voting power
is transferred; or
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(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company.
(d) If, upon any liquidation, distribution, or winding up, the
assets of the Company shall be insufficient to make payment in full to all
holders of Series Preferred, then such assets shall be distributed among the
holders of Series Preferred at the time outstanding, ratably in proportion to
the full amounts to which they would otherwise be respectively entitled pursuant
to Section 3(a) above.
4. Redemption.
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(a) The Company shall be obligated to redeem the Series
Preferred as follows:
(1) At any time after May 19, 1998, the holders of at least
two-thirds of (2/3) of the then outstanding shares of Series B Preferred and
Series C Preferred, voting together as a single class, may require the Company
to redeem all of the outstanding Series Preferred for cash in three equal annual
installments, at a per share purchase price equal to the Original Issue Price
plus ten percent (10%) per year compounded annually through the redemption date
(the "Redemption Price"), by giving notice (the "Exercise Notice") to the
Company. Such Exercise Notice shall specify the initial redemption date, which
date shall be at least 60 days from the effective date of the Exercise Notice.
(2) The Company shall redeem the shares of Series Preferred
to be redeemed hereunder in three installments of equal amount, with the first
installment on the initial redemption date specified in the Exercise Notice, the
second installment on the first anniversary of such date and the third
installment on the second anniversary of such date. Each such installment date
shall be a "Redemption Date" as described herein.
(3) At least thirty (30) but no more than sixty (60) days
prior to each Redemption Date, the Company shall send a notice (a "Redemption
Notice") to all holders of Series Preferred setting forth (a) the Redemption
Price for the shares to be redeemed; and (b) the place at which such holders may
obtain payment of the Redemption Price upon surrender of their share
certificates. If the Company does not have sufficient funds legally available to
redeem all shares to be redeemed at the Redemption Date, then it shall redeem
such shares pro rata (based on the portion of the aggregate Redemption Price
payable to them) to the extent possible and shall redeem the remaining shares to
be redeemed as soon as sufficient funds are legally available.
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(b) On or prior to each Redemption Date, the Company shall
deposit the Redemption Price of all shares to be redeemed with a bank or trust
company having aggregate capital and surplus in excess of $10,000,000, as a
trust fund, with irrevocable instructions and authority to the bank or trust
company to pay, on and after such Redemption Date, the Redemption Price of the
shares to their respective holders upon the surrender of their share
certificates. The balance of any funds deposited by the Company pursuant to this
Section 4(b) remaining unclaimed at the expiration of one year following such
Redemption Date shall be returned to the Company promptly upon its written
request.
(c) On or after such Redemption Date, each holder of shares of
Series Preferred shall surrender such holder's certificates representing such
shares to the Company and thereupon the 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. From and after such Redemption Date, unless
there shall have been a default in payment of the Redemption Price or the
Company is unable to pay the Redemption Price due to not having sufficient
legally available funds, all dividends on the shares of Series Preferred shall
cease to accrue and all rights of the holders of such shares as holders of
Series Preferred (except the right to receive the Redemption Price without
interest upon surrender of their certificates), shall cease and terminate with
respect to such shares, provided that in the event that shares of Series
Preferred are not redeemed due to a default in payment by the Company or because
the Company does not have sufficient legally available funds, such shares of
Series Preferred shall remain outstanding and shall be entitled to all of the
rights and preferences provided herein.
5. Conversion Rights. The holders of the Series Preferred shall
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have the following rights to convert the Series Preferred into shares of Common
Stock:
(a) Optional Conversion. Subject to and in compliance with the
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provisions of this Section 5, any shares of Series Preferred may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the applicable "Conversion Rate" for such series of
Preferred Stock then in effect (determined as provided in Section 5(b)) by the
number of shares of Series Preferred being converted.
(b) Conversion Rate. The conversion rate in effect at any time
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for conversion of the Series A Preferred (the "Series A
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Conversion Rate") shall be the quotient obtained by dividing $0.17885 by the
"Series A Conversion Price," calculated as provided in Section 5(c). The
conversion rate in effect at any time for conversion of the Series B Preferred
(the "Series B Conversion Rate") shall be the quotient obtained by dividing the
Original Issue Price of the Series B Preferred by the "Series B Conversion
Price," calculated as provided in Section 5(c). The conversion rate in effect
at any time for conversion of the Series C Preferred (the "Series C Conversion
Rate") shall be the quotient obtained by dividing the Original Issue Price of
the Series C Preferred by the "Series C Conversion Price," calculated as
provided in Section 5(c).
(c) Conversion Price. The conversion price for the Series A
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Preferred shall initially be $0.17885 (the "Series A Conversion Price"). Such
initial Series A Conversion Price shall be adjusted from time to time in
accordance with this Section 5. All references to the Series A Conversion Price
herein shall mean the Series A Conversion Price as so adjusted. The conversion
price for Series B Preferred shall initially be the Original Issue Price of the
Series B Preferred (the "Series B Conversion Price"). Such initial Series B
Conversion Price shall be adjusted from time to time in accordance with this
Section 5. All references to the Series B Conversion Price herein shall mean
the Series B Conversion Price as so adjusted. The conversion price for Series C
Preferred shall initially be the Original Issue Price of the Series C Preferred
(the "Series C Conversion Price"). Such initial Series C Conversion Price shall
be adjusted from time to time in accordance with this Section 5. All references
to the Series C Conversion Price herein shall mean the Series C Conversion Price
as so adjusted.
(d) Mechanics of Conversion. Each holder of Series Preferred who
-----------------------
desires to convert the same into shares of Common Stock pursuant to this Section
5 shall surrender the certificate or certif icates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Series Preferred, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Series
Preferred being converted and the name or names in which said holder wishes the
certificate or certificates for shares of Common Stock to be issued (except that
no such notice of intent to convert shall be necessary in the event of an
automatic conversion pursuant to Section 5(m) below). Thereupon, the Company
shall promptly issue and deliver at such office to such holder a certificate or
certificates for the number of shares of Common Stock to which such holder is
entitled. Any declared and unpaid dividends on the Series Preferred being
converted shall remain payable to the holders converting such shares on the
specified payment date therefor. Except as provided in Section 5(m) below, such
conversion shall be deemed to have been made
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at the close of business on the date of such surrender of the certificates
representing the shares of Series Preferred to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date.
(e) Adjustment for Stock Splits and Combinations. If the Company
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shall at any time or from time to time after the date that the first share of a
series of Preferred Stock is issued (for each such series, the "Original Issue
Date") effect a subdivision of the outstanding Common Stock, the Conversion
Price for such series 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 Original Issue Date of a series of Preferred Stock
combine the outstanding shares of Common Stock into a smaller number of shares,
the Conversion Price for such series in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
Section 5(e) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(f) Adjustment for Common Stock Dividends and Distributions. If
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the Company at any time or from time to time after the Original Issue Date of a
series of Preferred Stock makes, or fixes a record date for the 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 Conversion
Price for such series that is then in effect shall be decreased as of the time
of such issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the Conversion Price then in effect
by a fraction (1) 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, and (2) 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 Conversion Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Conversion Price shall
be adjusted pursuant to this Section 5(f) to reflect the actual payment of such
dividend or distribution.
(g) Adjustments for Other Dividends and Distributions. If the
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Company at any time or from time to time after the Original Issue Date of a
series of Preferred Stock makes, or fixes a record
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date for the determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in securities of the Company other than
shares of Common Stock, in each such event provision shall be made so that the
holders of such series of Preferred Stock shall receive upon conversion thereof,
in addition to the number of shares of Common Stock receivable thereupon, the
amount of other securities of the Company which they would have received had
their Series Preferred been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such event to
and including the conversion date, retained such securities receivable by them
as aforesaid during such period, subject to all other adjustments called for
during such period under this Section 5 with respect to the rights of the
holders of the Series Preferred or with respect to such other securities by
their terms.
(h) Adjustment for Reclassification, Exchange and Substitution.
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If at any time or from time to time after the Original Issue Date of a series of
Preferred Stock, the Common Stock issuable upon the conversion of such series of
Preferred Stock is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 5 or in Section 3(c)), in any such event each holder
of such series of Preferred Stock shall have the right thereafter to convert
such stock into the kind and amount of stock and other securities and 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 Preferred 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.
(i) Reorganizations, Mergers, Consolidations or Sales of Assets.
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If at any time or from time to time after the Original Issue Date of a series of
Preferred Stock, there is a capital reorganization of the Common Stock (other
than a recapitalization, subdivision, combination, reclassification, exchange
or substitution of shares provided for elsewhere in this Section 5 or in Section
3(c)), as a part of such capital reorganization, provision shall be made so that
the holders of such series of Preferred Stock shall thereafter be entitled to
receive upon conversion of such series of Preferred Stock the number of shares
of stock or other securities or property of the Company to which a holder of the
number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, subject to adjustment in respect of
such stock or securities by the terms thereof. In any such case, appropriate
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adjustment shall be made in the application of the provisions of this Section 5
with respect to the rights of the holders of Series Preferred after the capital
reorganization to the end that the provisions of this Section 5 (including
adjustment of the Conversion Price then in effect and the number of shares
issuable upon conversion of the Series Preferred) shall be applicable after that
event and be as nearly equivalent as practicable.
(j) Sale of Shares Below Conversion Price.
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(1) If at any time or from time to time after the Original
Issue Date of a series of Preferred Stock, the Company issues or sells, or is
deemed by the express provisions of this subsection (j) to have issued or sold,
Additional Shares of Common Stock (as hereinafter defined), other than as a
dividend or other distribution on any class of stock as provided in Section 5(f)
above, and other than a subdivision or combination of shares of Common Stock as
provided in Section 5(e) above, for an Effective Price (as defined in
subsection (j)(4) below) less than the then effective Conversion Price of such
series, then and in each case the then existing Conversion Price shall be
reduced, as of the opening of business on the date of such issue or sale, to a
price determined by multiplying the Conversion Price by a fraction (i) the
numerator of which shall be (A) the number of shares of Common Stock deemed
outstanding (as defined in the following sentence) immediately prior to such
issue or sale, plus (B) the number of shares of Common Stock which the aggregate
consideration received (as defined in subsection (j)(2)) by the Company for the
total number of Additional Shares of Common Stock so issued would purchase at
such Conversion Price, and (ii) the denominator of which shall be the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale plus the total Additional Shares of Common Stock so
issued. For the purposes of the preceding sentence, all outstanding shares of
Common Stock and all shares of Common Stock issuable upon conversion of Series
Preferred that are outstanding as of the close of business on the day next
preceding the date of issue or sale of Additional Shares of Common Stock shall
be deemed outstanding.
(2) For the purpose of making any adjustment required under this
Section 5(j), the consideration received by the Company for any issue or sale of
securities shall (A) to the extent it consists of cash, be computed at the net
amount of cash received by the Company after deduction of any underwriting or
similar commissions, compensation or concessions paid or allowed by the
Company in connection with such issue or sale but without deduction of any
expenses payable by the Company, (B) to the extent it consists of property other
than cash, be computed at the fair value of that property as determined in good
faith by the Board of Directors, and (C) if Additional Shares of
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Common Stock, Convertible Securities (as hereinafter defined) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined in
good faith by the Board of Directors to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.
(3) For the purpose of the adjustment required under this
Section 5(j), if the Company issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares
of Common Stock is less than the applicable Conversion Price, in each case the
Company shall be deemed to have issued at the time of the issuance of such
rights or options or Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, received by the Company for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such rights or options, the minimum amounts of consideration, if any, payable
to the Company upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof; provided that if in
the case of Convertible Securities the minimum amounts of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, the Company shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; provided
further that if the minimum amount of consideration payable to the Company upon
the exercise or conversion of such rights, options or Convertible Securities is
subsequently increased, the Effective Price shall be again recalculated using
the increased minimum amount of consideration payable to the Company upon the
exercise or conversion of such rights, options or Convertible Securities. No
further adjustment of the Conversion Price, as adjusted upon the issuance of
such rights, options or Convertible Securities, shall be made as a result of the
actual issuance of Additional Shares of Common Stock on
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the exercise of any such rights or options or the conversion of any such
Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, the Conversion Price as adjusted upon the issuance of
such rights, options or Convertible Securities shall be readjusted to the
Conversion Price which would have been in effect had an adjustment been made on
the basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company upon such exercise,
plus the consideration, if any, actually received by the Company for the
granting of all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities,
provided that such readjustment shall not apply to shares that have previously
been converted.
(4) "Additional Shares of Common Stock" for each series of
Preferred Stock shall mean all shares of Common Stock issued by the Company,
whether or not subsequently reacquired or retired by the Company, other than (1)
shares of Common Stock issued upon conversion of the Series Preferred; (2) up
to 3,643,104 shares of Common Stock, and/or options, warrants or other Common
Stock purchase rights, issued after the Original Issue Date to employees,
officers or directors of, or consultants or advisors to the Company or any
subsidiary pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board, net of repurchases and option
expirations (provided that shares issued pursuant to the exercise of options or
warrants issued after the Original Issue Date shall not be included in such
number if such shares were included at the time the option or warrant was
issued); (3) shares of Common Stock or Convertible Securities issued in
connection with equipment lease or commercial credit agreements with financial
institutions and (4) shares of Common Stock issued or issuable upon exercise of
the Warrants to purchase Common Stock issued pursuant to the Note and Warrant
Purchase Agreement dated March 15, 1994. The "Effective Price" of Additional
Shares of Common Stock shall mean the quotient determined by dividing the total
number of Additional Shares of Common Stock issued or sold, or deemed to have
been issued or sold by the Company under this Section 5(j) into the aggregate
consideration received, or deemed to have been received by the Company for such
issue under this Section 5(j), for such Additional Shares of Common Stock.
-13-
(k) Accountants' Certificate of Adjustment. In each case of an
--------------------------------------
adjustment or adjustment of the Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series
Preferred, if the Series Preferred is then convertible pursuant to this Section
5, 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 Preferred 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, including a statement of (1) the
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (2) the Conversion Price at the time in effect, (3) the number of
Additional Shares of Common Stock and (4) the type and amount, if any, of other
property which at the time would be received upon conversion of the Series
Preferred.
(l) Notices of Record Date. Upon (i) any taking by the Company
----------------------
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 or
other distribution, or (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company with or into any other corporation, or
any transfer of all or substantially all the assets of the Company to any other
person, or any voluntary or involuntary dissolution, liquidation or winding up
of the Company, the Company shall mail to each holder of Series Preferred at
least twenty (20) days prior to the record date specified therein a notice
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (2) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (3) the date, if any, that is to be fixed as
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up.
(m) Automatic Conversion.
--------------------
(1) Each share of a series of Preferred Stock shall
automatically be converted into shares of Common Stock, based on the then-
effective Conversion Price for such series, at any time upon the affirmative
vote of the holders of a majority of the out-
-14-
standing shares of Series B Preferred and Series C Preferred, voting together as
a single class, or immediately upon the closing of a firmly underwritten public
offering pursuant to an effective registra tion statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Company in which (i) the per share price is at least $1.65 (as
adjusted for stock splits, recapitalizations and the like), and (ii) the gross
cash proceeds to the Company (before underwriting discounts, commissions and
fees) are at least $7,500,000. Upon such automatic conversion, any declared and
unpaid dividends shall remain payable on the specified payment date.
(2) Upon the occurrence of the event specified in paragraph
(1) above, the outstanding shares of each such series of Preferred Stock shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent; provided, however, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificates evidencing
such shares of Series Preferred are either delivered to the Company or its
transfer agent as provided below, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates. Upon the
occurrence of such automatic conversion of the Series Preferred, the holders of
Series Preferred shall surrender the certificates representing such shares at
the office of the Company or any transfer agent for the Series Preferred.
Thereupon, there shall be issued and delivered to such holder promptly at such
office and in its name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Common Stock into
which the shares of Series Preferred surrendered were convertible on the date on
which such automatic conversion occurred. All declared and unpaid dividends on
the shares of Series Preferred being converted, to and including the date of
such conversion, shall remain payable on the specified payment date.
(n) Fractional Shares. No fractional shares of Common Stock
-----------------
shall be issued upon conversion of Series Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Corporation shall, in
lieu of issuing any fractional share, pay cash equal to the product of such
fraction
-15-
multiplied by the Common Stock's fair market value (as determined by the Board)
on the date of conversion.
(o) Reservation of Stock Issuable Upon Conversion. 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 the Series Preferred, 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 the Series Preferred. 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 the Series Preferred, the
Company 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 purpose.
(p) Notices. Any notice required by the provisions of this
-------
Section 5 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
(q) Payment of Taxes. The Company will pay all taxes (other than
----------------
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series Preferred
so converted were registered.
(r) No Dilution or Impairment. The Company shall not amend its
-------------------------
Articles of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Series Preferred
against dilution or other impairment.
-16-
6. No Reissuance of Series Preferred. No share or shares of
---------------------------------
Series Preferred acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued.
7. Residual Rights. All rights accruing to the outstanding
---------------
shares of the Company not otherwise expressly provided for in the Restated
Articles of Incorporation or any subsequent Restated Articles of Incorporation
shall be vested in the Common Stock.
IV.
A. The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
B. The Corporation is authorized to indemnify the directors and officers
of the Corporation to the fullest extent permissible under California law.
C. Any repeal or modification of this Article shall only be prospective
and shall not effect the rights under this Article in effect at the time of the
alleged occurrence of any action or omission to act giving rise to liability."
3. The foregoing amendment and restatement of the articles of
incorporation has been duly approved by the Board of Directors of this
Corporation.
4. The foregoing amendment and restatement of the articles of
incorporation has been duly approved by the required vote of share holders in
accordance with Section 902 of the California Corporations Code. The
Corporation has two classes of stock outstanding and such classes of stock are
entitled to vote with respect to the amendment herein set forth. The total
number of outstanding shares of Common Stock of the Corporation is 7,072,800.
The total number of out standing shares of Series A Preferred of the
Corporation is 2,848,000.
-17-
The total number of outstanding shares of Series B Preferred of the Corporation
is 6,848,922. The number of shares voting in favor of the amendment equaled or
exceeded the vote required, such required vote being a majority of the
outstanding shares of Common Stock, a majority of the outstanding Series
Preferred voting together as a single class, and two-thirds of the outstanding
shares of Series B Preferred voting as a separate class.
(The balance of this page is intentionally left blank).
-18-
We further declare under penalty of perjury that the matters set forth in
the foregoing certificate are true and correct of our own knowledge.
Executed at Mountain View, California on June 27, 1994.
/s/ Donald K. McKinney
-------------------------------
Donald K. McKinney, President
/s/ Kevin J. Laughlin
-------------------------------
Kevin J. Laughlin, Secretary
-19-
Ex 3.1
CERTIFICATE OF AMENDMENT OF
RESTATED ARTICLES OF INCORPORATION OF
INTERNATIONAL NETWORK SERVICES
Donald K. McKinney and Kevin J. Laughlin hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of International Network Services, a California corporation (the
"Corporation" or the "Company").
2. That Section III B. of the Restated Articles of Incorporation of this
corporation is hereby amended to read as follows:
"B. Two million eight hundred forty-eight thousand (2,848,000) of the
authorized shares of Preferred Stock are hereby designated "Series A Preferred
Stock" (the "Series A Preferred"), six million eight hundred forty-eight
thousand nine hundred twenty-two (6,848,922) of the authorized shares of
Preferred Stock are hereby designated "Series B Preferred Stock" (the "Series B
Preferred"), and seven million one hundred one thousand two hundred fifty-eight
(7,101,258) shares of the authorized Preferred Stock are hereby designated
"Series C Preferred Stock" (the "Series C Preferred"). The Series A Preferred,
the Series B Preferred and the Series C Preferred are hereinafter collectively
referred to as the "Series Preferred."
3. That Section III C.2.(d) of the Restated Articles of Incorporation of
this corporation is hereby amended to read as follows:
"(d) In addition to any other vote or consent required herein or
by law, so long as at least two million eight hundred sixty-one thousand eighty-
nine (2,861,089) shares of Series C Preferred remain outstanding, the vote or
written consent of the holders of at least a majority of the outstanding Series
C Preferred shall be necessary for effecting or validating the following
actions:
(i) Any increase or decrease, whether by reclassification
or otherwise, in the authorized shares of Series C Preferred; or
(ii) Any redemption of, or payment of dividends with
respect to, Junior Stock, other than a repurchase of Junior Stock pursuant to
the exercise of any contractual or other legal rights of first refusal or
repurchase, or any repurchase of any outstanding securities of the Company that
is approved by the Company's Board of Directors."
4. That Section III C.2.(e) of the Restated Articles of Incorporation of
this corporation is hereby amended to read as follows:
"(e) In addition to any other vote or consent required herein or
by law, so long as at least three million four hundred twenty-four thousand four
hundred sixty-one (3,424,461) shares of Series B Preferred and two million eight
hundred sixty-one thousand eighty-nine (2,861,089) shares of Series C Preferred
remain outstanding, the vote or written consent of the holders of at least a
majority of the outstanding Series B Preferred and Series C Preferred voting
together as a single class, shall be necessary for effecting or validating the
following actions:
(i) Any amendment, alteration, or repeal of any provision
of the Articles of Incorporation or the Bylaws of the Company (including any
filing of a Certificate of Determination), that adversely affects the rights,
preferences or privileges of the Series B Preferred or Series C Preferred;
(ii) Any creation, whether by reclassification or otherwise,
of any new class or series of shares having rights, prefer ences or privileges
senior to or on parity with the Series B Preferred or Series C Preferred; or
(iii) Any agreement to sell, lease or otherwise dispose of
all or substantially all of the assets, property or busi ness of the Company, or
to merge or consolidate the Company with any person, or permit any other person
to merge into it, or any other reorganization except for mergers, consolidations
or reorganizations in which the Company is the surviving corporation and, after
giving effect to the merger, consolidation, or reorganization, the holders of
the Company's outstanding capital stock immediately preceding such event own
more than fifty percent (50%) of the outstanding capital stock of the surviving
corporation."
5. The foregoing amendment of the restated articles of incorporation has
been duly approved by the Board of Directors of this Corporation.
6. The foregoing amendment of the restated articles of incorporation has
been duly approved by the required vote of share holders in accordance with
Sections 902 and 903 of the California Corporations Code. The Corporation has
two classes of stock outstanding and such classes of stock are entitled to vote
with respect to the amendment herein set forth. The total number of outstanding
shares of Common Stock of the Corporation is 7,922,800. The total number of
outstanding shares of Series A Preferred of the
-2-
Corporation is 2,848,000. The total number of outstanding shares of Series B
Preferred of the Corporation is 6,848,922. The total number of outstanding
shares of Series C Preferred of the Corporation is 3,823,443. The number of
shares voting in favor of the amendment equaled or exceeded the vote required,
such required vote being a majority of the outstanding shares of Common Stock
and outstanding Series Preferred voting together as a single class, a majority
of the outstanding shares of Series C Preferred voting together as a separate
class, and a majority of the outstanding shares of Series B Preferred and Series
C Preferred voting together as a separate class.
(The balance of this page is intentionally left blank).
-3-
We further declare under penalty of perjury that the matters set forth in
the foregoing certificate are true and correct of our own knowledge.
Executed at Mountain View, California on July 22, 1994.
/s/ Donald K. McKinney
------------------------------
Donald K. McKinney, President
/s/ Kevin J. Laughlin
----------------------
Kevin J. Laughlin, Secretary
-4-
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
INTERNATIONAL NETWORK SERVICES
Donald K. McKinney and Kevin J. Laughlin certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of International Network Services, a California corporation (the
"Corporation" or the "Company").
2. Article III C.5.(j)(4) of the Restated Articles of Incorporation of
this corporation is hereby amended to read as follows:
"(4) "Additional Shares of Common Stock" for each series of Preferred
Stock shall mean all shares of Common Stock issued by the Company, whether or
not subsequently reacquired or retired by the Company, other than (1) shares of
Common Stock issued upon conversion of the Series Preferred; (2) up to 4,643,104
shares of Common Stock, and/or options, warrants or other Common Stock purchase
rights, issued after the Original Issue Date to employees, officers or directors
of, or consultants or advisors to the Company or any subsidiary pursuant to
stock purchase or stock option plans or other arrangements that are approved by
the Board, net of repurchases and option expirations (provided that shares
issued pursuant to the exercise of options or warrants issued after the Original
Issue Date shall not be included in such number if such shares were included at
the time the option or warrant was issued); (3) shares of Common Stock or
Convertible Securities issued in connection with equipment lease or commercial
credit agreements with financial institutions and (4) shares of Common Stock
issued or issuable upon exercise of the Warrants to purchase Common Stock issued
pursuant to the Note and Warrant Purchase Agreement dated March 15, 1994. The
"Effective Price" of Additional Shares of Common Stock shall mean the quotient
determined by dividing the total number of Additional Shares of Common Stock
issued or sold, or deemed to have been issued or sold by the Company under this
Section 5(j) into the aggregate consideration received, or deemed to have been
received by the Company for such issue under this Section 5(j), for such
Additional Shares of Common Stock."
3. The foregoing amendment of the Restated Articles of Incorporation has
been duly approved by the Board of Directors of this Corporation.
4. The foregoing amendment to the Restated Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
Sections 902 and 903 of the California Corporations Code and Section III C.2.(e)
of the Restated Articles of Incorporation. The Corporation has two classes of
stock outstanding and such classes of stock are entitled to vote with respect to
the amendment herein set forth. The total number of outstanding shares of
Common Stock of the Corporation is 7,944,100. The total number of outstanding
shares of Series A Preferred of the Corporation is 2,848,000. The total number
of outstanding shares of Series B Preferred of the Corporation is 6,848,922.
The total number of outstanding shares of Series C Preferred of the Corporation
is 5,722,178. The number of shares voting in favor of the amendment equaled or
exceeded the vote required, such required vote being a majority of the
outstanding shares of Common Stock and Series Preferred voting together as a
single class, a majority of the outstanding Series Preferred voting together as
a single class and a majority of the outstanding shares of Series B and Series C
Preferred voting together as a single class.
(The balance of this page is intentionally left blank).
-2-
We further declare under penalty of perjury that the matters set forth in
the foregoing Certificate are true and correct of our own knowledge.
Executed at Mountain View, California, this 8th day of December, 1994.
/s/ Donald K. McKinney
-------------------------------------
Donald K. McKinney, President
/s/ Kevin J. Laughlin
-------------------------------------
Kevin J. Laughlin, Secretary
-3-
EX 3.1
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
INTERNATIONAL NETWORK SERVICES
Donald K. McKinney and Kevin J. Laughlin certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of International Network Services, a California corporation (the
"Corporation" or the "Company").
2. Article III C.5.(j)(4) of the Restated Articles of Incorporation of
this corporation is hereby amended to read as follows:
"(4) "Additional Shares of Common Stock" for each series of Preferred
Stock shall mean all shares of Common Stock issued by the Company, whether or
not subsequently reacquired or retired by the Company, other than (1) shares of
Common Stock issued upon conversion of the Series Preferred; (2) up to 7,043,104
shares of Common Stock, and/or options, warrants or other Common Stock purchase
rights, issued after the Original Issue Date to employees, officers or directors
of, or consultants or advisors to the Company or any subsidiary pursuant to
stock purchase or stock option plans or other arrangements that are approved by
the Board, net of repurchases and option expirations (provided that shares
issued pursuant to the exercise of options or warrants issued after the Original
Issue Date shall not be included in such number if such shares were included at
the time the option or warrant was issued); (3) shares of Common Stock or
Convertible Securities issued in connection with equipment lease or commercial
credit agreements with financial institutions and (4) shares of Common Stock
issued or issuable upon exercise of the Warrants to purchase Common Stock issued
pursuant to the Note and Warrant Purchase Agreement dated March 15, 1994. The
"Effective Price" of Additional Shares of Common Stock shall mean the quotient
determined by dividing the total number of Additional Shares of Common Stock
issued or sold, or deemed to have been issued or sold by the Company under this
Section 5(j) into the aggregate consideration received, or deemed to have been
received by the Company for such issue under this Section 5(j), for such
Additional Shares of Common Stock."
3. The foregoing amendment of the Restated Articles of Incorporation has
been duly approved by the Board of Directors of this Corporation.
4. The foregoing amendment to the Restated Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
Sections 902 and 903 of the California Corporations Code and Section III C.2.(e)
of the Restated Articles of Incorporation. The Corporation has two classes of
stock outstanding and such classes of stock are entitled to vote with respect to
the amendment herein set forth. The total number of outstanding shares of
Common Stock of the Corporation is 8,523,005. The total number of outstanding
shares of Series A Preferred of the Corporation is 2,848,000. The total number
of outstanding shares of Series B Preferred of the Corporation is 6,848,922.
The total number of outstanding shares of Series C Preferred of the Corporation
is 7,037,967. The number of shares voting in favor of the amendment equaled or
exceeded the vote required, such required vote being a majority of the
outstanding shares of Common Stock and Series Preferred voting together as a
single class, a majority of the outstanding Series Preferred voting together as
a single class and a majority of the outstanding shares of Series B and Series C
Preferred voting together as a single class.
(The balance of this page is intentionally left blank).
-2-
We further declare under penalty of perjury that the matters set forth in
the foregoing Certificate are true and correct of our own knowledge.
Executed at Mountain View, California, this 20th day of September, 1995.
/s/ Donald K. McKinney
------------------------------------
Donald K. McKinney, President
/s/ Kevin J. Laughlin
------------------------------------
Kevin J. Laughlin, Secretary
-3-
EX 3.1
CERTIFICATE OF AMENDMENT OF RESTATED
ARTICLES OF INCORPORATION OF
INTERNATIONAL NETWORK SERVICES
John Drew and Kevin J. Laughlin hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of International Network Services, a California corporation (the
"Corporation" or the "Company").
2. Article III A. of the Restated Articles of Incorporation, as amended,
of this Corporation is hereby amended to read as follows:
A. This Corporation is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is sixty two
million (62,000,000) shares, forty five million (45,000,000) shares of which
shall be Common Stock (the "Common Stock") and seventeen million (17,000,000)
shares of which shall be Preferred Stock.
3. Article III C.2.(b) of the Restated Articles of Incorporation, as
amended, of this Corporation is hereby amended to read as follows:
"(b) The Company's Board of Directors shall consist of seven members,
elected as follows: (i) so long as at least four million (4,000,000) shares of
Series B Preferred are outstanding, holders of the Series B Preferred, voting as
a separate class, shall be entitled to elect two (2) members of the Board of
Directors at or pursuant to each meeting or consent of the Company's
shareholders for the election of directors, and to remove from office such
directors and to fill any vacancy caused by the resignation, death or removal of
such directors; (ii) holders of the Common Stock, voting as a separate class,
shall be entitled to elect one (1) member of the Board of Directors at or
pursuant to each meeting or consent of the Company's shareholders for the
election of directors, and to remove from office such director and to fill any
vacancy caused by the resignation, death or removal of such director; (iii) so
long as at least one million five hundred thousand (1,500,000) shares of Series
A Preferred are outstanding, holders of the Series A Preferred, voting as a
separate class, shall be entitled to elect one (1) member of the Board of
Directors at or pursuant to each meeting or consent of the Company's
shareholders for the election of directors, and to remove from office such
director and to fill any vacancy caused by the resignation, death or removal of
such director; and (iv) the remaining directors authorized for election at such
election of directors shall be elected by the holders of the Common Stock and
the Series Preferred voting together in accordance with Section 2(a) hereof."
4. Article III C.5.(j)(4) of the Restated Articles of Incorporation, as
amended, of this Corporation is hereby amended to read as follows:
"(4) "Additional Shares of Common Stock" for each series of Preferred
Stock shall mean all shares of Common Stock issued by the Company, whether or
not subsequently reacquired or retired by the Company, other than (1) shares of
Common Stock issued upon conversion of the Series Preferred; (2) up to 8,000,000
shares of Common Stock, and/or options, warrants or other Common Stock purchase
rights, issued after the Original Issue Date to employees, officers or directors
of, or consultants or advisors to the Company or any subsidiary pursuant to
stock purchase or stock option plans or other arrangements that are approved by
the Board, net of repurchases and option expirations (provided that shares
issued pursuant to the exercise of options or warrants issued after the Original
Issue Date shall not be included in such number if such shares were included at
the time the option or warrant was issued); (3) shares of Common Stock or
Convertible Securities issued in connection with equipment lease or commercial
credit agreements with financial institutions and (4) shares of Common Stock
issued or issuable upon exercise of the Warrants to purchase Common Stock issued
pursuant to the Note and Warrant Purchase Agreement dated March 15, 1994. The
"Effective Price" of Additional Shares of Common Stock shall mean the quotient
determined by dividing the total number of Additional Shares of Common Stock
shall mean the quotient determined by dividing the total number of Additional
Shares of Common Stock issued or sold, or deemed to have been issued or sold by
the Company under this Section 5(j) into the aggregate consideration received,
or deemed to have been received by the Company for such issue under this Section
5(j), for such Additional Shares of Common Stock."
5. The foregoing amendment of the Restated Articles of Incorporation has
been duly approved by the Board of Directors of this Corporation.
6. The foregoing amendment of the Restated Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
Section 902 of the California Corporations Code. The Corporation has two
classes of stock outstanding and such classes of stock are entitled to vote with
respect to the amendment herein set forth. The total number of outstanding
shares of Common Stock of the Corporation is 11,260,635. The total number of
outstanding shares of Series A Preferred Stock of the Corporation is 2,848,000.
The total number of outstanding shares of Series B Preferred Stock of the
Corporation is 6,848,922. The total number of outstanding shares of Series C
Preferred Stock of the Corporation is 7,037,967. The number of shares voting in
favor of the amendment equaled or exceeded the vote required, such required vote
being a majority of the outstanding shares of Common Stock voting as a separate
class, a majority of the outstanding shares of Common Stock and Preferred Stock
voting together as a single class, a majority of the outstanding shares of
Preferred Stock voting together as a single class, a majority of the outstanding
shares of Series B and Series C Preferred Stock voting together as a single
class, and two-thirds of the outstanding shares of Series B Preferred Stock
voting as a separate class.
-2-
We further declare under penalty of perjury that the matters set forth in
the foregoing certificate are true and correct of our own knowledge.
Executed at Mountain View, California on July 16, 1996.
/s/ John L. Drew
---------------------------------
John L. Drew, President
/s/ Kevin J. Laughlin
---------------------------------
Kevin J. Laughlin, Secretary
-3-