This excerpt taken from the FZN DEF 14A filed Oct 9, 2007.
Purpose of Amendment and Possible Effects
The Board believes that amending and restating its Restated Certificate of Incorporation to authorize the issuance of preferred stock will provide us with increased flexibility in raising future capital. The creation of blank-check preferred stock would permit the Board to negotiate with potential investors regarding the rights and preferences of a series of equity securities. In addition, the Board would not be required to seek stockholder approval for the creation of a series of preferred stock and, therefore, would be able to proceed expeditiously with a future plan of financing involving preferred stock. The Board believes that increased flexibility in capital raising is in the best interests of the Company and its stockholders. Although the Board is recommending that stockholders vote for the proposed Second Restated Certificate in part to increase flexibility for future financings, we currently have no plan in place to utilize preferred stock in connection with any future financings.
We believe that for us to successfully execute our business strategy, we may need to raise investment capital at some point in the future and it may be preferable or necessary to issue preferred stock to investors. Preferred stock usually grants the holders certain preferential rights in voting, dividends, liquidation and/or other rights in preference over the common stock. Accordingly, in order to grant us the flexibility to issue our equity securities in the manner best suited for the Company, or as may be required by the capital markets, the Second Restated Certificate would create 2,000,000 authorized shares of blank-check preferred stock for us to issue.
Subject to the limitations prescribed by law, the Board of Directors would be expressly authorized, at its discretion, to determine the number of series into which shares of preferred stock may be divided, to determine the designations, powers, preferences and voting and other rights, and the qualifications, limitations and restrictions granted to or imposed upon the preferred stock or any series thereof or any holders thereof, to determine and alter the designations, powers, preferences and rights, and the qualifications, limitations and restrictions granted to or imposed upon any wholly unissued series of preferred stock or the holders thereof, to fix the number of shares of that series and to increase or decrease, within the limits stated in any resolution of the Board of Directors originally fixing the number of shares constituting any series (but not below the number of such shares then outstanding), the number of shares of any such series subsequent to the issuance of shares of that series.
The availability of undesignated preferred stock may have certain negative effects on the rights of the holders of our common stock. The actual effect of the issuance of any shares of blank-check preferred
stock upon the rights of holders of common stock cannot be stated until the Board determines the specific rights of the holders of such blank-check preferred stock. The proposed amendment will permit the Board, without future stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights, which are superior to and could adversely affect the voting power or other rights of the holders of our common stock. Specifically, we will be in a position to issue securities which would grant to the holders thereof, preferences or priorities over the holders of common stock with respect to, among other things, liquidation, dividends and voting. This could result in holders of common stock receiving less in the event of a liquidation, dissolution or other winding up of our company, reduce the amount of funds, if any, available for dividends on common stock, and dilute the voting power of the holders of common stock.
In addition, preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. For example, the Board could designate and issue a series of preferred stock in an amount that sufficiently increases the number of outstanding shares to overcome a vote by the holders of our common stock or with rights and preferences that include special voting rights to veto a change in control. The effect of such provisions could delay or frustrate a merger, tender offer or proxy contest, the removal of incumbent directors, or the assumption of control by stockholders, even if such proposed actions would be beneficial to our stockholders. This could include discouraging bids even if such bid represents a premium over our then existing trading price and thereby prevent stockholders from receiving the maximum value for their shares.
The affirmative vote of the holders of a majority of the outstanding shares of common will be required to approve this amendment to the Companys Restated Certificate of Incorporation. As a result, abstentions and broker non-votes will have the same effect as negative votes.