<PAGE>
Exhibit 3.2
AMENDMENT OF THE
ARTICLES OF ASSOCIATION OF VERISITY LTD.
Articles 7(e), 7(g), 51(a), 57, 64 and 126 of the Articles of Association of the
Company in their current form shall be canceled and replaced by new Articles
7(g), 57, 64 and 126 as follows:
"7(e) For the purpose of Article 7(b) and 7(c), the consideration of any New
Shares shall be calculated at the U.S. dollar equivalent thereof, on the
day such New Shares are issued or deemed to be issued pursuant to Article
7(b) or 7(c). "New Shares" shall mean shares of whatever class issued or
deemed to have been issued pursuant to Article 7(b) or 7(c) by the
Company other than (i) shares held by Ma'ahaz Ne'eman Ltd. or its
successor, as of the date of the adoption of these Articles, to be
distributed to employees and shares to be issued to bona fide directors,
officers, employees, independent contractors, consultants, distributors,
representatives, sales agents or advisers of the Company or of the
Company's subsidiaries pursuant to any share option plan or share
incentive plan approved by the Board of Directors, including shares to be
issued pursuant to options granted to employees of SureFire Verification,
Inc., ("SureFire") and assumed by the Company or replaced by it under the
Agreement and Plan of Merger dated as of October 5, 1999 (the "Merger
Agreement"), in an amount not exceeding 8,720,000 Shares (as adjusted for
any bonus shares, combinations, splits etc. with respect to such shares)
("Compensatory Shares"), (ii) Ordinary Shares issued upon the conversion
of the Preferred Shares or of Class B Ordinary Shares, or Series B1
Preferred Shares issued upon the conversion of the Series B2 Preferred
Shares or Series C1 Preferred Shares issued upon the conversion of the
Series C2 Preferred Shares, (iii) shares issued pursuant to an offering
of shares by the Company, to all Participating Shareholders (as that term
is defined in Article 50 below) only, (iv) shares issued upon the
exercise of any warrants issued to Gemini Israel Fund L.P., (v) shares,
in an amount not to exceed 3% of the then issued and outstanding share
capital of the Company on a fully diluted basis, issued to a "strategic
investor", it being understood that the then-sitting directors appointed
by the Investor Shareholders, if any are then sitting, shall solely
decide whether an investor is a "strategic investor", (vi) shares issued
to lenders or lessors in connection with bona fide bank and lease
financing approved by the Board of Directors ("Lease/Bank Financing
Shares"), (vii) shares issued upon the exercise of any warrants issued to
investment bankers providing services to the Company in connection with
capital raising transactions of the Company or to any affiliate of such
investment bankers ("Investment Bankers Shares"), and (viii) Ordinary
Shares issued to any of the shareholders of SureFire, as part of the
Merger Consideration as defined within the Merger Agreement ("Merger
Consideration Shares").
7(g) Upon conversion pursuant to Article 7(a) other than automatic conversion
(i) due to a public offering, or (ii) with the consent of the majority of
the issued and outstanding Series D Preferred Shares, Series B1 and
Series C1 Preferred Shares and Series A Preferred Shares, all as
specified in Article 7(a) above, the following provisions shall have
effect:
<PAGE>
(i) the conversion shall be effected by notice in writing given to
the Company signed by the holder of the Preferred Shares wishing to
convert as the case may be and the conversion shall take effect
immediately upon the date of delivery of such notice to the Company
unless such notice states that conversion is to be effective on any
later date or when any conditions specified in the notice have been
fulfilled in which case conversion shall take effect on such other
date or when such conditions have been fulfilled;
(ii) forthwith after conversion takes effect the holders of the
Preferred Shares resulting from such conversion shall send to the
Company the certificates in respect of their respective holdings of
Preferred Shares and the Company shall issue to such holders
respectively certificates for the Ordinary Shares resulting from the
conversion;
(iii) the Ordinary Shares, save for the Class B Ordinary Shares which
will have no voting rights, resulting from the conversion shall rank
from date of conversion pari passu in all respects with the other
Ordinary Shares in the capital of the Company.
51(a) "New Securities" shall mean any equity interest (including Ordinary
and Preferred Shares) in the Company, whether now authorized or not,
and rights, options or warrants to purchase such equity interests, and
securities of any type whatsoever that are convertible into equity
interests; provided that the term "New Securities" does not include:
(i) Ordinary Shares issued upon the conversion of the Preferred Shares
or of Class B Ordinary Shares, or Series B1 Preferred Shares issued
upon the conversion of the Series B2 Preferred Shares or Series C1
Preferred Shares issued upon the conversion of the Series C2 Preferred
Shares, (ii) Compensatory Shares in an amount not exceeding 8,720,000
Shares (as adjusted for any bonus shares combinations, splits etc.
with respect to such shares), (iii) shares issued upon the exercise of
any warrants issued to Gemini Israel Fund L.P., (iv) shares, in an
amount not to exceed 3% of the then issued and outstanding share
capital of the Company on a fully diluted basis, issued to a
"strategic investor", it being understood that the then-sitting
directors appointed by the Investor Shareholders, if any are then
sitting, shall solely decide whether an investor is a "strategic
investor", (v) Lease/Bank Financing Shares, (vi) Investment Bankers
Shares, and (vii) Merger Consideration Shares".
57. A prior notice of at least 7 days of any general meeting, including in the
event that a special resolution is to be proposed, shall be given with
respect to the place, date and hour of the meeting, and in the event that a
special item shall be discussed, a general description of the nature of
that item. The notice shall be given as hereinafter provided to the Members
entitled pursuant to these Articles to receive notices from the Company.
Non-receipt of a notice given as aforesaid shall not invalidate the
resolution passed or the proceedings held at that meeting. With the consent
of all the Members who are entitled at that time to receive notices, it
shall be permitted to convene meetings and to resolve all types of
resolutions, upon shorter notice or without any notice and in such manner,
generally, as shall be approved by the Members.
64. The chairman may, with the consent of any meeting at which a quorum is
present, and shall if so directed by the meeting, adjourn the meeting from
time to time and from place to place, as the meeting shall decide. If the
meeting shall be adjourned for twenty-one days or more a notice shall be
given of the adjourned meeting as in the case of an original meeting.
2
<PAGE>
126.
(a) For purposes of these Articles, the term "Office Holder" shall mean
every Director and every officer of the Company, including, without
limitation, each of the persons defined as "Nose Misra" in the
Companies Law.
(b) Subject to the provisions of the Companies Law, the Company may exempt
in advance an Office Holder from all or any part of his responsibility
for damage resulting from a breach of his duty of care towards the
Company.
(c) Subject to the provisions of the Companies Law, the Company may
indemnify an Office Holder in respect of an obligation or expense
specified below imposed on the Office Holder in respect of an act
performed in his capacity as an Office Holder, as follows:
(i) a financial obligation imposed on him in favor of another
person by a court judgment, including a compromise judgment or
an arbitrator's award approved by court;
(ii) reasonable litigation expenses, including attorneys' fees,
incurred by an Office Holder or charged to the Office Holder by
a court, in a proceeding instituted against the Office Holder
by the Company or on its behalf or by another person, or in a
criminal charge from which the Office Holder was acquitted, or
in a criminal proceeding in which the Office Holder was
convicted of an offense that does not require proof of criminal
intent;
(iii) any other circumstances in which indemnity of an Office Holder
is allowed in accordance with any applicable law.
The Company may undertake to indemnify an Office Holder as
aforesaid, (i) in advance, provided that the undertaking is limited to
categories of events which in the opinion of the Directors can be
foreseen when the undertaking to indemnify is given, and to an amount
set by the Directors as reasonable under the circumstances and (ii)
retroactively.
(d) Subject to the provisions of the Companies Law, the Company may enter
into a contract for the insurance of all or part of the liability of
any Office Holder imposed on the Office Holder in respect of an act
performed in his capacity as an Office Holder, in respect of each of
the following:
(i) a breach of his duty of care to the Company or to another
person;
(ii) a breach of his duty of loyalty to the Company, provided that
the Office Holder acted in good faith and had reasonable basis
to assume that such act would not prejudice the interests of
the Company;
(iii) a financial obligation imposed on him in favor of another
person;
(iv) Any other circumstances in which insurance of an Office Holder
is allowed in accordance with any applicable law.
3
<PAGE>
For the removal of doubt, the above insurance may also cover acts and
omissions of an Office Holder which were acted or omitted prior to the
issuance of the insurance contract in respect thereof.
(e) The provisions of the above Articles are not intended and shall not be
construed as restricting and/or limiting in any manner the Company in
connection with the exemption in advance from responsibility and/or
the procurement of insurance and/or in respect of indemnification (i)
in respect of any person other than Office Holder, including, without
limitation, any employee, consultant or contractor of the Company,
and/or (ii) in respect of any Office Holder to the extent that such
exemption from responsibility and/or insurance and/or indemnification
is not specifically prohibited under law; provided that the decision
to so exempt from liability and/or the procurement of any such
insurance and/or the provision of any such indemnification shall be
approved in accordance with the provisions of any applicable law."
4