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EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PROGRESSIVE NETWORKS, INC.
Progressive Networks, Inc., a Washington corporation, by its
President, hereby submits the following Amended and Restated Articles of
Incorporation of said Corporation pursuant to the provisions of RCW 23B.10.070,
and resolutions duly adopted by the Board of Directors on July 25, 1997. These
Amended and Restated Articles of Incorporation were duly approved by the
shareholders in accordance with the provisions of RCW 23B.10.030 and RCW
23B.10.040, and supersede the original Articles of Incorporation and all
amendments and prior restatements thereto as of the date of their adoption.
ARTICLE I
NAME
The name of this corporation is Progressive Networks, Inc.
ARTICLE II
DURATION
This Corporation is organized under the Washington Business
Corporation Act (the "Act") and shall have perpetual existence.
ARTICLE III
PURPOSE AND POWERS
The purpose and powers of this Corporation are as follows: (a) to
engage in any lawful business; (b) to engage in any and all activities that, in
the judgment of the Board of Directors, may at any time be incidental or
conducive to the attainment of the foregoing purpose; and (c) to exercise any
and all powers that a corporation formed under the Act, or any amendment
thereto or substitute therefor, is entitled at the time to exercise.
ARTICLE IV
CAPITAL STOCK
4.1 AUTHORIZED CAPITAL. The aggregate number of shares of capital
stock which this Corporation shall be authorized to issue shall be Three
Hundred Sixty Million (360,000,000), divided into two classes as follows:
Three Hundred Million (300,000,000) shares of common stock (the "Common
Stock"), and Sixty Million (60,000,000) shares of preferred stock (the
"Preferred Stock").
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4.2 ISSUANCE OF COMMON STOCK IN SERIES.
4.2.1 AUTHORITY VESTED IN BOARD OF DIRECTORS. The Common
Stock may be divided into and issued in series from time to time. Authority is
vested in the Board of Directors, subject to the limitations and procedures
prescribed by law, to divide any part or all of such Common Stock into any
number of series, to fix and determine the relative rights and preferences of
the shares of any series to be established, and to amend the rights and
preferences of the shares of any series that has been established but is wholly
unissued.
4.2.2 AMENDMENT TO SERIES DECREASING SHARES. Within any
limits stated in these Articles of Incorporation or in the resolution of the
Board of Directors establishing a series, the Board of Directors, after the
issuance of shares of a series, may amend the resolution establishing the
series to decrease (but not below the number of shares of such series then
outstanding) the number of shares of that series, and the number of shares
constituting the decrease shall thereafter constitute authorized but
undesignated shares.
4.2.3 AUTHORITY LIMITED TO UNISSUED SHARES. The authority
herein granted to the Board of Directors to determine the relative rights and
preferences of the Common Stock shall be limited to unissued shares, and no
power shall exist to alter or change the rights and preferences of any shares
that have been issued.
4.3 DESIGNATION OF SERIES A COMMON STOCK, SERIES B COMMON STOCK,
SERIES C COMMON STOCK, SERIES D COMMON STOCK AND SERIES E
COMMON STOCK.
The following series of Common Stock are hereby designated,
and each such series shall have the following rights, preferences and
limitations:
4.3.1 DESIGNATION. Two Hundred Seven Million Forty-Seven
Thousand Six Hundred Seventy-Nine (207,047,679) shares of Common Stock shall be
designated and known as "Series A Common Stock"; Thirty Million (30,000,000)
shares of Common Stock shall be designated and known as "Series B Common
Stock"; Thirty Million (30,000,000) shares of Common Stock shall be designated
and known as "Series C Common Stock"; one (1) share shall be designated and
known as "Series D Common Stock" and Seven Million Forty-Seven Thousand Six
Hundred Seventy-Nine (7,047,679) shares of Common Stock shall be designated and
known as "Series E Common Stock." Except as otherwise provided in these
Articles of Incorporation, all shares of Series A Common Stock, Series B Common
Stock, Series C Common Stock, Series D Common Stock and Series E Common Stock
shall be identical and shall entitle the holders thereof to the same rights and
privileges. The designations of the Series A Common Stock, Series B Common
Stock, Series C Common Stock, Series D Common Stock and Series E Common Stock
in this Article are expressly subject to the provisions of Section 4.3.6,
Section 4.3.7, and Section 4.3.8.
4.3.2 ISSUANCE. Shares of Series A Common Stock, Series B
Common Stock, Series C Common Stock, Series D Common Stock and Series E Common
Stock may be issued, upon authorization by the Board of Directors, to such
persons and entities, and for such consideration permitted by the Act, as the
Board of Directors shall determine; provided, that shares of Series B Common
Stock shall be issued only to persons or entities who, at the time of issuance,
are either (a) employees of the Corporation, or (b) directors, or affiliates of
directors, of the Corporation. For purposes of this section, an "affiliate"
shall be a person or
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entity that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, a director; and
provided further, that shares of Series D Common Stock shall be issued only in
compliance with Section 4.3.7.
4.3.3 VOTING RIGHTS. Except as otherwise required by law
and except as otherwise provided in these Articles of Incorporation, on all
matters submitted to the Corporation's shareholders, each share of Series A
Common Stock shall entitle the holder to fifteen (15) votes, each share of
Series B Common Stock shall entitle the holder to fifteen (15) votes, each
share of Series D Common Stock shall entitle the holder to fifteen (15) votes,
each share of Series C Common Stock shall entitle the holder to one (1) vote,
and each share of Series E Common Stock shall not be entitled to vote, except
as required by law, in which case it shall entitle the holder to one (1) vote.
Except with regard to those matters required by law to be voted on by one or
more voting groups and except as otherwise provided in these Articles of
Incorporation, all shares of Series A Common Stock, Series B Common Stock,
Series C Common Stock and Series D Common Stock shall vote and be counted
together and not separately as a voting group upon all matters submitted to a
vote of shareholders. Where the Series E Common Stock is entitled to voting
rights by law, all shares of Series E Common Stock shall vote and be counted
together with the Series A Common Stock, the Series B Common Stock, the Series
C Common Stock and the Series D Common Stock and not separately as a voting
group, except as required by law.
4.3.4 DIVIDENDS.
(a) IN CASH OR SECURITIES. Subject to any
preferential rights granted for any series of Common Stock or Preferred Stock,
the holders of Series A Common Stock, the holders of Series B Common Stock, the
holders of Series C Common Stock, the holders of the Series D Common Stock and
the holders of Series E Common Stock shall be entitled to receive dividends
equally, share for share, if, when and as declared by the Board of Directors
out of funds of this Corporation legally available for that purpose; provided,
that if such dividends are declared, they will be payable at the same rate on
each other series of Common Stock and payable in Common Stock of the series
with respect to which it is declared or in Common Stock of one or more newly
designated series with substantially similar rights to the series with respect
to which it is declared, as determined by the Board of Directors in its sole
discretion.
(b) SUBDIVISIONS AND COMBINATIONS OF SHARES. Any
increase or decrease in the number of shares of any series of Common Stock
resulting from a subdivision or combination of shares or other capital
reclassification shall not be permitted unless parallel action is taken with
respect to each other series of Common Stock, so that the number of shares of
each series of Common Stock outstanding shall be increased or decreased
proportionately.
4.3.5 AUTOMATIC CONVERSION OF SERIES B COMMON STOCK.
(a) CONVERSION EVENT/CONVERSION DATE FOR EMPLOYEE
HOLDERS. Each share of Series B Common Stock held by a holder who was an
employee at the time of issuance shall automatically convert into one (1) share
of Series C Common Stock upon the termination of the holder's employment with
the Corporation for any reason, including but not limited to death, disability,
retirement, resignation or involuntary termination by the Corporation. In
addition, if any such holder, while an employee, makes or attempts to make any
transfer of shares of Series B Common Stock to any person or entity, whether
voluntary or involuntary, each such
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share that the holder has transferred or attempted to transfer shall
automatically convert into one (1) share of Series C Common Stock
simultaneously with such transfer or attempted transfer. If it is necessary
for any reason to determine whether the holder's employment has terminated or
the time thereof, or whether the holder has made or attempted to make any
transfer of any shares of Series B Common Stock or the time thereof, the Board
of Directors shall make such determination and it shall be binding on the
holder and any other person having any interest therein.
(b) CONVERSION EVENT/CONVERSION DATE FOR DIRECTOR
OR AFFILIATE HOLDERS. Each share of Series B Common Stock held by a holder who
was a director or an affiliate of a director (as defined above) at the time of
issuance shall automatically convert into one (1) share of Series C Common
Stock upon the termination of the holder's status as a director or an affiliate
of a director for any reason, including but not limited to death, resignation
or removal by the shareholders. In addition, if any such holder, while a
director or an affiliate of a director, makes or attempts to make any transfer
of shares of Series B Common Stock, whether voluntary or involuntary, each such
share that the holder has transferred or attempted to transfer shall
automatically convert into one (1) share of Series C Common Stock
simultaneously with such transfer or attempted transfer. If it is necessary
for any reason to determine whether the holder has made or attempted to make
any transfer of any shares of Series B Common Stock or the time thereof, the
Board of Directors shall make such determination and it shall be binding on the
holder and any other person having any interest therein.
(c) STATUS OF CERTIFICATES. If one or more
shares of Series B Common Stock are so converted, the certificate(s)
representing such share or shares shall, by virtue of the conversion and
without any action on the part of the holder, thereafter represent, to the
extent of the number of shares so converted, the corresponding number of shares
of Series C Common Stock, and the share or shares of Series B Common Stock
previously represented by such certificate(s) shall be canceled and revert to
the status of authorized but unissued share(s) of Series B Common Stock. Upon
surrender of any such certificate to the Corporation, the Corporation shall
issue and deliver to the person entitled thereto a new certificate or
certificates to represent the shares of Series C Common Stock (and, if
applicable, any remaining shares of Series B Common Stock) represented by the
surrendered certificate.
(d) RESERVATION AND ISSUANCE OF SERIES C COMMON
STOCK. The Corporation shall reserve at all times, for so long as any shares
of Series B Common Stock remain outstanding, free from preemptive rights, out
of its authorized but unissued shares of Series C Common Stock, solely for the
purpose of effecting the conversion of the shares of Series B Common Stock,
sufficient shares of Series C Common Stock to provide for the conversion of all
outstanding shares of Series B Common Stock. All shares of Series C Common
Stock issued upon conversion of the shares of Series B Common Stock will be
duly and validly issued, fully paid and nonassessable to the same extent as the
shares of Series B Common Stock from which they were converted.
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4.3.6 TERMINATION OF DESIGNATION OF SERIES A COMMON STOCK,
SERIES B COMMON STOCK AND SERIES C COMMON STOCK. Upon the earlier of:
(a) the written election delivered to the
Corporation at any time by the holders of a majority of: (i) the then
outstanding shares of Series A Preferred Stock, or (ii) the then outstanding
shares of Series A Common Stock issued upon the conversion of Series A
Preferred as provided in Article V; or
(b) the closing of a Public Offering (as defined
in Section 5.4(b)), provided: (i) immediately following the closing of the
Public Offering, the persons who held shares of Series A Preferred prior to the
Public Offering, or prior to the conversion of the Series A Preferred into
Common Stock as provided in Article V, hold more than fifty percent (50%) of
all of the outstanding shares of the Corporation, assuming the issuance and
exercise of all options under the Corporation's 1995 Stock Option Plan, 1996
Stock Option Plan or any other stock option, employee stock bonus or restricted
stock plan designated and approved by the Board of Directors, and (ii) in the
opinion of the underwriters, delivered to the Corporation prior to the closing
of the Public Offering, the existence of multiple classes of Common Stock will
lower the price in the public offering by more than twenty-five percent (25%);
the designation of the Series A Common Stock, Series B Common Stock and Series
C Common Stock as separate series of Common Stock having the respective rights,
preferences and limitations set forth in this Section 4.3, and the authority of
the Board of Directors under Section 4.2 to divide the Common Stock into series
and to fix and determine the relative rights and preferences therefor, shall
automatically terminate. Effective immediately upon such termination (A) the
number of authorized shares of Common Stock of the Corporation shall be
increased by the number of authorized shares of Series A Common Stock, Series B
Common Stock, and Series C Common Stock, without any distinctions between any
of such shares (except as provided in Section 4.3.7); (B) each share of Series
A Common Stock, Series B Common Stock and Series C Common Stock then
outstanding shall thereafter constitute one (1) share of Common Stock, the
holder of which shall be entitled to one (1) vote upon all matters submitted to
a vote of shareholders; and (C) each certificate representing shares of Series
A Common Stock, Series B Common Stock or Series C Common Stock that were
outstanding immediately prior to the termination shall, by virtue of the
termination and without any action on the part of the holder, thereafter
represent the corresponding number of shares of Common Stock. Upon surrender
of any such certificate to the Corporation, the Corporation shall issue and
deliver to the person entitled thereto a new certificate to represent the
shares of Common Stock represented by the surrendered certificate.
4.3.7 SERIES D COMMON STOCK. Notwithstanding anything in
Section 4.3.6 to the contrary, one (1) share of Common Stock shall remain
designated a share of Series D Common Stock, and, as provided in Section
5.4(a), the holders of Series A Preferred shall have the nontransferable right
to convert one (1) share of Series A Preferred into one (1) share of Series D
Common Stock provided the Corporation has received, in connection with a Public
Offering (as defined in Section 5.4(b)), an opinion of a recognized investment
banking firm that the existence of this class of stock will not impair the
value of the Series A Common Stock. Upon the transfer of that one (1) share of
Series D Common Stock, the one (1) share of Series D Common Stock shall
automatically convert into one (1) share of Series A Common Stock or Conversion
Stock (as defined in Section 5.4(a)). The one (1) share of Series D Common
Stock,
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which shall be issued as described in Section 5.4(a), shall have the right (in
addition to its right to vote with the Common Stock) to elect one (1) member of
the Board of Directors of the Corporation (the "Policy Director") who shall
have the rights and authority set forth in Section 7.1.
4.3.8 TERMINATION OF DESIGNATION OF SERIES E COMMON STOCK.
If a holder of Series E Preferred elects to convert such shares into shares of
Series A Common Stock, then, at any time following such conversion, the Board
of Directors may amend the resolution establishing the Series E Common Stock to
decrease (but not below the number of Series E Preferred then outstanding) the
number of shares of Series E Common Stock, and the number of shares
constituting the decrease shall thereafter constitute authorized but
undesignated shares of Common Stock. In addition, if all of the Series E
Preferred are converted into shares of Series A Common Stock, the designation
of the Series E Common Stock as a separate series of Common Stock shall
automatically terminate. Effective immediately upon such termination, the
number of authorized, but undesignated shares of Common Stock of the
Corporation shall be increased by the number of authorized shares of Series E
Common Stock.
4.4 ISSUANCE OF PREFERRED STOCK IN SERIES.
4.4.1 AUTHORITY VESTED IN BOARD OF DIRECTORS. The
Preferred Stock may be divided into and issued in series from time to time.
Authority is vested in the Board of Directors, subject to the limitations and
procedures set forth in these Articles of Incorporation or prescribed by law,
to divide any part or all of such Preferred Stock into any number of series, to
fix and determine the relative rights and preferences of the shares of any
series to be established, and to amend the rights and preferences of the shares
of any series that has been established but is wholly unissued.
4.4.2 DESIGNATION OF SERIES A PREFERRED STOCK, SERIES B
PREFERRED STOCK, SERIES C PREFERRED STOCK, SERIES D
PREFERRED STOCK AND SERIES E PREFERRED STOCK.
The following series of Preferred Stock are hereby designated,
and each such series shall have the following rights, preferences and
limitations:
4.4.3 DESIGNATION. Thirteen Million Seven Hundred Thirteen
Thousand Four Hundred Thirty Nine (13,713,439) shares of Preferred Stock shall
be designated and known as "Series A Preferred Stock" or "Series A Preferred";
Three Million Fifty-Nine Thousand Seven Hundred One (3,059,701) shares of
Preferred Stock shall be designated and known as "Series B Preferred Stock" or
"Series B Preferred"; Three Million Four Thousand Three Hundred Five
(3,004,305) shares of Preferred Stock shall be designated and known as "Series
C Preferred Stock" or "Series C Preferred"; Three Million Ninety-Five Thousand
Three Hundred Thirteen (3,095,313) shares of Preferred Stock shall be
designated and known as "Series D Preferred Stock" or "Series D Preferred"; and
Seven Million Forty-Seven Thousand Six Hundred Seventy-Nine (7,047,679) shares
of Preferred Stock shall be designated as "Series E Preferred Stock" or "Series
E Preferred." Except as otherwise provided in these Articles of Incorporation,
all shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall be
identical and shall entitle the holders thereof to the same rights and
privileges.
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4.4.4 AMENDMENT TO SERIES DECREASING SHARES. Within any
limits stated in these Articles of Incorporation or in the resolution of the
Board of Directors establishing a series, the Board of Directors, after the
issuance of shares of a series, may amend the resolution establishing the
series to decrease (but not below the number of shares of such series then
outstanding or reserved for issuance pursuant to the exercise of any
outstanding warrants) the number of shares of that series, and the number of
shares constituting the decrease shall thereafter constitute authorized but
undesignated shares.
4.4.5 AUTHORITY LIMITED TO UNISSUED SHARES. The authority
herein granted to the Board of Directors to determine the relative rights and
preferences of the Preferred Stock shall be limited to unissued shares, and no
power shall exist to alter or change the rights and preferences of any shares
that have been issued.
4.5 ISSUANCE OF CERTIFICATES. The Board of Directors shall have
the authority to issue shares of the capital stock of this Corporation and the
certificates therefor subject to such transfer restrictions and other
limitations as it may deem necessary to promote compliance with applicable
federal and state securities laws, and to regulate the transfer thereof in such
manner as may be calculated to promote such compliance or to further any other
reasonable purpose.
4.6 NO CUMULATIVE RIGHTS. Shareholders of this Corporation shall
not have the right to cumulate votes for the election of directors.
4.7 NO PREEMPTIVE RIGHTS. No shareholder of this Corporation
shall have, solely by reason of being a shareholder, any preemptive or
preferential right or subscription right to any stock of this Corporation or to
any obligations convertible into stock of this Corporation, or to any warrant
or option for the purchase thereof, except to the extent provided by written
agreement with this Corporation.
4.8 QUORUM FOR MEETING OF SHAREHOLDERS. A quorum shall exist at
any meeting of shareholders if a majority of the votes entitled to be cast is
represented in person or by proxy. In the case of any meeting of shareholders
that is adjourned more than once because of the failure of a quorum to attend,
those who attend the third convening of such meeting, although less than a
quorum, shall nevertheless constitute a quorum for the purpose of electing
directors, provided that the percentage of shares represented at the third
convening of such meeting shall not be less than one-third of the shares
entitled to vote.
4.9 CONTRACTS WITH INTERESTED SHAREHOLDERS. Subject to the
limitations set forth in RCW 23B.19.040, to the extent applicable:
4.9.1 The Corporation may enter into contracts and
otherwise transact business as vendor, purchaser, lender, borrower, or
otherwise with its shareholders and with corporations, associations, firms, and
entities in which they are or may be or become interested as directors,
officers, shareholders, members, or otherwise.
4.9.2 Any such contract or transaction shall not be
affected or invalidated or give rise to liability by reason of the
shareholder's having an interest in the contract or transaction.
4.10 SHAREHOLDER VOTING REQUIREMENTS. Subject to the requirements
of RCW 23B.08.730, and 23B.19.040, any contract, transaction, or act of the
Corporation or of
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any director or officer of the Corporation that shall be authorized, approved,
or ratified by a majority of the votes entitled to be cast at a meeting at
which a quorum is present shall, insofar as permitted by law, be as valid and
as binding as though ratified by every shareholder of the Corporation.
4.11 EXECUTION OF CONSENT OF SHAREHOLDERS BY LESS THAN UNANIMOUS
CONSENT. To the extent that the Act may at any time be amended to authorize
the taking of action by shareholders without a meeting by less than unanimous
written consent of all shareholders entitled to vote on the action, the taking
of such action by the shareholders of the Corporation shall be permitted.
Before the date on which the action becomes effective, notice of the taking of
such action shall be given to each shareholder of record, in writing,
describing with reasonable clarity and specifying the general nature of the
action approved, stating the effective date and time of the approved action,
and accompanied by the same material that, under the Act, would have been
required to be sent to nonconsenting or nonvoting shareholders in a notice of
meeting at which the proposed action would have been submitted for shareholder
action. Such notice shall be given as follows: (i) if mailed, by deposit in
the U.S. mail at least seventy-two (72) hours prior to the specified effective
time of such action, with first-class postage thereon prepaid, correctly
addressed to each shareholder of record at the shareholder's address as it
appears on the current record of shareholders of the Corporation; or (ii) if
delivered by personal delivery, by courier service, by wire or wireless
equipment, by telegraphic or other facsimile transmission, or by any other
electronic means which transmits a facsimile of such communication correctly
addressed to each shareholder of record at the shareholder's physical address,
electronic mail address, or facsimile number, as it appears on the current
record of shareholders of the corporation, at least twenty-four (24) hours
prior to the specified effective time of such action.
ARTICLE V
ADDITIONAL TERMS OF CAPITAL STOCK
In addition to the relative rights, preferences, privileges and
restrictions granted to or imposed on the respective classes of the shares of
capital stock or the holders thereof as set forth in Article IV, the relative
rights, preferences, privileges and restrictions granted to or imposed on the
respective classes of the shares of capital stock or the holders thereof are as
follows:
5.1 DIVIDENDS. No dividends or other distributions shall be made
with respect to the Common Stock, other than dividends payable solely in Common
Stock, unless at the same time an equivalent dividend with respect to the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred has been paid or set apart or such equivalent dividend
has been waived by the affirmative vote or written consent of the holders of
not less than Sixty-Six and Two-Thirds Percent (66-2/3%) of the outstanding
shares of each of Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred. Any declared but unpaid dividends
on the shares of Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred shall be paid upon the conversion of
such shares into Common Stock either (at the option of the Corporation) by
payment of cash or by the issuance of additional shares of Common Stock based
upon the fair market value of the Common Stock at the time of conversion, as
determined by the Corporation's Board of Directors.
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5.2 LIQUIDATION PREFERENCES. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the shareholders of the Corporation shall be made in the
following manner:
(a) The holders of each of the Series D Preferred and the
Series E Preferred shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Series A Preferred, the Series B Preferred, the Series C
Preferred or the Common Stock by reason of their ownership of such stock, an
amount equal to the greater of: (1) $11.295 per share, in the case of Series D
Preferred, and $8.99 per share, in the case of Series E Preferred, adjusted for
any combinations, consolidations, subdivisions, or stock dividends with respect
to such shares and, in addition, an amount equal to all declared but unpaid
dividends on such shares; or (2) the amount per share the holder would have
received if he/she/it had converted his/her/its shares into Common Stock as
provided in these Articles of Incorporation, provided, that the holders of
Series D Preferred and the Series E Preferred shall receive such amounts
simultaneously with the receipt by the holders of Common Stock of the amounts
to which they are entitled, as described in Section 5.2(c). If the assets and
funds thus distributed among the holders of the Series D Preferred and Series E
Preferred shall be insufficient to permit the payment to such holders of the
full aforesaid preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed, first, pro
rata among the holders of the Series E Preferred in proportion to the full
preferential amount each such holder is otherwise entitled to receive under
clause (1) above, and among the holders of the Series D Preferred in proportion
to Sixty-Six and Two-Thirds Percent (66-2/3%) of the full preferential amount
each such holder is otherwise entitled to receive under clause (1) above, and,
second, among the holders of the Series D Preferred in proportion to the
remaining full preferential amount each such holder is otherwise entitled to
receive under clause (1) above.
(b) After payment has thus been made to the holders of
each of the Series D Preferred and the Series E Preferred of the full amounts
to which they shall be entitled as aforesaid, the holders of each of the Series
A Preferred, the Series B Preferred and the Series C Preferred shall be
entitled to receive prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of the Common Stock
by reason of their ownership of such stock, an amount equal to the greater of:
(1) $0.0729 per share, in the case of Series A Preferred, $0.67 per share, in
the case of Series B Preferred, and $1.9634 per share, in the case of Series C
Preferred, adjusted for any combinations, consolidations, subdivisions, or
stock dividends with respect to such shares and, in addition, an amount equal
to all declared but unpaid dividends on such shares; or (2) the amount per
share the holder would have received if he/she/it had converted his/her/its
shares into Common Stock as provided in these Articles of Incorporation,
provided, that the holders of the Series A Preferred, the Series B Preferred
and the Series C Preferred shall receive such amounts simultaneously with the
receipt by the holders of Common Stock of the amounts to which they are
entitled, as described in Section 5.2(c). If the assets and funds thus
distributed among the holders of the Series A Preferred, the Series B Preferred
and the Series C Preferred shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amount, then the entire assets and
funds of the Corporation legally available for distribution shall be
distributed among the holders of the Series A Preferred, the Series B Preferred
and the Series C Preferred in proportion to the full preferential amount each
such holder is otherwise entitled to receive under clause (1) above.
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(c) After payment has thus been made to the holders of
each of the Series A Preferred, the Series B Preferred, the Series C Preferred,
the Series D Preferred and the Series E Preferred of the full amounts to which
they shall be entitled as aforesaid, the holders of the Common Stock shall be
entitled to receive ratably on a per-share basis all the remaining assets.
(d) For purposes of this Section 5.2, a merger or
consolidation of the Corporation with or into any other corporation or
corporations, or the merger of any other corporation or corporations into the
Corporation, in which the shareholders of the Corporation receive distributions
in cash or securities of another corporation or corporations as a result of
such consolidation or merger, or a sale of all or substantially all of the
assets of the Corporation, shall be treated as a liquidation, dissolution or
winding up of the Corporation unless the Corporation's stockholders immediately
prior to such an event hold, immediately after such event, at least 50% of the
general voting power of the surviving or acquiring entity by virtue of their
ownership of the Corporation's equity securities.
5.3 VOTING RIGHTS. Except as otherwise required by law or by
Section 5.6, the holder of each share of Common Stock issued and outstanding
shall have the votes set forth in Section 4.3.3, and the holder of each share
of Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred shall be entitled to the number of votes equal to the number of votes
entitled to be cast by the number of shares of Common Stock into which such
share of Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred could be converted at the record date for determination of the
shareholders entitled to vote on such matters, such votes to be counted
together with all other shares of the Corporation having general voting power
and not separately as a class. Fractional votes by the holders of Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred shall
not, however, be permitted and any fractional voting right shall (after
aggregating all shares into which shares of Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred held by each holder could
be converted) be rounded to the nearest whole number. Except as otherwise
required by law, in which case the holder of each share of Series E Preferred
shall be entitled to one (1) vote, the holders of Series E Preferred shall not
be entitled to vote. Where the Series E Preferred is entitled to voting rights
by law, all shares of Series E Preferred shall vote and be counted together
with the Series A Preferred, the Series B Preferred, the Series C Preferred and
Series D Preferred and not separately as a voting group, except as otherwise
required by law. Holders of Common Stock and Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred shall
be entitled to notice of any shareholders' meeting in accordance with the
Bylaws of the Corporation.
5.4 CONVERSION. The holders of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred shall
have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred shall be convertible, at the option of the holder thereof, at any
time after the date of issuance of such share (including immediately prior to
any liquidation, dissolution or winding up of the Corporation as set forth in
Section 5.2 above) at the office of the Corporation or any transfer agent for
each of the Series A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred or Series E Preferred (whichever is appropriate), into such number
of fully paid and nonassessable shares of Series A Common
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Stock, or if, pursuant to Section 4.3.6, the Articles of Incorporation as
amended from time to time do not, at the time of conversion, provide for Series
A Common Stock, into shares of Common Stock, or if applicable pursuant to
Section 5.4(i), into shares of Series E Common Stock, (such Series A Common
Stock, Series E Common Stock or Common Stock, as the case may be, the
"Conversion Stock"), as is determined by dividing $8.99, in the case of the
Series E Preferred, $7.53, in the case of the Series D Preferred, $1.9634, in
the case of the Series C Preferred, $0.67, in the case of the Series B
Preferred, and $0.0729, in the case of the Series A Preferred, by the
Conversion Price (determined as hereinafter provided) for such series in effect
at the time of the conversion (the "Conversion Rate"). The price at which
shares of Conversion Stock shall be deliverable upon conversion (the
"Conversion Price") shall initially be $8.99, in the case of the Series E
Preferred, $7.53, in the case of the Series D Preferred, $1.9634, in the case
of the Series C Preferred, $0.67, in the case of the Series B Preferred, and
$0.0729, in the case of the Series A Preferred. Such initial Conversion Price
shall be subject to adjustment as hereinafter provided. Notwithstanding
anything in this Section 5.4(a) to the contrary, in the event of a Public
Offering (as defined in Section 5.4(b)), the holders of the Series A Preferred
(including for this purpose any shares of Conversion Stock issued upon
conversion of the Series A Preferred prior to a Public Offering) will have the
non-transferable right to convert one (1) such share, unless otherwise provided
in Section 4.3.7, into one (1) share of Series D Common Stock with the rights
provided in Section 4.3.7.
(b) AUTOMATIC CONVERSION. Each share of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and
Series E Preferred shall automatically be converted into shares of the
appropriate Conversion Stock at the then effective Conversion Price upon the
earlier to occur of: (x) the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Corporation to the public at a price of at least $13.554 per
share (as adjusted to reflect subsequent stock dividends, stock splits and
recapitalizations) with aggregate proceeds of not less than $20,000,000 (prior
to deduction of underwriter commissions and offering expenses) (a "Public
Offering"); or (y) the affirmative vote or written consent of the holders of
not less than Sixty-Six and Two/Thirds Percent (66-2/3%) of the then
outstanding shares of Series D Preferred.
(c) MECHANICS OF CONVERSION. No fractional shares of
Conversion Stock shall be issued upon conversion of Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred or Series E Preferred. 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
effective Conversion Price. Before any holder of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred shall
be entitled to convert the same into full shares of Conversion Stock and to
receive certificates therefor, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred (whichever is appropriate),
and shall give written notice to the Corporation at such office that such
holder elects to convert the same; provided, however, that in the event of an
automatic conversion pursuant to Section 5.4(b), the outstanding shares of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred 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
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Corporation or its transfer agent, and provided further, that the Corporation
shall not be obligated to issue certificates evidencing the shares of
Conversion Stock issuable upon such automatic conversion unless the
certificates evidencing such shares of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred are either
delivered to the Corporation or its transfer agent as provided above, or the
holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. The Corporation shall, as soon as
practicable after delivery of such certificate, or such agreement of
indemnification in the case of a lost certificate, issue and deliver at such
office to such holder of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred, a certificate or
certificates for the number of shares of Conversion Stock to which such holder
shall be entitled as aforesaid and a check payable to the holder in the amount
of any cash amounts payable as the result of a conversion into fractional
shares of Conversion Stock. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred to be converted, or in the case of automatic
conversion under Section 5.4(b), on the date of closing of the Public Offering,
and the person or persons entitled to receive the shares of Conversion Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Conversion Stock on such date.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTIVE ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this
Section 5.4(d), the following definitions shall apply:
(1) "OPTIONS" shall mean rights, options
or warrants to subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities.
(2) "ORIGINAL ISSUE DATE" shall mean the
date on which the first share of Series E Preferred was first issued.
(3) "CONVERTIBLE SECURITIES" shall mean
any evidence of indebtedness, shares of capital stock (other than the Common
Stock) or other securities convertible into or exchangeable for Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK"
shall mean all shares of Common Stock issued (or, pursuant to Section
5.4(d)(ii), deemed to be issued) by the Corporation after the Original Issue
Date, other than:
(A) shares of Common Stock issued
or issuable at any time upon conversion of the shares of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E
Preferred authorized herein;
(B) shares of Common Stock issued
or issuable at any time to officers, directors, and employees of, and
consultants to, the Corporation pursuant to the Corporation's 1995 Stock Option
Plan, 1996 Stock Option Plan or any other stock option, restricted stock plan
or employee stock bonus program or grant designated and approved by the
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Board of Directors by unanimous vote if there are three or fewer directors then
serving or, if there are greater than three directors then serving, by a
two-thirds majority vote thereof (provided that any shares repurchased by the
Corporation from employees, officers, directors and consultants pursuant to the
terms of stock repurchase agreements approved by the Board of Directors shall
not, unless reissued, be counted as issued for purposes of this calculation)
other than shares issued to Rob Glaser, the Corporation's Founder, without the
written consent of the holders of a majority of the Series B Preferred, Series
C Preferred, Series D Preferred and Series E Preferred (provided, for purposes
of calculating the majority for purposes of this clause (B), the shares of
Series E Preferred to be issued upon exercise, if ever, of the Series E
Preferred Stock Purchase Warrant issued pursuant to the Series E Preferred
Stock Purchase Agreement dated July 21, 1997, shall not be deemed to be
outstanding, regardless of whether such Series E Preferred Stock Purchase
Warrant has been exercised);
(C) shares of Common Stock issued
or issuable at any time as a dividend or distribution on Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E
Preferred or any other event for which adjustment is made pursuant to Section
5.4(e)(i) hereof;
(D) shares of Common Stock issued
upon conversion of Series B Common Stock to Series C Common Stock pursuant to
Section 4.3.5 of these Articles;
(E) shares of Common Stock issued
upon exercise of the Series B Common Stock Warrants which were issued pursuant
to the Series C Preferred Stock Purchase Agreement by and among the Corporation
and certain purchasers dated October 26, 1995; and
(F) shares of Common Stock issued
or issuable at any time by way of dividend or other distribution on shares of
Common Stock (x) excluded from the definition of Additional Shares of Common
Stock by the foregoing clauses (A), (B), (C), (D), (E), or this clause (F) or
(y) on shares of Common Stock so excluded under Subsection (x).
(ii) DEEMED ISSUANCE OF ADDITIONAL SHARES OF
COMMON STOCK.
(1) OPTIONS AND CONVERTIBLE SECURITIES.
In the event the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities, then the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent adjustment
of such number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall, except as otherwise provided in
Section 5.4(d)(i)(4), be deemed to be Additional Shares of Common Stock issued
as of the time of such issuance, provided that, with respect to a particular
series of Preferred Stock, Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 5.4(d)(iv) hereof) of such Additional Shares of Common
Stock would be less than the Conversion Price in effect for such series on the
date of and immediately prior to such issuance, and, provided further that in
any such case in which Additional Shares of Common Stock are deemed to be
issued (notwithstanding the foregoing):
(A) no further adjustment in the
Conversion Price for such series shall be made upon the subsequent issuance of
Convertible Securities or shares of Common
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Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise,
except as provided in this Section 5.4(d), for any increase or decrease in the
consideration payable to the Corporation, or in the number of shares of Common
Stock issuable, upon the exercise, conversion or exchange thereof (a "Change
Event"), the Conversion Price for any series of Preferred Stock recomputed upon
the original issuance thereof, and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, again be
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities; provided, however, that anything to the contrary notwithstanding,
if the Change Event is triggered or caused by a Dilutive Issue (as defined in
Section 5.4(d)(iii)), this Section 5.4(d)(ii)(B) shall be inapplicable and no
adjustment shall be made to any Conversion Price as a result of the Change
Event;
(C) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Conversion Price computed
upon the original issuance thereof, and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if,
(I) in the case of
Convertible Securities or Options for Common Stock, only the shares of Common
Stock, if any, actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities were issued at the time of
the issuance of such Convertible Securities or Options and the consideration
received therefor was the consideration actually received by the Corporation for
the issue of all such Options or Convertible Securities, whether or not
exercised, converted, or exchanged, plus the consideration actually received by
the Corporation upon such exercise, conversion or exchange, and
(II) in the case of
Options for Convertible Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued at the time of issue of
such Options, and the consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been then issued was the
consideration actually received by the Corporation for the issue of all such
Options, whether or not exercised, plus the consideration deemed to have been
received by the Corporation upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;
(D) no readjustment pursuant to
clause (B) or (C) above shall have the effect of increasing the Conversion
Price to an amount which exceeds the lower of (i) the Conversion Price on the
original adjustment date, or (ii) the Conversion Price that would have resulted
from any other issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date; and
(E) in the case of any options
which expire by their terms not more than 90 days after the date of issuance
thereof, no adjustment of the Conversion Price shall be made until all such
Options have either expired or been exercised.
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In the event that a record date is established for the purpose of
determining the holders of the Corporation's securities who shall be entitled
to receive Options or Convertible Securities as a dividend or a distribution,
the Options or Convertible Securities to be so distributed or issued shall, for
purposes of this Section 5.4(d), be deemed to have been issued as of such
record date (provided that the Conversion Price so computed shall be recomputed
if such Options or Convertible Securities are not so distributed or issued).
(2) STOCK DIVIDENDS. In the event the
Corporation at any time or from time to time after the Original Issue Date
shall declare or pay any dividend on the Common Stock payable in Common Stock,
then and in any such event, Additional Shares of Common Stock shall be deemed
to have been issued immediately after the close of business on the record date
for the determination of holders of any class of securities entitled to receive
such dividend; provided, however, that if such record date is fixed and such
dividend is not fully paid, the only Additional Shares of Common Stock deemed
to have been issued will be the number of shares of Common Stock actually
issued in such dividend, and such shares will be deemed to have been issued as
of the close of business on such record date, and the Conversion Price shall be
recomputed accordingly.
(iii) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE
OF ADDITIONAL SHARES OF COMMON STOCK.
(1) If at any time or from time to time
after the Original Issue Date this Corporation shall issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 5.4(d)(ii)) without consideration or for a consideration
(as determined in Section 5.4(d)(iv)) per share issued or deemed to have been
issued under Section 5.4(d)(ii), less than: (I) in the case of the Series A
Preferred, the Conversion Price for the Series A Preferred in effect on the
date of and immediately prior to such issuance, (II) in the case of the Series
B Preferred, the Conversion Price for the Series B Preferred in effect on the
date of and immediately prior to such issuance, (III) in the case of the Series
C Preferred, the Conversion Price for the Series C Preferred in effect on the
date of and immediately prior to such issuance, (IV) in the case of the Series
D Preferred, the Conversion Price for the Series D Preferred in effect on the
date of and immediately prior to such issuance, or (V) in the case of the
Series E Preferred, the Conversion Price for the Series E Preferred in effect
on the date of and immediately prior to such issuance, then and in such event
(a "Dilutive Issue"), any one or all of such Conversion Prices shall be
reduced, concurrently with such issuance, to a price determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issuance on a
fully diluted basis (including for such purpose Convertible Securities the
conversion rights of which, are then exercisable but excluding all Options)
plus the number of shares of Common Stock which the aggregate consideration
received by the Corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Conversion Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance on a fully-diluted basis (including for such purpose
Convertible Securities the conversion rights of which, are then exercisable but
excluding all Options) plus the number of such Additional Shares of Common
Stock so issued.
(2) In addition to any adjustments to
the Conversion Price for the Series E Preferred made pursuant to Section
5.4(d)(iii)(1), if this Corporation sells shares of
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Common Stock to the public in a public offering pursuant to Section 5.4(b)(y)
at a price per share less than $8.99, (as adjusted to reflect subsequent stock
dividends, stock splits and recapitalizations), the Conversion Price for the
Series E Preferred in effect on the date of and immediately prior to such
public offering, shall be reduced, immediately prior to but contingent upon the
effectiveness of the public offering, to $7.53 (as adjusted to reflect
subsequent stock dividends, stock splits and recapitalizations).
(iv) DETERMINATION OF CONSIDERATION. For purposes
of this Section 5.4(d), the consideration received by the Corporation for the
issuance of any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY: Such
consideration shall:
(A) insofar as it consists of cash,
be computed at the aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time of
such issuance, as determined in good faith by the Corporation's Board of
Directors; and
(C) in the event Additional Shares
of Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(A) and (B) above, as determined in good faith by the Corporation's Board of
Directors.
(2) OPTIONS AND CONVERTIBLE SECURITIES.
The consideration per share received by the Corporation for Additional Shares
of Common Stock deemed to have been issued pursuant to Section 5.4(d)(ii)(1),
relating to Options and Convertible Securities, shall be determined by
dividing: (x) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities; by (y) the maximum
number of shares of Common Stock (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(3) STOCK DIVIDENDS. Any Additional
Shares of Common Stock relating to stock dividends shall be deemed to have been
issued for no consideration.
(e) ADDITIONAL ADJUSTMENTS TO CONVERSION PRICE.
(i) ADJUSTMENTS FOR SUBDIVISIONS, COMBINATIONS OR
CONSOLIDATION OF COMMON STOCK. In the event the outstanding shares of Common
Stock (whether Series A Common Stock, Series E Common Stock or Common Stock)
shall be subdivided, by stock split,
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or otherwise (but other than by stock dividend, which is addressed in Section
5.4(d)(ii)(2) of these Articles of Incorporation), into a greater number of
shares of Common Stock, the Conversion Price for each series of Preferred Stock
then in effect shall, concurrently with the effectiveness of such subdivision,
be proportionately decreased. In the event the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, the Conversion Price for each series
of Preferred Stock then in effect shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately increased.
(ii) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the
event the Corporation at any time or from time to time makes, or fixes a record
date for the determination of holders of Common Stock entitled to receive, any
distribution payable in securities of the Corporation other than shares of
Common Stock and other than as otherwise adjusted in this Section 5.4, then and
in each such event provision shall be made so that the holders of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and
Series E Preferred shall receive upon conversion thereof, in addition to the
number of shares of Common Stock (whether Series A Common Stock, Series E
Common Stock or Common Stock) receivable thereupon, the amount of securities of
the Corporation which they would have received had their Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred been converted into Common Stock on the date of such event and had
then thereafter, during the period from the date of such event to and including
the date of conversion, retained such securities receivable by them as
aforesaid during such period, subject to all other adjustments called for
during such period under this Section 5.4 with respect to the rights of the
holders of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred.
(iii) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE
AND SUBSTITUTION. If the Common Stock (whether Series A Common Stock, Series E
Common Stock or Common Stock) issuable upon conversion of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and
Series E Preferred shall be changed into the same or a different number of
shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for above), the terms of the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred shall, concurrently with the effectiveness of such reorganization or
reclassification, be modified such that the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred, as
the case may be, shall be convertible into, in lieu of the number of shares of
Common Stock which the holders would otherwise have been entitled to receive, a
number of shares of such other class or classes of stock equivalent to the
number of shares of Common Stock that would have been subject to receipt by the
holders upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred immediately before that
change.
(f) NO IMPAIRMENT. Except as provided in Section 5.6,
the Corporation will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issuance or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation but will at all times in
good faith assist in the carrying
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out of all the provisions of this Section 5.4 and in the taking of all such
actions as may be necessary or appropriate in order to protect the Conversion
Rights of the holders of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred against impairment.
(g) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence
of each adjustment or readjustment of the Conversion Price for the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred pursuant to this Section 5.4, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each holder of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation shall,
upon the written request at any time of any holder of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E
Preferred, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion Price
in effect at the time for such series, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of such series of Preferred Stock.
(h) NOTICES OF RECORD DATE. In the event that this
Corporation shall propose at any time:
(i) to declare any dividend or distribution upon
its Common Stock, whether in cash, property, stock or other securities, whether
or not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription, pro rata to the
holders of any class or series of its stock, any additional shares of stock of
any class or series or any other similar rights;
(iii) to effect any reclassification or
recapitalization of its Common Stock outstanding which results in a change in
the Common Stock; or
(iv) to merge or consolidate with or into any
other corporation, or sell, lease or convey all or substantially all its
property or business, or to liquidate, dissolve or wind up; then, in connection
with each such event;
this Corporation shall send to the holders of the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred:
(1) at least twenty (20) days prior
written notice of (x) the record date for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
Stock shall be entitled thereto) or (y) the record date at which the rights to
vote on the matters referred to in (iii) and (iv) above will be determined; and
(2) in the case of the matters referred
to in (iii) and (iv) above, at least twenty (20) days prior written notice of
the date when the same shall take place and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such event or
the record date for the determination of such holders if such record date is
earlier.
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Each such written notice shall (x) be delivered personally; (y) given
by certified or registered mail, postage prepaid; or (z) to the extent receipt
is confirmed, by telecopy, telefax or other electronic transmission service;
addressed to the holders of the Series A Preferred, Series B Preferred, Series
C Preferred, Series D Preferred and Series E Preferred at the address for each
such holder as shown on the books of this Corporation.
(i) ELECTION UPON CONVERSION OF SERIES E PREFERRED STOCK.
In the event that a holder of Series E Preferred elects to convert its shares
of Series E Preferred pursuant to Section 5.4(a) or there occurs an event
requiring automatic conversion of the Series E Preferred pursuant to Section
5.4(b), such holder may elect to convert all of such shares into Series E
Common Stock with the rights provided in these Articles of Incorporation.
5.5 REDEMPTION.
(a) NO CALL. The Corporation shall not have the right to
call for redemption all or any part of the Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred.
(b) OPTION TO REQUIRE REDEMPTION. On or at any time
after December 31, 2002, within sixty (60) days after the receipt by the
Corporation of the written request (a "Redemption Notice") by one or more
holders of shares of Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred (the "Requesting Holders"), together with the written
approval of the holders of not less than two-thirds of the Series B Preferred
then outstanding if any shares of Series B Preferred are to be redeemed, and
with the written approval of not less than two-thirds of the Series C Preferred
then outstanding if any shares of Series C Preferred are to be redeemed, and
with the written approval of not less than two-thirds of the Series D Preferred
then outstanding if any shares of Series D Preferred are to be redeemed, and
with the written approval of not less than two-thirds of the Series E Preferred
then outstanding if any shares of Series E Preferred are to be redeemed (each
series for which such approval is granted being hereinafter referred to as an
"Approved Series"), the Corporation shall, to the extent it may lawfully do so,
redeem the number of whole shares of each Approved Series most nearly equal to
one-third of the shares specified in the Redemption Notice by paying therefor
in cash the Series B Redemption Price, Series C Redemption Price, Series D
Redemption Price, or Series E Redemption Price (each as defined below), as
appropriate. The date of this payment shall be referred to as an "Initial
Redemption Date." The remaining shares of each Approved Series specified in
the Redemption Notice shall be redeemed in two (2) additional equal
installments (or, if such number of shares is not evenly divisible by two, then
the first such installment shall be rounded to the nearest whole number of
shares) on an annual basis in a similar manner, beginning one (1) year from the
Initial Redemption Date, with all remaining shares of each Approved Series
specified in the Redemption Notice being purchased on the second anniversary of
the Initial Redemption Date (the "Initial Redemption Date" and each of the two
following redemption dates shall be referred to as a "Redemption Date"). The
Corporation shall effect any redemption pursuant to this Section 5.5 on a pro
rata basis according to the aggregate amounts which would be received upon
redemption by each Requesting Holder.
(c) REDEMPTION PRICE. The redemption price to be paid by
the Corporation shall be $0.67 per share, in the case of the Series B Preferred
(as adjusted to reflect subsequent stock
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dividends, stock splits or recapitalizations), $1.9634, in the case of the
Series C Preferred (as adjusted to reflect subsequent stock dividends, stock
splits or recapitalizations), $7.53 in the case of the Series D Preferred (as
adjusted to reflect subsequent stock dividends, stock splits or
recapitalizations) and $8.99, in the case of the Series E Preferred (as
adjusted to reflect subsequent stock dividends, stock splits or
recapitalizations) (in each case, the "Issue Price"), in each case plus: (i)
all declared but unpaid dividends thereon as of the Initial Redemption Date,
and (ii) an amount per share equal to the percentage increase (if any) in the
Implicit Price Deflator for Gross Domestic Product, as published by the United
States Department of Commerce, Economics and Statistics Administration, Bureau
of Economic Analysis, or any successor thereto (1987 = 100), from the date of
the original issuance of the share to the date of the Corporation's receipt of
the Redemption Notice multiplied by the applicable Issue Price (such totals are
referred to as the "Series B Redemption Price," the "Series C Redemption
Price," the "Series D Redemption Price," and the "Series E Redemption Price,"
respectively).
(d) NOTICE OF REDEMPTION. Within ten (10) days of the
Corporation's receipt of a Redemption Notice and the related written approval
of the holders of two-thirds of the then outstanding shares of each Approved
Series, the Corporation shall deliver (by (i) personal delivery; (ii) certified
or registered mail, postage prepaid; or (iii) to the extent receipt is
confirmed, by telecopy, telefax or other electronic transmission service)
written notice to each holder of Series B Preferred, Series C Preferred, Series
D Preferred or Series E Preferred who did not approve the Redemption Notice, at
the address of such holder last shown on the records of the Corporation for the
purpose of notice or, if no such address appears or is given, at the place
where the principal executive office of the Corporation is located, identifying
each Requesting Holder and specifying the number of shares to be redeemed by
such holder. If, within ten (10) days of receiving such notice, the holders of
Series B Preferred, Series C Preferred, Series D Preferred or Series E
Preferred who did not approve the Redemption Notice give written notice to the
Corporation of their wish to have any of their shares of Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred redeemed
simultaneously with the redemption of the Requesting Holders, such holders
shall become Requesting Holders for purposes of such redemption.
(e) SURRENDER OF CERTIFICATES. On the Initial Redemption
Date, each Requesting Holder shall surrender to the Corporation the certificate
or certificates representing the number of shares of Series B Preferred, Series
C Preferred, Series D Preferred and Series E Preferred specified in the
Redemption Notice or pursuant to Section 5.5(d). Simultaneously, the
Corporation shall pay one-third of the Series B Redemption Price, the Series C
Redemption Price, the Series D Redemption Price or the Series E Redemption
Price (as applicable) of such shares to be redeemed on that date to the order
of the person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be canceled. In the event
that less than all the shares represented by any such certificate are to be
redeemed pursuant to the Redemption Notice, a new certificate shall be issued
representing the shares not subject to redemption and delivered to the
Requesting Holder. In the event that less than all the shares represented by
any such certificate have been redeemed on a Redemption Date, a new certificate
shall be issued representing the shares not redeemed and such certificate shall
be retained by the Corporation for cancellation on the next Redemption Date(s).
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(f) STATUS OF SHARES SPECIFIED IN THE REDEMPTION NOTICE.
From and after the Initial Redemption Date, unless there has been a default in
payment of the Series B Redemption Price, the Series C Redemption Price, the
Series D Redemption Price or the Series E Redemption Price, all rights of the
Requesting Holders with respect to the shares of Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred specified in the Redemption
Notice (except the right to receive the Series B Redemption Price, the Series C
Redemption Price, the Series D Redemption Price or the Series E Redemption
Price) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the Corporation
legally available for redemption of such shares on any Redemption Date are
insufficient to redeem the total number of shares of Series B Preferred, Series
C Preferred, Series D Preferred or Series E Preferred to be redeemed on such
date, those funds which are legally available shall be used to redeem the
maximum possible number of such shares, and the shares of Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred not redeemed
shall be deemed to be outstanding and shall be entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of
the Corporation are legally available for the redemption of such shares, such
funds will immediately be used to redeem the balance of the shares that the
Corporation has become obligated to redeem on any Redemption Date but that it
has not redeemed.
(g) PARTIAL REVOCATION OF REDEMPTION NOTICE.
Notwithstanding any provision in this Section 5.5 to the contrary, if, after
the Initial Redemption Date, while a Requesting Holder has not yet received in
full the Series B Redemption Price, the Series C Redemption Price, the Series D
Redemption Price or the Series E Redemption Price, as applicable, for all
shares specified in his/her/its Redemption Notice (the shares for which the
applicable redemption price has not been received shall be referred to as the
"Shares Being Redeemed"), the Corporation enters into any transaction described
in Section 5.2(d) in which the Requesting Holder would have received an amount
per share, in cash or securities of another corporation or corporations,
greater than the Series B Redemption Price, the Series C Redemption Price, the
Series D Redemption Price or the Series E Redemption Price, as applicable, for
the Shares Being Redeemed had the shares not been the subject of the Redemption
Notice, the Corporation shall notify the Requesting Holder in writing of such
transaction, in accordance with Section 5.4(h), as if his/her/its rights with
respect to the Shares Being Redeemed had not terminated in accordance with
Section 5.5, and if, within seven (7) days of receipt of such notice, the
Requesting Holder delivers written notice to the Corporation of his/her/its
election to convert the Shares Being Redeemed into Common Stock, such shares
shall be converted to Common Stock in accordance with Section 5.4 and
simultaneously the Requesting Holder's right to receive the applicable
redemption price for the Shares Being Redeemed shall terminate.
5.6 COVENANTS.
(a) SERIES A PREFERRED, SERIES B PREFERRED, SERIES C
PREFERRED AND SERIES D PREFERRED. In addition to any other rights provided by
law, this Corporation shall not, without first obtaining the affirmative vote
or written consent of the holders of not less than a majority of the
outstanding shares of Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred, voting as a single voting group:
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(i) amend or repeal any provision of, or add any
provision to, the Corporation's Articles of Incorporation if such action would
alter or change the preferences, rights, or privileges of the Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred;
(ii) increase or decrease the authorized number of
shares of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Common Stock;
(iii) authorize, create or issue any shares of (A)
Preferred Stock or securities convertible into Common Stock equal or senior to
the Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred as to dividends, conversion rights, redemption rights or liquidation
preference or (B) Common Stock equal or senior to the Series D Preferred as to
redemption rights or liquidation preference or senior to the Series D Preferred
as to dividends or voting rights (other than shares issuable upon exercise of
the Series C Preferred Stock Warrants issued pursuant to the Series C Preferred
Stock Purchase Agreement dated October 25, 1995 or the Series D Preferred Stock
Purchase Warrants issued pursuant to the Series D Preferred Stock Purchase
Agreement dated November 19, 1996);
(iv) merge or consolidate with one or more other
corporations if, after such merger or consolidation, the stockholders of the
Corporation would hold stock representing less than a majority of the voting
power of the outstanding stock of the surviving corporation; or
(v) declare or pay any dividend on the Common
Stock.
(b) SERIES D PREFERRED. In addition to any other rights
provided by law, this Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of not less than Sixty-Six
and Two/Thirds Percent (66-2/3%) of the outstanding shares of Series D
Preferred:
(i) amend or repeal any provision of, or add any
provision to, the Corporation's Articles of Incorporation if such action would
adversely alter or change the preferences, rights, or privileges of the Series
D Preferred;
(ii) increase the authorized number of shares of
Series D Preferred;
(iii) authorize, create or issue any shares of (A)
Preferred Stock or securities convertible into Common Stock equal or senior to
the Series D Preferred as to dividends, conversion rights, redemption rights or
liquidation preference or (B) Common Stock equal or senior to the Series D
Preferred as to redemption rights or liquidation preference or senior to the
Series D Preferred as to dividends or voting rights (other than shares issuable
upon exercise of the Series C Preferred Stock Warrants issued pursuant to the
Series C Preferred Stock Purchase Agreement dated October 25, 1995 or the
Series D Preferred Stock Purchase Warrants issued pursuant to the Series D
Preferred Stock Purchase Agreement dated November 19, 1996); or
(iv) declare or pay any dividend.
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ARTICLE VI
DIRECTORS
6.1 NUMBER OF DIRECTORS. The number of directors of the
Corporation shall be fixed as provided in the Bylaws and may be changed from
time to time by amending the Bylaws.
6.2 AUTHORITY OF BOARD OF DIRECTORS TO AMEND BYLAWS. Subject to
the limitation(s) of RCW 23B.10.210, and subject to the power of the
shareholders of the Corporation to change or repeal the Bylaws, the Board of
Directors is expressly authorized to make, amend, or repeal the Bylaws of the
Corporation unless the shareholders in amending or repealing a particular bylaw
provide expressly that the Board of Directors may not amend or repeal that
bylaw.
6.3 CONTRACTS WITH INTERESTED DIRECTORS. Subject to the
limitations set forth in RCW 23B.08.700 through 23B.08.730:
6.3.1 The Corporation may enter into contracts and
otherwise transact business as vendor, purchaser, lender, borrower, or
otherwise with its directors and with corporations, associations, firms, and
entities in which they are or may be or become interested as directors,
officers, shareholders, members, or otherwise.
6.3.2 Any such contract or transaction shall not be
affected or invalidated or give rise to liability by reason of the director's
having an interest in the contract or transaction.
6.4 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
6.4.1 The capitalized terms in this Section 6.4 shall have
the meanings set forth in RCW 23B.08.500.
6.4.2 The Corporation shall indemnify and hold harmless
each individual who is or was serving as a Director or officer of the
Corporation or who, while serving as a Director or officer of the Corporation,
is or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against any and all Liability incurred with respect to any
Proceeding to which the individual is or is threatened to be made a Party
because of such service, and shall make advances of reasonable Expenses with
respect to such Proceeding, to the fullest extent permitted by law, without
regard to the limitations in RCW 23B.08.510 through 23B.08.550; provided that
no such indemnity shall indemnify any Director or officer from or on account of
(1) acts or omissions of the Director or officer finally adjudged to be
intentional misconduct or a knowing violation of law; (2) conduct of the
Director or officer finally adjudged to be in violation of RCW 23B.08.310; or
(3) any transaction with respect to which it was finally adjudged that such
Director or officer personally received a benefit in money, property, or
services to which the Director or officer was not legally entitled.
6.4.3 The Corporation may purchase and maintain insurance
on behalf of an individual who is or was a Director, officer, employee, or
agent of the Corporation or, who, while a Director, officer, employee, or agent
of the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan,
or other
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enterprise against Liability asserted against or incurred by the individual in
that capacity or arising from the individual's status as a Director, officer,
employee, or agent, whether or not the Corporation would have power to
indemnify the individual against such Liability under RCW 23B.08.510 or
23B.08.520.
6.4.4 If, after the effective date of this Section 6.4, the
Act is amended to authorize further indemnification of Directors or officers,
then Directors and officers of the Corporation shall be indemnified to the
fullest extent permitted by the Act as so amended.
6.4.5 To the extent permitted by law, the rights to
indemnification and advance of reasonable Expenses conferred in this Section
6.4 shall not be exclusive of any other right which any individual may have or
hereafter acquire under any statute, provision of the Bylaws, agreement, vote
of shareholders or disinterested Directors, or otherwise. The right to
indemnification conferred in this Section 6.4 shall be a contract right upon
which each Director or officer shall be presumed to have relied in determining
to serve or to continue to serve as such. Any amendment to or repeal of this
Section 6.4 shall not adversely affect any right or protection of a Director or
officer of the Corporation for or with respect to any acts or omissions of such
Director or officer occurring prior to such amendment or repeal.
6.4.6 If any provision of this Section 6.4 or any
application thereof shall be invalid, unenforceable, or contrary to applicable
law, the remainder of this Section 6.4, and the application of such provisions
to individuals or circumstances other than those as to which it is held
invalid, unenforceable, or contrary to applicable law, shall not be affected
thereby.
6.5 LIMITATION OF DIRECTORS' LIABILITY. To the fullest extent
permitted by the Act, as it exists on the date hereof or may hereafter be
amended, a director of this Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for conduct as a director.
Any amendment to or repeal of this Section 6.5 shall not adversely affect a
director of this Corporation with respect to any conduct of such director
occurring prior to such amendment or repeal.
ARTICLE VII
OTHER MATTERS
7.1 DELEGATION OF DUTIES OF DIRECTORS. The power and authority of
the Board of Directors of the Corporation to adopt or change the editorial
policies of the Corporation shall vest solely in the Policy Director, when such
director is elected to and serving on the Board of Directors of the
Corporation.
7.2 AMENDMENTS TO ARTICLES OF INCORPORATION. Except as otherwise
provided in these Articles of Incorporation, as amended from time to time, the
Corporation reserves the right to amend, alter, change, or repeal any
provisions contained in these Articles of Incorporation in any manner now or
hereafter prescribed or permitted by statute. All rights of shareholders of
the Corporation are subject to this reservation. A shareholder of the
Corporation does not have a vested property right resulting from any provision
of these Articles of Incorporation.
7.3 CORRECTION OF CLERICAL ERRORS. The Corporation shall have
authority to correct clerical errors in any documents filed with the Secretary
of State of Washington, including these
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Articles of Incorporation or any amendments hereto, without the necessity of
special shareholder approval of such corrections.
Executed this 19th day of September, 1997.
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/s/ Bruce Jacobsen
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Its: Bruce Jacobsen, President
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