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EXHIBIT 3.3
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
REALNETWORKS, INC.
RealNetworks, Inc., a Washington corporation, by its Chief Executive
Officer, 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 September 24, 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 RealNetworks, 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, $.001 par value per share (the
"Common Stock"), and Sixty Million (60,000,000) shares of preferred stock, $.001
par value per share (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, Section 4.3.8 and 4.3.9.
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 entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled
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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 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.
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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.
4.3.6 TERMINATION OF DESIGNATION OF SERIES A COMMON STOCK, SERIES B
COMMON STOCK AND SERIES C COMMON STOCK. Upon the earlier of the following events
(a "Designated Event"):
(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
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(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, (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%), and (iii) the
Public Offering does not constitute a Qualified Public Offering (as defined in
Section 4.3.9);
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 but undesignated 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. Following a Designated Event,
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 the Designated Event, 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, 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 to adopt or change the editorial policies of the
Corporation.
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
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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.
4.3.9 QUALIFIED PUBLIC OFFERING. The provisions of this Section
4.3.9 shall apply in the event of the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), covering the offer
and sale of Common Stock for the account of the Corporation to the public with
aggregate proceeds to the Corporation of not less than $20,000,000 (prior to
deduction of underwriter commissions and offering expenses), provided, the
holders of not less than Sixty-Six and Two-Thirds Percent (662/3%) of the then
outstanding shares of Series D Preferred, by affirmative vote or written
consent, have consented to such offering ("Qualified Public Offering").
(a) TERMINATION OF DESIGNATION OF SERIES A COMMON STOCK,
SERIES B COMMON STOCK, SERIES C COMMON STOCK AND SERIES D COMMON STOCK.
Effective upon closing of a Qualified Public Offering, the designation of the
Series A Common Stock, Series B Common Stock, Series C Common Stock and Series D
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 (i) the
number of authorized but undesignated 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, Series C Common Stock and Series D Common Stock without
any distinctions between any of such shares; (ii) each share of Series A Common
Stock, Series B Common Stock, Series C Common Stock and Series D 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 (iii) each certificate representing shares of Series
A Common Stock, Series B Common Stock, Series C Common Stock or Series D 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.
(b) DESIGNATION OF SPECIAL COMMON STOCK; RECLASSIFICATION OF
SERIES E COMMON STOCK. Effective upon closing of a Qualified Public Offering (i)
the designation of the Seven Million Forty-Seven Thousand Six Hundred
Seventy-Nine (7,047,679) shares of Series E Common Stock shall automatically
terminate and be replaced by the designation of a new series of Common Stock to
be known as "Special Common Stock," consisting of the same number of shares,
which series shall have the rights described in this Section 4.3.9, and (ii)
each share of Series E Common Stock then outstanding shall automatically be
reclassified as one (1) share of Special Common Stock; and (iii) each
certificate representing shares of Series E
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Common Stock that were outstanding immediately prior to the reclassification
shall, by virtue of the reclassification and without any action on the part of
the holder, thereafter represent the corresponding number of shares of Special
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 Special Common Stock represented by the
surrendered certificate.
(c) CONVERSION SUBJECT TO PRIOR APPROVAL OF BOARD OF
DIRECTORS. At any time after the closing of a Qualified Public Offering, at the
option of the holder except as provided in this Section 4.3.9, the holder of
such shares may request, only upon delivery to the Corporation of a written
conversion request, that the shares be converted into an equal number of shares
of Common Stock (with the same rights and preferences as shares of Common
Stock); provided, however, that such optional conversion can only occur with the
prior written consent of the Board of Directors, which consent may be withheld
in the sole discretion of the Board of Directors.
(d) VOTING RIGHTS. Each share of Common Stock shall be
entitled to one (1) vote on all matters submitted to the shareholders of the
Corporation and each share of Special Common Stock shall not be entitled to
vote, except as required by law, in which case each share of Special Common
Stock shall be entitled to one (1) vote.
(e) RANKING. The rights and preferences of the Common Stock
and the Special Common Stock shall be in all respects identical, except as
otherwise required by law or expressly provided in these Articles of
Incorporation.
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
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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.
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.
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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 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 permitted by the Act, the taking of action by shareholders without
a meeting by less than unanimous written consent of all shareholders entitled to
vote on the action shall be permitted. Before the date on which the action
becomes effective, notice of the taking of such action shall be given to those
shareholders entitled to vote on the action who have not consented in writing
(and, if the Act would otherwise require that notice of a meeting of
shareholders to consider the action be given to nonvoting shareholders, to all
nonvoting shareholders), in writing, describing with reasonable clarity and
specifying the general nature of the action taken or to be taken, stating the
effective date and time of the 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 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 entitled thereto 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 entitled thereto 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.
4.12 SPECIAL MEETINGS OF SHAREHOLDERS. Subsequent to the date of closing
of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act covering the offer and sale of
Common Stock for the account of the Corporation to the public, special meetings
of the shareholders for any purpose or purposes may be called at any time only
by a majority of the Board of Directors or the Chairman of the Board of
Directors (if one be appointed) or the President or one or more shareholders
holding not less than twenty-five percent (25%) of all the shares entitled to be
cast on any issue proposed to be considered at that meeting.
4.13 MAJORITY VOTE REQUIRED. Unless otherwise provided in these Articles
of Incorporation, subsequent to the date of closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Common Stock for the
account of the Corporation to the public, pursuant to authority granted under
Sections 23B.10.030, 23B.11.030, 23B.12.020, and 23B.14.020 of the Act, the vote
of shareholders of the Corporation required in order to approve amendments to
the Articles of Incorporation, a plan of merger or share exchange, the sale,
lease, exchange, or other
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disposition of all or substantially all of the property of the Corporation not
in the usual and regular course of business, or dissolution of the Corporation
shall be a majority of all of the votes entitled to be cast by each voting group
entitled to vote thereon, regardless of whether or not the Corporation is a
"public company," as that term is defined in Section 23B.01.400 of the Act.
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 (662/3%) 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.
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
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receive under clause (1) above, and among the holders of the Series D Preferred
in proportion to Sixty-Six and Two-Thirds Percent (662/3%) 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.
(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
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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 Stock, or if, pursuant to Section 4.3.6
or Section 4.3.9, 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 for the Series E Preferred, into shares of Series E Common
Stock, or if, pursuant to Section 4.3.9, the Articles of Incorporation as
amended from time to time do not, at the time of conversion, provide for Series
E Common Stock, into shares of Special Common Stock (such Series A Common Stock,
Series E Common Stock, Common Stock or Special 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 that is not a Qualified Public
Offering, 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.
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(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 the number and class of fully paid and
nonassessable shares of Conversion Stock into which such share would then
convert upon voluntary conversion under Section 5.4(a), effective upon the
closing of a firm commitment underwritten public offering (a "Public Offering")
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock for the account of the Corporation
to the public, if either (x) the price to the public in the offering is at least
$13.554 per share (as adjusted to reflect subsequent stock dividends, stock
splits, combinations and recapitalizations) and the aggregate proceeds of the
offering are not less than $20,000,000 (prior to deduction of underwriter
commissions and offering expenses), or (y) the holders of not less than
Sixty-Six and Two-Thirds Percent (662/3%) of the then outstanding shares of
Series D Preferred, by affirmative vote or written consent, have consented to
the automatic conversion.
(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 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
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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 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;
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(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 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,
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(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.
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
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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 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.
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(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, 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.
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(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 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;
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(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.
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
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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 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
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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).
(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
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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:
(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
(662/3%) of the outstanding shares of Series D Preferred:
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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 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.
ARTICLE VI
DIRECTORS
6.1 NUMBER OF DIRECTORS.
6.1.1 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.
6.1.2 When the Board of Directors shall consist of four or more
members, the directors shall be divided into three classes: Class 1, Class 2 and
Class 3. Such classes shall be as nearly equal in number of directors as
possible. Except as provided in Section 6.1.4, each director shall serve for a
term ending at the third annual meeting of shareholders following the director's
election; provided, that the director or directors first elected to Class 1
shall serve for a term ending at the first annual meeting of shareholders
following such election, the director or directors first elected to Class 2
shall serve for a term ending at the second annual meeting of shareholders
following such election, and the director or directors first elected to Class 3
shall serve for a term ending at the third annual meeting of shareholders
following such election.
6.1.3 At each annual meeting of shareholders, the directors
nominated to succeed those whose terms then expire shall be identified as being
of the same class as the directors they succeed unless, by reason of any
intervening changes in the authorized number of directors, the Board of
Directors shall designate one or more directorships whose terms then expire as
directorships of another class in order more nearly to achieve equality in the
number of directors in the respective classes. When the Board of Directors fills
a vacancy resulting from the death, resignation or removal of a director, the
director chosen to fill that vacancy shall be of the same class as the director
he succeeds.
6.1.4 Notwithstanding the foregoing provisions of this Section 6.1,
in all cases, including upon any change in the authorized number of directors,
each director then continuing to serve as such will nevertheless continue as a
director of the class of which he is a member until the expiration of his or her
term or his or her earlier death, resignation or
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removal. Any vacancy in any class resulting from the death, resignation or
removal of a director or an increase in the number of authorized directors may
be filled by the directors in any manner permitted by the Act; provided, if the
term of the director or directors in that class is not scheduled to expire at
the next annual meeting of shareholders, the term of the director chosen to fill
such vacancy shall continue only until the next annual meeting of shareholders
at which a successor shall be chosen for a term to expire at the scheduled date
for expiration of the term of the director or directors in that class.
6.1.5 If a Qualified Public Offering does not occur on or prior to
January 31, 1998, then the provisions of Sections 6.1.2 through 6.1.4 shall
automatically cease to apply, and each director then in office shall continue in
office, without class designation, until the next annual meeting of shareholders
or until his or her earlier death, resignation or removal.
6.2 REMOVAL.
6.2.1 Any director or the entire Board of Directors may be removed
with or without cause by the holders of not less than a majority of the shares
then entitled to vote at an election of directors; provided, that, following a
Qualified Public Offering, no director may be removed without "cause," as
defined below. Action to remove a director may be taken at any annual or special
meeting of the shareholders of this Corporation, provided that notice of the
proposed removal, which shall include a statement of the charges alleged against
the director in the event of removal for cause, shall have been duly given to
the shareholders together with or as a part of the notice of the meeting.
6.2.2 Where a proposal to remove a director for cause is to be
presented for shareholder consideration following a Qualified Public Offering,
an opportunity shall be provided the director to present the director's defense
to the shareholders in a statement to accompany or precede the notice of the
meeting at which such proposal is to be presented. The director shall also be
served with notice of the meeting at which such proposal is to be presented,
together with a statement of the specific charges alleged against the director,
and shall be given an opportunity to be present and to be heard at the meeting.
6.2.3 For purposes of this Section 6.2, "cause" for removal shall be
limited to (a) action by a director involving willful malfeasance having a
material adverse effect on the Corporation and (b) conviction of a director of a
felony; provided, that action by a director shall not constitute "cause" if, in
good faith, the director believed such action to be in or not opposed to the
best interests of the Corporation, or if the director is entitled, under
applicable law or the Articles of Incorporation or Bylaws of this Corporation,
to be indemnified with respect to such action.
6.3 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.
6.4 CONTRACTS WITH INTERESTED DIRECTORS. Subject to the limitations set
forth in RCW 23B.08.700 through 23B.08.730:
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6.4.1 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.
6.4.2 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.
6.5 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
6.5.1 The capitalized terms in this Section 6.5 shall have the
meanings set forth in RCW 23B.08.500.
6.5.2 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.
6.5.3 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
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.
6.5.4 If, after the effective date of this Section 6.5, 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.
6.5.5 To the extent permitted by law, the rights to indemnification
and advance of reasonable Expenses conferred in this Section 6.5 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 6.5 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
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such. Any amendment to or repeal of this Section 6.5 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.
6.5.6 If any provision of this Section 6.5 or any application
thereof shall be invalid, unenforceable, or contrary to applicable law, the
remainder of this Section 6.5, 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.
6.6 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 6.6 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 CERTAIN CORPORATE GOVERNANCE MATTERS. At all times following the
closing of a Qualified Public Offering, the following provisions will apply:
7.1.1 STRATEGIC TRANSACTIONS COMMITTEE.
(a) MEMBERS. There shall be a Strategic Transactions Committee
(the "Committee") of the Board of Directors which shall consist of three (3)
directors. The members of the initial Committee shall be Robert Glaser, the
Corporation's Founder, James Breyer and Mitchell Kapor. A member of the
Committee shall automatically cease to be a member of the Committee upon the
earlier of: (i) his or her death, resignation or removal as a director, or (ii)
at the option of the Chairman of the Committee, his or her ceasing to hold or
control, directly or indirectly, at least five percent (5%) of the outstanding
shares of capital stock of the Corporation. Neither the Board of Directors nor
the shareholders shall have any authority to remove any member of the Committee
or to otherwise reconstitute the Committee or its membership.
(b) CHAIRMAN OF COMMITTEE. Mr. Glaser shall serve as Chairman
of the Committee as long as he is a member of the Committee. At such time as Mr.
Glaser is no longer a member of the Committee, the Committee shall select one of
its members as Chairman.
(c) POWER OF COMMITTEE. Without the prior approval of the
Committee, the Board of Directors of the Corporation shall not have the power
and authority to: (i) adopt a plan of merger, (ii) authorize the sale, lease,
exchange or mortgage of (A) assets representing more than fifty percent (50%) of
the book value of the Corporation's assets prior to the transaction, or (B) any
other asset or assets on which the long-term business strategy of the
Corporation is substantially dependent, (iii) authorize the voluntary
dissolution of the Corporation, or (iv) take any action that has the effect of
clauses (i) through (iii) of this Section 7.1.1(c).
(d) MEETINGS AND NOTICE. The Committee shall meet from time to
time on the call of its Chairman or of the other two members. Each meeting of
the Committee shall be
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held at the date, time and place as may be designated in the notice of the
meeting given by the person or persons authorized to call the meeting. Notice of
the date, time and place of each meeting of the Committee shall be given to each
member of the Committee in any manner permitted by the Act not less than one (1)
day prior to the meeting; such notice need not state the purpose or purposes of
the meeting. The Committee shall keep regular minutes of its meetings and
proceedings.
(e) QUORUM. At any meeting of the Committee, presence of the
Chairman and at least one other member thereof shall constitute a quorum. The
act of at least two (2) members of the Committee at a meeting at which a quorum
is present shall be the act of the Committee. All action of the Committee shall
be taken at a meeting of the Committee or as otherwise provided or allowed by
law.
(f) VACANCIES. Any vacancy on the Committee shall be filled by
the remaining member or members of the Committee, regardless of whether or not a
quorum. If two members of the Committee remain and they are unable to agree on
an individual to fill the vacancy, the vacancy may be filled by the member who
holds or controls, directly or indirectly, the larger percentage of the
outstanding shares of capital stock of the Corporation.
(g) TERMINATION OF COMMITTEE. The Committee, by vote of the
Chairman of the Committee and one additional member, may limit the powers of the
Committee or may terminate the Committee. The existence and powers of the
Committee shall terminate when the members in the aggregate cease to hold or
control, directly or indirectly, at least ten percent (10%) of the outstanding
shares of capital stock of the Corporation. The Board of Directors shall have
and succeed to any and all power and authority of the Committee that have been
limited or eliminated as a result of actions taken pursuant to this Section
7.1.1(g).
7.1.2 POLICY OMBUDSMAN. Mr. Glaser shall serve, or shall appoint
another officer of the Corporation who shall serve, as the Corporation's Policy
Ombudsman. The Policy Ombudsman shall have exclusive responsibility for adopting
or changing the editorial policies of the Corporation as reflected on the
Corporation's Web sites or in other communications or media where the
Corporation has a significant editorial or media voice. The Policy Ombudsman may
be removed only by the unanimous approval of all members of the Board of
Directors. Upon the death, resignation or removal of Mr. Glaser as the Policy
Ombudsman, the Chief Executive Officer or another officer of the Corporation
appointed by the Chief Executive Officer, shall serve as his or her successor.
7.1.3 AUTHORITY FOR SECTION 7.1. The provisions of this Section 7.1
are intended to modify the authority of the Board of Directors in a manner
permitted by RCW 23B.08.010(3) and shall be construed consistent with that
provision of the Act. Except as otherwise provided in these Articles of
Incorporation, as amended from time to time, the Committee shall have all of the
powers and authority of a committee of the Board of Directors created pursuant
to RCW 23B.08.250.
7.1.4 AMENDMENT OF SECTION 7.1. Notwithstanding any provision of
these Articles of Incorporation or the Corporation's Bylaws, as either may be
amended from time to time by the Board of Directors or the shareholders of the
Corporation, this Section 7.1 cannot be amended without the approval of the
holders of ninety percent (90%) of the shares entitled to be voted on such
proposed amendment(s).
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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 Articles of Incorporation or any amendments hereto,
without the necessity of special shareholder approval of such corrections.
Executed this _____ day of September, 1997.
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Robert Glaser, Chief Executive Officer
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