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SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FREESHOP.COM, INC.
ARTICLE 1. NAME
The name of the corporation (the "Corporation") is FreeShop.com, Inc.
ARTICLE 2. CAPITAL STOCK
2.1 AUTHORIZED CAPITAL
2.1.1 Every 2.5 shares of issued and outstanding Common Stock of this
Corporation are, on the effective date hereof, automatically reclassified into
one share of Common Stock of this Corporation, thereby giving effect to a
1-for-2.5 reverse stock split (the "Reverse Stock Split"). All outstanding
rights and obligations (including option plans, stock options and the exercise
price thereof, stock purchase warrants and the exercise prices thereof and the
conversion terms of the Corporation's shares of Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock) relating to the Corporation's
Common Stock shall be mathematically adjusted to reflect the Reverse Stock Split
so that the proportionate ratio of such rights and obligations to the
reclassified shares will be equal to the proportionate ratio of such rights and
obligations to the shares outstanding immediately prior to such
reclassification. In lieu of the issuance of any fractional shares that would
otherwise result from the Reverse Stock Split, the Corporation shall issue one
whole share to any shareholder that would otherwise receive fractional shares,
the additional shares hereby issued being taken from authorized but theretofore
unissued shares of Common Stock.
2.1.2 After giving effect to the Reverse Stock Split, the total
authorized stock of the Corporation shall consist of 100,000,000 shares of
Common Stock, no par value, and 10,000,000 shares of Preferred Stock, no par
value.
2.2 ISSUANCE OF PREFERRED STOCK IN SERIES
The Preferred Stock may be issued from time to time in one or more
series, the shares of each series to have such voting powers, full or limited,
and such designations, preferences and relative, participating, optional or
other special rights and qualifications, limitations or restrictions thereof as
are stated and expressed herein or in the resolution or resolutions providing
for the issue of such series adopted by the Board of Directors.
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2.2.1 AUTHORITY OF THE BOARD OF DIRECTORS
Authority is hereby expressly granted to the Board of Directors of the
Corporation, subject to the provisions of this Article 2 and to the limitations
prescribed by law, to authorize the issue of one or more series of Preferred
Stock, and with respect to each such series to fix by resolution or resolutions
providing for the issue of each series the number of shares of such series, the
voting powers, full or limited, if any, of the shares of such series and the
designations, preferences and relative, participating, optional or other special
rights and the qualifications, limitations or restrictions thereof. The
authority of the Board of Directors with respect to each series of Preferred
Stock shall include, but not be limited to, the determination or fixing of the
following:
(a) The number of shares of such series;
(b) The designation of such series;
(c) The dividends of such series, the conditions and dates
upon which such dividends shall be payable, the relation which such dividends
shall bear to the dividends payable on any other class or classes of stock and
whether such dividends shall be cumulative or noncumulative;
(d) Whether the shares of such series shall be subject to
redemption by the Corporation and, if made subject to such redemption, the
times, prices, rates, adjustments, and other terms and conditions of such
redemption;
(e) The terms and amounts of any sinking fund provided for
the purchase or redemption of the shares of such series;
(f) Whether or not the shares of such series shall be
convertible into or exchangeable for shares of any other class or classes or of
any other series of any class or classes of stock of the Corporation and, if
provision be made for conversion or exchange, the times, prices, rates,
adjustments, and other terms and conditions of such conversion or exchange;
(g) The extent, if any, to which the holders of the shares
of such series shall be entitled to vote with respect to the election of
directors or otherwise, including the right to elect a specified number or class
of directors, the number or percentage of votes required for certain actions,
and the extent to which a vote by class or series shall be required for certain
actions;
(h) The restrictions, if any, on the issue or reissue of any
Preferred Stock;
(i) The rights of the holders of the shares of such series
upon the dissolution of, or upon the distribution of the assets of, the
Corporation; and
(j) The extent, if any, to which any committee of the Board
of Directors may fix the designations and any of the preferences or rights of
the shares of such series relating to
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dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into or exchange of such shares for shares of any
other class or classes of stock of the Corporation or any other series of the
same or any other class or classes of stock of the Corporation, or fix the
number of shares of any such series or authorize the increase or decrease in the
shares of such series.
2.2.2 DIVIDENDS
Subject to any preferential rights granted for any series of Preferred
Stock, the holders of shares of the Common Stock shall be entitled to receive
dividends, out of the funds of the Corporation legally available therefor, at
the rate and at the time or times, whether cumulative or noncumulative, as may
be provided by the Board of Directors. The holders of shares of the Preferred
Stock shall be entitled to receive dividends to the extent provided herein or by
the Board of Directors in designating the particular series of Preferred Stock.
The holders of shares of the Common Stock shall not be entitled to receive any
dividends thereon other than the dividends referred to in this section.
2.2.3 VOTING
The holders of shares of the Common Stock, on the basis of one vote per
share, shall have the right to vote for the election of members of the Board of
Directors of the Corporation and the right to vote on all other matters, except
those matters on which a separate class of the Corporation's Shareholders vote
by class or series to the exclusion of the holders of the shares of the Common
Stock. To the extent provided herein or by resolution or resolutions of the
Board of Directors providing for the issue of a series of Preferred Stock, the
holders of each such series shall have the right to vote for the election of
members of the Board of Directors of the Corporation and the right to vote on
all other matters, except those matters in which a separate class of the
Corporation's shareholders vote by class or series to the exclusion of the
holders of the shares of such series.
2.2.4 ISSUANCE OF SHARES
The Corporation may from time to time issue and dispose of any of the
authorized and unissued shares of the Common Stock or the Preferred Stock for
such consideration as may be fixed from time to time by the Board of Directors,
without action by the shareholders. The Board of Directors may provide for
payment therefor to be received by the Corporation in cash, property, services
or such other consideration as is approved by the Board of Directors. Any and
all such shares of the Common Stock or the Preferred Stock of the Corporation,
the issuance of which has been so authorized, and for which consideration so
fixed by the Board of Directors has been paid or delivered, shall be deemed
fully paid stock and shall not be liable to any further call or assessment
thereon.
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2.3 DESIGNATION OF SERIES A CONVERTIBLE PREFERRED STOCK
The following series of Preferred Stock is hereby designated, which
series shall have the rights, preferences, privileges and limitations as set
forth below in this Section 2.3:
2.3.1 SERIES A PREFERRED STOCK
The series of Series A Convertible Preferred Stock, consisting of
1,935,484 shares, no par value, authorized herein, shall be designated herein as
the Series A Stock and shall be convertible into shares of the Corporation's
Common Stock, as described in Section 4.3.5.
The rights, preferences, restrictions and other matters relating to
Series A Stock are set forth below.
2.3.2 DIVIDENDS
(a) Subject to the rights of the holders, if any, of any
outstanding shares of Preferred Stock of the Corporation having a preferential
right to dividends ranking equal or superior to the rights of the holders of
Series A Stock, holders of shares of Series A Stock, in preference to holders of
shares of Common Stock of the Corporation, shall be entitled to receive out of
funds that are legally available therefor when and as declared by the Board of
Directors noncumulative cash dividends at the rate of $.000006 per annum on each
outstanding share of Series A Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares).
(b) So long as any shares of Series A Stock shall remain
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Common Stock until
all declared and unpaid dividends on the Series A Stock have been paid.
(c) No cash dividends shall be declared on the Common Stock
or Preferred Stock having a preferential right to dividends ranking equal to the
Series A Stock unless or until a cash dividend in an amount equal to or greater
than the dividend declared on the Common Stock or such Preferred Stock having a
preferential right to dividends equal to the Series A Stock (dividends shall be
compared on an as-converted-to-Common-Stock basis) shall have been paid to, or
declared and a sum sufficient for the payment thereof set apart for the Series A
Stock.
2.3.3 LIQUIDATION RIGHTS
Upon the voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, the assets of the Corporation available for distribution to
its shareholders shall be distributed in the following order and amounts:
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(a) General.
(i) First, the holders, if any, of any outstanding
shares of Preferred Stock of the Corporation having a preferential right to
liquidation payments ranking superior to the rights of the holders of Series A
Stock shall be entitled to receive the full preferential amount per share held
by them (the "Superior Liquidation Amount"). If the assets of the Corporation
shall be insufficient to permit the payment of the full Superior Liquidation
Amount, then the assets of the Corporation available for distribution shall be
distributed ratably among the holders of the shares of such superior Preferred
Stock in the same proportions as the full Superior Liquidation Amount each such
holder would otherwise be entitled to receive bears to the total of the full
Superior Liquidation Amount that would otherwise be payable to all holders of
such superior Preferred Stock.
(ii) If, upon completion of the distribution required
by subsection (i) of this Section 2.3.3(a), assets remain in the Corporation,
(A) the holders of shares of Series A Stock shall be entitled to receive $.086
for each outstanding share of Series A Stock held by them and (B) the holders,
if any, of any outstanding shares of Preferred Stock of the Corporation having a
preferential right to liquidation payments ranking equal to the rights of the
holders of the Series A Stock shall be entitled to receive the liquidation
payment specified for such shares held by them; in addition, each such holder
shall be entitled to receive any declared and unpaid dividend per share on such
outstanding share of Series A Stock or other parity Preferred Stock
(collectively, such liquidation payment amounts are referred to as the "Parity
Liquidation Amount"). If, upon the occurrence of such event, the assets of the
Corporation shall be insufficient to permit the payment of the full Parity
Liquidation Amount, then the assets of the Corporation available for
distribution shall be distributed ratably among the holders of shares of Series
A Stock and the Preferred Stock, if any, ranking equal to the Series A Stock, in
the same proportions as the aggregate of the Parity Liquidation Amount each such
holder would otherwise be entitled to receive bears to the total of the Parity
Liquidation Amount that would otherwise be payable to all such holders, and no
distribution to other shareholders of the Corporation shall be made.
(b) Limitation. Upon the completion of the distribution of
the distributions contemplated pursuant to Section 2.3.3(a), if assets remain in
the Corporation, such remaining assets shall be distributed to the holders of
any other class or series of Preferred Stock of the Corporation having a
liquidation preference to the extent of, and in accordance with, such
preference, and then the holders of the Common Stock shall be entitled to share
ratably in the remaining assets of the Corporation.
(c) Treatment of Consolidations, Mergers and Sales of
Assets. The sale of all or substantially all of the assets of the Corporation,
or the acquisition of the Corporation by another entity by means of merger,
consolidation, share exchange, reorganization or otherwise pursuant to which
shares of capital stock of the Corporation are converted into cash, securities
or other property of the acquiring entity or any of its affiliates shall be
regarded as a liquidation within the meaning of this Section 2.3.3; provided,
however, that each holder of Series A Stock or other shares of convertible
Preferred Stock of the Corporation shall have the right to elect the benefits of
the provisions of Section 2.3.5 or other applicable conversion provisions in
lieu of receiving payment
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in the event of the liquidation, dissolution or winding up of the Corporation
pursuant to this Section 2.3.3; provided, further, that this provision shall not
apply if the holders of voting capital stock of the Corporation immediately
prior to such merger, consolidation, share exchange, reorganization or sale of
assets beneficially own, directly or indirectly, 50% or more of the combined
voting power of the capital stock of the surviving entity resulting from such
merger, consolidation, share exchange or reorganization or the successor
corporation in any such sale of assets.
(d) Distributions Other Than Cash. Whenever the distribution
provided for in this Section 2.3.3 shall be payable in property other than cash,
the value of such distribution shall be the fair market value of such property
as determined in good faith by the Board of Directors.
2.3.4 VOTING POWER
(a) General. Each holder of Series A Stock shall be entitled
to vote on all matters submitted to a vote of shareholders and shall be entitled
to that number of votes equal to the largest number of whole shares of Common
Stock into which such holder's shares of Series A Stock could be converted under
Section 2.3.5, at the record date for the determination of shareholders entitled
to vote on such matter, or, if no such record date is established, at the date
on which notice of the meeting of shareholders at which the vote is to be taken
is mailed, or the date any written consent of shareholders is solicited if the
vote is not to be taken at a meeting. Except as otherwise expressly provided
herein or by the Washington Business Corporation Act, the holders of shares of
the Series A Stock and Common Stock shall vote together as a single class on all
matters submitted to a vote of shareholders.
(b) Series A Stock Voting. Without the affirmative consent
of the holders of shares representing at least a majority (unless a greater
number is otherwise required by law) of the voting power of the Series A Stock
then outstanding, acting separately as a class, given by written consent or by
vote at a meeting called for such purpose for which notice shall have been given
to the holders of the Series A Stock, the Corporation shall not:
(i) authorize or issue (or obligate itself to
authorize or issue) any security of the Corporation having rights, preferences
or privileges senior to the Series A Stock,
(ii) amend its Articles of Incorporation or Bylaws in
any manner that materially adversely affects the preferences, privileges,
restrictions or other rights of the Series A Stock;
(iii) declare or pay any dividends or other
distributions on the Common Stock or Series A Stock, or redeem or repurchase any
of the Corporation's capital stock (unless such shares are repurchased or
redeemed pursuant to the redemption provisions of Section 2.3.7 hereof or from
employees, officers, directors, consultants or other persons performing work for
the Corporation upon termination of the employment, consulting or other
relationship between the Corporation and such person pursuant to an employment
or similar vesting agreement or other stock repurchase agreement where the
redemption or repurchase price does not exceed the fair
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market value of such shares (as determined by the Board of Directors, whose
determination shall be conclusive) or, in the case of unvested shares, the cost
of such shares to the holder thereof);
(iv) effect any sale, lease, assignment, transfer or
other conveyance of material assets of the Corporation to any person other than
a wholly owned subsidiary of the Corporation, or any consolidation or merger in
which the holders of the Corporation's equity securities do not hold at least a
majority of the voting securities of the surviving corporation
(v) authorize any increase in the number of
authorized shares of Series A Stock; or
(vi) approve or effect any liquidation or dissolution
of the Corporation.
2.3.5 CONVERSION RIGHTS
The holders of Series A Stock shall have the following rights with
respect to the conversion of Series A Stock into shares of Common Stock:
(a) General.
(i) Voluntary Conversion. Any share of Series A
Stock may, at the option of the holder, be converted at any time into such
number of fully paid and nonassessable shares of Common Stock as is equal to the
product obtained by multiplying the Series A Conversion Rate (determined under
Section 2.3.5(b)) by the number of shares of Series A Stock being converted.
(ii) Mandatory Conversion. Each share of Series A
Stock shall be converted automatically, without any 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, into the number of shares
of Common Stock into which such Series A Stock is convertible pursuant to
Section 2.3.5(a)(i) upon the earliest of, (A) immediately prior to the closing
of a firmly underwritten, public offering by the Corporation of shares of Common
Stock, registered under the Securities Act of 1933, as amended, in which the
aggregate gross offering proceeds are in excess of $10,000,000 (before deduction
of underwriters' discounts and commissions and expenses of the offering) and the
per share price at which such shares of Common Stock are offered to the public
is at least equal to $5.00 (appropriately adjusted to reflect the occurrence of
any extraordinary Common Stock Event (as defined below)), or (B) the consent or
vote by holders of at least two-thirds of the Series A Stock then outstanding to
such conversion. Any such automatic conversion shall take precedence over and
shall occur irrespective of any notice of redemption of any shares of Series A
Stock if such conversion occurs prior to the applicable Redemption Date (as
defined in Section 2.3.7(d)) for such shares.
(b) Conversion Rate. The conversion rate for Series A Stock
in effect at any time (the "Series A Conversion Rate") shall equal $.086 divided
by the Series A Conversion Price, calculated as provided in Section 2.3.5(c).
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(c) Conversion Price. The conversion price for Series A
Stock in effect from time to time shall initially be $.086, subject to
adjustment, in accordance with Section 2.3.5(d) (the "Series A Conversion
Price").
(d) Adjustments to Applicable Conversion Price.
(i) Extraordinary Common Stock Event. Upon the
happening of an Extraordinary Common Stock Event (as defined below) after the
date of the initial issuance of any shares of Series A Stock, the Series A
Conversion Price shall, simultaneously with the happening of such Extraordinary
Common Stock Event, be adjusted by multiplying the then effective Series A
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such Extraordinary
Common Stock Event and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such Extraordinary Common Stock
Event, and the product so obtained shall thereafter be the Series A Conversion
Price. The Series A Conversion Price, as so adjusted, shall be readjusted in the
same manner upon the happening of any successive Extraordinary Common Stock
Event or Events. "Extraordinary Common Stock Event" shall mean (x) the issuance
of additional shares of Common Stock as a dividend or other distribution on
outstanding Common Stock of the Corporation, (y) a subdivision of outstanding
shares of Common Stock into a greater number of shares of Common Stock, or (z) a
combination of outstanding shares of Common Stock into a smaller number of
shares of Common Stock.
(ii) Sale of Shares Below Applicable Conversion
Price.
(A) If the Corporation shall issue any
Additional Stock (as defined in Section 2.3.5(d)(iii)) without consideration or
for a consideration per share less than the Series A Conversion Price in effect
immediately before the issuance of such Additional Stock, the Series A
Conversion Price in effect upon issuance (except as otherwise provided in this
Section 2.3.5(d)(ii)) shall be adjusted to a price equal to the quotient
obtained by dividing the total computed under clause (x) below by the total
computed under clause (y) below as follows:
(x) an amount equal to the sum of
(1) the result obtained by multiplying the number of shares of Common Stock
deemed outstanding immediately prior to such issuance (which shall include the
actual number of shares outstanding plus all shares issuable upon the conversion
or exercise of all outstanding convertible securities, warrants and options) by
the Series A Conversion Price then in effect, and (2) the aggregate
consideration, if any, received by the Corporation upon the issuance of such
Additional Stock;
(y) the number of shares of Common
Stock of the Corporation outstanding immediately after each issuance (including
the shares deemed outstanding as provided above).
(B) No adjustment of the Series A Conversion
Price shall be made in an amount less than $.01 per share, provided that any
adjustments that are not required to
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be made by reason of this sentence shall be carried forward and shall be taken
into account in any subsequent adjustment made to the Series A Conversion Price.
Except as provided in Subsections 2.3.5(d)(i) and 2.3.5(d)(ii)(E)(3) and (4), no
adjustment of the Series A Conversion Price pursuant to this Section
2.3.5(d)(ii) shall have the effect of increasing the Series A Conversion Price
above the Series A Conversion Price in effect immediately before such
adjustment.
(C) In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any discounts, commissions or other expenses allowed,
paid or incurred by the Corporation for any underwriting or otherwise in
connection with the issuance and sale thereof.
(D) In the case of the issuance of Common
Stock for consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined by
the Board irrespective of any accounting treatment.
(E) In the case of the issuance of options
to purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to purchase or
rights to subscribe for such convertible or exchangeable securities (which
options, rights, or convertible or exchangeable securities are not excluded from
the definition of Additional Stock), the following provisions shall apply:
(1) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued for a consideration equal to the
consideration (determined in the manner provided in Subsections 2.3.5(d)(ii)(C)
and (D)) received by the Corporation upon the issuance of such options or
rights, plus the minimum purchase price provided in such options or rights for
the Common Stock covered thereby, but no further adjustment to the Series A
Conversion Price shall be made for the actual issuance of Common Stock upon the
exercise of such options or rights in accordance with their terms;
(2) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued for a consideration equal to the consideration received by the
Corporation for any such securities and related options or rights, plus the
additional consideration, if any, to be received by the Corporation upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in Subsections 2.3.5(d)(ii)(C) and (D)), but no further adjustments to
the Series A Conversion Price shall be made for the actual issuance of Common
Stock upon the conversion or exchange of such securities in accordance with
their terms;
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(3) if such options, rights, or
convertible or exchangeable securities by their terms provide, with the passage
of time or otherwise, for any increase in the consideration payable to the
Corporation, or decrease in the number of shares of Common Stock issuable, upon
the exercise, conversion or exchange thereof, the Series A Conversion Price
computed upon the original issue thereof, and any subsequent adjustments based
thereon, shall, upon such increase or decrease becoming effective, be recomputed
to reflect such increase or decrease with respect to such options, rights and
securities not already exercised, converted or exchanged before such increase or
decrease became effective, but no further adjustment to the Series A Conversion
Price shall be made for the actual issuance of Common Stock upon the exercise of
any such options or rights or the conversion or exchange of such securities in
accordance with their terms;
(4) upon the expiration of any such
options or rights, the termination of any such rights to convert or exchange, or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Series A Conversion Price shall forthwith be
readjusted to such Series A Conversion Price as would have been obtained had the
adjustment that was made upon the issuance of such options, rights, or
securities or options or rights related to such securities been made upon the
basis of the issuance of only the number of shares of Common Stock actually
issued upon the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or rights
related to such securities; and
(5) if any such options or rights
shall be issued in connection with the issuance and sale of other securities of
the Corporation, together comprising one integral transaction in which no
specific consideration is allocated to such options or rights by the parties
thereto, such options or rights shall be deemed to have been issued for such
consideration as determined in good faith by the Board.
(iii) Additional Stock. "Additional Stock" shall mean
any shares of Common Stock or securities convertible into or exchangeable or
exercisable for shares of Common Stock issued (or deemed to have been issued
pursuant to Subsection 2.3.5(d)(ii)(E)) by the Corporation after the date of
first issuance of Series A Stock other than:
(A) Common Stock issued pursuant to a
transaction for which the Series A Conversion Price is adjusted under Section
2.3.5(d)(i);
(B) up to 1,500,000 shares of Common Stock
issued or issuable (whether directly or pursuant to stock options or warrants)
to employees, directors, advisors or consultants;
(C) Common Stock issued or issuable upon
conversion of or as a dividend or distribution on Series A Stock;
(D) Common Stock issued or issuable in
connection with: (i) the acquisition of another corporation or entity by the
Corporation or any subsidiary of the Corporation by means of a merger,
consolidation, purchase of assets or other transaction or series of related
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transactions whereby the Corporation owns a majority of the voting power of such
other entity following such acquisition; (ii) the acquisition by the Corporation
of intellectual property rights, including intellectual property licenses; or
(iii) the creation of a corporate or other joint venture or any other strategic
alliance with any other corporation or entity; provided, however, that each such
transaction shall have been approved by the Board of Directors and that with
respect to each such transaction or series of related transactions, the number
of shares of Common Stock issued thereunder shall not exceed 10% of the number
of shares of Common Stock outstanding immediately prior to such transaction or
series of transactions.
(e) Capital Reorganization or Reclassification. If the
Common Stock issuable upon the conversion of Series A Stock shall be changed
into the same or different number of shares of any class or classes of stock of
the Corporation, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for in Section 2.3.5(d) or a merger, consolidation, share exchange or
reorganization provided for in Section 2.3.3(c)), then and in each such event
the holder of each share of Series A Stock shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification or
other change by holders of the number of shares of Common Stock into which such
share of Series A Stock, respectively, could have been converted immediately
prior to such reorganization, reclassification or change, all subject to further
adjustment as provided herein.
(f) Accountant's Certificate as to Adjustments, Notice by
the Corporation. In each case of an adjustment or readjustment of the Series A
Conversion Rate, the Corporation at its expense will furnish each holder of
Series A Stock, as applicable, with a certificate, prepared by the Chief
Financial Officer of the Corporation, showing such adjustment or readjustment
and stating in detail the facts upon which such adjustment or readjustment is
based.
(g) Exercise of Conversion Privilege.
(i) Generally. Promptly after receiving the
certificate representing shares of any Series A Stock being converted, the
Corporation shall: (A) issue and deliver to the holder of the shares being
converted, or, if permitted by applicable securities laws, to the nominee or
nominees of such holder, a certificate or certificates as such holder may
request for the number of whole shares of Common Stock that is nearest to the
number of shares of Common Stock issuable in accordance with the provisions of
this Section 2.3.5 upon the conversion of such shares of Series A Stock and (B)
pay to such holder or its nominee any declared but unpaid dividends on the
shares being converted. Conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date (as defined
below for voluntary conversions and for mandatory conversions), and at such
time, whether or not certificates representing the shares being converted shall
have been received by the Corporation or its transfer agent in the case of a
mandatory conversion, the rights of the holder as holder of the converted shares
of Series A Stock, as applicable, shall cease and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
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(ii) Voluntary Conversion. Before any holder of
shares of Series A Stock shall be entitled to voluntarily convert such shares to
Common Stock pursuant to Section 2.3.5(a)(i), such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for such shares and, if appropriate, shall
give written notice by mail, postage prepaid, addressed to the same location at
which the certificate or certificates were or will be surrendered, of the
election to convert such shares and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. With respect to a voluntary conversion pursuant to Section 2.3.5(a)(i),
the date when written notice of the holder's election to convert is received by
the Corporation or a transfer agent for the shares to be converted, together
with the certificate or certificates representing the shares to be converted,
shall be the "Conversion Date."
(iii) Mandatory Conversion. Holders of shares of
Series A Stock converted pursuant to the mandatory conversion provisions of
Section 2.3.5(a)(ii) shall promptly surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for such shares and, if other than the record holder of the converted
shares, shall state the name or names in which the certificate or certificates
for shares of Common Stock are to be issued. Whether or not such certificate or
certificates have been so surrendered, with respect to mandatory conversions
pursuant to Section 2.3.5(a)(ii), the applicable date specified in Section
2.3.5(a)(ii) for automatic conversion shall be the "Conversion Date."
(h) Partial Conversion. In the event some but not all of the
shares of Series A Stock represented by a certificate or certificates
surrendered by a holder are converted, the Corporation shall execute and deliver
to or on the order of the holder, at the expense of the Corporation, a new
certificate representing the shares of Series A Stock that were not converted.
(i) Reservation of Common Stock. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of the Series A Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series A Stock and, if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series A Stock, the Corporation shall
immediately take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
2.3.6 NO REISSUANCE OF STOCK
No share or shares of Series A Stock converted, purchased or otherwise
acquired by the Corporation shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares that the Corporation shall be
authorized to issue. The Corporation may from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of Series A Stock accordingly.
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2.3.7 REDEMPTION
(a) No Call. The Corporation shall not have the right to
call for redemption all or any part of the Series A Stock, but may, pursuant to
the terms of this Section 2.3.7, have the obligation to redeem Series A Stock.
(b) Option to Require Redemption. On July 1, 2002, the
Corporation shall, upon receipt of at least 60 days' prior written request by
the holders of at least 60% of the Series A Stock then outstanding, redeem up to
one-third of the Series A Stock then outstanding. On July 1, 2003, the
Corporation shall, upon receipt of at least 60 days' prior written request by
the holders of at least 60% of the Series A Stock then outstanding, redeem up to
an additional one-third of the Series A Stock then outstanding. On July 1, 2004,
the Corporation shall, upon receipt of at least 60 days' prior written request
by the holders of at least 60% of the Series A Stock then outstanding, redeem up
to the balance of the Series A Stock then outstanding.
(c) Redemption Price. The redemption price per share of
Series A Stock shall be equal to $.086 plus $.000006 per annum from the date
such share was issued (the "Series A Redemption Price"). The Series A Redemption
Price shall be appropriately adjusted for any stock dividends, splits or
combinations applicable to the Series A Stock.
(d) Notice of Redemption. Upon receiving a notice requesting
redemption pursuant to Section 2.3.7(b), the Corporation shall within five
business days mail by certified or registered mail a written notice (a
"Redemption Notice") to each holder of record of Series A Stock, as applicable,
at the address last shown on the records of the Corporation, with a copy of the
Redemption Notice to each such holder sent by facsimile transmission or by
tested or otherwise authenticated telex. Each Redemption Notice shall state that
a redemption pursuant to this Section 2.3.7 has been requested and shall specify
the date fixed for such redemption (the "Redemption Date"), which date shall be
July 1 of the calendar year in which the redemption is requested or the first
day thereafter on which banks in Seattle, Washington, are not authorized to be
closed, and shall specify the maximum number of shares that could be redeemed
from each Series A holder, and each holder of Series A Stock shall have until
the close of business on the date 10 business days before each Redemption Date
to request the redemption of up to the maximum number of shares of Series A
Stock such holder is entitled to redeem. No defect in the Redemption Notice or
any response thereto or in the mailing or publication thereof shall affect the
validity of the redemption proceeding with respect to the Corporation or any
holder of Series A Stock; provided, however, that the Corporation or such holder
has timely received actual notice of the redemption.
(e) Surrender of Stock. On or after the Redemption Date,
each holder of shares of Series A Stock, the redemption of which was requested
by the holder pursuant to Section 2.3.7(d), shall surrender the certificate or
certificates evidencing such shares to the Corporation at any place designated
for such surrender in the Redemption Notice and shall then be entitled to
receive payment in cash, by wire transfer or by bank-certified check of the
Series A Redemption Price for each share of Series A Stock to be redeemed. If
less than all the shares represented by a
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share certificate are to be redeemed, the Corporation shall promptly issue a new
certificate representing the shares not redeemed
(f) Failure to Redeem. If the Corporation shall fail to
discharge its obligation to redeem shares of Series A Stock pursuant to this
Section 2.3.7 (the "Redemption Obligation"), the Redemption Obligation shall be
discharged, pro rata with respect to each holder based on the number of shares
requested to be redeemed, as soon as the Corporation is permitted by law to
discharge such Redemption Obligation. If and so long as any Redemption
Obligation shall not fully be discharged, the Corporation shall not, directly or
indirectly, declare or pay any dividend or make any distribution on, or
purchase, redeem, or satisfy any mandatory redemption, sinking fund or other
similar obligation in respect of, any securities ranking junior to the Series A
Stock with respect to liquidation preference, redemption rights or warrants,
rights or options exercisable for any such junior securities. If and so long as
any Redemption Obligation shall not fully be discharged, the Corporation shall
not, directly or indirectly, declare or pay any dividend or make any
distribution on, or purchase, redeem, or satisfy any mandatory redemption,
sinking fund or other similar obligation in respect of, any securities ranking
on a parity to the Series A Stock with respect to liquidation preference or
redemption rights ("parity securities"), unless such dividends or distributions
on the shares of Series A Stock and the shares of such parity securities are
declared and paid on a pro rata basis, or, in the event any mandatory
redemption, sinking fund or other similar obligation is then undischarged with
respect to such parity securities, unless shares of Series A Stock and such
parity securities are redeemed on a pro rata basis. For purposes of this Section
2.3.7(f), "pro rata basis" shall refer to the proportion that the distribution
payable to holders of Series A Stock or parity securities, respectively, bears
to the aggregate distribution payable to all holders of Series A Stock and
parity securities.
(g) Status of Redeemed Shares. From and after the Redemption
Date, unless default shall be made by the Corporation in paying the Series A
Redemption Price at the time and place specified in the Redemption Notice, all
dividends on shares of Series A Stock to be redeemed on such Redemption Date
shall cease and all rights of holders of such shares shall cease, except the
right of holders of such shares to receive the Series A Redemption Price, as
applicable, against delivery of certificates representing such shares, and such
shares shall cease to be outstanding.
2.3.8 NOTICES OF RECORD DATE
In the event of
(a) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation or
(b) any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation,
then and in each such event the Corporation shall mail or deliver or cause to be
mailed or delivered to each holder of Series A Stock a notice specifying (i) the
date on which any such reorganization,
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reclassification, recapitalization, merger, consolidation, transfer,
dissolution, liquidation or winding up is expected to become effective and (ii)
the time, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, recapitalization, merger,
consolidation, transfer, dissolution, liquidation or winding up. Such notice
shall be mailed or delivered at least 20 days prior to the date specified in
such notice on which such action is to be taken.
2.4 DESIGNATION OF SERIES B CONVERTIBLE PREFERRED STOCK
The following series of Preferred Stock is hereby designated, which
series shall have the rights, preferences, privileges and limitations as set
forth below in this Section 2.4:
2.4.1 SERIES B PREFERRED STOCK
The series of Series B Convertible Preferred Stock, consisting of
1,250,000 shares, authorized herein, is designated in these Articles of
Incorporation as the "Series B Stock" and will be convertible into shares of the
Corporation's Common Stock, as described in Section 2.4.5. The rights,
preferences, restrictions and other matters relating to Series B Stock are set
forth below.
2.4.2 DIVIDENDS
The holders of shares of Series B Stock shall be entitled to receive
dividends, out of the funds of the corporation legally available therefor, at
the rate and at the time or times, whether cumulative or noncumulative, as may
be provided by the Board of Directors. This right to receive dividends shall be
on an equal basis with the holders of shares of Common Stock but subject to any
preferential rights granted for any other series of Preferred Stock.
2.4.3 LIQUIDATION RIGHTS
Upon the voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, the assets of the Corporation available for distribution to
its shareholders shall be distributed in the following order and amounts:
(a) General.
(i) First, the holders, if any, of any outstanding
shares of Preferred Stock of the corporation having a preferential right to
liquidation payments shall be entitled to receive the full preferential amount
per share held by them (the "Superior Liquidation Amount"). If the assets of the
corporation shall be insufficient to permit the payment of the full Superior
Liquidation Amount, then the assets of the corporation available for
distribution shall be distributed ratably among the holders of the shares of
such superior Preferred Stock in the same proportions as the full Superior
Liquidation Amount each such holder would otherwise be
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entitled to receive bears to the total of the full Superior Liquidation Amount
that would otherwise be payable to all holders of such superior Preferred Stock.
(ii) If, upon completion of the distribution required
by subsection (i) of this Section 2.6.3(a), assets remain in the corporation,
the holders of outstanding shares of Series B Stock and Common Stock shall be
entitled to share ratably in the such assets.
(b) Distributions Other Than Cash. Whenever the distribution
provided for in this Section 2.4.3 shall be payable in property other than cash,
the value of such distribution shall be the fair market value of such property
as determined in good faith by the Board of Directors.
2.4.4 VOTING POWER
The holders of Series B Stock will have the right, as a separate voting
group, to elect one director, who must be reasonably acceptable to the other
directors. Except for such right or as otherwise expressly provided by the
Washington Business Corporation Act, the holders of Series B Stock shall not be
entitled to vote on any matter submitted to a vote of shareholders.
2.4.5 CONVERSION RIGHTS
The holders of Series B Stock shall have the following rights with
respect to the conversion of Series B Stock into shares of Common Stock:
(a) General.
(i) Voluntary Conversion. Any share of Series B
Stock may, at the option of the holder, be converted at any time into such
number of fully paid and nonassessable shares of Common Stock as is equal to the
product obtained by multiplying the Series B Conversion Rate (determined under
Section 2.4.5(b)) by the number of shares of Series B Stock being converted.
(ii) Mandatory Conversion. Each share of Series B
Stock shall be converted automatically, without any 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, into the number of shares
of Common Stock into which such Series B Stock is convertible pursuant to
Section 2.4.5(a)(i) upon the earlier of (A) the closing of a firmly
underwritten, public offering by the corporation of shares of Common Stock,
registered under the Securities Act of 1933, as amended, on a Form S-1 or
successor form in which the pre-money valuation of the corporation is at least
$75,000,000, or (B) December 31, 2000.
(b) Conversion Rate. The conversion rate for Series B Stock
in effect at any time (the "Series B Conversion Rate") shall equal $1.00 divided
by the Series B Conversion Price, calculated as provided in Section 2.4.5(c).
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(c) Conversion Price. The conversion price for Series B
Stock in effect from time to time shall initially be $0.10, subject to
adjustment, in accordance with Section 2.4.5(d) (the "Series B Conversion
Price").
(d) Adjustments to Applicable Conversion Price.
(i) Extraordinary Common Stock Event. Upon the
happening of an Extraordinary Common Stock Event (as defined below) after the
date of the initial issuance of any shares of Series B Stock, the Series B
Conversion Price shall, simultaneously with the happening of such Extraordinary
Common Stock Event, be adjusted by multiplying the then effective Series B
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such Extraordinary
Common Stock Event and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such Extraordinary Common Stock
Event, and the product so obtained shall thereafter be the Series B Conversion
Price. The Series B Conversion Price, as so adjusted, shall be readjusted in the
same manner upon the happening of any successive Extraordinary Common Stock
Event or Events. "Extraordinary Common Stock Event" shall mean (x) the issuance
of additional shares of Common Stock as a dividend or other distribution on
outstanding Common Stock of the Corporation, (y) a subdivision of outstanding
shares of Common Stock into a greater number of shares of Common Stock, or (z) a
combination of outstanding shares of Common Stock into a smaller number of
shares of Common Stock.
(ii) Other Distributions. In the event this
corporation shall declare a distribution payable in securities of other persons,
evidences of indebtedness issued by this corporation or other persons, assets
(excluding cash dividends), options or rights, then, in each such case for the
purpose of this Subsection 2.4.5(d)(ii), the holders of the Series B Stock shall
be entitled to a proportionate share of any such distribution as though they
were the holders of the number of shares of Common Stock of this corporation
into which their shares of Series B Stock are convertible as of the record date
fixed for the determination of the holders of Common Stock of this corporation
entitled to receive such distribution.
(e) Capital Reorganization or Reclassification. If the
Common Stock issuable upon the conversion of Series B Stock shall be changed
into the same or different number of shares of any class or classes of stock of
the Corporation, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for in Section 2.4.5(d)), then and in each such event the holder of
each share of Series B Stock shall have the right thereafter to convert such
share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change
by holders of the number of shares of Common Stock into which such share of
Series B Stock, respectively, could have been converted immediately prior to
such reorganization, reclassification or change, all subject to further
adjustment as provided herein, and in any such case appropriate provisions shall
be made with respect to the rights and interests of such holder to the end that
the provisions hereof shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights.
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(f) Accountant's Certificate as to Adjustments, Notice by
the Corporation. In each case of an adjustment or readjustment of the Series B
Conversion Rate, the Corporation at its expense will furnish each holder of
Series B Stock, as applicable, with a certificate, prepared by the Chief
Financial Officer of the Corporation, showing such adjustment or readjustment
and stating in detail the facts upon which such adjustment or readjustment is
based.
(g) Exercise of Conversion Privilege.
(i) Generally. Promptly after receiving the
certificate representing shares of any Series B Stock being converted, the
Corporation shall: (A) issue and deliver to the holder of the shares being
converted, or, if permitted by applicable securities laws, to the nominee or
nominees of such holder, a certificate or certificates as such holder may
request for the number of whole shares of Common Stock that is nearest to the
number of shares of Common Stock issuable in accordance with the provisions of
this Section 2.4.5 upon the conversion of such shares of Series B Stock and (B)
pay to such holder or its nominee any declared but unpaid dividends on the
shares being converted. Conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date (as defined
below for voluntary conversions and for mandatory conversions), and at such
time, whether or not certificates representing the shares being converted shall
have been received by the Corporation or its transfer agent in the case of a
mandatory conversion, the rights of the holder as holder of the converted shares
of Series B Stock, as applicable, shall cease and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby. The
corporation shall not be required to issue any fraction of a share of Common
Stock upon conversion of Series B Stock; if any fraction of a share of Common
Stock would, except for the foregoing clause, be issuable to any holder on the
conversion of any Series B Stock, the Corporation shall pay to the holder of
such converted Series B Stock an amount in cash equal to the then current fair
market value of such fractional interest.
(ii) Voluntary Conversion. Before any holder of
shares of Series B Stock shall be entitled to voluntarily convert such shares to
Common Stock pursuant to Section 2.4.5(a)(i), such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for such shares and, if appropriate, shall
give written notice by mail, postage prepaid, addressed to the same location at
which the certificate or certificates were or will be surrendered, of the
election to convert such shares and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. With respect to a voluntary conversion pursuant to Section 2.4.5(a)(i),
the date when written notice of the holder's election to convert is received by
the Corporation or a transfer agent for the shares to be converted, together
with the certificate or certificates representing the shares to be converted,
shall be the "Conversion Date."
(iii) Mandatory Conversion. Holders of shares of
Series B Stock converted pursuant to the mandatory conversion provisions of
Section 2.4.5(a)(ii) shall promptly
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surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for such shares and, if other than
the record holder of the converted shares, shall state the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. The Corporation will give such holders written notice at least five days
prior to the date on which they are requested to surrender their certificate or
certificates. Whether or not such certificate or certificates have been so
surrendered, with respect to mandatory conversions pursuant to Section
2.4.5(a)(ii), the applicable date specified in Section 2.4.5(a)(ii) for
automatic conversion shall be the "Conversion Date."
(h) Partial Conversion. In the event some but not all of the
shares of Series B Stock represented by a certificate or certificates
surrendered by a holder are converted, the Corporation shall execute and deliver
to or on the order of the holder, at the expense of the Corporation, a new
certificate representing the shares of Series B Stock that were not converted.
(i) Reservation of Common Stock. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of the Series B Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series B Stock and, if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series B Stock, the Corporation shall
immediately take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
The Corporation covenants that all shares of Common Stock which shall be
so issued shall be duly and validly issued and fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof. The
Corporation will take such action as may be necessary to assure that all such
shares of Common Stock may be so issued without violation of any applicable law
or regulation, or of any requirement of any securities exchange upon which the
Common Stock may be listed.
2.4.6 NO REISSUANCE OF STOCK
No share or shares of Series B Stock converted, purchased or otherwise
acquired by the Corporation shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares that the Corporation shall be
authorized to issue. The Corporation may from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of Series B Stock accordingly.
2.4.7 NOTICES OF CERTAIN EVENTS
If the Corporation becomes subject to:
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(a) any capital reorganization of the Corporation, any
reclassification or recapitalization of the Corporation's capital stock, any
merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation, or
(b) any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, then the Corporation will mail or deliver or
cause to be mailed or delivered to each holder of Series B Stock at least twenty
(20) days' prior written notice specifying (i) the expected effective date of
such reorganization, reclassification, recapitalization, merger, consolidation,
transfer, dissolution, liquidation or winding up, and (ii) the time, if any,
that is to be fixed, as to when the holders of record of Common Stock (or other
securities) will be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, merger, consolidation,
transfer, dissolution, liquidation or winding up.
ARTICLE 3. DIRECTORS
The number of directors of the Corporation and the manner in which such
directors are to be elected shall be as set forth in the bylaws. The terms of
the initial directors shall expire at the first shareholders' meeting at which
directors are elected.
ARTICLE 4. SHAREHOLDERS' RIGHTS
Shareholders of the Corporation have no preemptive rights to acquire
additional shares issued by the Corporation.
ARTICLE 5. VOTING RIGHTS
5.1 APPROVAL OF CERTAIN TRANSACTIONS
Subsequent to the date that a class of the Corporation's shares are
registered pursuant to Section 12 or Section 15 under the Securities Exchange
Act of 1934, as amended, a majority of all votes entitled to be cast by a voting
group will be sufficient to approve any (a) amendment to the Articles of
Incorporation, (b) plan of merger or share exchange, (c) sale of assets other
than in the usual and regular course of business of the Corporation or (d)
dissolution of the Corporation.
5.2 NO CUMULATIVE VOTING
No cumulative voting for directors shall be permitted.
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ARTICLE 6. DIRECTOR LIABILITY AND INDEMNIFICATION
6.1 LIMITATION OF DIRECTOR LIABILITY
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for his or her conduct as a
director, except for (i) acts or omissions that involve intentional misconduct
of a knowing violation of law by the director, (ii) conduct violating RCW
23B.08.310, or (iii) any transaction from which the director will personally
receive a benefit in money, property or services to which the director is not
legally entitled. If the Washington Business Corporation Act is amended in the
future to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be deemed eliminated or limited to the fullest extent
permitted by the Washington Business Corporation Act, as so amended, without any
requirement of further action by the shareholders.
6.2 INDEMNIFICATION
6.2.1 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 (a) acts or omissions of the
director or officer finally adjudged to be intentional misconduct or a knowing
violation of law; (b) conduct of the director or officer finally adjudged to be
in violation of RCW 23B.08.310; or (c) 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.
6.2.2 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.
6.2.3 If, after the effective date of this Section 6.2, the Washington
Business Corporation Act (the "Act") is amended to authorize further
indemnification of directors or
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officers, then directors and officers of the Corporation shall be indemnified to
the fullest extent permitted by the Act as so amended.
6.2.4 To the extent permitted by law, the rights to indemnification
and advance of reasonable expenses conferred in this Section 6.2 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 6.2 shall be a contract right upon which each director or officer
shall be presumed to have relied in determining to serve or to continue to serve
as such. Any amendment to or repeal of this Section 6.2 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.
6.2.5 If any provision of this Section 6.2 or any application thereof
shall be invalid, unenforceable, or contrary to applicable law, the remainder of
this Section 6.2, 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.
ARTICLE 7. INCORPORATOR
The name and address of the incorporator are:
Name Address
---- -------
Bryce L. Holland, Jr. Two Union Square
601 Union Street
Seattle, Washington 98101-2346
ARTICLE 8. AMENDMENT OF ARTICLES
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on
shareholders and directors are subject to this reserved power.
Dated: September __, 1999
FREESHOP.COM, INC.
By
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Timothy Choate
President and CEO