Exhibit 3.5
CERTIFICATE OF DESIGNATIONS, PREFERENCES, AND RELATIVE
OPTIONAL OR OTHER SPECIAL RIGHTS OF
PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
OLYMPIC CASCADE FINANCIAL CORPORATION
Pursuant to the
General Corporation Law of the State of Delaware
Olympic Cascade Financial Corporation, a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in Article A
of its Certificate of Incorporation, its Board of Directors ("Board") adopted
the following resolution creating a series of its Preferred Stock, par value
$0.01 per share, designated as Series B Convertible Preferred Stock:
WHEREAS, the Certificate of Incorporation of the Corporation authorizes a
class of shares known as Preferred Stock, par value $0.01 per share, to be
issuable from time to time in one or more series;
RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation by the provisions of the
Certificate of Incorporation, the Board hereby creates a series of the class of
authorized Preferred Stock of the Corporation, and hereby fixes the designation
and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof as follows:
(A) Designation of Series. The Corporation shall have a series of
Preferred Stock designated as "Series B Preferred Stock" (the "Series B
Preferred Stock").
(B) Designation of Number of Shares in Series. The number of shares
constituting the Series B Preferred Stock shall be 20,000.
(C) Fixing the Rights, Preferences, Privileges and Restrictions. The
following rights, preferences, privileges and restrictions are hereby granted to
and imposed upon the Series B Preferred Stock:
1. Rank.
The Series B Preferred Stock shall rank (i) prior to the Corporation's
common stock, par value $.02 per share (the "Common Stock"); (ii) prior to any
class or series of capital stock of the Corporation hereafter created
(collectively, with the Common Stock, "Junior Securities"); (iii) pari passu, in
all respects, to the Corporation's Series A Convertible Preferred Stock (the
"Series A Preferred") and with any class or series of capital stock of the
Corporation hereafter created specifically ranking, by its terms, on parity with
the Series B Preferred Stock ("Pari Passu Securities"); and (iv) junior to any
class or series of capital stock of the Corporation hereafter created
specifically ranking, by its terms, senior to the Series B Preferred Stock
("Senior Securities"), in each case as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary.
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2. Dividends.
(a) The holders of the Series B Preferred Stock shall be entitled to
receive dividends with respect to each share of Series B Preferred Stock at the
annual rate of 10% of the Initial Series B Preferred Stock Price (as hereinafter
defined), payable out of any assets or funds legally available therefor. Such
dividends shall be cumulative and shall accrue, whether or not declared by the
Board of Directors, and shall be paid quarterly in arrears on the first day of
January, April, July and October in each year. Accrued but unpaid dividends will
be paid upon conversion or redemption of the Series B Preferred Stock.
(b) In no event, so long as any Series B Preferred Stock shall
remain outstanding, shall any dividend whatsoever be declared or paid upon, nor
shall any distribution be made upon, any Junior Securities, nor shall any shares
of Junior Securities be purchased or redeemed by the Corporation nor shall any
moneys be paid to or made available for a sinking fund for the purchase or
redemption of any Junior Securities (other than a distribution of Junior
Securities), without, in each such case, the written consent of the holders of a
majority of the outstanding shares of the Series B Preferred Stock, voting
together as a class.
3. Liquidation Preference.
In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, distributions to the stockholders
of the Corporation shall be made in the following manner:
(a) The holders of the Series B Preferred Stock shall be entitled to
receive, on a pari passu basis with the holders of the Pari Passu Securities,
and 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 $100 (the "Initial Series B
Preferred Stock Price") for each share of Series B Preferred Stock then held by
them and, in addition, an amount equal to all cumulated and unpaid dividends on
the Series B Preferred Stock. If upon the occurrence of a liquidation,
dissolution or winding up of the Corporation the assets and funds thus
distributed among the holders of the Series B Preferred Stock and the Pari Passu
Securities shall be insufficient to permit the payment to such holders of the
full preferential amount, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of the Series B Preferred Stock and the Pari Passu Securities in
proportion to the preferential amount each such holder is otherwise entitled to
receive.
(b) After setting apart or paying in full the preferential amounts
due pursuant to Section 3(a) above, the remaining assets of the Corporation
available for distribution to stockholders, if any, shall be distributed to the
holders of the Series B Preferred Stock, the Series A Preferred Stock and Common
Stock on a pro rata basis, based on the number of shares of Common Stock then
held by each holder on an as-converted basis.
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(c) A consolidation or merger of this Corporation with or into any
other corporation or corporations, or a sale, conveyance or disposition of all
or substantially all of the assets of this Corporation, the effectuation by the
Corporation of a transaction or series of related transactions in which more
than 50% of the voting power of the Corporation is disposed of; or an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, of shares of Common Stock of this
Corporation (each, a "Liquidity Event"), shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 3.
(d) Notwithstanding any other provision of this Section 3, the
Corporation may at any time, out of funds legally available therefor, repurchase
shares of Common Stock of the Corporation issued to or held by employees,
officers or consultants of the Corporation or its subsidiaries upon termination
of their employment or services, pursuant to any agreement providing for such
right of repurchase, whether or not dividends on the Series B Preferred Stock
shall have been declared and funds set aside therefor and such repurchases shall
not be subject to the liquidation preferences of the Series B Preferred Stock.
(e) In the event the Corporation proposes to distribute assets other
than cash in connection with any liquidation, dissolution or winding up of the
Corporation, the value of the assets to be distributed to the holder of shares
of Series B Preferred Stock, the Series A Preferred Stock and Common Stock shall
be determined in good faith by the Board. Any securities not subject to
investment letter or similar restrictions on free marketability shall be valued
as follows:
(i) If traded on a securities exchange, the value shall be
deemed to be the average of the security's closing prices on such exchange over
the thirty (30) day period ending one (1) day prior to the distribution;
(ii) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the thirty (30) day
period ending three (3) days prior to the distribution; and
(iii) If there is no active public market, the value shall be
the fair market value thereof as determined in good faith by the Board.
The method of valuation of securities subject to investment
letter or other restrictions on free marketability shall be adjusted to make an
appropriate discount from the market value determined as above in clauses (i),
(ii) or (iii) to reflect the fair market value thereof as determined in good
faith by the Board. The holders of at least a majority of the outstanding Series
B Preferred Stock shall have the right to challenge any determination by the
Board of fair market value pursuant to this Section 3(e), in which case the
determination of fair market value shall be made by an independent appraiser
selected jointly by the Board and the challenging parties, the cost of such
appraisal to be borne equally by the Corporation and the challenging parties.
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4. Voting Rights.
Except as otherwise required by law or as set forth herein, the holder of
each share of Series B Preferred Stock shall be entitled to the number of votes
equal to the number of shares of Common Stock into which such share of the
Series B Preferred Stock could be converted at the record date for determination
on of the stockholders entitled to vote on such matters, or, if no such record
date is established, at the date such vote is taken or any written consent of
stockholders is solicited, such votes to be counted together with all other
shares of stock of the Corporation having general voting power and not counted
separately as a class. Holders of Series B Preferred Stock shall be entitled to
notice of any stockholders' meeting in accordance with the Bylaws of the
Corporation.
5. Conversion.
The holders of the Series B Preferred Stock have conversion rights as
follows (the "Conversion Rights"):
(a) Conversion.
(i) Optional Conversion. Each share of Series B Preferred
Stock shall be convertible, at the option of the holder thereof ("Optional
Conversion"), at any time after the date of issuance of such share at the office
of the Corporation or any transfer agent for the Series B Preferred Stock, into
such number of fully paid and nonassessable shares of Common Stock as is
determined in the case of the Series B Preferred Stock by dividing the Initial
Series B Preferred Stock Price by the Series B Conversion Price (as hereinafter
defined) in effect at the time of the conversion.
(ii) Corporation Mandated Conversion. Commencing January 11,
2007, each share of Series B Preferred Stock shall be convertible, at the option
of the Corporation ("Corporation Mandated Conversion"), into such number of
fully paid and nonassessable shares of Common Stock as is determined in the case
of the Series B Preferred Stock by dividing the Initial Series B Preferred Stock
Price by the Series B Conversion Price in effect at the time of the conversion,
provided that such conversion shall only occur if (A) (x) the closing price of
the Common Stock on the principal exchange or market on which it is then traded
has equaled or exceeded $1.80 per share for the 30 consecutive trading days
immediately prior to the date of conversion and the average daily volume during
such 30 day trading period exceeds 10,000 shares; or (y) the closing price of
the Common Stock on the principal exchange or market on which it is then traded
has equaled or exceeded $3.00 per share for the 30 consecutive trading days
immediately prior to the date of conversion irrespective of any average daily
trading volume, and (B) all of the shares of Common Stock into which the shares
of Series B Preferred Stock are convertible are then covered by an effective
registration statement filed under the Securities Act of 1933, as amended,
permitting the resale of such shares of Common Stock without restrictions. The
Corporation shall provide written notice of the Corporation Mandated Conversion
within five (5) business days following the satisfaction of any of the foregoing
conditions ("Corporation Mandated Conversion Notice") by mailing, by first class
mail, postage prepaid, a copy of such notice to all of the holders of record of
Series B Preferred Stock at their respective addresses appearing on the books or
transfer records of the Corporation. The Corporation Mandated Conversion Notice
shall include the effective date of the Corporation Mandated Conversion
("Corporation Mandated Conversion Date"), along with instructions on
surrendering original share certificates for the Series B Preferred Stock for
conversion.
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(iii) Series B Conversion Price. The price at which shares of
Common Stock shall be deliverable upon conversion of the Series B Preferred
Stock pursuant to an Optional Conversion or Corporation Mandated Conversion (the
"Series B Conversion Price") shall initially be $0.75 per share of Common Stock.
Such Series B Conversion Price shall be subject to adjustment as hereinafter
provided.
(b) Mechanics of Conversion.
(i) Optional Conversion. Before any holder of Series B
Preferred Stock shall be entitled to convert the same pursuant to Section
5(a)(i) into full shares of Common Stock and to receive certificates
therefore, he shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent
for the Series B Preferred Stock and shall give written notice to the
Corporation at such office that he elects to convert the same. The
Corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Series B Preferred Stock a certificate or
certificates for the number of shares of Common Stock to which he 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 Common 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 B Preferred Stock to be converted, and the person
or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(ii) Corporation Mandated Conversion. In the event of a
Corporation Mandated Conversion pursuant to Section 5(a)(ii), the
outstanding shares of Series B Preferred Stock shall be converted into
Common Stock as of the Corporation Mandated Conversion Date 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 Common Stock issuable upon such Corporation Mandated Conversion
unless the certificates evidencing such shares of Series B Preferred Stock
are either delivered to the Corporation or its transfer agent as provided
in Section 5(b)(i), 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. Such conversion shall be deemed to have been made on the
Corporation Mandated Conversion Date and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date. As soon as practicable after the Corporation
Mandated Conversion Date and the surrender of the certificate or
certificates for Series B Preferred Stock, the Corporation shall issue and
deliver at the office of the Corporation or of any transfer agent for the
Series B Preferred Stock to such holder of Series B Preferred Stock a
certificate or certificates for the number of shares of Common Stock to
which he 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 Common Stock.
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(iii) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the Series B Preferred Stock. 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 respective Series B Conversion Price.
(c) Reservation of Stock Issuable Upon Conversion. This 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 Preferred 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 Series B Preferred 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 Preferred Stock,
in addition to such other remedies as shall be available to the holder of such
Series B Preferred Stock, this Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
6. Adjustments to Conversion Price.
(a) Adjustments for Stock Dividends, Subdivisions, Combinations or
Consolidations of Common Stock. In the event the outstanding shares of Common
Stock shall be subdivided (by stock dividend, stock split, or otherwise), into a
greater number of shares of Common Stock, the Series B Conversion Price 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 Series B Conversion Prices then in
effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(b) Adjustments for Other Distributions. In the event the
Corporation at any time or from time to time makes, or files a record date for
the determination of holders of Common Stock entitled to receive, any
distribution payable in securities or assets of the Corporation other than
shares of Common Stock, then and in each such event provision shall be made so
that the holders of Series B Preferred Stock shall receive upon conversion
thereof, in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities or assets of the Corporation which they
would have received had their Series B Preferred Stock been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities or assets receivable by them as aforesaid during such
period, subject to all other adjustment called for during such period under this
Section 6 with respect to the rights of the holders of the Series B Preferred
Stock.
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(c) Adjustments for Reclassification, Exchange and Substitution. If
the Common Stock issuable upon conversion of the Series B Preferred Stock 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), then and in each such event the holder of each share of Series B
Preferred 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 or reclassification or other change by holders of the
number of shares of Common Stock that would have been subject to receipt by the
holders upon conversion of the Series B Preferred Stock immediately before that
change, all subject to further adjustment as provided herein.
(d) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue 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
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series B Preferred Stock against impairment.
(e) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series B Conversion Price pursuant to Section
6, 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 B Preferred Stock 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 B Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Series B Conversion Price at the time in effect, 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 Series B
Preferred Stock.
7. Protective Provisions.
So long as any shares of Series B Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval of the holders of at
least a majority of the then-outstanding shares of Series B Preferred Stock,
take any action that:
(a) alters the rights, preferences or privileges of the Series B
Preferred Stock;
(b) creates any new class or series of shares that has a preference
over or is on a parity with the Series B Preferred Stock with respect to voting
rights, dividends or liquidation preferences; or
(c) reclassifies stock into shares having a preference over or on a
parity with the Series B Preferred Stock with respect to voting, dividends or
liquidation preferences.
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8. Redemption.
The shares of Series B Preferred Stock shall not be redeemable, except as
set forth in this Section 8.
(a) Each holder of Series B Preferred Stock, upon written
notice (the "Redemption Notice") sent to the Corporation within thirty days
following its receipt of written notice of the death of Mark Goldwasser, by
certified mail, return receipt requested, addressed to the Corporation, 120
Broadway, 27th Floor, New York, New York 10271, Attn: CFO, shall have the right
to require the Corporation to repurchase all but not less than all of the Series
B Preferred Stock held by such holder at the Initial Series B Preferred Stock
Price plus accrued and unpaid dividends thereon (adjusted for stock splits,
subdivisions, combinations and similar transactions with respect to the Series B
Preferred Stock); provided, however, that the Corporation shall not be required
to repurchase Series B Preferred Stock if such repurchase would violate any
applicable law. The purchase price for such shares shall be payable by the
Corporation, without interest, in one installment, to be made no later then 120
days from the date of the Corporation's receipt of the Redemption Notice (the
date of such payment being referred to herein as the "Payment Date"); provided
that no payment need be made prior to such time as a certificate or certificates
evidencing the shares repurchased or an affidavit of loss with respect thereto
is surrendered to the Corporation in accordance with the procedures set forth in
Section 8(b). The Redemption Notice shall specify (i) the number of shares of
Series B Preferred Stock held by such holder, and (ii) the address to which such
holder wishes the check for payment of the purchase price for such shares
redeemed to be sent.
(b) Upon making the election pursuant to Section 8(a), each
holder of Series B Preferred Stock making such election shall surrender the
certificate or certificates representing its Series B Preferred Stock, duly
assigned or endorsed for transfer to the Corporation (with, if requested by the
Corporation, a signature guarantee from a bank or brokerage company reasonably
satisfactory to the Corporation), at the principal executive office of the
Corporation, or shall deliver an affidavit of loss with respect to such
certificates in form reasonably acceptable to the Corporation. The redemption of
Series B Preferred Stock pursuant to Section 8(a) hereof shall be effective as
of the Payment Date with respect to such shares, and thereafter such shares
shall be treated for all purposes as not being outstanding.
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Each of the undersigned declares under penalty of perjury under the laws
of the State of Delaware that he has read the foregoing certificate and knows
the contents thereof and that the same is true of his own knowledge.
Dated: January 11, 2006
/s/ Mark Goldwasser
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Mark Goldwasser
President
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