EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
SEATTLE GENETICS, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
SEATTLE GENETICS, INC., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that pursuant to the authority contained in Article IV(B) of
its Fourth Amended and Restated Certificate of Incorporation, and in accordance
with the provisions of Section 151 of the Delaware General Corporation Law, the
following resolution was duly adopted by the Board of Directors of the
Corporation at a meeting duly called and held on [______] [__], 2003.
RESOLVED, that a series of the class of authorized preferred
stock, $0.001 par value per share, of the Corporation is hereby created and that
the designations, powers, preferences and relative, participating optional or
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof, are hereby fixed as follows:
ARTICLE I
NUMBER OF SHARES AND DESIGNATIONS
1,640,000 shares of the Corporation's preferred stock, $0.001
par value per share, are hereby designated Series A Convertible Preferred Stock
(the "Series A Preferred Stock").
ARTICLE II
DEFINITIONS
As used herein, the following capitalized terms have the
following meanings:
"Business Day" means any day other than a Saturday, Sunday or a
day on which all United States securities exchanges on which the Common Stock
issued by the Corporation are listed, are authorized or required to be closed.
"By-laws" means the By-laws of the Corporation, as amended and
in effect from time to time.
"Calculation Certificate" has the meaning ascribed to it in
Article V(B)(1).
"Cash Amount" means the aggregate cash portion of the Series A
Preferred Liquidation Preference actually to be received by the holders of
Series A Preferred Stock as a result of a Sale of the Corporation.
"Certificate of Designations" means this certificate of
designations, powers, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions filed by the
Corporation with respect to the Series A Preferred Stock.
"Certificate of Incorporation" means the Fourth Amended and
Restated Certificate of Incorporation of the Corporation, as amended and in
effect from time to time.
"Common Stock" means the Corporation's common stock, par value
$0.001 per share.
"Corporation Conversion Date" has the meaning ascribed to it in
Article V(B)(1).
"Fair Market Value Per Share" means, for a share of Common
Stock, as of any date of determination:
(a) if such share of Common Stock is Publicly Traded as of
the date of determination, the price determined by computing the average of the
VWAP, over a period consisting of the most recent four (4) Trading Days
occurring on or prior to the date of determination (but excluding any trades or
quotations that are not bona fide, arm's length transactions); and
(b) if the Common Stock is not Publicly Traded as of the
date of determination, the Board will present to the stockholder a written good
faith estimate of the fair market value of such shares of Common Stock. Such
estimate shall be deemed to be the fair market value of such shares of Common
Stock unless the stockholder shall deliver a written objection to such estimate
to the Corporation within ten (10) Business Days of receipt of such estimate,
which notice shall set forth the stockholder's good faith estimate of the fair
market value of such shares of Common Stock. If the Corporation receives such an
objection notice from the stockholder, the Corporation and the stockholder shall
attempt in good faith to agree upon the fair market value of such shares of
Common Stock; provided, however, that if no resolution is reached within ten
(10) Business Days of the Corporation's receipt of such objection notice, the
Corporation shall engage a nationally recognized investment bank (which
investment bank shall be reasonably acceptable to the Requisite Series A
Preferred Holders) experienced in the valuation of business securities to
determine the fair market value of such shares of Common Stock, and the written
determination of such investment bank shall be deemed to be the fair market
value of such shares of Common Stock. The parties hereto agree that for purposes
of any such appraisal, the value of such shares of Common Stock shall not be
discounted to reflect (i) the lack of a public trading market in such shares of
Common Stock or (ii) if applicable, that the amount of Common Stock in question
represents a minority equity interest in the Corporation. The fees and expenses
of an investment bank engaged pursuant to this provision shall be borne equally
by the Corporation, on the one hand, and the stockholder, on the other hand;
provided, however, that if the Corporation's calculation of the fair market
value of such Common Stock is within 20% of the investment bank's determination
and that of the stockholder is not, then such fees and expenses of the
investment bank shall be borne entirely
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by the stockholder; provided, further, that if the stockholder's calculation of
the fair market value of such Common Stock is within 20% of the investment
bank's determination and that of the Corporation is not, then such fees and
expenses of the investment bank shall be borne entirely by the Corporation. For
purposes of this provision, the fair market value of such Common Stock shall be
determined as of the date such payment is made.
"Governmental Authority" means any domestic or foreign
government or political subdivision thereof, whether on a Federal, state or
local level and whether executive, legislative or judicial in nature, including
any agency, authority, board, bureau, commission, court, department or other
instrumentality thereof.
"Guaranty" means any obligation, contingent or otherwise, of any
Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation of any other Person in any manner, whether
directly or indirectly, including any obligation of such Person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness or other obligation, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (iii) to purchase or otherwise pay for
merchandise, materials, supplies, services or other property under an
arrangement which provides that payment for such merchandise, materials,
supplies, services or other property shall be made regardless of whether
delivery of such merchandise, materials, supplies, services or other property is
ever made or tendered, or (iv) to maintain the working capital, equity capital
or other financial statement condition of any primary obligor, provided,
however, that the term Guaranty shall not include endorsement of instruments for
deposit and collection in the ordinary course of business.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by (or which
customarily would be evidenced by) bonds, debentures, notes or similar
instruments, (c) all reimbursement obligations of such Person with respect to
letters of credit and similar instruments, (d) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (e) all obligations of such Person incurred,
issued or assumed as the deferred purchase price of property or services other
than accounts payable incurred and paid on terms customary in the business of
such Person (it being understood that the "deferred purchase price" in
connection with any purchase of property or assets shall include only that
portion of the purchase price which shall be deferred beyond the date on which
the purchase is actually consummated), (f) all obligations secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed, (g)
all obligations of such Person under forward sales, futures, options and other
similar hedging arrangements (including interest rate hedging or protection
agreements), (h) all obligations of such Person to purchase or otherwise pay for
merchandise, materials, supplies, services or other property under an
arrangement which provides that payment for such merchandise, materials,
supplies, services or other property shall be made regardless of whether
delivery of such merchandise, materials, supplies, services or other property is
ever made or tendered, (i) all
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Guaranties by such Person of obligations of others and (j) all capitalized lease
obligations of such Person; provided that, with respect to the Corporation,
Indebtedness shall not include any obligations under the Corporation's operating
lease for office and laboratory space.
"Investor Rights Agreement" means the Investor Rights Agreement
dated on or about the date hereof among the Corporation and the stockholders
named therein, as amended from time to time.
"Lien" means any security interest, lien, pledge, claim, charge,
escrow, encumbrance, option, right of first offer, right of first refusal,
preemptive right, mortgage, indenture, security agreement or other similar
agreement, arrangement, contract, commitment, understanding or obligation,
whether written or oral and whether or not relating in any way to credit or the
borrowing of money.
"Liquidation" means (i) any voluntary liquidation, dissolution
or winding up of the affairs of the Corporation or (ii) any Sale of the
Corporation.
"New Preferred Securities" means, in the case of a Sale of the
Corporation, preferred stock of the surviving or resulting corporation or
acquirer, as the case may be, having terms substantially similar to the Series A
Preferred Stock (and reasonably acceptable to the Requisite Series A Preferred
Holders in light of the circumstances then prevailing at the time such preferred
stock is issued), with respect to voting rights (including, without limitation,
protective covenants), board representation, seniority, liquidation preference
(with the aggregate liquidation preference thereof being equal to the
Outstanding Aggregate Cost minus the Cash Amount), and conversion features,
provided that the New Preferred Securities shall convert into a number of
securities of the surviving or resulting corporation or acquirer, as the case
may be, issued to the stockholders of the Corporation as part or all of the
consideration payable with respect to such Sale of the Corporation, having an
aggregate value on the date on which the Sale of the Corporation is consummated
equal to the aggregate Series A Preferred Liquidation Preference with respect to
the outstanding shares of Series A Preferred Stock minus the Cash Amount.
"Offered Securities" has the meaning ascribed to it in Article
V(B)(4)(i).
"Original Cost" means, with respect to any share of Series A
Preferred Stock, as of any particular date, the amount originally paid for such
share when it was originally issued. In the event of any change (by way of any
recapitalization, subdivision or recombination) in the number or kind of shares
of Series A Preferred Stock, the Original Cost immediately prior to such change
shall be ratably adjusted.
"Original Issuance Date" means with respect to a share of Series
A Preferred Stock, the date on which such share of Series A Preferred Stock was
first issued.
"Outstanding Aggregate Cost" means an amount equal to (x) the
Original Cost multiplied by (y) the aggregate number of shares of Series A
Preferred Stock outstanding immediately prior to such Liquidation.
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"Person" shall be construed as broadly as possible and shall
include without limitation an individual or natural person, a partnership
(including a limited liability partnership), a corporation, an association, a
joint stock company, a limited liability company, a trust, a joint venture, an
unincorporated organization and a Governmental Authority.
"Preferred Directors" has the meaning ascribed to it in Article
III(A)(3)(a).
"Publicly Traded" means, with respect to the Common Stock, that
such Common Stock is (a) listed on a domestic securities exchange, (b) quoted on
the Nasdaq National Market or the Nasdaq Small-Cap Market, (c) traded in the
domestic OTC Bulletin Board Market and its successor the Bulletin Board
Exchange, which trades are reported through systems maintained by the National
Association of Securities Dealers, Inc. or (d) traded in the domestic
over-the-counter "pink sheet" market, which trades are reported by the National
Quotation Bureau, Incorporated.
"Requisite Series A Preferred Holders" means those stockholders
of the Corporation who hold in the aggregate at least sixty-six and two-thirds
percent (66 2/3%) of the outstanding shares of Series A Preferred Stock held by
all stockholders at the time of determination.
"Sale of the Corporation" means (i) the sale (in one or a series
of related transactions) of all or substantially all of the Corporation's assets
to a Person or a group of Persons acting in concert (including, without
limitation, the sale of a division of the Corporation or such assets of the
Corporation that would materially change the nature or composition of the
Corporation's business lines); provided that a Sale of the Corporation shall not
include any sale, lease or disposition not effected voluntarily by the
Corporation (including, without limitation, actions taken in response to a
contractual obligation or court order), (ii) the sale or transfer (in one or a
series of related transactions) of capital stock of the Corporation, to one
Person or a group of Persons acting in concert effected by the Corporation with
the approval of the Board of Directors of the Corporation, or (iii) the merger
or consolidation of the Corporation with or into another Person that is not a
wholly-owned subsidiary of the Corporation effected by the Corporation with the
approval of the Board of Directors of the Corporation, in each case in clauses
(ii) and (iii) above under circumstances in which the holders of a majority in
voting power of the outstanding capital stock (assuming the conversion of all
convertible Securities, if any) of the Corporation immediately prior to such
transaction own less than a majority in voting power of the outstanding capital
stock (assuming the conversion of all convertible Securities, if any) of the
Corporation, or the surviving or resulting corporation or acquirer, as the case
may be, immediately following such transaction; provided, however, that a debt
or equity financing where (x) the Corporation is the surviving corporation and
(y) individuals who served as members of the Board immediately prior to such
financing constitute at least three-fourths (3/4) of the members of the Board
(rounded up to the nearest whole number) after such financing, shall not be
deemed a Sale of the Corporation. A sale (or multiple related sales) of one or
more Subsidiaries (whether by way of merger, consolidation, reorganization or
sale of all or substantially all assets or Securities) which constitutes all or
substantially all of the consolidated assets of the Corporation effected by the
Corporation with the approval of the Board of Directors of the Corporation shall
be deemed a Sale of the Corporation.
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"Securities" means "securities" as defined in Section 2(1) of
the Securities Act and includes capital stock or other equity interests or any
options, warrants or other securities or rights that are directly or indirectly
convertible into or exercisable or exchangeable for, capital stock or other
equity interests.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar Federal law then in force.
"Series A Preferred Liquidation Preference" has the meaning
ascribed to it in Article IV(B)(1).
"Subsidiary" shall mean, at any time, with respect to any Person
(the "Subject Person"), any Person of which either (x) more than 50% of the
shares of stock or other interests entitled to vote in the election of directors
or comparable Persons performing similar functions (excluding shares or other
interests entitled to vote only upon the failure to pay dividends thereon or
other contingencies) or (y) more than a 50% interest in the profits or capital
of such Person, are at the time owned or controlled directly or indirectly by
the Subject Person or through one or more Subsidiaries of the Subject Person or
by the Subject Person and one or more Subsidiaries of the Subject Person.
"Trading Day" means any day in which the principal stock
exchange (including Nasdaq) upon which the Common Stock is traded is open for
business.
"VWAP" means, as of any Trading Day, the volume weighted average
price on such Trading Day for a share of Common Stock:
(i) on all domestic national securities exchanges on which the
Common Stock may be listed if such exchanges are the primary securities markets
for the Common Stock;
(ii) if there have been no sales on any such domestic national
securities exchange on such Trading Day, on the immediately preceding Trading
Day on all such exchanges, if such exchanges are the primary securities markets
for the Common Stock;
(iii) if on such Trading Day the Common Stock is not listed on
any such domestic national securities exchange, on the Nasdaq National Market or
the Nasdaq Small-Cap Market, as applicable;
(iv) if there have been no sales on the Nasdaq National Market
or the Nasdaq Small-Cap Market, as the case may be, on such Trading Day, then on
the immediately preceding Trading Day quoted on the Nasdaq National Market or
the Nasdaq Small-Cap Market, as the case may be; or
(v) if on such Trading Day the Common Stock is not quoted on the
Nasdaq National Market or Nasdaq Small-Cap Market, then, as applicable (A) the
domestic OTC Bulletin Board Market and its successor the Bulletin Board
Exchange, which trades are reported through systems maintained by the National
Association of Securities Dealers, Inc. or (B) the domestic over-the-counter
"pink sheet" market, which trades are reported by the National Quotation Bureau,
Incorporated, or any similar successor organization;
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provided, however, that for purposes of calculating the VWAP for any period of
two or more consecutive Trading Days (including in connection with preparing the
Calculation Certificate and determining the Fair Market Value Per Share), if the
VWAP for any of such Trading Days is determined pursuant to clause (ii) or (iv)
above and the immediately preceding Trading Day has already been considered
pursuant to clause (i) or (iii) above, then the VWAP for such immediately
preceding Trading Day shall be determined by substituting the day next preceding
such immediately preceding Trading Day that has yet to be considered.
For the purposes of (1) any determination of the "Fair Market
Value Per Share" of any share of Common Stock and the calculations pursuant to
clauses (a) and (c) of Article V(B)(1), on or for any day after the "ex" date or
any similar date for any dividend or distribution paid or to be paid with
respect to the Common Stock, any VWAP of the Common Stock on a day prior to such
"ex" date or similar date shall be appropriately reduced by the fair market
value of the per share amount of such dividend or distribution, as determined by
the Board in good faith and on a reasonable, customary and consistent basis, and
(2) any determination of the "Fair Market Value Per Share" of any share of
Common Stock and the calculations pursuant to clauses (a) and (c) of Article
V(B)(1), on or for any day after (i) the effective day of any subdivision (by
stock split or otherwise) or combination (by reverse stock split or otherwise)
of outstanding shares of Common Stock or (ii) the "ex" date or any similar date
for any dividend or distribution paid or to be paid with respect to the Common
Stock in additional shares of Common Stock, any VWAP of a share of Common Stock
on a day prior to such effective date or "ex" date or similar date shall be
appropriately adjusted by the Board in good faith and on a reasonable, customary
and consistent basis to reflect such subdivision, combination, dividend or
distribution.
ARTICLE III
VOTING RIGHTS
A. GENERAL.
1. In addition to the rights provided by law and contained herein,
the holders of Series A Preferred Stock shall be entitled to vote (or render
written consents in lieu of a vote) on all matters as to which holders of Common
Stock shall be entitled to vote, voting together with the holders of Common
Stock and any other capital stock of the Corporation entitled to vote together
with the Common Stock, all as a single class; provided, however, that the
holders of Series A Preferred Stock shall have no right to vote their shares of
Series A Preferred Stock on the election of directors, other than the special
right to elect the Preferred Directors in accordance with Article III(A)(3)
below.
2. Subject to Article III(A)(1), each holder of Series A Preferred
Stock shall be entitled to vote in the same manner and with the same effect as
the Common Stock. Each holder of Series A Preferred Stock shall be entitled to
that number of votes equal to: the product of: (a) the largest number of whole
shares of Common Stock into which such holder's shares of Series A Preferred
Stock could then be converted, pursuant to the provisions of Article V, at the
record date for the determination of 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; and (b) 0.93.
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3. Board Representation.
(a) So long as at least 37.5% of the total number of shares
of Series A Preferred Stock issued on the Original Issuance Date remain
outstanding (as equitably adjusted to account for any stock split, stock
dividend, reorganization, recapitalization, subdivision or recombination), the
holders of Series A Preferred Stock shall have the exclusive and special right,
voting together as a single class, but separately from all other classes of
capital stock, to (i) elect two directors to the Board (collectively the
"Preferred Directors"), (ii) remove from the Board any Preferred Director, and
(iii) elect each successor to any such Preferred Director removed in accordance
herewith or who otherwise vacates such office. For so long as less than 37.5%
but at least 18.75% of the total number of shares of Series A Preferred Stock
issued on the Original Issuance Date remain outstanding (in each case, as
equitably adjusted to account for any stock split, stock dividend,
reorganization, recapitalization, subdivision or recombination), the holders of
Series A Preferred Stock shall have the exclusive and special right, voting
together as a single class, but separately from all other classes of capital
stock, to (i) elect one Preferred Director, (ii) remove from the Board the
Preferred Director, and (iii) elect each successor to the Preferred Director
removed in accordance herewith or who otherwise vacates such office.
Notwithstanding anything to the contrary contained in this Article III(A)(3)(a),
in the event that JPMP Global or BBI (each as defined in the Investor Rights
Agreement) is not entitled to designate a JPMP Director or a BBI Director (each
as defined in the Investor Rights Agreement), as applicable, pursuant to Section
2.1(b) of the Investor Rights Agreement, the Board shall, upon the expiration of
the term of the JPMP Director or BBI Director, as applicable, and for all times
thereafter be entitled to (x) fill the vacancy created thereby in accordance
with the By-laws, or (y) reduce the number of directors constituting the Board
by eliminating the seat previously reserved for the JPMP Director or BBI
Director, as the case may be.
(b) The right of the holders of Series A Preferred Stock to
elect directors may be exercised at the special meeting called pursuant to this
Article III(A)(3)(b), at any annual or other special meeting of stockholders
and, to the extent and in the manner permitted by applicable law, pursuant to a
written consent in lieu of a stockholders meeting. In accordance with the
By-laws, a proper officer of the Corporation shall, upon the written request of
the Requisite Series A Preferred Holders addressed to any of the president,
chief executive officer or the secretary of the Corporation, call a special
meeting of the holders of Series A Preferred Stock for the purpose of electing
one or more directors pursuant to this Article III(A)(3)(b). Such meeting shall
be held at the earliest legally permissible date at the principal office of the
Corporation, or at such other place designated by the Board pursuant to the
By-laws. If such meeting has not been called by a proper officer of the
Corporation within two days after personal delivery, by hand or by a nationally
recognized overnight courier guaranteeing next Business Day delivery of such
written request upon any of the president, chief executive officer or the
secretary of the Corporation or within five days (which five day period is
intended to be shorter than the time period set forth in Section 2.5 of the
By-Laws) after mailing the same to the secretary of the Corporation at its
principal office, then the Requisite Series A Preferred Holders may call such
meeting at the expense of the Corporation, and such meeting may be called upon
the notice required for annual meetings of stockholders and shall be held at the
Corporation's principal office, or at such other place designated by the Board
pursuant to the By-laws. The holders of Series A Preferred Stock shall be given
access to the stock record books of the
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Corporation consistent with applicable law for the purpose of causing a meeting
of stockholders to be called pursuant to this Article III(A)(3)(b).
(c) At any meeting or at any adjournment thereof at which
the holders of Series A Preferred Stock have the right to elect directors, the
presence, in person or by proxy, of the holders of a majority of the outstanding
shares of Series A Preferred Stock shall be required to constitute a quorum for
the election or removal of any Preferred Director. The affirmative vote of the
holders of a majority of the outstanding shares of Series A Preferred Stock
shall be required to elect or remove any Preferred Director.
(d) In accordance with the Certificate of Incorporation, one
Preferred Director shall be a Class I Director and the other Preferred Director
shall be a Class II Director, in each case as determined by the Corporation's
Board of Directors when approving the appointment of the Preferred Directors as
members of the Corporation's Board of Directors.
B. RESTRICTIONS AND LIMITATIONS ON CORPORATE ACTION.
1. For so long as any of the shares of Series A Preferred Stock
remain outstanding, without the prior written consent of the Requisite Series A
Preferred Holders, the Corporation shall not and shall not permit any of its
Subsidiaries to:
(a) reclassify, cancel or in any manner alter or change the
terms, designations, powers, preferences or relative, optional or other special
rights, or the qualifications, limitations or restrictions thereof, of the
Series A Preferred Stock;
(b) amend, alter or repeal any of the provisions of (i) this
Certificate of Designations, (ii) the Certificate of Incorporation (as amended,
restated, amended and restated or modified from time to time) or (iii) the
By-laws, if, in any such case, such amendment, alteration or repeal would have
an adverse effect on the terms, designations, powers, preferences of the Series
A Preferred Stock or the relative, participating, optional or other special
rights of the holders of the Series A Preferred Stock in their capacity as such;
or
(c) enter into any agreement or commitment or otherwise
become bound or obligated to do or perform any of the foregoing actions.
2. For so long as at least thirty-three and one-third percent (33
1/3%) of the total number of shares of Series A Preferred Stock issued on the
Original Issuance Date remain outstanding (as equitably adjusted to account for
any stock split, stock dividend, reorganization, recapitalization, subdivision
or recombination), without the prior written consent of the Requisite Series A
Preferred Holders, the Corporation shall not and shall not permit any of its
Subsidiaries to:
(a) in any manner authorize, issue or sell any shares, or
decrease the number of authorized shares, of Series A Preferred Stock;
(b) declare, pay, set aside or reserve amounts for the
payment of any dividend (in cash, capital stock, assets or otherwise) or make
any other distribution on or with respect to
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any Common Stock or other capital stock issued by the Corporation (other than
the Series A Preferred Stock) or such Subsidiary; or
(c) enter into any agreement or commitment or otherwise
become bound or obligated to do or perform any of the foregoing actions.
3. For so long as at least thirty-three and one-third percent (33
1/3%) of the total number of shares of Series A Preferred Stock issued on the
Original Issuance Date remain outstanding (as equitably adjusted to account for
any stock split, stock dividend, reorganization, recapitalization, subdivision
or recombination), without the prior written consent of the holders of a
majority of the outstanding shares of Series A Preferred Stock, the Corporation
shall not and shall not permit any of its Subsidiaries to:
(a) authorize or issue (by amendment of this Certificate of
Designations or the Certificate of Incorporation, by merger, or otherwise
(except in connection with a Sale of the Corporation pursuant to which the
holders of Series A Preferred Stock receive, in accordance with Article
IV(B)(1), payment in full of their aggregate Series A Liquidation Preference))
any class or series of capital stock of the Corporation, or reclassify any
Securities of the Corporation into shares of any class or series of capital
stock of the Corporation (by amendment of this Certificate of Designations or
the Certificate of Incorporation, by merger, or otherwise), in any case ranking,
either as to payment of dividends, distributions of assets or redemptions
(including, without limitation, distributions to be made upon the liquidation,
dissolution or winding up of the Corporation or a merger, consolidation or sale
of the assets thereof), senior to, or pari passu with, the Series A Preferred
Stock;
(b) permit outstanding Indebtedness at any time to exceed
$20,000,000 in the aggregate; or
(c) enter into any agreement or commitment or otherwise
become bound or obligated to do or perform any of the foregoing actions.
ARTICLE IV
DIVIDENDS, DISTRIBUTIONS AND LIQUIDATIONS
A. DIVIDENDS AND DISTRIBUTIONS.
The holders of the Series A Preferred Stock shall be entitled to
receive dividends, when and as declared by the Board out of assets legally
available therefor. Whenever the Corporation shall declare or pay any cash
dividends on its Common Stock, the holders of Series A Preferred Stock shall be
entitled to receive such dividends on a ratable basis based upon the number of
shares of Common Stock into which each share of Series A Preferred Stock could
then be converted pursuant to Article V.
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B. LIQUIDATION.
1. In the event of any Liquidation, the holders of shares of Series
A Preferred Stock then outstanding shall be entitled to receive, out of the
assets of the Corporation legally available for distribution to its
stockholders, before any payment shall be made to the holders of any stock
ranking on Liquidation junior to the Series A Preferred Stock (with respect to
rights on Liquidation, the Series A Preferred Stock shall rank senior to the
Common Stock and any other class of capital stock issued by the Corporation), an
amount per share equal to the greater of (a) the Original Cost (subject to
equitable adjustment for any stock dividend, stock split, combination,
reorganization, recapitalization, reclassification or other similar event
involving a change in the capital structure of the Series A Preferred Stock) or
(b) the amount such holder of Series A Preferred Stock would be entitled to
receive if such holder had converted such share of Series A Preferred Stock into
Common Stock (in accordance with the terms of Article V) immediately prior to
such Liquidation (such greater amount being the "Series A Preferred Liquidation
Preference"); provided, however, that if such Liquidation is a Sale of the
Corporation that is approved by the Board on or before the fourth anniversary of
the Original Issuance Date, and the Cash Amount is less than the Outstanding
Aggregate Cost, then, as payment in full of the aggregate Series A Liquidation
Preference, the holders of Series A Preferred Stock shall receive (x) the Cash
Amount and (y) the New Preferred Securities; provided further, however, that the
foregoing proviso shall not apply if (1) the aggregate value of the proceeds
actually to be received by the holders of Series A Preferred Stock as a result
of such Sale of the Corporation is, pursuant to the definitive documentation for
such transaction (assuming such transaction closed on the date of such
agreement), equal to or greater than two and one-half (2 1/2) times the Original
Cost (subject to equitable adjustment for any stock dividend, stock split,
combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the capital structure of the Series A Preferred
Stock) or (2) the Requisite Series A Holders waive such provision in writing.
If, upon any Liquidation, the assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of the Series A Preferred Stock the full amounts to which they
respectively shall be entitled, the holders of shares of Series A Preferred
Stock shall share ratably in any distribution of assets according to the
respective amounts which would be payable with respect to the shares held by
them upon such distribution if all amounts payable on or with respect to said
shares were paid in full. In the event of any Liquidation, after payment shall
have been made to the holders of shares of Series A Preferred Stock in the full
amount to which they are entitled, the holders of shares of Common Stock shall
be entitled to share in all remaining assets of the Corporation available for
distribution to its stockholders.
2. At least 15 days prior notice by mail, postage prepaid, shall be
given to the holders of record of shares of Series A Preferred Stock of any
liquidation, dissolution or winding up of the affairs of the Corporation
(provided that in the event of a liquidation that results from an involuntary
proceeding, notice shall be given no later than five days after the Corporation
becomes aware of such liquidation), such notice to be addressed to each such
holder at the address of such holder appearing on the books of the Corporation
or given by such holder to the Corporation for the purpose of notice, or if no
such address appears or is so given, at the place where the principal office of
the Corporation is located. Such notice shall state the anticipated date fixed
for the Liquidation, the Series A Preferred Liquidation Preference, and shall
call upon such holder to surrender to the Corporation on said date at the place
designated in the notice such
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holder's certificate or certificates representing their shares of Series A
Preferred Stock; provided, however, that failure to so surrender such
certificate or certificates shall not affect such holder's rights under this
Article IV(B)(2). If a holder fails to surrender such holder's certificate or
certificates, the Corporation shall deposit the aggregate Series A Preferred
Liquidation Preference due to such holder in a segregated account for the
benefit of such holder, which amount will be delivered to such holder upon his,
her or its surrender of such certificate or certificates.
3. If the Corporation subdivides (by any stock split, stock
dividend, recapitalization or otherwise) the Series A Preferred Stock, into a
greater number of shares, the Series A Preferred Liquidation Preference of such
Series A Preferred Stock will be proportionately reduced, and if the Corporation
combines (by reverse stock split or otherwise) the Series A Preferred Stock into
a lesser number of shares, the Series A Preferred Liquidation Preference of such
Series A Preferred Stock will be proportionately increased.
ARTICLE V
CONVERSION
The holders of the Series A Preferred Stock shall have the
following rights and be subject to the following obligations with respect to the
conversion of shares of Series A Preferred Stock into shares of Common Stock:
A. OPTIONAL CONVERSION.
1. Conversion at Holder's Election. Subject to and in compliance
with the provisions of this Article V, each share of Series A Preferred Stock
may, at the option of the holder thereof, be converted at any time and from time
to time after the first anniversary of the Original Issuance Date into that
number of fully-paid and non-assessable shares of Common Stock as is determined
by dividing the Original Cost by the Conversion Price (as defined below) in
effect at the time of conversion. The "Conversion Price" shall initially be
equal to $2.50, subject to adjustment as provided herein.
B. MANDATORY CONVERSION.
1. Conversion at the Corporation's Election. At any time from and
after the fourth anniversary of the Original Issuance Date, the Corporation may
elect to have all (but not less than all) of the then outstanding shares of
Series A Preferred Stock converted into Common Stock so long as the following
conditions exist as of the date of such conversion (such date, the "Corporation
Conversion Date"): (a) the average VWAP of the Common Stock for the
60-consecutive Trading Days immediately preceding the Corporation Conversion
Date is equal to or greater than two and one-half (2 1/2) times the
then-applicable Conversion Price, (b) the average daily trading volume of the
Common Stock for such period is at least 75,000 shares and (c) the VWAP on each
of the five Trading Days immediately preceding the Corporation Conversion Date
is equal to or greater than two and one-half (2 1/2) times the then-applicable
Conversion Price. In the event of such election by the Corporation and delivery
of notice of such election to the holders of the Series A Preferred Stock, each
outstanding share of Series A Preferred Stock
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shall be converted into that number of fully-paid and non-assessable shares of
Common Stock as is determined by dividing the Original Cost by the Conversion
Price in effect at the time the conversion becomes effective. Prior to
converting the outstanding shares of Series A Preferred Stock into shares of
Common Stock pursuant to this Article V(B)(1), the Corporation shall prepare and
deliver, at the expense of the Corporation, to the holders of Series A Preferred
Stock, a certificate signed by the president of the Corporation (the
"Calculation Certificate") setting forth in detail its calculation (including
the basis of such calculation and the source of information used for such
calculation) of the items described in clauses (a), (b) and (c) of this Article
V(B)(1). The Corporation may convert the outstanding shares of Series A
Preferred Stock as of the Corporation Conversion Date, and such conversion shall
be binding upon the holders of Series A Preferred Stock, unless the Requisite
Series A Preferred Holders notify the Corporation by 5 p.m. (Pacific Time) on
the Business Day immediately following receipt of the Calculation Certificate
that they object to any of the calculations of the items described in clause
(a), (b) or (c) above, or the basis for such calculation. If the Corporation
receives such an objection notice from the Requisite Series A Preferred Holders,
the Corporation and the Requisite Series A Preferred Holders shall attempt in
good faith to agree upon the calculations set forth in the Calculation
Certificate; provided, however, that if no resolution is reached within ten (10)
Business Days after the Corporation's receipt of such objection notice, the
Corporation shall engage a nationally recognized investment bank (which
investment bank shall not be otherwise engaged by the Corporation and shall be
reasonably acceptable to the Requisite Series A Preferred Holders) experienced
in the valuation of business securities to determine the calculation of the
items set forth in clauses (a), (b) and (c) of this Article V(B)(1), and the
written determination of such investment bank shall be deemed to be a final
determination of such calculations and shall confirm or deny, as the case may,
the Corporation's election to convert the Series A Preferred Stock under this
Article V(B)(1). The fees and expenses of an investment bank engaged pursuant to
this provision shall be borne by the Corporation.
2. Conversion upon Election of Holders of Series A Preferred Stock.
At any time from and after the first anniversary of the Original Issuance Date,
upon the election of the Requisite Series A Preferred Holders to convert all
outstanding shares of Series A Preferred Stock into Common Stock and delivery of
notice of such election to the Corporation, all outstanding shares of Series A
Preferred Stock shall, 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, be converted automatically into that
number of fully paid, non-assessable shares of Common Stock as is determined by
dividing the Original Cost by the Conversion Price then in effect.
3. Surrender of Certificates Upon Conversion. Upon receipt by the
holders of the Series A Preferred Stock of a notice from the Corporation or the
Requisite Series A Preferred Holders that a conversion election has been made
pursuant to Article V(B)(1) or V(B)(2) above, the holders of the Series A
Preferred Stock shall surrender the certificates representing such shares at the
office of the Corporation or its transfer agent for the Common Stock. Thereupon,
there shall be issued and delivered to such holder a certificate or certificates
for the number of shares of Common Stock into which the shares of Series A
Preferred Stock so surrendered were convertible on the date on which the
conversion became effective. The Corporation will pay cash in lieu of fractional
shares pursuant to Article V(B)(7) below. The Corporation shall not be obligated
to issue such certificates unless certificates evidencing such shares of Series
A
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Preferred Stock being converted are either delivered to the Corporation or any
such transfer agent, or the holder notifies the Corporation that such
certificates have been lost, stolen, destroyed or mutilated and executes an
agreement reasonably satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection therewith.
4. Anti-Dilution Adjustments.
(a) If, at any time after the Original Issuance Date, the
number of shares of Common Stock outstanding is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then, following the record date for the determination of holders
of Common Stock entitled to receive such stock dividend, subdivision or split-up
(or if no record date is set, the date such stock dividend, subdivision of stock
split is consummated), the Conversion Price shall be appropriately decreased so
that the number of shares of Common Stock issuable on conversion of each share
of Series A Preferred Stock shall be increased in proportion to such increase in
outstanding shares.
(b) If, at any time after the Original Issuance Date, the
number of shares of Common Stock outstanding is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date for such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each share of Series
A Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares.
(c) In the event of (i) any capital reorganization of the
Corporation, (ii) any reclassification of the stock of the Corporation (other
than a change in par value or from no par value to par value or from par value
to no par value or as a result of a stock dividend or subdivision, split-up or
combination of shares), or (iii) any consolidation or merger of the Corporation,
then, to the extent that such event set forth in clause (i), (ii) or (iii) of
this Article V(B)(4)(c) is not deemed a Liquidation, each share of Series A
Preferred Stock shall after such reorganization, reclassification,
consolidation, or merger be convertible into the kind and number of shares of
stock or other securities or property of the Corporation or of the corporation
resulting from such consolidation or surviving such merger to which the holder
of the number of shares of Common Stock deliverable (immediately prior to the
time of such reorganization, reclassification, consolidation or merger) upon
conversion of such share of Series A Preferred Stock would have been entitled
upon such reorganization, reclassification, consolidation or merger. The
provisions of this clause shall similarly apply to successive reorganizations,
reclassifications, consolidations or mergers.
(d) All calculations under this paragraph shall be made to
the nearest one hundredth (1/100th) of a cent.
(e) In any case in which the provisions of this Article
V(B)(4) shall require that an adjustment shall become effective immediately
after a record date of an event, the Corporation may defer until the occurrence
of such event (A) issuing to the holder of any share of Series A Preferred Stock
converted after such record date and before the occurrence of such event the
shares of capital stock issuable upon such conversion by reason of the
adjustment required by such event in addition to the shares of capital stock
issuable upon such conversion before giving effect to such adjustments, and (B)
paying to such holder any amount in cash in
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lieu of a fractional share of capital stock; provided, however, that the
Corporation shall deliver to such holder an appropriate instrument evidencing
such holder's right to receive such additional shares and such cash.
(f) If the Corporation shall propose to take any action of
the types described in clauses (a), (b) or (c) of this Article V(B)(4), the
Corporation shall give notice to each holder of shares of Series A Preferred
Stock, in the manner set forth in Article V(B)(5) below, which notice shall
specify the record date, if any, with respect to any such action and the date on
which such action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the effect of
such action (to the extent such effect may be known at the date of such notice)
on the Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of shares of Series A
Preferred Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 10 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 10
days prior to the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of any such
action.
(g) 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 this
Article V(B)(4) 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 Series A
Preferred Stock against impairment.
(h) In the event the Corporation grants, issues or sells any
options, convertible securities or rights to purchase stock, warrants,
securities or other property pro rata to all record holders of two percent (2%)
or more of any class of Common Stock (the "Purchase Rights"), then each holder
of Series A Preferred Stock shall be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate number or amount of such
stock, warrants, securities or other property which such holder could have
acquired if such holder had held the Common Stock acquirable upon complete
conversion of the Series A Preferred Stock held by such holder immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of the grant,
issue or sale of such Purchase Rights.
(i) In the event the Corporation grants, issues or sells, or
agrees to grant, issue or sell, any preferred stock or options, convertible
securities or other rights to purchase preferred stock (the "Offered
Securities"), then each holder of Series A Preferred Stock shall be entitled to
acquire, upon the terms applicable to such Offered Securities, up to that number
of such Offered Securities necessary to maintain such holder's percentage
ownership of the Corporation. The rights of each holder of Series A Preferred
Stock to acquire the Offered Securities pursuant to this Article V(B)(4)(i) are
assignable to any affiliate of such holder of Series A Preferred Stock.
(j) Prior to making any offer to purchase, redeem or acquire
any shares of its capital stock from any holder thereof, the Corporation shall
first offer to purchase, redeem or acquire from the holders of Series A
Preferred Stock (to the extent of the consideration intended
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to be paid with respect to such offer) all or any part of the outstanding shares
of Series A Preferred Stock, at the option of such holders, at the Fair Market
Value Per Share, which payments, if any, shall be made pro rata among the
holders of Series A Preferred Stock based upon the number of shares owned by
each such holder. Notwithstanding anything to the contrary contained herein,
this Article V(B)(4)(j) shall not apply with respect to purchases made pursuant
to any of the Corporation's stock option or equity incentive plans that have
been approved by the Board.
5. Certificate as to Adjustments; Notice by Corporation. In each
case of an adjustment or readjustment of a Conversion Price, the Corporation at
its expense will send, by first class certified mail, return receipt requested
and postage prepaid or by confirmed facsimile, to each holder of Series A
Preferred Stock so affected at such holder's address appearing on the
Corporation's records a certificate prepared by the Treasurer or 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. Where
appropriate, such copy may be given in advance and may be included as part of
any notice required to be mailed under the provisions of Article V(B)(4)(f)
above.
6. Exercise of Conversion Privilege. To exercise its conversion
privilege, a holder of Series A Preferred Stock shall surrender the certificate
or certificates representing the shares being converted to the Corporation at
its principal office, and shall give written notice to the Corporation at that
office that such holder elects to convert such shares. The holder of Series A
Preferred Stock may make any such notice of conversion, whether such conversion
is in connection with a Sale of the Corporation or otherwise, conditional upon
the happening of any event or the passage of such time as is specified by such
holder of Series A Preferred Stock in such conversion notice, and may rescind
any notice of conversion prior to the effective time thereof specified in any
such notice. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. The certificate or certificates
for shares of Series A Preferred Stock surrendered for conversion shall be
accompanied by proper assignment thereof to the Corporation or in blank. The
later of (i) the date when such written notice is received by the Corporation,
together with the certificate or certificates representing the shares of Series
A Preferred Stock being converted, and (ii) the effective date provided for in
such notice shall be the "Conversion Date." As promptly as practicable (but in
no event more than 10 Business Days) after the Conversion Date, the Corporation
shall issue and deliver to the holder of the shares of Series A Preferred Stock
being converted, or on its written order, such certificate or certificates as it
may request for the number of whole shares of Common Stock issuable upon the
conversion of such shares of Series A Preferred Stock in accordance with the
provisions of this Article V(B)(6) (which shall contain such legends as were set
forth on the surrender certificate or certificates), and cash, as provided in
Article V(B)(7) in respect of any fraction of a share of Common Stock issuable
upon such conversion. Such conversion shall be deemed to have been effective
immediately prior to the close of business on the Conversion Date, and at such
time the rights of the holder as holder of the converted shares of Series A
Preferred Stock shall cease and the person(s) in whose name(s) any
certificate(s) 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. Upon issuance of shares in accordance with
this Article V(B)(6) such shares shall be deemed to be duly authorized, validly
issued, fully paid and
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non-assessable, with no personal liability attaching to the ownership thereof
and free from all taxes, Liens or charges with respect thereto due to any action
of, or omission by, the Corporation. The Corporation shall take all such actions
as may be necessary to assure that all such shares may be so issued without
violation of any applicable law or any requirements of any domestic securities
exchange upon which such shares may be listed (except for official notice of
issuance which will be immediately transmitted by the Corporation upon
issuance). The Corporation shall not close its books against the transfer of
shares in any manner which would interfere with the timely conversion of any
shares. The issuance of certificates for shares of any class of capital stock
(upon conversion of shares of any other class of capital stock or otherwise)
shall be made without charge to the holders of such shares for any issuance tax
in respect thereof imposed by the government of the United States or any
political subdivision thereof or other cost incurred by the Corporation in
connection with such conversion and/or the issuance of such shares; provided,
however, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the shares converted. In
the event the holder of shares of Series A Preferred Stock converted hereunder,
in connection with the conversion of such shares, shall be required to file a
notification pursuant to the Hart-Scott-Rodino Anti-Trust Improvements Act of
1976, the Corporation and the holder shall take all actions necessary to comply
with such notification requirement and the conversion hereunder of such shares,
or the accrued and unpaid dividends on such shares, shall become effective upon
the expiration of the applicable waiting period.
7. Cash in Lieu of Fractional Shares. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series A Preferred Stock. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
Series A Preferred Stock, the Corporation shall pay to the holder of the shares
of Series A Preferred Stock which were converted a cash adjustment in respect of
such fractional shares in an amount equal to the product of (i) the Fair Market
Value Per Share of the Common Stock as of the close of business on the
Conversion Date and (ii) such fractional interest. The determination as to
whether or not any fractional shares are issuable shall be based upon the
aggregate number of shares of Series A Preferred Stock being converted at any
one time by any holder thereof, not upon each share of Series A Preferred Stock
being converted.
8. Partial Conversion. In the event some but not all of the shares
of Series A Preferred Stock represented by a certificate(s) 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 number of shares of Series A Preferred Stock which were not
converted (which shall contain such legends as were set forth on the surrendered
certificate or certificates).
9. 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 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 the Series A Preferred Stock (including any shares of Series A
Preferred Stock represented by any warrants, options, subscription or purchase
rights for Series A Preferred Stock), and if at any time the number of
authorized but unissued shares of Common
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Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Series A Preferred Stock (including any shares of Series A
Preferred Stock represented by any warrants, options, subscriptions or purchase
rights for such Series A Preferred Stock), the Corporation shall take such
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.
In the event that the Corporation does not have a sufficient number of shares of
Common Stock authorized and reserved to effect the conversion of any shares of
Series A Preferred Stock requested by a holder thereof pursuant to Article
V(A)(1) or by the Requisite Series A Preferred Holders pursuant to Article
V(B)(2), then, at the election of such holder or holders of Series A Preferred
Stock, the Corporation shall purchase from such holder or holders, at the Fair
Market Value Per Share, all or any portion of the number of shares of Common
Stock that would have been issuable upon conversion of the Series A Preferred
Stock that are unable to be so converted.
10. Registration of Transfer. The Corporation shall keep at its
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of shares of each class of its capital stock.
Upon the surrender of any certificate representing shares of any class of
capital stock at such place, the Corporation shall, at the request of the
registered holder of such certificate, execute and deliver a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares of such class represented by the surrendered certificate, and the
Corporation forthwith shall cancel such surrendered certificate. Each such new
certificate will represent such number of shares of such series as is requested
by the holder of the surrendered certificate and will be substantially identical
in form to the surrendered certificate. Subject to any other restrictions on
transfer to which such holder or such shares may be bound, the Corporation will
also register such new certificate in such name as requested by the holder of
the surrendered certificate.
11. Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of any class of capital stock, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided, however, that if the holder is a
financial institution or other institutional investor, its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such number of shares of such series represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
12. Notices. All notices referred to herein shall be in writing,
shall be delivered personally or by first class mail, postage prepaid, and shall
be deemed to have been given when so delivered or mailed to the Corporation at
its principal executive offices and to any stockholder at such holder's address
as it appears in the stock records of the Corporation (unless otherwise
specified in a written notice to the Corporation by such holder).
13. Stock Splits, Stock Dividends, Etc. The Corporation shall not in
any manner subdivide (by stock split, stock dividend or otherwise) or combine
(by reverse stock split or otherwise) the outstanding shares of any class of
capital stock unless all such subdivisions and combinations shall be payable to
the holder of shares of any class of capital stock of the Corporation only in
shares of such class.
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The foregoing Certificate of Designations of Series A Preferred Stock
has been duly adopted by the Corporation's Board of Directors in accordance with
the applicable provisions of Section 151 of the General Corporation Law of the
State of Delaware.
Executed at Bothell, Washington on [_________], 2003
------------------------------------------
Clay B. Siegall
President and Chief Executive Officer
------------------------------------------
Eric L. Dobmeier
Secretary
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