Washington law contains certain provisions that may have the effect of delaying, deterring or preventing a change in control of the Company. Chapter
23B.19 of the Washington Business Corporation Act prohibits us, with certain exceptions, from engaging in certain significant business transactions with an
"acquiring person" (defined generally as a person or group of persons who acquire 10% or more of our voting securities) for a period of five years following
the acquiring person's share acquisition date. The prohibited transactions include, among others, a merger or consolidation with, disposition of assets to, or
issuance or redemption of stock to or from, the acquiring person, or any other receipt by the acquiring person of a disproportionate benefit as a shareholder.
Exceptions to this statutory prohibition include approval of the transaction at a shareholders meeting by holders of not less than two-thirds of the outstanding
shares entitled to vote on the transaction, not counting shares as to which the acquiring person has beneficial ownership or voting control, transactions
approved by the board of directors prior to the acquiring person first becoming an acquiring person or a merger, share exchange, consolidation, liquidation,
distribution or certain other significant business transactions entered into with the acquiring person where certain requirements regarding the fairness of the
consideration to be received by the shareholders have been met. We may not exempt ourselves from coverage of this statute. These statutory provisions may
have the effect of delaying, deterring or preventing a change in control of the Company.
Our board of directors is divided into three approximately equal classes of directors serving staggered three-year terms. In addition, our articles of
incorporation provide that directors may be removed from office only at a meeting of the shareholders called expressly for that purpose and only for "cause."
Our articles of incorporation limit "cause" to willful misfeasance having a material adverse effect on us or conviction of a felony, provided that any action by
a director shall not constitute "cause" if, in good faith, the director believed the action to be in, or not opposed to, our best interests or if the director is entitled
to be indemnified with respect to such action under applicable law, our articles of incorporation or bylaws or a contract with us. Further, our bylaws require a
shareholder to provide notice to us of such shareholder's intention to nominate a person or persons for election as directors not later than 90 days prior to the
first anniversary of the previous year's annual meeting or, in the case of an election to be held at a special meeting of the shareholders for the election of
directors, the close of business on the tenth day following the date on which notice of such meeting is first given to shareholders. A shareholder must also
provide us with notice of such shareholder's intent to make any proposal at an annual meeting of shareholders not later than 90 days prior to the first
anniversary of the previous year's annual meeting of shareholders. These provisions may have the effect of deterring hostile takeovers or delaying a change in
control of our management.
On December 28, 2009, we entered into our rights plan with Computershare Trust Company, N.A., as rights agent. In connection with our rights plan,
one preferred stock purchase right was distributed for each common share held as of the close of business on January 7, 2010. Initially, the rights are not
exercisable and are attached to, and trade with, all of the shares of common stock outstanding as of, and issued subsequent to, the record date (as defined in
the rights plan). As adjusted in connection with our 1-for-6 reverse stock split effected on May 15, 2011, each right, if and when it becomes exercisable, will
entitle the holder to purchase six ten-thousandths of a share of Series ZZ Junior Participating Cumulative Preferred Stock for $36.00, subject to standard
adjustment in the rights plan. Upon the acquisition of 20% or more of common stock by a person or group, subject to certain exceptions (such acquisition
referred to herein as a 20% acquisition), the rights will become exercisable for our preferred stock, except for those rights held by such 20% acquirer, which
will become null and void. Upon a 20% acquisition, the holder of an exercisable right will be entitled to receive, upon exercise, in lieu of preferred stock, that
number of shares of common stock, or in certain circumstances, including if there are insufficient shares of common stock to permit the exercise in full of the
rights, preferred stock, other securities, cash, property or a reduction in the exercise price of the rights, or any combination of the foregoing, having a market
value of two times the exercise price of the right.
If we are acquired in a merger, consolidation or certain other business combination transactions after a 20% acquisition, each holder of an exercisable
right would then have the right to receive, upon exercise, common stock of the acquiring company having a market value equal to two times the exercise price
of the right.
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