CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary of SGI International, a Utah
Corporation.
2. The Resolution set forth below is a true and correct copy of a Resolution
passed by the SGI Board of Directors on September 23, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of
the corporation on September 23, 1999.
/s/ JOHN R. TAYLOR
- -------------------------------
John R. Taylor, Secretary
RESOLVED, that pursuant to the authority expressly granted to and vested in the
Board by provisions of the Certificate of Incorporation of the Company, as
amended (the "Certificate of Incorporation"), and the Corporation Laws of the
State of Utah, the issuance of a series of Preferred Stock, which shall consist
of Four Hundred Eighty (480) shares, out of Twenty Million (20,000,000) shares
of Preferred Stock which the Company has authority to issue, be, and the same
hereby is, authorized, and the Board hereby fixes the powers, designations,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restriction thereof, of the shares of such
series (in addition to the powers, designations, preferences, and relative,
participating, optional or to other special rights and the qualification,
limitations or restrictions thereof, set forth in the Certificate of
Incorporation which may be applicable to the Preferred Stock) authorized by this
resolution as follows:
(a) Designation and Rank
The designation of the series of Preferred Stock authorized by this resolution
shall be 99-D Convertible Preferred Stock (the "Series 99-D Preferred Stock").
The Series 99-D Preferred Stock shall not have any liquidation preference (the
"Liquidation Preference"). The Series 99-D Preferred Stock shall rank prior to
the Company's Common Stock and to all other classes and series of equity
securities of the Company now or hereafter authorized, issued, or outstanding,
other than any classes or series of equity securities of the Company ranking on
a parity with or senior to the Series 99-D Preferred Stock as to dividend rights
or rights upon liquidation, winding up or dissolution of the Company. The Series
99-D Preferred Stock shall be junior to all previous Series of Preferred Stock
as to both the payment of dividends and the distribution of assets upon
liquidation, dissolution, or winding up of the Company, and shall be junior to
all outstanding debt of the Company. The Series 99-D Preferred Stock shall be
subject to the creation of senior stock, parity stock and junior stock to the
extent not expressly prohibited by the Company's Certificate of Incorporation.
(b) Voting Rights
Each holder of the Series 99-D Preferred Stock shall have no voting rights or
powers whatsoever on any matters concerning the Company.
(c) Dividend Provisions
(1) The holders of shares of Series 99-D Preferred Stock shall not be entitled
to receive any dividends.
(d) Liquidation
1. General. Upon any liquidation, dissolution or winding up of the Company, the
holders of the Series 99-D Preferred Stock shall not be entitled to be
paid out of the assets of the Company available for distribution to
stockholders, before any distribution or payment is made upon any Common
Stock or any other stock ranking as to the distribution of assets upon
liquidation, dissolution or winding up of the Company junior to the Series
99-D Preferred Stock. Neither the consolidation or merger of the Company into
or with any other company or companies, nor the sale or transfer by the Company
of all or any part of its assets, nor the reduction of the capital stock of
the Company, shall be deemed to be a liquidation, dissolution, or winding
up of the Company for purposes hereof.
(e) Conversion.
1. General. Subject to the other provisions hereof including paragraph (f)
herein, each share of the Series 99-D Preferred Stock shall be convertible,
at the option of the holder as described in paragraph 2 below, into 1200
shares of fully paid and nonassessable shares of Common Stock.
2. Exercise of Conversion Rights. Subject to the limitations described in
paragraph (f) herein, all of the Series 99-D shall first be convertible at
the option of the holder at any time after November 15, 1999. Subject to the
limitations described in this paragraph regarding the period of time when
the 99-D Preferred Stock shall first be convertible, the Preferred Share
will be convertible into 1,200 shares of common stock of the Company at any
time, but only if the ten (10) business day average closing bid price of the
Company's common stock is $0.75 per share or greater at the time of conversion.
The Preferred Share will automatically convert into common stock on October
30, 2001, if not converted earlier. The holder of the Series 99-D Preferred
Stock shall further be prohibited from converting any portion of the Series
99-D Preferred Stock which would result in the holder being deemed the
beneficial owner in accordance with the provisions of Rule 13d-3 of the
Securities Act of 1934, as amended, of 4.99% or more of the issued and
outstanding Common Stock of the Company.
3. Mechanics of Conversion. The holder of the Series 99-D Preferred Stock shall
exercise its right to convert the Series 99-D Preferred Stock by telecopying an
executed and completed notice of conversion to the Company and delivering the
original notice of conversion and the certificate representing the Series 99-D
Preferred Stock to the Company by express courier. Each business date on which a
notice of conversion is telecopied to and received by the Company in accordance
with the provisions hereof shall be deemed a Conversion Date. The Company will
use its best efforts to transmit the certificates representing shares of Common
Stock issuable upon conversion of any Series 99-D Preferred Stock (together with
the certificates representing the Series 99-D Preferred Stock not so converted)
to the holder, by electronic transfer or otherwise within five business days
after the Conversion Date if the Company has received the original duly executed
notice of conversion and Series 99-D Preferred Stock certificate being so
converted by such date. 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 as of such date. If
certificates for Common Stock are not delivered within five (5) business days of
actual receipt of a duly completed election to convert and the certificate to be
converted, then the purchaser of the Series 99-D Preferred Stock will be
entitled to revoke the relevant notice of conversion by delivering a notice to
such effect to the Company whereupon the Company and the purchaser shall each be
restored to their respective positions immediately prior to the delivery of such
notice of conversion.
4. Adjustment Provisions. The number of shares of Common Stock issuable upon the
conversion of the Preferred Stock and the Conversion Price shall be subject to
adjustment as follows:
(i) In case the Company shall (i) pay a dividend on Common Stock in Common Stock
or securities convertible into, exchangeable for or otherwise entitling a
holder thereof to receive Common Stock, (ii) declare a dividend payable in
cash on its Common Stock and at substantially the same time offer its
shareholder a right to purchase new Common Stock (or securities convertible
into, exchangeable for or other entitling a holder thereof to receive Common
Stock) from proceeds of such dividend (all Common Stock so issued shall be
deemed to have been issued as a stock dividend), (iii) subdivide its
outstanding shares of Common Stock into a greater number of shares of Common
Stock, (iv) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (v) issue by reclassification of its
Common Stock any shares of Common Stock of the Company, the number of shares of
Common Stock issuable upon conversion of the Series 99-D Preferred Stock
immediately prior thereto shall be adjusted so that the holders of the Series
99-D Preferred Stock shall be entitled to receive after the happening of
any of the events described above that number and kind of shares as the holders
would have received had such Series 99-D Preferred Stock been converted
immediately prior to the happening of such event or any record date with
respect thereto. Any adjustment made pursuant to this subdivision shall
become effective immediately after the close of business on the record date in
the case of a stock dividend and shall become effective immediately after the
close of business on the record date in the case of a stock split, subdivision,
combination or reclassification.
(ii) Any adjustment in the numbers of shares of Common Stock issuable hereunder
otherwise required to be made by this Section (e)(4) will not have to be made if
such adjustment would not require an increase or decrease in one (1%) percent or
more in the number of shares of Common Stock issuable upon conversion of the
Series 99-D Preferred Stock. No adjustment in the Conversion Rate will be
made for the issuance of shares of capital stock to directors, employees or
independent contractors pursuant to the Company's or any of its subsidiaries'
stock option, stock ownership or other benefit plans or arrangements or
trusts related thereto or for issuance of any shares of Common Stock pursuant
to any plan providing for the reinvestment of dividends or interest payable
on securities of the Company and the investment of additional optional
amounts in shares of Common Stock under such plan.
5. Mergers, etc. In the case of any (i) consolidation or merger of the Company
into any entity (other than a consolidation or merger that does not result in
any reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Company), (ii) sale, transfer, lease or
conveyance of all or substantially all of the assets of the Company as an
entirety or substantially as an entirety, or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a change in par
value, or from par value to no par value), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
holder of a share of Series 99-D Preferred Stock then outstanding shall have
the right thereafter to convert such share only into the kind and amount of
securities, cash and other property receivable upon such consolidation,
merger, sale, transfer, capital reorganization or reclassification by a holder
of the number of shares of Common Stock of the Company into which such shares
of Series 99-D Preferred Stock would have been converted immediately prior to
such consolidation, merger, sale, transfer, capital reorganization or
reclassification, assuming such holder of Common Stock of the Company (A) is
not an entity with which the Company consolidated or into which such sale or
transfer was made, as the case may be ("constituent entity"), or an affiliate
of the constituent entity, and (B) failed to exercise his or her rights of
election, if any, as to the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer (provided
that if the kind or amount of securities, cash or other property receivable
upon such consolidation, merger, sale or transfer is not the same for each
share of Common Stock of the Company held immediately prior to such
consolidation, merger, sale or transfer by other than a constituent entity or an
affiliate thereof and in respect of which the Company merged into the Company or
to which such rights or election shall not have been exercised ("non-electing
share"), then for the purpose of this Section (e)(5) the kind and amount of
securities, cash or other property receivable upon such consolidation, merger,
sale or transfer by each non-electing share shall be deemed to be the kind and
amount so receivable per share by a plurality of the non-electing shares). If
necessary, appropriate adjustment shall be made in the application of the
provision set forth herein with respect to the rights and interest thereafter of
the holders of shares of Series 99-D Preferred Stock, to the end that the
provisions set forth herein shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to any shares of stock or other
securities or property thereafter deliverable on the conversion of the shares.
The above provisions shall similarly apply to successive consolidations,
mergers, sales, transfers, capital reorganizations and reclassifications. The
Company shall not effect any such consolidation, merger, sale or transfer unless
prior to or simultaneously with the consummation thereof the successor Company
or entity (if other than the Company) resulting from such consolidation, merger,
sale or transfer shall assume, by written instrument, the obligation to deliver
to the holder of each share of Series 99-D Preferred Stock such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to receive under this Section (e)(5).
6. No Impairment. This Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, recapitalization, 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 Company, but
will at all times in good faith assist in the carrying out of all the
provisions of this Section (e) and in taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of Series 99-D Preferred Stock against impairment.
7. Fractional Shares. Any fractional shares issuable upon conversion of the
Series 99-D Preferred Stock shall be rounded to the nearest whole share or, at
the election of the Company, the Company shall pay the holder thereof an amount
in cash equal to the closing bid price thereof. Whether or not fractional
shares are issuable upon conversion shall be determined on the basis of the
total number of shares of Series 99-D Preferred Stock the holder is at the time
converting to Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
8. Reservation of Common Stock Issuable Upon Conversion. The Company 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
shares of Series 99-D Preferred Stock, such numbers of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series 99-D Preferred Stock. If at any time the number
of authorized but unissued shares of Common Stock shall be insufficient to
satisfy the conversion rights hereunder, in addition to such other remedies as
shall be available to the holder of Series 99-D Preferred Stock, the Company
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 purpose.
9. Status of Converted Shares. In the event any shares of Series 99-D Preferred
Stock shall be converted pursuant to Section (e) hereof, the shares so
converted shall be canceled and shall have the status of authorized but
unissued shares of Preferred Stock and may be reissued by the Company at
anytime as shares of any series of Preferred Stock other than Series 99-D
Preferred Stock.
10. Status of Retired Shares. Shares of Series 99-D Preferred Stock, purchased
or otherwise acquired for value by the Company, or converted by the holder,
shall after such acquisition, have the status of authorized and unissued shares
of Preferred Stock and may be reissued by the Company at any time as shares of
any Series of Preferred Stock other than as shares of Series 99-D Preferred
Stock.
(f) Notices.
1. Upon the Company. Any notice pursuant to the terms thereof to be given or
made by a holder of shares of Preferred Stock to or upon the Company shall be
sufficiently given or made if sent by facsimile or by mail, postage prepaid,
addressed (until another address is sent by the Company to the holder) as
follows:
SGI International
1200 Prospect Street, Suite 325
La Jolla, CA 92037
2. Upon Series 99-D Preferred Stock Holders. Any notice pursuant to the terms
hereof to be given or made by the Company to or upon any holder of shares of
Series 99-D Preferred Stock shall be sufficiently given or made if sent by mail,
postage Prepaid, addressed (until another address is sent by the holder to the
Company) to the address of such holder on the records of the Company.
IN WITNESS WHEREOF, SGI International, has caused this Certificate to be signed
by its Senior Vice President, and attested to by its Secretary, this 23rd day of
September, 1999.
SGI INTERNATIONAL
/s/ MICHAEL L. ROSE
By:---------------------------------
Michael L. Rose
President and CEO
Attest:
/s/ JOHN R. TAYLOR
- -----------------------------
John R. Taylor, Secretary