EXHIBIT 4.1
CERTIFICATE OF DETERMINATION OF
SERIES B CONVERTIBLE PREFERRED STOCK OF
ALPHAREL, INC.
The undersigned, Stephen P. Gardner and John W. Low,
hereby certify that:
I. They are the duly elected and acting President and
Secretary, respectively, of Alpharel, Inc., a California
corporation (the "Company").
II. The Company has 1,000,000 shares of preferred
stock authorized, of which 478,261 shares have been previously
designated as Series A Preferred Stock, none of which are issued
and outstanding as of the date hereof. No other series of
preferred stock has been designated and no other shares of
preferred stock have been issued. The number of shares of
preferred stock to be designated as Series B Convertible
Preferred Stock is 172,500.
III. Pursuant to authority given to it by the Company's
Articles of Incorporation, the Board of Directors of the Company
has duly adopted the following recitals and resolutions:
WHEREAS, the Articles of Incorporation of the Company,
as amended, provide for a class of shares known as preferred
stock, issuable from time to time in one or more series;
WHEREAS, the Board of Directors of the Company is
authorized, within the limitations and restrictions stated in the
Articles of Incorporation, to determine and alter the rights,
preferences, privileges and restrictions granted to or imposed
upon any wholly unissued series of preferred stock, to fix the
number of shares constituting any such series and to determine
the designation thereof;
WHEREAS, the Board of Directors of the Company desires,
pursuant to its authority as aforesaid, to designate a new series
of preferred stock and the number of shares constituting such
series and to fix the rights, preferences, privileges and
restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of
Directors of the Company hereby designates a new series of
preferred stock and the number of shares constituting such series
and fixes the rights, preferences, privileges and restrictions
relating to such series as follows:
Section 1. DESIGNATION, AMOUNT, RANKING AND PAR VALUE.
The series of Preferred Stock shall be designated as the Series B
Convertible Preferred Stock (the "Preferred Stock"), and the
number of shares so designated shall be 172,500. The par value
of each share of Preferred Stock shall be $1.00. Each share of
Preferred Stock shall have a stated value of $20.00 per share
(the "Stated Value"). The shares of the Preferred Stock shall rank
prior to the Junior Stock (as defined below) as to
distribution of assets (upon liquidation or otherwise) and
payment of dividends.
Section 2. DIVIDENDS.
(a) Holders of the Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors of the
Company out of funds legally available therefor, cumulative cash
dividends at the rate per share (as a percentage of the Stated
Value per share) equal to 8% per annum, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 in
each year, with the first dividend payable on March 31, 1996.
Dividends on the Preferred Stock shall accrue on March 31,
June 30, September 30 and December 31 of each year beginning on
March 31, 1996 and shall be deemed to accrue on such date whether
or not earned or declared. Each such dividend will be payable to
holders of record as they appear on the books of the Company on
such record dates, which shall be 30 days prior to the payment
dates thereof unless another record date, which shall be no more
than 45 days prior to such payment dates, shall be fixed by the
Board of Directors of the Company. The party that holds the
Preferred Stock on an applicable record date for any dividend
payment will be entitled to receive such dividend payment and any
other accrued and unpaid dividends which were accrued prior to
such dividend payment date, without regard to any sale or
disposition of such Preferred Stock subsequent to the applicable
record date but prior to the applicable dividend payment date.
The Company will pay no interest on accrued and unpaid dividends
on the Preferred Stock.
(b) So long as any Preferred Stock shall remain
outstanding, in no event shall any dividend or distribution
(other than a dividend or distribution described in Section 5) be
paid upon, nor shall any distribution be made in respect of, the
Junior Stock, nor shall any monies be set aside for or applied to
the purchase or redemption (through a sinking fund or otherwise)
of the Junior Stock unless all dividends on the Preferred Stock
for all past dividend periods shall have been paid, but without
interest.
Section 3. VOTING RIGHTS. The holders of the
Preferred Stock shall not be entitled to vote on matters
submitted to the vote of the holders of Common Stock. However,
so long as any shares of the Preferred Stock are outstanding, the
Company shall not, without the affirmative vote of the holders of
two-thirds of the outstanding shares of the Preferred Stock,
(i) alter or change adversely the powers, preferences or rights
given to the Preferred Stock or (ii) authorize or create any
class of stock ranking as to dividends or distribution of assets
(upon liquidation or otherwise) prior to or PARI PASSU with the
Preferred Stock.
Section 4. LIQUIDATION. In the event of any complete
liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, the holders of shares of the Preferred
Stock shall be entitled to receive out of the assets of the
Company, whether such assets are capital or surplus, for each
share of the Preferred Stock an amount equal to $20.00 per share,
plus an amount equal to accrued but unpaid dividends per share,
whether declared or not, but without interest, before any
distribution shall be made to the holders of Junior Stock of the
Company, and if the assets of the Company shall be insufficient
to pay in full
2
such amounts, then such assets shall be distributed among such holders
ratably in accordance with the respective amounts that would be payable
on such shares if all amounts payable thereon were paid in full.
Section 5. CONVERSION.
(a) (i) Each share of Preferred Stock shall be
convertible into shares of Common Stock at the Conversion Ratio
(subject to reduction under Section 5(a)(ii) and (iii)), at the
option of the holder in whole or in part at any time after the
expiration of 45 days after the Original Issue Date (as defined
in Section 7 below) (the "Conversion Term"). The holder shall
effect conversions by delivering to the Company a written notice
(the "Conversion Notice"), accompanied by the certificate
representing the shares of the Preferred Stock to be converted.
Each Conversion Notice shall specify the number of shares of
Preferred Stock to be converted and the date on which such
conversion is to be effected (the "Conversion Date"), which shall
in no event be earlier than the date such Conversion Notice is
given in accordance with Section 5(j) below. Each Conversion
Notice, once given, shall be irrevocable (subject to Section 5(b)
below). If the holder is converting less than all shares of
Preferred Stock, the Company shall promptly deliver to the holder
a certificate for such number of shares of Preferred Stock as
have not been converted.
(ii) If on the Conversion Date (as defined below)
applicable to any conversion, the Conversion Price (as defined
below) then in effect is such that the aggregate number of shares
of Common Stock that would then be issuable upon conversion of
all then-outstanding shares of Preferred Stock, when combined
with any shares of Common Stock previously issued upon conversion
of any shares of Preferred Stock, would equal or exceed 1,070,000
shares (the "Issuable Maximum"), then the Company shall be
obligated to effect the conversion of only such portion of each
share of Preferred Stock subject to such conversion as is
represented by the Conversion Percentage (as defined in the next
sentence), and the remaining portion of such share shall be
subject to the mandatory redemption provisions of Section 6.
The "Conversion Percentage" shall be a fraction, the
numerator of which is the "Allowable Conversion Maximum" (as
defined in the next sentence) and the denominator of which is the
total number of shares of Preferred Stock outstanding prior to
such conversion. The Allowable Conversion Maximum at any time
shall be the difference between the Issuable Maximum and the
total number of shares of Common Stock previously issued upon
conversion of shares of Preferred Stock. In the event of any
stock split, stock dividend, recapitalization, reorganization or
other similar action or event, appropriate adjustment shall be
made to the Issuable Maximum and the Allowable Conversion
Maximum.
(iii) If on any Conversion Date for any shares of
Preferred Stock applicable to any conversion, the Per Share
Market Value of the Common Stock on the immediately preceding
date exceeds $7.75, the number of shares issued upon conversion
of such shares of Preferred Stock shall be reduced by a number of
shares equal to 50% of (A) the amount by which such Per Share
Market Value exceeds $7.75, divided by (B) such Per Share
3
Market Value, times (C) the number of shares which would otherwise be
issued upon such conversion, but for the reduction provided for
in this Section 5(a)(iii).
(b) Three Trading Days after the Conversion Date, the
Company will deliver to the holder (i) a certificate or
certificates which shall be free of restrictive legends and
trading restrictions (other than those then required by law),
representing the number of shares of Common Stock being acquired
upon the conversion of shares of Preferred Stock (subject to any
reduction required pursuant to Section 5(a)(ii) or (iii)), and
(ii) subject to Section 6 below, the certificate representing the
number of shares of Preferred Stock not converted; provided,
however that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon
conversion of any shares of Preferred Stock (or with respect to
shares subject to redemption pursuant to Sections 5(a)(ii) and 6,
to pay the redemption price payable under Section 6), until
certificates evidencing such shares of Preferred Stock are either
delivered to the Company or any transfer agent for the Preferred
Stock or Common Stock, or the holder notifies the Company that
such certificates have been lost, stolen or destroyed and
provides a bond (or other adequate security acceptable to the
Company) satisfactory to the Company to indemnify the Company
from any loss incurred by it in connection therewith. The
Company shall, upon request of the holder, use its best efforts
to deliver any certificate or certificates required to be
delivered by the Company under this Section 5(b) electronically
through the Depository Trust Corporation or another established
clearing corporation performing similar functions. In the case
of a conversion pursuant to a Conversion Notice, if such
certificate or certificates are not delivered by the date
required under this Section 5(b), the holder shall be entitled by
written notice to the Company at any time on or before such
holder's receipt of such certificate or certificates thereafter,
to rescind such conversion, in which event the Company shall
immediately return the certificates representing the shares of
Preferred Stock tendered for conversion.
(c) (i) The Conversion Price (the "Conversion Price")
in effect on any Conversion Date shall be the lesser of the
Closing Price on the Trading Day immediately preceding the
Original Issue Date or 82.5% of the average of the Closing Price
on the three Trading Days immediately preceding the Conversion
Date. For purposes of this Section, the "Closing Price" on any
Trading Day shall mean the last reported closing price of the
Common Stock of the Company on such day on the principal
securities exchange on which the Common Stock is listed or, if
the Common Stock is not so listed, the last reported bid price of
the Common Stock as reported on The Nasdaq National Market on
such date or, if the Common Stock is neither so listed nor so
reported, the last reported bid price of the Common Stock as
quoted by a registered broker-dealer for which such quotes are
available on such date.
(ii) If the Company, at any time while any shares of
Preferred Stock are outstanding, (a) shall pay a stock dividend
or otherwise make a distribution or distributions on shares of
its Junior Stock payable in shares of its capital stock (whether
payable in shares of its Common Stock or of capital stock of any
class), (b) subdivide outstanding shares of Common Stock into
larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any
4
shares of capital stock of the Company, the Conversion Price
designated in Section 5(c)(i) shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common
Stock of the Company outstanding before such event and of which
the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to
this Section 5(c)(ii) shall become effective immediately after
the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
(iii) In case the Company, at any time while any
shares of the Preferred Stock are outstanding, shall issue rights
or warrants to all holders of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per
share less than the Per Share Market Value of Common Stock at the
record date mentioned below, the Conversion Price designated in
Section 5(c)(i) shall be multiplied by a fraction, of which the
denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date
of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares
so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive
such rights or warrants. However, upon the expiration of any
right or warrant to purchase Common Stock the issuance of which
resulted in an adjustment in the Conversion Price designated in
Section 5(c)(i) pursuant to this Section 5(c)(iii), if any such
right or warrant shall expire and shall not have been exercised,
the Conversion Price designated in Section 5(c)(i) shall
immediately upon such expiration be recomputed and effective
immediately upon such expiration be increased to the price which
it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this
Section 5 after the issuance of such rights or warrants) had the
adjustment of the Conversion Price made upon the issuance of such
rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common
Stock actually purchased upon the exercise of such rights or
warrants actually exercised.
(iv) In case the Company, at any time while shares of
Preferred Stock are outstanding, shall distribute to all holders
of Common Stock (and not to holders of Preferred Stock) evidences
of its indebtedness or assets or rights or warrants, to subscribe
for or purchase any security (excluding those referred to in
Section 5(c)(iii) above) then in each such case the Conversion
Price at which each share of the Preferred Stock shall thereafter
be convertible shall be determined by multiplying the Conversion
Price in effect prior to the record date fixed for determination
of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market
Value of Common Stock determined as of the record date mentioned
above, and of which the numerator shall be such Per Share Market
Value of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or
evidence of indebtedness so
5
distributed applicable to one outstanding share of Common Stock as
determined by the Board of Directors of the Company in good faith;
provided, however that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, then such fair
market value shall be determined by a nationally recognized or major
regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Company) (an
"Appraiser") selected in good faith by the holders of a majority
in interest of the shares of Preferred Stock; and provided,
further that the Company, after receipt of the determination by
such Appraiser shall have the right to select an additional
Appraiser, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. In
either case the adjustments shall be described in a statement
provided to all holders of Preferred Stock of the portion of
assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date
mentioned above.
(v) All calculations under this Section 5 shall be
made to the nearest cent or the nearest 1/100th of a share, as
the case may be.
(vi) Whenever the Conversion Price is adjusted
pursuant to Section 5(c)(ii),(iii), (iv) or (v), the Company
shall promptly mail to each holder of shares of Preferred Stock,
a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment.
(vii) In case of any reclassification of the Common
Stock, any consolidation or merger of the Company with or into
another person, sale or transfer of all or substantially all of
the assets of the Company or any compulsory share exchange
pursuant to which share exchange the Common Stock is converted
into other securities, cash or property, then the holders of the
shares of Preferred Stock then outstanding shall have the right
thereafter to convert such shares only into the kind and amount
of shares of stock and other securities and property receivable
upon or deemed to be held following such reclassification,
consolidation, merger, sale, transfer or share exchange by a
holder of a number of shares of the Common Stock of the Company
into which such shares Preferred Stock could have been converted
immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange. The terms of any such
consolidation, merger, sale, transfer or share exchange shall
include such terms so as to continue to give to the holder of
shares of Preferred Stock the right to receive the securities or
property set forth in this Section 5(c)(vii) upon any conversion
following such consolidation, merger, sale, transfer or share
exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or
share exchanges.
(viii) In case:
(A) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
6
(B) the Company shall declare a special
nonrecurring cash dividend on or a redemption
of its Common Stock; or
(C) the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or
(D) the approval of any stockholders of the
Company shall be required in connection with
any reclassification of the Common Stock of
the Company (other than a subdivision or
combination of the outstanding shares of
Common Stock), any consolidation or merger to
which the Company is a party, any sale or
transfer of all or substantially all of the
assets of the Company, or any compulsory
share exchange whereby the Common Stock is
converted into other securities, cash or
property, or
(E) of the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of
the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of the shares of
Preferred Stock, and shall cause to be mailed to the holders of
the shares of Preferred Stock at their last addresses as they
shall appear upon the stock books of the Company, at least 10
calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding-up
is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation
or winding-up (but no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of
the corporate action required to be specified in such notice).
(d) In case at any time conditions shall arise by
reason of action taken by the Company which in the opinion of the
Board of Directors of the Company are not adequately covered by
the other provisions hereof and which might materially and
adversely affect the rights of the holders of shares of Preferred
Stock (different than or distinguished from the effect generally
on the rights of holders of any class of the Company's capital
stock) or in case at any time any such conditions are expected to
arise by reason of any action contemplated by the Company, an
Appraiser selected by the holders of majority in interest of the
shares of Preferred Stock shall give its opinion as to the
adjustment, if any (not inconsistent with the standards
established in this Section 5), of the Conversion Price
(including, if necessary, any adjustment as to the securities
into which shares of Preferred Stock may thereafter be
7
convertible) and any distribution which is or would be required
to preserve without diluting the rights of the holders of the
shares of Preferred Stock; provided, however, that the Company,
after receipt of the determination by such Appraiser, shall have
the right to select an additional Appraiser, in which case the
adjustment shall be equal to the average of the adjustments
recommended by each such Appraiser. The Board of Directors of
the Company shall make the adjustment recommended forthwith upon
the receipt of such opinion or opinions or the taking of any such
action contemplated, as the case may be; provided, however, that
no such adjustment of the Conversion Price shall be made which in
the opinion of the Appraiser(s) giving the aforesaid opinion or
opinions would result in an increase of the Conversion Price to
more than the Conversion Price then in effect.
(e) The Company covenants that it will at all times
reserve and keep available, out of its authorized and unissued
Common Stock solely for the purpose of issuance upon conversion
of Preferred Stock as herein provided, free from preemptive
rights or any other actual contingent purchase rights of Persons
other than the holders of shares of Preferred Stock, such number
of shares of Common Stock as shall be issuable (taking into
account the adjustments and restrictions of Section 5(c) hereof)
upon the conversion of all outstanding shares of Preferred Stock.
The Company covenants that all shares of Common Stock that shall
be so issuable shall, upon issue, be duly and validly issued and
fully paid and nonassessable.
(f) Except as otherwise required by Section 6 hereof,
the Company shall not be required to issue stock certificates
representing fractions of shares of Common Stock, but may if
otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the Per Share Market Value at such
time. If the Company elects not, or is unable, to make such a
cash payment, the holder of a share of Preferred Stock shall be
entitled to receive, in lieu of the final fraction of a shares,
one whole share of Common Stock; provided, however, that in no
event shall any such issuance of a whole share result in the
issuance of a number of shares of Common Stock in excess of the
Issuable Maximum and if such issuance would so result in the
issuance of a number of shares in excess of the Issuable Maximum,
the holder shall be entitled to receive the cash payment
described above as soon as such cash payment may be lawfully
made.
(g) The issuance of certificates for shares of Common
Stock on conversion of Preferred Stock shall be made without
charge to the holders thereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or
delivery of such certificate, provided that the Company shall not
be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such
certificate in a name other than that of the holder of the shares
of Preferred Stock converted and the Company shall not be
required to issue or deliver such certificates unless or until
the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has
been paid.
(h) Shares of Preferred Stock converted into Common
Stock shall be canceled and shall have the status of authorized
but unissued shares of preferred stock.
8
(i) If the Company intends to initiate a public
offering of its securities in an amount exceeding $5 million in
the aggregate and the Company reasonably believes that the
conversion of any shares of Preferred Stock may have an adverse
effect on the ability of the Company to complete such offering or
the price at which such securities could be sold therein, the
Company, upon at least 30 days prior written notice to the
holders of Preferred Stock, may suspend the right of the holders
of the shares of Preferred Stock to convert such shares pursuant
to Section 5 for the period commencing on the date the Company
files a registration statement with the Securities and Exchange
Commission and terminating 90 days after the closing of the
public offering, provided that the last day that the Preferred
Stock is convertible (as set forth in Section 5(a)) shall be
extended for such number of days as the conversion right was
suspended under this Section 5(i).
(j) Each Conversion Notice shall be given by facsimile
and by mail, postage prepaid, addressed to the attention of the
Chief Financial Officer of the Company at the facsimile telephone
number and address of the principal place of business of the
Company. Any such notice shall be deemed given and effective
upon the earliest to occur of (i) receipt of such facsimile at
the facsimile telephone number specified in this Section 5(j),
(ii) three days after deposit in the United States mails or
(iii) upon actual receipt by the party to whom such notice is
required to be given.
Section 6. MANDATORY REDEMPTION OF THE PREFERRED STOCK.
(a) If on the Conversion Date specified in any
Conversion Notice the provisions of Section 5(a)(ii) do not
permit the issuance of the full number of shares into which the
shares of Preferred Stock to be converted would otherwise be
convertible, then the Company shall, with respect to each share
of Preferred Stock that is subject to such Conversion Notice,
redeem, from funds legally available therefor at the time of such
redemption, a portion of such share that is represented by the
fraction that is the difference between one and the Conversion
Percentage (such fraction to be known as the "Redemption Ratio").
The redemption price for such portion of each share of Preferred
Stock to be redeemed shall be an amount equal to the product of
(i) the Per Share Market Value on the Conversion Date, (ii) the
number of shares of Common Stock into which such share of
Preferred Stock would then be convertible, but for
Section 5(a)(ii), times (iii) the Redemption Ratio. If any
portion of such redemption price shall not be paid by the Company
within 20 days after the Conversion Date, such redemption price
shall be increased by an amount accruing from the twenty-first
day to the fortieth day after the Conversion Date at the rate of
10% per annum, from the forty-first day to the sixtieth day at
12.5% per annum and from the sixty-first day until paid at the
rate of 15% per annum. If, on any such Conversion Date, the
Company is prohibited under the relevant provisions of the
California General Corporation Law (the "CGCL") from paying, in
whole or in part, the redemption price for any shares of
Preferred Stock, any portion of the redemption price which may be
lawfully paid in accordance with the CGCL shall be paid pro rata
to the holders of the shares of Preferred Stock being redeemed on
such Conversion Date and the remainder of such redemption price
9
shall be paid on a pro rata basis to such holders as soon as such
payment is permissible under the CGCL.
Section 7. DEFINITIONS. For the purposes hereof, the
following terms shall have the following meanings:
"Common Stock" means shares now or hereafter authorized
of the class of Common Stock, no par value, of the Company
presently authorized and stock of any other class into which such
shares may hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of
which the numerator is Stated Value plus accrued but unpaid
dividends, and of which the denominator is the Conversion Price
at such time.
"Junior Stock" means the Common Stock of the Company
and any other stock of the Company over which shares of the
Preferred Stock has preference as to distribution of assets.
"Original Issue Date" shall mean the date of the first
issuance of any shares of the Preferred Stock.
"Per Share Market Value" means on any particular date
(a) the last sale price per share of the Common Stock on such
date on The Nasdaq National Market or other stock exchange on
which the Common Stock has been listed or if there is no such
price on such date, then the last price on such exchange on the
date nearest preceding such date, or (b) if the Common Stock is
not listed on The Nasdaq National Market or any stock exchange,
the average of the bid and asked price for a share of Common
Stock in the over-the-counter market, as reported by the NASDAQ
Stock Market at the close of business on such date, or (c) if the
Common Stock is not quoted on the NASDAQ Stock Market, the
average of the bid and asked price for a share of Common Stock in
the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or similar organization or agency succeeding
to its functions of reporting prices), or (d) if the Common Stock
is no longer publicly traded the fair market value of a share of
Common Stock as determined by an Appraiser (as defined in
Section 5(c)(iv) above) selected in good faith by the holders of
a majority in interest of the shares of the Preferred Stock;
provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case, the fair market value
shall be equal to the average of the determinations by each such
Appraiser.
"Person" means a corporation, an association, a
partnership, organization, a business, an individual, a
government or political subdivision thereof or a governmental
agency.
"Trading Day" means (a) a day on which the Common Stock
is traded on The Nasdaq National Market or principal stock
exchange on which the Common Stock has been
10
listed, or (b) if the Common Stock is not listed on The Nasdaq National
Market or any stock exchange, a day on which the Common Stock is traded
in the over-the-counter market, as reported by the NASDAQ Stock Market,
or (c) if the Common Stock is not quoted on the NASDAQ Stock
Market, a day on which the Common Stock is quoted in the over-the-
counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding
its functions of reporting prices).
RESOLVED FURTHER, that the President and Secretary of
the Company be, and they hereby are, authorized and directed to
prepare, execute, verify, and file in the Office of the
California Secretary of State, a Certificate of Determination in
accordance with this resolution and as required by law.
11
Each of the undersigned further declares under penalty
of perjury under the laws of the State of California that the
matters set forth in this certificate are true and correct of his
own knowledge.
Executed at San Diego, California on the 15th day of
December, 1995.
/s/ STEPHEN P. GARDNER
--------------------------------
Stephen P. Gardner, President
/s/ JOHN W. LOW
--------------------------------
John W. Low, Secretary
12