CERTIFICATE OF DETERMINATION OF
SERIES C 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, and
172,500 shares have been previously designated as Series B Convertible 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 C Convertible Preferred Stock is 100,000.
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 C Convertible Preferred Stock
(the "Preferred Stock"), and the number of shares so designated shall be
100,000. 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 June 30, 1996. Dividends on the
Preferred Stock shall accrue on March 31, June 30, September 30 and December 31
of each year beginning on June 30, 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 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.
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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 500,000 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 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
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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
Company 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 80% 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 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.
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(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 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
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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.
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(viii) In case:
(A) the Company shall declare a dividend (or any other distribution)
on its Common Stock; or
(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
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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 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.
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(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.
(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 shall
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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 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
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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.
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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 ____ day of April, 1996.
________________________________
Stephen P. Gardner, President
________________________________
John W. Low, Secretary
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