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 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.
2
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 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
3
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 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
4
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 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
5
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
(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
6
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
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
7
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.
(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
8
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 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.
9
"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 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.
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
10