EXHIBIT 3.01(D)
CERTIFICATE OF DETERMINATION OF PREFERENCES
OF SERIES A CONVERTIBLE PREFERRED STOCK
OF RADIUS INC.
Pursuant to Section 401 of the Corporations
Code of the State of California
The undersigned, being the Chairman of the Board and Chief Executive
Officer, and Secretary, respectively, of Radius Inc., a corporation organized
and existing under the laws of the State of California (the "Corporation"),
hereby certify that, pursuant to the authority contained in Article III of the
Sixth Amended and Restated Articles of Incorporation of the Corporation, and in
accordance with the provisions of Section 401 of the Corporations Code of the
State of California, the Board of Directors of the Corporation has duly adopted
the following recitals and resolution creating a new series of its Preferred
Stock and designating 750,000 shares as Series A Convertible Preferred Stock,
none of which shares of Series A Convertible Preferred Stock have been
previously issued, pursuant to a unanimous consent of directors dated August 30,
1996:
WHEREAS, the Corporation is authorized by its Articles of Incorporation to
issue up to 2,000,000 shares of Preferred Stock, issuable from time to time in
one or more series;
WHEREAS, the Board of Directors of the Corporation is authorized to
determine the rights, preferences, privileges and restrictions granted to or
imposed upon any additional series of Preferred Stock, to fix the number of
shares constituting any such series and to determine the designation thereof, or
any of them; and
WHEREAS, the Board of Directors of the Corporation desires, pursuant to its
authority as aforesaid, to issue and to determine and fix the rights, privileges
and restrictions relating to a new series of Preferred Stock and the number of
shares constituting and the designation of such series;
NOW THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes and
determines the designation of, the number of shares constituting and the rights,
preferences, privileges and restrictions relating to a new series of Preferred
Stock, as follows:
1. SERIES AND NUMBER OF SHARES. Of the authorized shares of Preferred Stock,
750,000 shares are hereby designated Series A Convertible Preferred Stock. The
Series A Preferred Stock still have the rights, preferences, privileges and
restrictions set forth below.
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2. DEFINITIONS. The following definitions shall apply:
2.1 "AVAILABLE NET PROCEEDS" shall mean the net proceeds to the
Company generated by a Triggering Event (after reduction for the related
expenses and amounts otherwise required to be paid to holders of the Company's
indebtedness pursuant to the terms of such indebtedness).
2.2 "BOARD" shall mean the Board of Directors of the Company.
2.3 "BREAKEVEN PRICE" shall mean the number obtained by multiplying
the Original Issue Price by a fraction, (i) the numerator of which is 750,000,
and (ii) the denominator of which is the Common Share Equivalent.
2.4 "COMPANY" shall mean this Corporation.
2.5 "COMMON SHARE EQUIVALENT" shall mean 5,523,030.
2.6 "COMMON STOCK" shall mean the Common Stock, no par value, of the
Company.
2.7 "COMMON STOCK DIVIDEND" shall mean a stock dividend declared and
paid on the Common Stock that is payable in shares of Common Stock.
2.8 "CONVERSION FACTOR" shall have the meaning specified in Section
7.3.
2.9 "DIVIDED PAYMENT DATE" shall mean the last day of each of the
Company's fiscal quarters.
2.10 "DIVIDEND RATE" shall mean $0.40 per share per annum.
2.11 "MARKET PRICE" shall mean with respect to each share of Common
Stock:
(i) if traded on a national securities exchange or the Nasdaq
National Market (or similar national quotation system), the Market Price shall
be deemed to be the closing price (last reported sale) on the Dividend Payment
Date;
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(ii) if traded over-the-counter, the Market Price shall be
deemed to be the closing bid price quoted on the Dividend Payment Date (or, if
no closing bid price was quoted on that date, then the closing bid price that
was last quoted prior to such date); or
(iii) if at any time the Common Stock is not traded as described
in (i) or (ii) above, the Market Price shall be the highest price per share
which the Company could obtain from a willing buyer (not a current employee or
director) for shares of Common Stock sold by the Company, from authorized but
unissued shares, as determined in good faith by its Board of Directors.
2.12 "ORIGINAL ISSUE DATE" shall mean the date on which the first
share of Series A Preferred Stock is issued by the Company.
2.13 "ORIGINAL ISSUE PRICE" shall mean $4.00 per share.
2.14 "PERMITTED REPURCHASES" shall mean the repurchase by the Company
of shares of Common Stock held by employees, officers, directors, consultants,
independent contractors, advisors or other persons performing services for the
Company or a Subsidiary that are subject to restricted stock purchase agreements
or stock option exercise agreements under which the Company has the option to
repurchase such shares: (i) at cost, upon the occurrence of certain events,
such as the termination of employment or services; or (ii) at any price pursuant
to the Company's exercise of a right of first refusal to repurchase such shares;
provided, that the Board approves such repurchase.
2.15 "QUARTERLY RATE" shall mean, for each share of Series A Preferred
Stock outstanding during any fiscal quarter of the Company, the rate equal to
$0.10 per fiscal quarter (prorated for any portion of such quarter during which
such share was not outstanding).
2.16 "SERIES A PREFERRED STOCK" shall mean the Series A Convertible
Preferred Stock, no par value, of the Company.
2.17 "SUBSIDIARY" shall mean any corporation of which at least 50% of
the outstanding voting stock is at the time owned directly or indirectly by the
Company or by one or more of such subsidiary corporations.
2.18 "TRIGGERING EVENT" shall mean any of the following events or
combination of the following events during any 12 month period which generate
Available Net Proceeds to the Company of at least $100,000 in the aggregate and
which proceeds are otherwise legally available for distribution to its
shareholders: (i) any of the events specified in clauses (1)-(6) of Section
8.1; (ii) the sale by the Company of any securities owned by it (other than to a
holder of Series A Preferred Stock) of either (x) Splash Technology Holdings,
Inc., (y) Portrait Display
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Labs, Inc. or (z) UMAX Computer Corporation (or any securities issued in
exchange therefor); (iii) the sale by the Company of any of its businesses; or
(iv) the sale by the Company of any of its assets or inventory other than in the
ordinary course of business.
3. DIVIDEND RIGHTS.
3.1 DIVIDEND PREFERENCE. In each calendar year, the holders of
the then outstanding Series A Preferred Stock shall be entitled to receive, when
and as declared by the Board, out of any funds and assets of the Company legally
available therefor, dividends at the annual Dividend Rate, prior and in
preference to the payment of any dividends on the Common Stock in such calendar
year (other than a Common Stock Dividend or any Permitted Repurchases) whether
or not such dividends have been declared. If declared, each such dividend shall
be paid within five days after the next Dividend Payment Date to the holders of
record of the Series A Preferred Stock as they shall appear on the stock
register of the Company on such record date as shall be fixed by the Board of
Directors of the Company or a duly authorized committee thereof, which record
date shall be no more than 45 days or less than 10 days preceding the Dividend
Payment Date. No dividends (other than a Common Stock Dividend) shall be paid
with respect to the Common Stock during any calendar year unless dividends in
the total amount of the annual Dividend Rate for the Series A Preferred Stock
plus all previously accrued but unpaid dividends on the Series A Preferred Stock
shall have first been paid or declared and set apart for payment to the holders
of Series A Preferred Stock; PROVIDED, HOWEVER, that this restriction shall not
apply to Permitted Repurchases.
Dividends on the outstanding shares of Series A Preferred Stock
shall accrue as of each Dividend Payment Date at the Quarterly Rate. If, on any
Dividend Payment Date, the holders of the Series A Preferred Stock shall not
have received, in cash or in additional shares of Common Stock, the full
dividends that are then accrued as provided for in this Section 3.1, then the
unpaid amount of such dividends shall cumulate, whether or not earned or
declared.
The Company may elect, at any time, at its option and in its sole
discretion in lieu of dividends in cash on the Series A Preferred Stock, to pay
all or any portion of the accrued and unpaid dividends through the issuance of
shares of Common Stock. Such shares of Common Stock shall be valued at a per
share price equal to the Market Price on the Dividend Payment Date.
3.2 NON-CASH DIVIDENDS. Whenever a dividend provided for in
this Section 3 shall be payable in property other than cash or Common Stock, the
value of such dividend shall be deemed to be the fair market value of such
property as determined in good faith by the Board.
4. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary, the funds and
assets of the
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Company that may be legally distributed to the Company's shareholders (the
"AVAILABLE FUNDS AND ASSETS") shall be distributed to shareholders in the
following manner:
4.1 LIQUIDATION PREFERENCES. The holders of each share of
Series A Preferred Stock then outstanding shall be entitled to be paid, out of
the Available Funds and Assets, and prior and in preference to any payment or
distribution (or any setting apart of any payment or distribution) of any
Available Funds and Assets on any shares of Common Stock or any other series of
Preferred Stock, an amount per share equal to the applicable Original Issue
Price for each such share plus all accrued but unpaid dividends thereon. If
upon any liquidation, dissolution or winding up of the Company, the Available
Funds and Assets shall be insufficient to permit the payment to holders of the
Series A Preferred Stock of their full preferential amounts described in this
subsection, then all of the remaining Available Funds and Assets shall be
distributed among the holders of the then outstanding Series A Preferred Stock
on a pro rata basis.
4.2 REMAINING ASSETS. If there are any Available Funds and
Assets remaining after the payment or distribution (or the setting aside for
payment or distribution) to the holders of the Series A Preferred Stock of their
full preferential amounts described in Section 4.1, then holders of the then
outstanding Preferred Stock (other than Series A Preferred Stock) and Common
Stock shall receive all the remaining Available Funds and Assets (if any) pro
rata according to the number of outstanding shares of Preferred Stock or Common
Stock, as applicable, then held by each of them.
4.3 NON-CASH CONSIDERATION. If any assets of the Company
distributed to shareholders in connection with any liquidation, dissolution, or
winding up of the Company are other than cash, then the value of such assets
shall be their fair market value as determined by the Board, EXCEPT THAT any
securities to be distributed to shareholders in a liquidation, dissolution, or
winding up of the Company shall be valued as follows:
(a) The method of valuation of securities not subject to
investment letter or other similar restrictions on free marketability shall be
as follows:
(i) if the securities are then traded on a national
securities exchange or the Nasdaq National Market (or a similar national
quotation system), then the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the 30-day
period ending three days prior to the distribution;
(ii) if the securities are then traded over-the-
counter, then the value shall be deemed to be the average of the closing bid
prices over the 30-day period ending three days prior to the distribution; and
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(iii) if the securities are not then traded as
described in (i) or (ii) above, then the value shall be the fair market value
thereof, as determined in good faith by the Board of Directors of the Company.
(b) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in
subparagraphs (a)(i), (ii) or (iii) of this subsection to reflect the
approximate fair market value thereof, as determined in good faith by the Board.
5. REDEMPTION.
5.1 OPTIONAL REDEMPTION.
(a) Subject to the provisions regarding partial redemption in
Section 5.2, upon the occurrence of a Triggering Event, the Company shall,
within ten days after the occurrence of such Triggering Event, provide written
notice (the "TRIGGERING EVENT NOTICE") of such Triggering Event to the holders
of record of Series A Preferred Stock as of the date of such Triggering Event.
The Company shall, upon receipt of written notice from holders of a majority of
the shares of Series A Preferred Stock outstanding (a "REDEMPTION REQUEST"),
provided that such notice is received within ten days after the date on which
the Triggering Event Notice was sent (such ten day period is referred to as the
"ELECTION PERIOD"), redeem the Series A Preferred Stock in whole or in part to
the extent of the Available Net Proceeds, but in no event shall the aggregate
amount paid in such redemption exceed the amount of funds legally available
therefor. The redemption price for each share of Series A Preferred Stock shall
be the Original Issue Price for such Series A Preferred Stock plus the amount of
all accrued and unpaid dividends thereon.
(b) In the event that the Company does not receive a Redemption
Request from holders of a majority of the outstanding shares of Series A
Preferred Stock within the Election Period, the Company may redeem the Series A
Preferred Stock, in whole or in part (to the extent of Available Net Proceeds),
at a redemption price for each share of Series A Preferred Stock equal to
(i) the Original Issue Price multiplied by 110%, plus (ii) the amount of all
accrued and unpaid dividends thereon. If the Company elects to redeem shares of
the Series A Preferred Stock in accordance with the immediately preceding
sentence, the Company shall provide written notice of such election, within 30
days after the Election Period, in the same manner as the Triggering Event
Notice (the "SECOND NOTICE"). A number of shares of Series A Preferred Stock
equal to the Conversion Amount (defined below) shall, upon a vote of a majority
of the outstanding shares of Series A Preferred Stock (a "SERIES A ELECTION")
occurring within fifteen days after the date on which the Second Notice was
sent, be automatically converted, pursuant to the procedures set forth in
Section 7 below, into Common Stock (with each share of Series A Preferred Stock
being converted into a number of shares of Common Stock equal to the Conversion
Factor (as defined in Section 7.3 below)) (such conversion is referred to as a
"TRIGGERING EVENT CONVERSION"). For purposes hereof, the number of shares of
Series A Preferred Stock subject to a Triggering Event Conversion (the
"CONVERSION AMOUNT") shall equal
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the amount of the Available Net Proceeds divided by (x) the Original Issue Price
plus (y) the amount of all accrued and unpaid dividends on the Series A
Preferred Stock. If the Company does not receive notice of a Series A Election
within such fifteen day period, the Company may, within 30 days after the
expiration of such fifteen day period, redeem the Series A Preferred Stock as
provided in this Section 5.1(b). If the shares of Series A Preferred Stock are
not redeemed or converted in accordance with this Section 5.1(b), or if shares
of Series A Preferred Stock which are subject to redemption hereunder have not
been redeemed due to insufficient legally available funds and assets of the
Company, then such shares of Series A Preferred Stock shall continue to be
outstanding and entitled to all dividend, liquidation, conversion (including
conversion into Common Stock pursuant to Section 7.1(a)) and other rights,
preferences, privileges and restrictions on the Series A Preferred Stock
respectively until; such shares have been converted or redeemed.
5.2 PARTIAL REDEMPTION. No redemption shall be made under this
Section 5 of only a part of the then outstanding Series A Preferred Stock,
unless the Company shall effect such redemption pro rata among all holders of
Series A Preferred Stock then outstanding according to the number of shares of
such Series A Preferred Stock held by each holder thereof on the applicable
Redemption Date.
5.3 REDEMPTION NOTICE. At least 20 but no more than 60 days
prior to the date fixed for any redemption of any shares of Series A Preferred
Stock (the "REDEMPTION DATE"), written notice shall be mailed by the Company,
postage prepaid, to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of the Series A
Preferred Stock to be redeemed, at the address last shown on the records of the
Company for such holder or given by the holder to the Company for the purpose of
notice or, if no such address appears or is given, at the place where the
principal executive office of the Company is located, notifying such holder of
the redemption to be effected, specifying the subsection hereof under which such
redemption is being effected, the Redemption Date, the applicable redemption
price, the number of such holder's shares of Series A Preferred Stock to be
redeemed and the place at which payment may be obtained and calling upon such
holder to surrender to the Company, in the manner and at the place designated,
the certificate or certificates representing the shares to be redeemed (the
"REDEMPTION NOTICE").
5.4 SURRENDER OF CERTIFICATES. On or before the designated
Redemption Date, each holder of Series A Preferred Stock to be redeemed shall
surrender the certificate(s) representing such shares of Series A Preferred
Stock to be redeemed to the Company or notify the Company that such
certificate(s) has been lost, stolen or destroyed and execute an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
the Company in connection with such certificate(s), in the manner and at the
place designated in the Redemption Notice, and thereupon the redemption price
for such shares shall be payable to the order of the person whose name appears
on such certificate(s) as the owner thereof, and each surrendered certificate
shall be canceled and retired. If less than all of the shares represented by
such certificate(s) are redeemed, then the Company shall promptly issue a new
certificate representing the unredeemed shares.
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5.5 EFFECT OF REDEMPTION. If the Redemption Notice shall have
been duly given, then from and after the Redemption Date, unless there shall
have been a default in payment of the redemption price, all rights of the
holders of the shares of Series A Preferred Stock called for redemption in the
Redemption Notice (notwithstanding that the certificates evidencing any of the
shares of Series A Preferred Stock so called for redemption shall not have been
surrendered) shall terminate with respect to such shares (except only the right
of the holders to receive the redemption price without interest upon surrender
of their certificates therefor), all dividends with respect to such shares shall
cease to accrue, and such shares shall not thereafter be transferred on the
Company's books.
5.6 DEPOSIT OF REDEMPTION FUNDS. On or prior to the Redemption
Date, the Company shall deposit the redemption price of all shares of Series A
Preferred Stock designated for redemption in the Redemption Notice and not yet
redeemed with a bank or trust company having aggregate capital and surplus in
excess of $20,000,000 as a trust fund for the benefit of the respective holders
of the shares designated for redemption and not yet redeemed, with irrevocable
instructions and authority to the bank or trust company to pay the redemption
price for such shares to their respective holders on or after the Redemption
Date upon receipt of notification from the Company that such holder has
surrendered his or her share certificate to the Company pursuant to Section 5.4.
The balance of any funds deposited by the Company pursuant to this Section 5.6
remaining unclaimed at the expiration of six months following the Redemption
Date shall be returned to the Company upon its request expressed in a resolution
of its Board of Directors.
6. VOTING RIGHTS.
6.1 COMMON STOCK. Each holder of shares of Common Stock shall
be entitled to one vote for each share thereof held.
6.2 SERIES A PREFERRED STOCK. Each holder of shares of Series A
Preferred Stock shall be entitled to the number of votes equal to the number of
whole shares of Common Stock into which such shares of Series A Preferred Stock
could be converted pursuant to the provisions of Section 7.1(a) below at the
record date for the determination of the shareholders entitled to vote on such
matters or, if no such record date is established, the date such vote is taken
or any written consent of shareholders is solicited.
6.3 GENERAL. Subject to the foregoing provisions of this
Section 6, each holder of Series A Preferred Stock shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock,
and shall be entitled to notice of any shareholders' meeting in accordance with
the bylaws of the Company (as in effect at the time in question) and applicable
law, and shall be entitled to vote, together with the holders of Common Stock,
with respect to any question upon which holders of Common Stock have the right
to vote, except as may be otherwise provided by applicable law. Except as
otherwise expressly provided
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herein or as required by law, the holders of Series A Preferred Stock and the
holders of Common Stock shall vote together and not as separate classes.
7. CONVERSION RIGHTS. The outstanding shares of Preferred Stock
shall be convertible into Common Stock as follows:
7.1 CONVERSION AT THE OPTION OF HOLDER.
(a) At the option of the holder thereof, each share of
Series A Preferred Stock shall be convertible, at any time or from time to time
prior to the close of business on the tenth day following the date on which a
Second Notice is sent by the Company without the Company having received a
Series A Election Notice, into fully paid and nonassessable shares of Common
Stock as provided herein.
(b) Each holder of shares of Series A Preferred Stock who
elects to convert any such shares into shares of Common Stock pursuant to
Section 7.1(a) above shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Company or any transfer agent for the
Series A Preferred Stock or Common Stock, or notify the Company that such
certificate(s) have been lost, stolen or destroyed and execute an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
the Company in connection with such certificate(s), and shall give written
notice to the Company at such office that such holder elects to convert shares
of Series A Preferred Stock and shall state therein the number of such shares
being converted. Thereupon, the Company shall promptly issue and deliver at
such office to such holder a certificate or certificates for the number of fully
paid and nonassessable shares of Common Stock to which such holder is entitled
upon such conversion (and a certificate or certificates for any shares of Series
A Preferred Stock that were represented by the surrendered certificate or
certificates and that were not converted). Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the certificate or certificates representing the shares of Series A
Preferred Stock to be converted, and the person entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder of such shares of Common Stock on such date.
7.2 AUTOMATIC CONVERSION.
(a) On no more than one occasion during any fiscal quarter
(which fiscal quarter ends on a date which is more than 90 days following the
effective date of a registration statement under the Securities Act of 1933, as
amended (the "Act"), with respect to the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock), 93,750 shares (or such lesser
number of shares outstanding if less than 93,750 shares of Series A Preferred
Stock are outstanding) of Series A Preferred Stock shall automatically be
converted into fully paid and nonassessable shares of Common Stock in the event
that (i) the Common Stock is traded on a national securities exchange or the
Nasdaq National Market (or similar
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national quotation system) or is actively traded over-the-counter, (ii) the
Market Price of the Common Stock exceeds 150% of the Breakeven Price for a
period of 15 consecutive trading days, and (iii) for such preceding 15
consecutive trading days, a registration statement under the Act is effective
with respect to the shares of Common Stock issuable upon such conversion of the
Series A Preferred Stock and such shares of Common Stock are eligible for resale
pursuant thereto or such shares of Common Stock are eligible for resale pursuant
to Rule 144 under the Act without the limitations on volume or manner of sale
set forth in such Rule. The "Conversion Date" for a conversion described in
this Section 7.2(a) shall be the next day following the 15 consecutive trading
day period described in clause (ii) of this Section 7.2(a). The occurrence of a
Triggering Event Conversion during any fiscal quarter shall not reduce the
number of shares of Series A Preferred Stock subject to conversion pursuant to
this Section 7.2(a).
(b) In the event of a Triggering Event Conversion described
in Section 5.1(b), a number of shares of Series A Preferred Stock as set forth
in Section 5.1(b) shall automatically be converted into fully paid and
nonassessable shares of Common Stock. The "Conversion Date" for a conversion
described in this Section 7.2(b) shall be the date of a Series A Election.
(c) The number of shares of Series A Preferred Stock held
by each holder of Series A Preferred Stock which are subject to automatic
conversion pursuant to Section 7.2(a) or (b) shall be determined on a pro rata
basis among all holders of Series A Preferred Stock outstanding according to the
number of shares of Series A Preferred Stock held by each holder thereof on the
Conversion Date.
(d) On the Conversion Date, the applicable outstanding
shares of Series A Preferred Stock shall be converted into Common Stock
automatically without the need for any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent; PROVIDED, HOWEVER, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificates evidencing
such shares of Series A Preferred Stock are either delivered to the Company or
its transfer agent as provided below, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates. Upon the
occurrence of such automatic conversion of the Series A Preferred Stock, the
holders of Series A Preferred Stock shall surrender the certificates
representing such shares at the office of the Company or any transfer agent for
the Series A Preferred Stock or Common Stock. Thereupon, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Series A Preferred
Stock surrendered were convertible on the date on which such automatic
conversion occurred. The Company shall notify each holder of Series A Preferred
Stock of a conversion pursuant to Section 7.2 and the number of shares of Series
A Preferred Stock held by such holder which were subject to such conversion (as
calculated in accordance with Section 7.2(c)) within five days of the Conversion
Date.
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7.3 CONVERSION FACTOR. Each share of Series A Preferred Stock
converted in accordance with Section 7.1 and 7.2(b) above shall be convertible
into seven and three hundred sixty-four thousandths (7.364) shares of Common
Stock (the "CONVERSION FACTOR"). Each share of Series A Preferred Stock
converted in accordance with Section 7.2(a) above shall be convertible into the
number of shares of Common Stock which results from multiplying the Conversion
Factor by 110%. The Conversion Factor shall be subject to adjustment from time
to time as provided below.
7.4 ADJUSTMENT UPON COMMON STOCK EVENT. Upon the happening of a
Common Stock Event (as hereinafter defined), the Conversion Factor shall,
simultaneously with the happening of such Common Stock Event, be adjusted by
multiplying the Conversion Factor in effect immediately prior to such Common
Stock Event by a fraction, (i) the denominator of which shall be the number of
shares of Common Stock issued and outstanding immediately prior to such Common
Stock Event, and (ii) the numerator of which shall be the number of shares of
Common Stock issued and outstanding immediately after such Common Stock Event,
and the product so obtained shall thereafter be the Conversion Factor. The
Conversion Factor shall be readjusted in the same manner upon the happening of
each subsequent Common Stock Event. As used herein, the term
"COMMON STOCK EVENT" shall mean (i) the issue by the Company of additional
shares of Common Stock as a dividend or other distribution on outstanding Common
Stock, (ii) a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock, or (iii) a combination of the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock.
7.5 ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If at
any time or from time to time after the Original Issue Date the Company pays a
dividend or makes another distribution to the holders of the Common Stock
payable in securities of the Company other than shares of Common Stock, then in
each such event provision shall be made so that the holders of the Series A
Preferred Stock shall receive upon conversion thereof, in addition to the number
of shares of Common Stock receivable upon conversion thereof, the amount of
securities of the Company which they would have received had their Series A
Preferred Stock been converted into Common Stock on the date of such event (or
such record date, as applicable) and had they thereafter, during the period from
the date of such event (or such record date, as applicable) to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period, subject to all other adjustments called for during such period
under this Section 7 with respect to the rights of the holders of the Series A
Preferred Stock or with respect to such other securities by their terms.
7.6 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If at any time or from time to time after the Original Issue Date the Common
Stock issuable upon the conversion of the Series A Preferred Stock is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (OTHER THAN by a
Common Stock Event or a stock dividend, reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 7), then in any such event
each holder of Series A Preferred Stock shall have the right thereafter to
convert such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization,
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reclassification or other change by holders of the number of shares of Common
Stock into which such shares of Series A Preferred Stock could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.
7.7 CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Conversion Factor for the Series A Preferred Stock, the
Company, at its expense, shall cause its Chief Financial Officer to compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
the Series A Preferred Stock at the holder's address as shown in the Company's
books.
7.8 FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon any conversion of Series A Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the Company
shall pay the holder cash equal to the product of such fraction multiplied by
the Common Stock's fair market value as determined in good faith by the Board as
of the date of conversion.
7.9 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series A
Preferred Stock, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
7.10 NOTICES. Any notice hereunder to be given to or by the
holders of shares of the Series A Preferred Stock shall, unless otherwise
specified herein, be deemed given or sent upon the earlier of actual receipt or
three business days after deposit in the United States mail, postage prepaid,
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
7.11 NO IMPAIRMENT. The Company shall not avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Series A Preferred
Stock against impairment.
8. RESTRICTIONS AND LIMITATIONS.
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8.1 PROTECTIVE PROVISIONS. So long as any shares of Series A
Preferred Stock remain outstanding, the Company shall not, without the approval,
by vote or written consent, of the holders of a majority of the Series A
Preferred Stock then outstanding, voting as a single class:
(1) amend its Articles of Incorporation in any manner that
would alter or change any of the rights, preferences, privileges or restrictions
of the Series A Preferred Stock adversely;
(2) amend its Articles of Incorporation to increase the
authorized number of shares of Preferred Stock or Series A Preferred Stock;
(3) reclassify or recapitalize any outstanding shares of
securities of the Company into shares having rights, preferences or privileges
senior to or on a parity with the Series A Preferred Stock;
(4) authorize or issue any other stock having rights or
preferences senior to or on a parity with the Series A Preferred Stock;
(5) reorganize, merge or consolidate with or into any
corporation if such reorganization, merger or consolidation otherwise requires
shareholder approval and would result in the shareholders of the Company
immediately prior to such merger or consolidation holding less than majority of
the voting power of the stock of the surviving corporation immediately after
such merger or consolidation; or
(6) sell all or substantially all the Company's assets in a
single transaction or series of related transactions.
9. MISCELLANEOUS
9.1 NO REISSUANCE OF SERIES A PREFERRED STOCK. No share or
shares of Series A Preferred Stock acquired by the Company by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be canceled, retired and eliminated from the shares which the
Company shall be authorized to issue.
9.2 CONSENT TO CERTAIN TRANSACTIONS. Each holder of shares of
Series A Preferred Stock shall, by virtue of its acceptance of a stock
certificate evidencing Series A Preferred Stock, be deemed to have consented,
for purposes of Sections 502, 503 and 506 of the California Corporations Code,
to all Permitted Repurchases.
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9.3 FUTURE SERIES OF PREFERRED STOCK. Subject to the rights of
the holders of Series A Preferred Stock set forth herein, nothing herein shall
limit the right of the Corporation's Board of Directors to divide any authorized
but undesignated shares of Preferred Stock into such number of series, with such
number of shares in each such series, with such designation, and with such
rights, preferences, privileges and restrictions as may be determined by the
Corporation's Board of Directors pursuant to Article III of the Corporation's
Sixth Amended Restated Articles of Incorporation.
The authorized number of shares of preferred stock of the Corporation is
Two Million (2,000,000), none of which have been issued.
[The Remainder of this Page was Intentionally Left Blank]
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We further declare under penalties of perjury under the laws of the State
of California that the matters set forth in this certificate of determination of
preferences of Series A Preferred Stock are true and correct of our own
knowledge.
DATE: September 5, 1996
/s/ Charles W. Berger
---------------------------------------------
Charles W. Berger Chairman of the Board
and Chief Executive Officer
/s/ Cherrie L. Fosco
---------------------------------------------
Cherrie L. Fosco, Secretary
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