Document:

Exhibit
4.1

 

CERTIFICATE OF DETERMINATION

 

OF

 

SERIES B MANDATORILY CONVERTIBLE CUMULATIVE

 

PERPETUAL PREFERRED STOCK

 

OF

 

HERITAGE COMMERCE CORP

 

Pursuant
to Section 401 of the Corporations Code of the State of California:

 

We,
Lawrence McGovern, Executive Vice-President and Chief Financial Officer, and
Debbie Reuter, Secretary, of Heritage Commerce Corp, a corporation organized
under the laws of the State of California (hereinafter called the “Corporation”), do hereby certify as
follows:

 

1.             On June 17, 2010, the Board of
Directors of the Corporation adopted a resolution designating 54,050 shares of
preferred stock as Series B Mandatorily Convertible Cumulative Perpetual
Preferred Stock.

 

2.             No shares of Series B
Mandatorily Convertible Cumulative Perpetual Preferred Stock have been issued.

 

3.             Pursuant to the authority conferred
upon the Board of Directors by the Articles of Incorporation of the
Corporation, as amended, the following resolution was duly adopted by the Board
of Directors on June 17, 2010, creating the series of preferred stock
designated as Series B Mandatorily Convertible Cumulative Perpetual
Preferred Stock:

 

RESOLVED,
that pursuant to the provisions of the Articles of Incorporation of the
Corporation, as amended, and applicable law, a series of preferred stock of the
Corporation be and hereby is created, and that the designation and number of
shares of such series, and the voting and other powers, preferences and
relative, participating, optional or other rights, and the qualifications, limitations
and restrictions thereof, of the shares of such series are as follows:

 

Section 1.  Designation.  There is hereby created out of the authorized
and unissued shares of preferred stock of the Corporation a series of preferred
stock designated as the “Series B Mandatorily
Convertible Cumulative Perpetual Preferred Stock” (the “Series B Preferred Stock”).
The number of shares constituting such series shall be 54,050. The
Series B Preferred Stock shall have no par value per share.

 

Section 2.  Ranking. The
Series B Preferred Stock will, with respect to dividend rights and rights
on liquidation, winding up and dissolution, rank (i) on a parity with the
Corporation’s Series A Fixed Rate Cumulative Perpetual Stock issued on
November 21, 2008 (the “Series A Preferred
Stock”), the Corporation’s Series C Convertible Perpetual
Preferred Stock (the “Series C Preferred
Stock”), and with each class or series of equity securities of
the Corporation the terms of which do not expressly provide that such class or
series will rank senior or junior to the Series B Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution of the
Corporation (collectively referred to as “Parity Securities”),
and (ii) senior to the Corporation’s common stock, no par value per share
(the “Common Stock”), and each other
class or series of capital stock of the Corporation outstanding or established
on or after the Effective Date by the Corporation the terms of which do not
expressly provide that it ranks on a parity with or senior to the Series B
Preferred Stock as to dividend rights and rights on liquidation, winding-up and
dissolution of the Corporation (collectively referred to as “Junior Securities”). The
Corporation has the power to authorize and/or issue additional shares or
classes or series of Junior Securities or Parity Securities without the
approval of the Holders; provided, however, that for as long as the Series B
Preferred Stock remains outstanding, no preferred stock of the Corporation that
would rank senior to the Series B Preferred 

 

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Stock may be issued without, in each case, the
express approval of the Holders of at least two-thirds of the issued and
outstanding shares of Series B Preferred Stock voting as a single class.

 

Section 3.  Definitions. The
following initially capitalized terms shall have the following meanings,
whether used in the singular or the plural:

 

(a)           “Additional Stock”
has the meaning set forth in Section 10(a)(viii)(F).

 

(b)           “Affiliate”
of any specified Person means any other Person directly or indirectly
controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, “control”
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.

 

(c)           “Applicable Conversion
Price” means the Conversion Price in effect at any given time.

 

(d)           “Business Day”
means any day that is not Saturday or Sunday and that, in the City of New York
and in the State of California, is not a day on which banking institutions
generally are authorized or obligated by law or executive order to be closed.

 

(e)           “Certificate of
Determination” means this Certificate of Determination of
Heritage Commerce Corp, dated June 17, 2010.

 

(f)            “Closing Price”
of the Common Stock (or other relevant capital stock or equity interest) on any
date of determination means the closing sale price or, if no closing sale price
is reported, the last reported sale price of the shares of the Common Stock (or
other relevant capital stock or equity interest) on the NASDAQ Global Select
Market on such date. If the Common Stock (or other relevant capital stock or
equity interest) is not traded on the NASDAQ Global Select Market on any date
of determination, the Closing Price of the Common Stock (or other relevant
capital stock or equity interest) on such date of determination means the
closing sale price as reported in the composite transactions for the principal
U.S. national or regional securities exchange on which the Common Stock (or
other relevant capital stock or equity interest) is so listed or quoted, or, if
no closing sale price is reported, the last reported sale price on the
principal U.S. national or regional securities exchange on which the Common
Stock is so listed or quoted, or if the Common Stock (or other relevant capital
stock or equity interest) is not so listed or quoted on a U.S. national or
regional securities exchange, the last quoted bid price for the Common Stock
(or other relevant capital stock or equity interest) in the over-the-counter
market as reported by Pink OTC Markets Inc. or similar organization, or, if
that bid price is not available, the market price of the Common Stock (or other
relevant capital stock or equity interest) on that date as determined by a
nationally recognized independent investment banking firm retained by the
Corporation for this purpose, subject to the joint approval of the Board of
Directors of the Corporation and the Holders. 
The Corporation shall cause at its expense the investment bank to perform
the determinations and notify the Corporation and the Holders of the results no
later than ten Business Days from the time it receives the engagement.  All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during the applicable calculation period.

 

For
purposes of this Certificate of Determination, all references herein to the “Closing Price” and “last reported sale price” of the
Common Stock (or other relevant capital stock or equity interest) on the NASDAQ
Global Select Market shall be such closing sale price and last reported sale
price as reflected on the website of the NASDAQ Global Select Market
(www.nasdaq.com) and as reported by Bloomberg Professional Service; provided
that in the event that there is a discrepancy between the closing price and the
last reported sale price as reflected on the website of the NASDAQ Stock Market
and as reported by Bloomberg Professional Service, the closing sale price and
the last reported sale price on the website of the NASDAQ Stock Market shall
govern.

 

(g)           “Common Stock”
has the meaning set forth in Section 2.

 

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(h)           “Common Stock Equivalents”
means securities representing rights convertible into or exchangeable for, or
entitling the holder thereof to purchase or receive directly or indirectly,
shares of Common Stock.

 

(i)            “Conversion Date”
means, as applicable, the Mandatory Conversion Date or the Section 15
Conversion Date.

 

(j)            “Conversion Price”
means for each share of Series B Preferred Stock, $3.75; provided that if
the Shareholder Approval is not obtained by the six month anniversary of the
Effective Date, the Conversion Price shall be reduced by ten percent (10%)
(subject to further adjustment or limitation from time to time in a manner
consistent with the provisions of Section 10).

 

(k)           “Corporation”
means Heritage Commerce Corp, a California corporation.

 

(l)            “Current Market Price”
means, on any date, the average of the daily Closing Price per share of the
Common Stock on each of the five consecutive Trading Days preceding the earlier
of the day before the date in question and the day before the Ex-Date with
respect to the issuance or distribution giving rise to an adjustment to the
Conversion Price pursuant to Section 10.

 

(m)          “Distributed Property” has
the meaning set forth in Section 10(a)(iv).

 

(n)           “Distribution”
has the meaning set forth in Section 4(g).

 

(o)           “Dividend Rate”
means for purposes of Section 4(b) an annual rate equal to twenty
percent (20%) per annum.

 

(p)           “Effective Date”
means the date on which shares of the Series B Preferred Stock are first
issued.

 

(q)           “Exchange Property”
has the meaning set forth in Section 11(a).

 

(r)            “Ex-Date”,
when used with respect to any issuance or distribution, means the first date on
which the Common Stock trades without the right to receive the issuance or
distribution giving rise to an adjustment to the Conversion Price pursuant to
Section 10.

 

(s)           “Filing Date”
has the meaning set forth in Section 10(a)(viii)(A).

 

(t)            “First Dilutive Issuance”
has the meaning set forth in Section 10(a)(viii)(A).

 

(u)           “Holder”
means the Person in whose name the shares of the Series B Preferred Stock
are registered, which may be treated by the Corporation as the absolute owner
of the shares of Series B Preferred Stock for the purpose of making
payment and settling the related conversions and for all other purposes.

 

(v)           “Junior Securities”
has the meaning set forth in Section 2.

 

(w)          “Liquidation Preference”
means, as to the Series B Preferred Stock, $1,000 per share (as adjusted
for any split, subdivision, combination, consolidation, recapitalization or
similar event with respect to the Series B Preferred Stock).

 

(x)            “Mandatory Conversion Date”
means, with respect to the shares of Series B Preferred Stock of any
Holder, the first Business Day after the date on which the Corporation receives
the Shareholder Approval (or if a Reorganization Event has theretofore been
consummated, the date of consummation of such Reorganization Event), provided,
however, that if a Mandatory Conversion Date would otherwise occur on or after
an Ex-Date for an issuance or distribution that results in an adjustment of the
Conversion Price pursuant to Section 10 and on or before the Record Date
for such issuance or distribution, such Mandatory Conversion Date shall instead
occur on the first calendar day after the Record Date for such issuance or
distribution.

 

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(y)           “Notice of Mandatory
Conversion” has the meaning set forth in Section 9(a).

 

(z)            “Parity Securities”
has the meaning set forth in Section 2.

 

(aa)         “Permitted Rights Offering”
means an offering of up to $10 million of aggregate offering price of Common
Stock pursuant to subscription rights distributed pro rata to the then existing
holders of record of Common Stock at a price per share of Common Stock of not
less than $3.75, and the associated declaration, issuance and exercise of the
subscription rights with respect to such offering and shares of Common Stock
issuable in connection with the exercise of any such rights pursuant to the
terms of the Securities Purchase Agreement.

 

(bb)         “Person” means a legal
person, including any individual, corporation, estate, partnership, joint
venture, association, joint-stock company, limited liability company or trust.

 

(cc)         “Series A Preferred Stock”
has the meaning set forth in Section 2.

 

(dd)         “Series B Preferred Stock”
has the meaning set forth in Section 1.

 

(ee)         “Series C Preferred Stock”
has the meaning set forth in Section 2.

 

(ff)           “Record Date”
has the meaning set forth in Section 4(d).

 

(gg)         “Reorganization Event” has
the meaning set forth in Section 11(a).

 

(hh)         “Section 4 Dividend Payment Date”
has the meaning set forth in Section 4(b).

 

(ii)           “Section 4 Dividend
Period” has the meaning set forth in Section 4(c).

 

(jj)           “Section 15
Conversion Date” has the meaning set forth in Section 15.

 

(kk)         “Securities
Purchase Agreement” means the agreement by and among the
Corporation and the purchasers named therein dated June 18, 2010.

 

(ll)           “Shareholder Approval”
means the vote of a majority of the Common Stock present and voting and vote of
at least a majority of the outstanding shares of the Series B Preferred
Stock to approve the issuance of Common Stock upon conversion of the Series B
Preferred Stock for purposes of Rule 5635 of the NASDAQ Stock Market
Rules.

 

(mm)       “Subsequent Dilutive Issuance”
has the meaning set forth in Section 10(a)(viii)(A).

 

(nn)         “Trading Day” means a day on
which the shares of Common Stock:

 

(i)            are not suspended from trading on any national or
regional securities exchange or association or over-the-counter market at the
close of business; and

 

(ii)           have traded at least once on the national or regional securities
exchange or association or over-the-counter market that is the primary market
for the trading of the Common Stock.

 

(oo)         “Trading Market” means
whichever of the New York Stock Exchange, the NYSE Amex, the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the
date in question.

 

Section 4.  Dividends.

 

(a)           From and after the Effective Date, the Holders shall be
entitled to receive, only if, when and as declared by the Board of Directors or
a duly authorized committee of the Board of Directors, out of funds legally 

 

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available therefor, cumulative dividends of the type
and in the amounts determined as set forth in this Section 4, and no more,
provided, however, notwithstanding any other provision in this Section 4
other than Section 4(g), if the Mandatory Conversion Date occurs before
the six month anniversary of the Effective Date, then no accrued dividends
shall be payable.

 

(b)           Subject to Section 4(a), commencing on the Effective
Date, dividends shall accrue and be payable semi-annually in arrears, with the
first such dividend payable on the six month anniversary of the Effective Date
and continuing on each six (6) month anniversary thereafter (each, a “Section 4 Dividend Payment Date”)
or, if any such day is not a Business Day, the next Business Day, if, when and
as declared by the Board of Directors or a duly authorized committee of the Board
of Directors. Dividends payable pursuant to this Section 4, if, when and
as declared by the Board of Directors or a duly authorized committee of the
Board of Directors, will be, for each outstanding share of Series B
Preferred Stock, payable in cash at an annual rate equal to the Dividend Rate
multiplied by the sum of (A) the Liquidation Preference plus (B) all
accrued and unpaid dividends for any prior Section 4 Dividend Period that
are payable on such share of Series B Preferred Stock, payable in cash.

 

(c)           Dividends payable pursuant to Section 4 will be
computed on the basis of a 360-day year of twelve 30-day months and, for any Section 4
Dividend Period greater or less than a full Section 4 Dividend Period,
will be computed on the basis of the actual number of days elapsed in the
period divided by 360. Each period from and including a Section 4 Dividend
Payment Date to but excluding the following Section 4 Dividend Payment
Date is herein referred to as a “Section 4 Dividend
Period”.

 

(d)           Each dividend will be payable to Holders of record as they
appear in the records of the Corporation on the applicable record date (each, a
“Record Date”), which with respect
to dividends payable pursuant to this Section 4, shall be on the fifteenth
day of the month immediately prior to the month in which the relevant Section 4
Dividend Payment Date occurs.

 

(e)           Dividends on the Series B Preferred Stock are
cumulative. To the extent that the Board of Directors does not declare or pay
dividends on the Series B Preferred Stock for a Section 4 Dividend
Period prior to the related Section 4 Dividend Payment Date, in full or
otherwise, such unpaid dividend shall accrue and shall cumulate from such
scheduled Section 4 Dividend Payment Date, shall compound on each
subsequent Section 4 Dividend Payment Date and shall be payable
semi-annually in arrears on each subsequent Section 4 Dividend Payment
Date. As used herein, the term “accrued”
includes both accrued and accumulated dividends.

 

(f)            So long as any shares of Series B Preferred Stock
remain outstanding, if all dividends on all outstanding shares of the
Series B Preferred Stock for any Section 4 Dividend Period have not
been declared and paid, or declared and funds set aside therefor, the
Corporation shall not (x) declare or pay dividends with respect to, or
make any distributions on, or, directly or indirectly, redeem, purchase or
acquire any of its Junior Securities or (y) directly or indirectly,
redeem, purchase or acquire any of its Parity Securities, other than, in each
case, (i) redemptions, purchases or other acquisitions of Junior
Securities or Parity Securities in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of any one or
more employees, officers, directors or consultants or in connection with a
dividend reinvestment plan, (ii) any declaration of a dividend in
connection with any shareholders’ rights plan, or the issuance of rights, stock
or other property under any shareholders’ rights plan, or the redemption or
repurchase of rights pursuant thereto, (iii) conversions or exchanges of
Junior Securities or Parity Securities for Junior Securities or Parity
Securities, respectively, and (iv) any purchase of fractional interests in
shares of the Corporation’s capital stock pursuant to the conversion or
exchange provisions of such capital stock or the securities being converted or
exchanged. If dividends payable pursuant to Section 4 for any Section 4
Dividend Payment Date are not paid in full, or declared and funds set aside
therefor on the shares of the Series B Preferred Stock and there are
issued and outstanding shares of Parity Securities with the same Section 4
Dividend Payment Date (or, in the case of Parity Securities having dividend
payment dates different from the Section 4 Dividend Payment Dates, on a
dividend payment date falling within a Section 4 Dividend Period
applicable to such Section 4 Dividend Payment Date), then all dividends
declared on shares of the Series B Preferred Stock and such Parity Securities
on such date or dates, as the case may be, shall be declared pro rata so that
the respective amounts of such dividends shall bear the same ratio to each
other as full semi-annual dividends per share payable on the shares of the
Series B Preferred Stock pursuant to Section 4 and all such Parity
Securities otherwise payable on such Section 4 Dividend Payment Date (or,
in the case of Parity Securities having dividend payment dates different from
the Section 4 Dividend Payment Dates, on a dividend payment date falling 

 

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within a Section 4 Dividend Period applicable
to such Section 4 Dividend Payment Date) (subject to such dividends on
such Parity Securities having been declared by the Board of Directors out of
legally available funds and including, in the case of any such Parity
Securities that bear cumulative dividends, all accrued and unpaid dividends)
bear to each other.

 

(g)           Subject to the limitations in Section 4(f), if
applicable, so long as any shares of Series B Preferred Stock are
outstanding, the Corporation shall not declare, pay or set apart for payment
any dividend or make any Distribution on any Common Stock, unless at the time
of such dividend or Distribution the Corporation simultaneously pays a dividend
or makes a Distribution on each outstanding share of Series B Preferred
Stock in the same form of consideration as received by the holders of Common
Stock in an amount equal to the product of (i) the dividend payable or
Distribution to be made on each share of Common Stock and (ii) the number
of shares of Common Stock issuable upon conversion of a share of Series B
Preferred Stock (assuming receipt of the Shareholder Approval and, if
necessary, regulatory approvals), calculated on the record date for
determination of holders entitled to receive such dividend or Distribution. For
purposes hereof, “Distribution” shall mean the
transfer of cash, securities or other assets or property, including, without
limitation, evidences of indebtedness, shares of capital stock or securities
(including, without limitation, any dividend or distribution of (i) shares
of capital stock of any class or series, or similar equity interests, of or
relating to a subsidiary or other business unit in a “spin-off”
transaction or (ii) rights or warrants to purchase shares of Common Stock
(other than rights issued pursuant to a shareholders’ rights plan, a dividend
reinvestment plan, other similar plans or a Permitted Rights Offering), without
consideration, whether by way of dividend or otherwise.

 

(h)           If a Conversion Date with respect to any share of
Series B Preferred Stock occurs on or prior to the Record Date for any
declared dividend applicable to any Section 4 Dividend Period, the Holder
of such share of Series B Preferred Stock will have the right to receive
accrued dividends on the Series B Preferred Stock prior to the Conversion
Date with respect to such Section 4 Dividend Period, and this shall not
affect any rights to receive any accrued and unpaid dividends on the Series B
Preferred Stock attributable to any Section 4 Dividend Period completed
prior to such Record Date. If a Conversion Date is after the Record Date for
any declared dividend applicable to any Section 4 Dividend Period and
prior to the relevant Section 4 Dividend Payment Date, such Holder shall
receive that dividend on the relevant Section 4 Dividend Payment Date if
such Holder was the Holder of record on the Record Date for that dividend.

 

Section 5.  Liquidation.

 

(a)           In the event the Corporation voluntarily or involuntarily
liquidates, dissolves or winds up, the Holders at the time shall be entitled to
receive, for each share of the Series B Preferred Stock, the sum of (i) liquidating
distributions in an amount equal to the Liquidation Preference, plus any
accrued but unpaid dividends thereon to and including the date of such
liquidation, out of assets legally available for distribution to the
Corporation’s shareholders, before any distribution of assets is made to the
holders of the Common Stock or any other Junior Securities and (ii) after
all distributions have been made to Holders pursuant to clause (i) of this
sentence, liquidating distributions, as determined by the Corporation (or the
trustee or other Person or Persons administering its liquidation, dissolution
or winding-up in accordance with applicable law) as of a date that is at least
ten (10) Business Days before the first liquidating distribution is made
on Series B Preferred Stock, that would be made on the number of shares of
Common Stock equal to the Liquidation Preference divided by the Applicable
Conversion Price as if all of the outstanding shares of Series B Preferred
Stock and Series C Preferred Stock had been converted into Common Stock on
such date of determination, out of assets legally available for distribution to
the Corporation’s shareholders, simultaneous with any distribution of assets
made to the holders of the Common Stock.

 

(b)           In the event the assets of the Corporation available for
distribution to shareholders upon any liquidation, dissolution or winding-up of
the affairs of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full the amounts payable with respect to all outstanding
shares of the Series B Preferred Stock and the corresponding amounts
payable on any Parity Securities, the Holders and the holders of such Parity
Securities shall share ratably in any distribution of assets of the Corporation
in proportion to the full respective liquidating distributions to which they
would otherwise be respectively entitled.

 

6

 

(c)           Except as provided in Section 11, the Corporation’s
consolidation or merger with or into any other entity, the consolidation or
merger of any other entity with or into the Corporation, or the sale of all or
substantially all of the Corporation’s property or business will not constitute
its liquidation, dissolution or winding up.

 

Section 6.  Maturity. The
Series B Preferred Stock shall be perpetual unless converted in accordance
with this Certificate of Determination.

 

Section 7.  Redemptions.

 

(a)           Redemption by the Holder.
Holders of Series B Preferred Stock will have no right to require
redemption of any shares of Series B Preferred Stock.

 

(b)           No Redemption by the
Corporation. The Series B Preferred Stock shall not be
redeemable by the Corporation at any time. The Series B Preferred Stock
shall not be subject to any sinking fund or other obligation to redeem,
repurchase or retire the Series B Preferred Stock.

 

Section 8.  Mandatory Conversion.  Effective as of the close of business on the
Mandatory Conversion Date with respect to the shares of Series B Preferred
Stock of a Holder, all such Holder’s shares of Series B Preferred Stock
shall, subject to the provisions of Section 15, automatically convert into
shares of Common Stock as set forth below. The number of shares of Common Stock
into which a share of Series B Preferred Stock shall be convertible shall
be determined by dividing (i) the Liquidation Preference, plus the aggregate
sum of all accrued and unpaid dividends by (ii) the Applicable Conversion
Price (subject to the conversion procedures of Section 9 hereof). Upon
conversion, Holders shall receive cash in lieu of fractional shares in
accordance with Section 13 hereof.

 

Section 9.  Conversion Procedures.

 

(a)           Upon receipt by the Corporation of the Shareholder
Approval, the Corporation shall provide, within two Business Days thereafter,
notice of mandatory conversion to such Holder (such notice a “Notice of Mandatory Conversion”).
In addition to any information required by applicable law or regulation, the
Notice of Mandatory Conversion with respect to such Holder shall state, as
appropriate:

 

(i)            the Mandatory Conversion Date;

 

(ii)           after giving effect to the provisions of Section 15,
the number of shares of Series B Preferred Stock held of record by such
Holder (x) subject to conversion on the Mandatory Conversion Date and (y) that
will remain outstanding pursuant to the provisions of Section 15, if any;

 

(iii)          the Conversion Price and the resulting number of shares of
Common Stock to be issued upon conversion of each share of Series B
Preferred Stock subject to mandatory conversion; and

 

(iv)          if certificates are to be issued, the place or places where
certificates for shares of Series B Preferred Stock held of record by such
Holder and subject to mandatory conversion are to be surrendered for issuance
of certificates representing shares of Common Stock.

 

(b)           Effective immediately prior to the close of business on a
Conversion Date, with respect to any shares of Series B Preferred Stock to
be converted on such Conversion Date, dividends shall no longer be declared on
any such shares of Series B Preferred Stock and such shares of
Series B Preferred Stock shall cease to be outstanding, in each case,
subject to the right of the Holder to receive (i) shares of Common Stock
issuable upon such mandatory conversion, (ii) any accrued and unpaid
dividends on such shares to the extent provided in Section 4 and (iii) any
other payments to which such Holder is otherwise entitled pursuant to Section 8,
Section 11 or Section 13 hereof, as applicable.

 

(c)           Prior to the close of business on a Conversion Date, with
respect to any share of Series B Preferred Stock to be converted on such
Conversion Date, the shares of Common Stock issuable upon conversion thereof or
other securities issuable upon conversion of such share of Series B
Preferred Stock shall not be deemed outstanding 

 

7

 

for any purpose, and the Holder thereof shall have
no rights with respect to such shares of Common Stock or other securities
issuable upon conversion (including voting rights, rights to respond to tender
offers for the Common Stock or other securities issuable upon conversion and
rights to receive any dividends or other distributions on the Common Stock or
other securities issuable upon conversion) by virtue of holding such share of
Series B Preferred Stock, except to the extent provided in Section 4(g).

 

(d)           Shares of Series B Preferred Stock duly converted in
accordance with this Certificate of Determination, or otherwise reacquired by
the Corporation, will resume the status of authorized and unissued preferred
stock, undesignated as to series and available for future issuance. The
Corporation may from time to time take such appropriate action as may be
necessary to reduce the authorized number of shares of Series B Preferred
Stock; provided, however, that the Corporation shall not take any such action
if such action would reduce the authorized number of shares of Series B
Preferred Stock below the number of shares of Series B Preferred Stock
then outstanding.

 

(e)           The Person or Persons entitled to receive the Common Stock
and/or cash, securities or other property issuable upon conversion of
Series B Preferred Stock shall be treated for all purposes as the record
holder(s) of such shares of Common Stock and/or securities as of the close
of business on the relevant Conversion Date with respect thereto. In the event
that a Holder shall not by written notice designate the name in which shares of
Common Stock and/or cash, securities or other property (including payments of
cash in lieu of fractional shares) to be issued or paid upon conversion of
shares of Series B Preferred Stock should be registered or paid or the
manner in which such shares should be delivered, the Corporation shall be
entitled to register and deliver such shares, and make such payment, in the
name of the Holder and in the manner shown on the records of the Corporation.

 

(f)            On a Conversion Date with respect to any share of
Series B Preferred Stock, certificates representing shares of Common Stock
shall be issued and delivered to the Holder thereof or such Holder’s designee
(or, at the Corporation’s option such shares shall be registered in book-entry
form) upon presentation and surrender of the certificate evidencing the
Series B Preferred Stock to the Corporation and, if required, the
furnishing of appropriate endorsements and transfer documents and the payment
of all transfer and similar taxes.

 

Section 10.  Anti-Dilution Adjustments.

 

(a)           The Conversion Price shall be subject to the following
adjustments:

 

(i)            Stock Dividends and
Distributions. If the Corporation pays dividends or other
distributions on the Common Stock in shares of Common Stock, then the
Conversion Price in effect immediately prior to the Ex-Date for such dividend
or distribution will be multiplied by the following fraction:

 

·                                          the numerator
is the number of shares of Common Stock outstanding immediately prior to the
Ex-Date for such dividend or distribution, and

 

·                                          the denominator
is the sum of (1) the number of shares of Common Stock outstanding
immediately prior to the Ex-Date for such dividend or distribution plus (2) the
total number of shares of Common Stock constituting such dividend or
distribution.

 

For
the purposes of this Section 10(a)(i), the number of shares of Common
Stock at the time outstanding shall not include shares acquired by the
Corporation. If any dividend or distribution described in this Section 10(a)(i) is
declared but not so paid or made, the Conversion Price shall be readjusted,
effective as of the date the Board of Directors publicly announces its decision
not to make such dividend or distribution, to such Conversion Price that would
be in effect if such dividend or distribution had not been declared (but giving
effect to any intervening adjustments that may have been made with respect to
the Series B Preferred Stock).

 

8

 

(ii)           Subdivisions, Splits and
Combinations of the Common Stock. If the Corporation subdivides,
splits or combines the shares of Common Stock, then the Conversion Price in
effect immediately prior to the effective date of such share subdivision, split
or combination will be multiplied by the following fraction:

 

·                                          the numerator
is the number of shares of Common Stock outstanding immediately prior to the
effective date of such share subdivision, split or combination, and

 

·                                          the denominator
is the number of shares of Common Stock outstanding immediately after the
opening of business on the effective date of such share subdivision, split or
combination.

 

For
the purposes of this Section 10(a)(ii), the number of shares of Common
Stock at the time outstanding shall not include shares acquired by the
Corporation. If any subdivision, split or combination described in this Section 10(a)(ii) is
announced but the outstanding shares of Common Stock are not subdivided, split
or combined, the Conversion Price shall be readjusted, effective as of the date
the Board of Directors publicly announces its decision not to subdivide, split
or combine the outstanding shares of Common Stock, to such Conversion Price
that would be in effect if such subdivision, split or combination had not been
announced (but giving effect to any intervening adjustments that may have been
made with respect to the Series B Preferred Stock).

 

(iii)          Issuance of Stock Purchase
Rights. If the Corporation issues to all or substantially all
holders of the shares of Common Stock rights or warrants (other than rights or
warrants issued pursuant to a dividend reinvestment plan or share purchase plan
or other similar plans) entitling them to subscribe for or purchase the shares
of Common Stock at less than the Current Market Price on the date fixed for the
determination of shareholders entitled to receive such rights or warrants, then
the Conversion Price in effect immediately prior to the Ex-Date for such
distribution will be multiplied by the following fraction:

 

·                                          the numerator
is sum of (1) the number of shares of Common Stock outstanding immediately
prior to the Ex-Date for such dividend or distribution plus (2) the number
of shares of Common Stock equal to the aggregate price payable to exercise such
rights or warrants divided by the Current Market Price on the date fixed for
the determination of shareholders entitled to receive such rights or warrants,
and

 

·                                          the denominator
is the sum of (1) the number of shares of Common Stock outstanding
immediately prior to the Ex-Date for such dividend or distribution plus (2) the
total number of shares of Common Stock issuable pursuant to such rights or
warrants.

 

For
the purposes of this Section 10(a)(iii), the number of shares of Common
Stock at the time outstanding shall not include shares acquired by the
Corporation. The Corporation shall not issue any such rights or warrants in
respect of shares of the Common Stock acquired by the Corporation. In the event
that such rights or warrants described in this Section 10(a)(iii) are
not so issued, the Conversion Price shall be readjusted, effective as of the
date the Board of Directors publicly announces its decision not to issue such
rights or warrants, to the Conversion Price that would then be in effect if
such issuance had not been declared (but giving effect to any intervening
adjustments that may have been made with respect to the Series B Preferred
Stock). To the extent that such rights or warrants are not exercised prior to
their expiration or shares of Common Stock are otherwise not delivered pursuant
to such rights or warrants upon the exercise of such rights or warrants, the
Conversion Price shall be readjusted to such Conversion Price that would then
be in effect had the adjustment made upon the issuance of such rights or
warrants been made on the basis of the delivery of only the number of shares of
Common Stock actually delivered (but giving effect to any intervening
adjustments that may have been made with respect to the Series B Preferred
Stock). In determining the aggregate offering price payable for such shares of
Common Stock, there shall be taken into account any consideration received for
such rights or warrants and the value of such consideration (if other than
cash, to be determined in good faith by the Board of Directors). If an
adjustment to the Conversion Price is required under this Section 10(a)(iii),
delivery of any additional shares of Common Stock that may be deliverable upon
conversion as a

 

9

 

result
of an adjustment required under this Section 10(a)(iii) shall be
delayed to the extent necessary in order to complete the calculations provided
in this Section 10(a)(iii).

 

(iv)          Debt or Asset
Distributions. If the Corporation distributes to all or substantially
all holders of shares of Common Stock evidences of indebtedness, shares of
capital stock, securities, cash or other assets (excluding any dividend or
distribution referred to in Section 10(a)(i), any rights or warrants
referred to in Section 10(a)(iii), any dividend or distribution paid
exclusively in cash, any consideration payable in connection with a tender or
exchange offer made by the Corporation or any of its subsidiaries, and any
dividend of shares of capital stock of any class or series, or similar equity
interests, of or relating to a subsidiary or other business unit in the case of
certain spin-off transactions as described below) (such evidences of
indebtedness, shares of capital stock, securities, cash or other assets, the “Distributed Property”), then the
Conversion Price in effect immediately prior to the Ex-Date for such
distribution will be multiplied by the following fraction:

 

·                                          the numerator
is the Current Market Price per share of Common Stock on such date minus the
fair market value of the portion of the distribution applicable to one share of
Common Stock on such date as determined in good faith by the Board of
Directors, and

 

·                                          the denominator
is the Current Market Price per share of Common Stock on such date;

 

provided
that, if the fair market value of the portion of the distribution applicable to
one share of Common Stock on such date as determined in good faith by the Board
of Directors is equal to or greater than the Current Market Price per share of
Common Stock on such date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Holder shall receive on the date on which
the Distributed Property is distributed to holders of Common Stock, for each
share of Series B Preferred Stock, the amount of Distributed Property such
Holder would have received had such Holder’s Series B Preferred Stock been
converted into such number of shares of Common Stock that such Holder’s shares
of Series B Preferred Stock would then be convertible on the Ex-Date for such
distribution.

 

In
a “spin-off,” where the Corporation makes
a distribution to all or substantially all holders of shares of Common Stock
consisting of capital stock of any class or series, or similar equity interests
of, or relating to, a subsidiary or other business unit, the Conversion Price
will not be adjusted, but in lieu of such adjustment each Holder shall receive
the same distribution as a holder of Common Stock would as though such Holder’s
shares of Series B Preferred Stock had been converted into such number of
shares of Common Stock that such Holder’s shares of Series B Preferred
Stock would then be convertible.

 

In
the event that such distribution described in this Section 10(a)(iv) is
not so paid or made, the Conversion Price shall be readjusted, effective as of
the date the Board of Directors publicly announces its decision not to pay or
make such dividend or distribution, to the Conversion Price that would then be
in effect if such dividend or distribution had not been declared (but giving
effect to any intervening adjustments that may have been made with respect to
the Series B Preferred Stock). If an adjustment to the Conversion Price is
required under this Section 10(a)(iv), delivery of any additional shares
of Common Stock that may be deliverable upon conversion as a result of an
adjustment required under this Section 10(a)(iv) shall be delayed to
the extent necessary in order to complete the calculations provided for in this
Section 10(a)(iv).

 

(v)           Cash Distributions.
If the Corporation makes a distribution consisting exclusively of cash to all
holders of the Common Stock, excluding (a) any cash dividend or
distribution on the Common Stock to the extent a corresponding cash dividend or
distribution pursuant to Section 4 is paid on the Series B Preferred
Stock, (b) any dividend or distribution in connection with the Corporation’s
liquidation, dissolution or winding up, and (c) any consideration payable
in connection with a tender or exchange offer made by the Corporation or any of
its subsidiaries, then in each event, the Conversion Price in effect
immediately prior to the Ex-Date for such distribution will be multiplied by
the following fraction:

 

10

 

·                                          the numerator
is the Closing Price per share of Common Stock on the Trading Day immediately
preceding the Ex-Date minus the amount per share of Common Stock of the cash
distribution, as determined pursuant to the introduction to this Section 10(a)(v),
and

 

·                                          the denominator
is the Closing Price per share of Common Stock on the Trading Day immediately
preceding the Ex-Date.

 

In
the event that any distribution described in this Section 10(a)(v) is
not so made, the Conversion Price shall be readjusted, effective as of the date
the Board of Directors publicly announces its decision not to pay such
distribution, to the Conversion Price which would then be in effect if such
distribution had not been declared (but giving effect to any intervening
adjustments that may have been made with respect to the Series B Preferred
Stock).

 

Notwithstanding
the foregoing, if the amount per share of Common Stock of the cash
distribution, as determined pursuant to the introduction to this Section 10(a)(v),
is equal to or greater than the Closing Price per share of Common Stock on the
Trading Day immediately preceding the Ex-Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder shall have the
right to receive on the date on which the relevant cash dividend or
distribution is distributed to holders of Common Stock, for each share of
Series B Preferred Stock, the amount of cash such Holder would have
received had such Holder’s Series B Preferred Stock been converted into
such number of shares of Common Stock that such Holder’s shares of
Series B Preferred Stock would then be convertible on the Ex-Date for such
distribution.

 

(vi)          Self Tender Offers and
Exchange Offers. If the Corporation or any of its subsidiaries
successfully completes a tender or exchange offer for the Common Stock where
the cash and the value of any other consideration included in the payment per
share of the Common Stock exceeds the Closing Price per share of the Common
Stock on the Trading Day immediately succeeding the expiration of the tender or
exchange offer, then the Conversion Price in effect at the close of business on
such immediately succeeding Trading Day will be multiplied by the following
fraction:

 

      OS-l x SP     

AC + (SP x OS-2)

 

where,

 

SP =                                        the Closing Price per share
of Common Stock on the Trading Day immediately succeeding the expiration of the
tender or exchange offer.

 

OS-1 =                            the number of shares of
Common Stock outstanding immediately prior to the expiration of the tender or
exchange offer, including any shares validly tendered and not withdrawn.

 

OS-2 =                            the number of shares of
Common Stock outstanding immediately after the expiration of the tender or
exchange offer, giving effect to consummation of the acquisition of all shares
validly tendered or exchanged (and not withdrawn) in connection with such
tender or exchange.

 

AC =                                    the aggregate cash and fair
market value of the other consideration payable in the tender or exchange
offer, as determined by the Board of Directors.

 

In
the event that the Corporation, or one of its subsidiaries, is obligated to
purchase shares of Common Stock pursuant to any such tender offer or exchange
offer, but the Corporation, or such subsidiary, is permanently prevented by
applicable law from effecting any such purchases, or all such purchases are
rescinded, then the Conversion Price shall be readjusted to be such Conversion
Price that would then be in effect if such tender offer or exchange offer had
not been made (but giving effect to any intervening adjustments that may have
been made with respect to the Series B Preferred Stock). Except as set
forth in the preceding sentence, if the application of this 

 

11

 

Section 10(a)(vi) to
any tender offer or exchange offer would result in a decrease in the Conversion
Price, no adjustment shall be made for such tender offer or exchange offer
under this Section 10(a)(vi).

 

(vii)         Rights Plans.
To the extent that the Corporation has a shareholders’ rights plan in effect
with respect to the Common Stock on the Conversion Date, upon conversion of any
shares of the Series B Preferred Stock, Holders will receive, in addition
to the shares of Common Stock, the rights under the rights plan, unless, prior
to such Conversion Date, the rights have separated from the shares of Common
Stock, in which case the Conversion Price will be adjusted at the time of
separation as if the Corporation had made a distribution to all holders of the
Common Stock as described in Section 10(a)(iv) above, subject to readjustment
in the event of the expiration, termination or redemption of such rights.

 

(viii)        Other Issuances of
Additional Stock.

 

(A)          For so long as any shares of Series B Preferred Stock
remain outstanding, if the Corporation shall issue (or be deemed to have
issued), after the date of filing of this Certificate of Determination (the “Filing Date”), any Additional Stock
(as defined below in Section 10(a)(viii)(F)) without consideration or for
a consideration per share less than the Conversion Price for the Series B
Preferred Stock in effect immediately prior to the issuance of such Additional
Stock, the Conversion Price for such series in effect immediately prior to each
such issuance of Additional Stock shall forthwith (except as otherwise provided
in this Section 10(a)(viii)) be adjusted to a price equal to (calculated
to the nearest cent) the product obtained by multiplying the Conversion Price
for the Series B Preferred Stock in effect immediately prior to such
issuance of Additional Stock by a fraction, the numerator of which is equal to
the sum of (x) the total number of shares of Common Stock outstanding
(including any shares of Common Stock previously deemed to have been issued
pursuant to Section 10(a)(viii)(E)(l) or Section 10(a)(viii)(E)(2) (to
the extent not actually issued)) immediately prior to such issuance of
Additional Stock plus (y) the number of shares of Common Stock that the
aggregate consideration received by this Corporation for such issuance of
Additional Stock would purchase at the Conversion Price for Series B
Preferred Stock in effect immediately prior to such issuance of Additional
Stock, and the denominator of which is equal to the sum of (x) the total
number of shares of Common Stock outstanding (including any shares of Common Stock
previously deemed to have been issued pursuant to Section 10(a)(viii)(E)(l) or
Section 10(a)(viii)(E)(2) (to the extent not actually issued))
immediately prior to such issuance of Additional Stock plus (y) the number
of shares of Additional Stock issued. In the event that the Corporation issues
or sells, or is deemed to have issued or sold, Additional Stock (the “First Dilutive Issuance”), then in
the event that the Corporation issues or sells, or is deemed to have issued or
sold, Additional Stock other than the First Dilutive Issuance as a part of the
same transaction or series of related transactions as the First Dilutive
Issuance (a “Subsequent Dilutive Issuance”),
then and in each such case upon a Subsequent Dilutive Issuance, the Conversion
Price shall be reduced to the Conversion Price that would have been in effect
had the First Dilutive Issuance and each Subsequent Dilutive Issuance all
occurred on the closing date of the First Dilutive Issuance.

 

(B)           Except to the limited extent provided for in Section 10(a)(viii)(E)(3) or
Section 10(a)(viii)(E)(4), no adjustment of the Conversion Price for
Series B Preferred Stock pursuant to this subsection (viii) shall
have the effect of increasing any such Conversion Price above the Conversion
Price in effect immediately prior to such adjustment.

 

(C)           In the case of the issuance of Additional Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any discounts, commissions or other expenses allowed, paid or incurred
by the Corporation for any underwriting or otherwise in connection with the
issuance and sale thereof.

 

(D)          In the case of the issuance of Additional Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined in good faith
by the Corporation’s Board of Directors irrespective of any accounting
treatment.

 

(E)           In the case of the issuance after the Filing Date of (i) options
to purchase or rights to subscribe for Common Stock, (ii) securities by
their terms convertible into or exchangeable for Common Stock or (iii) options
to purchase or rights to subscribe for securities by their terms convertible
into or exchangeable for Common Stock, the following provisions shall apply for
all purposes of this Section 10(a)(viii):

 

12

 

(1)           The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential anti-dilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in Section 10(a)(viii)(C) and
Section 10(a)(viii)(D)) if any, received by the Corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential anti-dilution
adjustments) for the Common Stock covered thereby.

 

(2)           The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (assuming the satisfaction of any
conditions to convertibility or exchangeability, including without limitation,
the passage of time, but without taking into account potential anti-dilution
adjustments) for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such options
or rights were issued and for a consideration equal to the consideration, if
any, received by the Corporation for any such securities and related options or
rights (excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received
by the Corporation (without taking into account potential anti-dilution
adjustments) upon the conversion or exchange of such securities or the exercise
of any related options or rights (the consideration in each case to be
determined in the manner provided in Section 10(a)(viii)(C) and Section 10(a)(viii)(D)).

 

(3)           In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to this Corporation
upon exercise of such options or rights or upon conversion of or exchange for
such convertible or exchangeable securities, including, but not limited to, a
change resulting from the anti­dilution provisions thereof, the Conversion
Price for the Series B Preferred Stock, to the extent in any way affected
by or computed using such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such securities.

 

(4)           Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
Conversion Price for the Series B Preferred Stock, to the extent in any
way affected by or computed using such options, rights or securities or options
or rights related to such securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and convertible or
exchangeable securities that remain in effect) actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities (but giving effect to any intervening adjustments that may have been
made with respect to the Series B Preferred Stock).

 

(5)           The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to Section 10(a)(viii)(E)(l) or
Section 10(a)(viii)(E)(2) shall be appropriately adjusted to reflect
any change, termination or expiration of the type described in either Section 10(a)(viii)(E)(3) or
Section 10(a)(viii)(E)(4).

 

(F)           “Additional Stock”
shall mean any shares of Common Stock issued (or deemed to have been issued
pursuant to Section 10(a)(viii)(E)) by this Corporation after the Filing
Date for so long as any shares of Series B Preferred Stock remain
outstanding, other than:

 

(1)           shares of Common Stock or Common Stock Equivalents issued
pursuant to an event or transaction described in Section 10(a)(i) or Section 10(a)(ii);

 

(2)           shares of Common Stock issued pursuant to an event or
transaction described in Section 10(c)(iii);

 

(3)           shares of Common Stock issued or issuable upon conversion
of shares of Series B Preferred Stock;

 

13

 

(4)           shares of Common Stock issued (or deemed to have been
issued pursuant to Section 10(a)(viii)(E)) in connection with a
Reorganization Event;

 

(5)           shares of Common Stock issued or issuable upon conversion
of shares of Series C Preferred Stock.

 

(b)           The Corporation may make such decreases in the Conversion
Price, in addition to any other decreases required by this Section 10, if
the Board of Directors deems it advisable to avoid or diminish any income tax
to holders of the Common Stock resulting from any dividend or distribution of
shares of Common Stock (or issuance of rights or warrants to acquire shares of
Common Stock) or from any event treated as such for income tax purposes or for
any other reason.

 

(c)           (i)            All
adjustments to the Conversion Price shall be calculated to the nearest 1/10 of
a cent. No adjustment in the Conversion Price shall be required if such
adjustment would be less than $0.01; provided, that any adjustments which by
reason of this subparagraph are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided further
that on the applicable Conversion Date adjustments to the Conversion Price will
be made with respect to any such adjustment carried forward and which has not
been taken into account before such date.

 

(ii)           No adjustment to the Conversion Price shall be made if
Holders may participate in the transaction that would otherwise give rise to an
adjustment, as a result of holding the Series B Preferred Stock
(including, without limitation, pursuant to Section 4 hereof), without
having to convert the Series B Preferred Stock, as if they held the full
number of shares of Common Stock into which a share of the Series B
Preferred Stock may then be converted.

 

(iii)          The Conversion Price shall not be adjusted:

 

(A)          with respect to a Permitted Rights Offering;

 

(B)           upon the issuance of any shares of Common Stock pursuant
to any present or future plan providing for the reinvestment of dividends or
interest payable on the Corporation’s securities and the investment of
additional optional amounts in shares of Common Stock under any such plan;

 

(C)           upon the issuance of any shares of Common Stock or rights,
options or warrants to purchase those shares pursuant to any present or future
employee, director or consultant benefit plan, compensation plan or program of
or assumed by the Corporation or any of its subsidiaries (including the
Corporation’s 1994 Tandem Stock Option Plan and Amended and Restated 2004
Equity Plan);

 

(D)          upon the issuance of any shares of Common Stock pursuant to
any option, warrant (including the warrant issued to the U.S. Treasury on November 21,
2008) and any anti-dilution adjustments required hereunder, right or
exercisable, exchangeable or convertible security outstanding as of the date
shares of the Series B Preferred Stock were first issued and not
substantially amended thereafter;

 

(E)           for accrued and unpaid dividends on the Series A
Preferred Stock, the Series B Preferred Stock or the Series C
Preferred Stock.

 

(d)           Whenever the Conversion Price is to be adjusted in
accordance with Section 10(a) or Section 10(b), the Corporation
shall: (i) compute the Conversion Price in accordance with Section 10(a) or
Section 10(b), taking into account the $0.01 threshold set forth in Section 10(c) hereof;
(ii) as soon as practicable following the occurrence of an event that
requires an adjustment to the Conversion Price pursuant to Section 10(a) or
Section 10(b), taking into account the $0.01 threshold set forth in Section 10(c) hereof
(or if the Corporation is not aware of such occurrence, as soon as practicable
after becoming so aware), provide, or cause to be provided, a written notice to
the Holders of the occurrence of such event; and (iii) as soon as
practicable following the determination of the revised Conversion Price in
accordance with Section 10(a) or Section 10(b) hereof,
provide, or cause to be provided, 

 

14

 

a written notice to the Holders setting forth in
reasonable detail the method by which the adjustment to the Conversion Price
was determined and setting forth the revised Conversion Price.

 

Section 11.  Reorganization Events.

 

(a)           In the event that, for so long as any shares of
Series B Preferred Stock remain outstanding, there occurs:

 

(i)            any consolidation, merger or other similar business
combination of the Corporation with or into another Person, in each case
pursuant to which the Common Stock will be converted into cash, securities or
other property of the Corporation or another Person;

 

(ii)           any sale, transfer, lease or conveyance to another Person
of all or substantially all of the property and assets of the Corporation, in
each case pursuant to which the Common Stock will be converted into cash,
securities or other property of the Corporation or another Person;

 

(iii)          any reclassification of the Common Stock into securities
including securities other than the Common Stock; or

 

(iv)          any statutory exchange of the outstanding shares of Common
Stock for securities of another Person (other than in connection with a merger
or acquisition);

 

(any
such event specified in this Section 11(a), a “Reorganization
Event”), then each share of Series B Preferred Stock
outstanding immediately prior to such Reorganization Event shall, at the option
of the Holders, either convert into (the kind of securities, cash and other
property receivable in such Reorganization Event by the Holder (excluding the
counterparty to the Reorganization Event or an Affiliate of such counterparty)
of that number of shares of Common Stock into which the share of Series B
Preferred Stock would then be convertible (such securities, cash and other
property, the “Exchange Property”) plus an
amount in cash equal to any accrued and unpaid dividends on such Series B
Preferred Stock, or be entitled to receive liquidating distributions in
accordance with Section 5 as if such Reorganization Event were a
liquidation of the Corporation.

 

(b)           In the event that holders of the shares of Common Stock
have the opportunity to elect the form of consideration to be received in such
transaction, the Holders shall likewise be allowed to make such an election.

 

(c)           The above provisions of this Section 11 shall
similarly apply to successive Reorganization Events and the provisions of Section 10,
if applicable, shall apply to any shares of capital stock of the Corporation
(or any successor) received by the holders of the Common Stock in any such
Reorganization Event.

 

(d)           The Corporation (or any successor) shall, within seven (7) days
of the consummation of any Reorganization Event, provide written notice to the
Holders of such consummation of such event and of the kind and amount of the
cash, securities or other property that constitutes the Exchange Property.
Failure to deliver such notice shall not affect the operation of this Section 11.

 

(e)           The Corporation shall not enter into any agreement for a
transaction constituting a Reorganization Event unless such agreement does not
interfere with or prevent (as applicable) (i) conversion of the
Series B Preferred Stock into the Exchange Property or (ii) the ability
of Holders to receive, at their option, a liquidating distribution in
accordance with Section 5, in each case, in a manner that is consistent
with and gives effect to this Section 11.

 

Section 12.  Voting Rights.

 

(a)           Holders shall not have any voting rights (including no
right to elect any directors) except (i) as required by applicable law,
and (ii) as provided in Section 12(b).

 

15

 

(b)           Voting Rights.

 

(i)            So long as any shares of Series B Preferred Stock
are outstanding, in addition to any other vote or written consent of
shareholders required by law or by the Articles of Incorporation, the vote or
written consent of the Holders of at least two-thirds of the then outstanding
shares of Series B Preferred Stock (subject to the last paragraph of this Section 12(b)(i))
at the time outstanding and entitled to vote thereon, voting together as a
single class, given in person or by proxy, either in writing without a meeting
or by vote at any meeting called for the purpose, shall be necessary for
effecting or validating the following actions whether or not such approval is
required by California law:

 

(A)          Authorization of Senior
Stock. Any amendment or alteration (including by means of a merger,
consolidation or otherwise) of the Corporation’s Articles of Incorporation
(including this Certificate of Determination) to authorize, or create, or
increase the authorized amount of, any shares of, or any securities convertible
into shares of any class or series of the Corporation’s capital stock ranking
senior to the Series B Preferred Stock in the payment of dividends or in
the distribution of assets on any liquidation, dissolution or winding up of the
Corporation; or

 

(B)           Amendment of Series B
Preferred Stock. Any amendment, alteration or repeal (including by
means of a merger, consolidation or otherwise) of any provision of the
Corporation’s Articles of Incorporation (including this Certificate of
Determination) or the Corporation’s Bylaws that would significantly and
adversely affects the rights or preferences of the Series B Preferred
Stock;

 

provided,
however, that for all purposes of this Section 12(b), (1) any
increase in the amount of the Corporation’s authorized but unissued shares of
preferred stock, (2) any increase in the amount of the Corporation’s
authorized or issued Series B Preferred Stock, and (3) to the extent
allowed by California law, the creation and issuance, or an increase in the
authorized or issued amount, of other series of preferred stock of the
Corporation ranking equally with or junior to the Series B Preferred
Stock, either or both with respect to the payment of dividends (whether such
dividends are cumulative or non-cumulative) and/or the distribution of assets
upon the liquidation, dissolution or winding up of the Corporation, will not,
in and of itself, be deemed to materially and adversely affect the rights,
preferences, privileges or voting powers of the Series B Preferred Stock
and except as otherwise provided under California law, Holders will have no
right to vote solely by such an increase, creation or issuance.

 

(ii)           So long as any shares of Series B Preferred Stock are
outstanding a Holder shall be entitled to vote, with a number of votes equal to
that number of shares of Common Stock into which such Holder’s shares of
Series B Preferred Stock would then be convertible, together with the
holders of Common Stock acting as a single class, in person or by proxy, either
in writing without a meeting or by vote at any meeting called for the purpose,
for effecting or validating any consummation of any Reorganization Event, as
defined in Section 11 above;

 

(iii)          Notwithstanding the foregoing, Holders shall not have any
voting rights if, at or prior to the effective time of the act with respect to
which such vote would otherwise be required, all outstanding shares of
Series B Preferred Stock shall have been converted into shares of Common
Stock.

 

(c)           If the Board of Governors of the Federal Reserve System
determines that the Series B Preferred Stock is classified as “voting
stock” for the purposes of the Bank Holding Company Act of 1956, as amended,
the Holders and the Corporation will make such reasonable modifications to the
voting rights in this Section 12 so that the Series B Preferred Stock
is no longer considered “voting stock.”

 

(d)           Change for Clarification.
Without the vote or written consent of the holders of the Series B
Preferred Stock, so long as such action does not adversely affect the rights,
preferences, privileges and voting powers, and limitations and restrictions
thereof, of the Series B Preferred Stock, the Corporation may amend,
alter, supplement or repeal any terms of the Series B Preferred Stock:

 

(i)            to cure any ambiguity, or to cure, correct or supplement
any provision contained in this Certificate of Determination that may be
ambiguous, defective or inconsistent; or

 

16

 

(ii)           to make any provision with respect to matters or questions
relating to the Series B Preferred Stock that is not inconsistent with the
provisions of this Certificate of Determination.

 

(e)           Procedures for Voting and
Written Consents. The rules and procedures for calling and
conducting any meeting of the holders of Series B Preferred Stock
(including, without limitation, the fixing of a record date in connection
therewith), the solicitation and use of proxies at such a meeting, the
obtaining of written consents and any other aspect or matter with regard to
such a meeting or such written consents shall be governed by the requirements
of the Articles of Incorporation, the Bylaws, applicable law and the Trading
Market or other trading facility, if any, on which the Series B Preferred
Stock or Common Stock is listed or traded at the time.

 

Section 13.  Fractional Shares.

 

(a)           No fractional shares of Common Stock will be issued as a
result of any conversion of shares of Series B Preferred Stock.

 

(b)           In lieu of any fractional share of Common Stock otherwise
issuable in respect of any mandatory conversion pursuant to Section 8
hereof, the Corporation shall pay an amount in cash (computed to the nearest
cent) equal to the fair value of such fraction, which fair value shall be
determined based upon the same fraction of the Closing Price of the Common
Stock determined as of the second Trading Day immediately preceding the
applicable Conversion Date.

 

(c)           If more than one share of the Series B Preferred
Stock is surrendered for conversion at one time by or for the same Holder, the
number of full shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of the Series B
Preferred Stock so surrendered.

 

Section 14.  Reservation of Common Stock.

 

(a)           The Corporation shall at all times reserve and keep
available out of its authorized and unissued Common Stock solely for issuance
upon the conversion of shares of Series B Preferred Stock as provided in
this Certificate of Determination free from any preemptive or other similar
rights, such number of shares of Common Stock as shall from time to time be
issuable upon the conversion of all the shares of Series B Preferred Stock
(assuming receipt of the Shareholder Approval and, if necessary, regulatory
approvals), then outstanding, based on the Applicable Conversion Price. For
purposes of this Section 14(a), the number of shares of Common Stock that
shall be deliverable upon the conversion of all outstanding shares of
Series B Preferred Stock shall be computed as if at the time of
computation all such outstanding shares were held by a single Holder and there
was no regulatory impediment to such conversion.

 

(b)           All shares of Common Stock delivered upon conversion of
the Series B Preferred Stock shall be duly authorized, validly issued,
fully paid and non-assessable, free and clear of all liens, claims, security
interests and other encumbrances.

 

(c)           Prior to the delivery of any securities that the
Corporation shall be obligated to deliver upon conversion of the Series B
Preferred Stock, the Corporation shall use its reasonable best efforts to
comply with all federal and state laws and regulations thereunder requiring the
registration of such securities with, or any approval of or consent to the
delivery thereof by, any governmental authority.

 

(d)           The Corporation hereby covenants and agrees that it will
list and keep listed on the Trading Market, so long as the Common Stock shall
be so listed on the Trading Market, all the Common Stock issuable upon
conversion of the Series B Preferred Stock.

 

Section 15.  Limitations on Beneficial
Ownership.  Notwithstanding
anything to the contrary contained herein, if the number of shares to be issued
to a Holder of Series B Preferred Stock upon a conversion to Common Stock
would cause the Holder, together with any holdings of Common Stock already held
directly or indirectly by the Holder, or by any other Person whose Common Stock
would be aggregated with such Holder’s Common Stock for purposes of any bank
regulation, to (i) require prior approval of any banking regulator to
acquire those shares, 

 

17

 

(ii) violate any bank regulation, or (iii) collectively
be deemed to own, control or have the power to vote securities which (assuming,
for this purpose only, full conversion and/or exercise of such securities by
the Holder) would represent more than 9.9% of the voting securities of the
Corporation outstanding at such time (each, a “Violation”),
the Corporation will not issue shares of Common Stock to the extent, and only
to the extent, such issuance would result in a Violation until the shares of
Common Stock may be issued without causing a Violation (the third Business Day
following the date such shares may be issued without causing a Violation, the “Section 15 Conversion Date”),
and then only in accordance with the terms and conditions of any required
approvals. Any issuance of shares of Common Stock that would result in a
Violation shall be void ab initio.  By
accepting ownership of the Series B Preferred Stock, and as a condition to
the Corporation’s obligation to issue Common Stock upon conversion or to pay
any further dividends to such Holder, each Holder agrees (i) to provide
the Corporation all such customary and necessary information and documents as
the Corporation may reasonably require in order for the Corporation to
determine the status of compliance with any potential banking regulatory
approval requirements; provided, that such Holder shall not be obligated to
provide any information, the disclosure of which either (x) is prohibited
by applicable law or contract (and such Holder shall not be obligated to seek
the consent of any person to such disclosure) or (y) in the reasonable
judgment of such Holder’s investment adviser, would be adverse to the interests
of such Holder or such investment adviser or their respective partners or
clients, and (ii) that the Holder shall be solely responsible at the
Holder’s sole expense for obtaining any such approvals, but shall keep the
Corporation fully informed as to the status of the Holder’s efforts to obtain
approvals and the resolution of any applications for approval. To the extent
such approvals are not obtained, the shares of Series B Preferred Stock
that are not convertible shall remain outstanding and accrue dividends in
accordance with the provisions of Section 4. Notwithstanding any other
provision of this Certificate of Determination (as it may hereafter be amended)
or of the Series B Preferred Stock, during any period of delay beyond the
Mandatory Conversion Date because of the need for a regulatory approval as
described in this Section 15, the Corporation shall not be obligated to
pay any damages for delay in issuance and delivery of the Common Stock.

 

Section 16.  Replacement Certificates.

 

(a)           The Corporation shall replace any mutilated certificate at
the Holder’s expense upon surrender of that certificate to the Corporation. The
Corporation shall replace certificates that become destroyed, stolen or lost at
the Holder’s expense upon delivery to the Corporation of satisfactory evidence
that the certificate has been destroyed, stolen or lost, together with any
indemnity that may be required by the Corporation.

 

(b)           The Corporation shall not be required to issue any
certificates representing the Series B Preferred Stock on or after the
Mandatory Conversion Date. In place of the delivery of a replacement
certificate following the Mandatory Conversion Date, the Corporation, upon
delivery of the evidence and indemnity described in clause (a) above,
shall deliver the shares of Common Stock pursuant to the terms of the
Series B Preferred Stock formerly evidenced by the certificate.

 

Section 17.  Miscellaneous.

 

(a)           All notices referred to herein shall be in writing, and,
unless otherwise specified herein, all notices hereunder shall be deemed to
have been given upon the earlier of receipt thereof or five (5) Business
Days after the mailing thereof if sent by registered or certified mail (unless
first-class mail shall be specifically permitted for such notice under the
terms of this Certificate of Determination) with postage prepaid, addressed: (i) if
to the Corporation, to its office at 150 Almaden Boulevard, San Jose,
California 95113, Attention: President and Chief Executive Officer, with a copy
to the Corporation’s Corporate Secretary, or (ii) if to any Holder, to
such Holder at the address of such Holder as listed in the stock record books
of the Corporation, or (iii) to such other address as the Corporation or
any such Holder, as the case may be, shall have designated by notice similarly
given.

 

(b)           The Corporation shall pay any and all stock transfer and
documentary stamp taxes that may be payable in respect of any issuance or
delivery of shares of Series B Preferred Stock or shares of Common Stock
or other securities issued on account of Series B Preferred Stock pursuant
hereto or certificates representing such shares or securities. The Corporation
shall not, however, be required to pay any such tax that may be payable in
respect of any transfer involved in the issuance or delivery of shares of Series B
Preferred Stock or Common Stock or other securities in a name other than that
in which the shares of Series B Preferred Stock with respect to which such
shares or other securities are issued or delivered were registered, or in
respect of any payment to any Person 

 

18

 

other than a payment to the registered holder
thereof, and shall not be required to make any such issuance, delivery or
payment unless and until the Person otherwise entitled to such issuance,
delivery or payment has paid to the Corporation the amount of any such tax or
has established, to the satisfaction of the Corporation, that such tax has been
paid or is not payable.

 

(c)           All payments on the shares of Series B Preferred
Stock shall be subject to withholding and backup withholding of tax to the
extent required by applicable law, subject to applicable exemptions, and
amounts withheld, if any, shall be treated as received by the holders thereof.

 

(d)           No share of Series B Preferred Stock shall have any
rights of preemption whatsoever under this Certificate of Determination as to
any securities of the Corporation, or any warrants, rights or options issued or
granted with respect thereto, regardless of how such securities, or such
warrants, rights or options, may be designated issued or granted.

 

(e)           The shares of Series B Preferred Stock shall not have
any voting powers, preferences or relative, participating, optional or other
rights, or qualifications, limitations or restrictions thereof, other than as
set forth herein or in the Corporation’s Articles of Incorporation or as
provided by applicable law.

 

(f)            The Corporation covenants not to treat the Series B
Preferred Stock as preferred stock for purposes of Section 305 of the
Internal Revenue Code of 1986, as amended, except as otherwise required by
applicable law.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGE FOLLOWS]

 

19

 

We
further declare 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 our own knowledge.

 

 

	
   

  	
  /s/
  Lawrence McGovern

  
	
   

  	
  Lawrence
  McGovern,

  
	
   

  	
  Executive
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Debbie Reuter

  
	
   

  	
  Debbie
  Reuter,

  
	
   

  	
  Secretary

  

 

Date:  June 17, 2010.

 

Certificate of Determination — Series B

 

S-1Exhibit 4.2

 

CERTIFICATE OF DETERMINATION

 

OF

 

SERIES C CONVERTIBLE

 

PERPETUAL PREFERRED STOCK

 

OF

 

HERITAGE COMMERCE CORP

 

Pursuant
to Section 401 of the Corporations Code of the State of California:

 

We,
Lawrence McGovern, Executive Vice-President, and Debbie Reuter, Secretary, of
Heritage Commerce Corp, a corporation organized under the laws of the State of
California (hereinafter called the “Corporation”),
do hereby certify as follows:

 

1.             On June 17, 2010, the
Board of Directors of the Corporation adopted a resolution designating 21,050
shares of preferred stock as Series C Convertible Perpetual Preferred
Stock.

 

2.             No shares of Series C
Convertible Perpetual Preferred Stock have been issued.

 

3.             Pursuant to the authority
conferred upon the Board of Directors by the Articles of Incorporation of the
Corporation, as amended, the following resolution was duly adopted by the Board
of Directors on June 17, 2010, creating the series of preferred stock
designated as Series C Convertible Perpetual Preferred Stock:

 

RESOLVED,
that pursuant to the provisions of the Articles of Incorporation of the
Corporation, as amended, and applicable law, a series of preferred stock of the
Corporation be and hereby is created, and that the designation and number of
shares of such series, and the voting and other powers, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations and restrictions thereof, of the shares of such series are as
follows:

 

Section 1. 
Designation.  There is hereby created out of the authorized
and unissued shares of preferred stock of the Corporation a series of preferred
stock designated as the “Series C Convertible
Perpetual Preferred Stock” (the “Series C
Preferred Stock”). The number of shares constituting such series
shall be 21,050. The Series C Preferred Stock shall have no par value per
share.

 

Section 2. 
Ranking. The Series C Preferred
Stock will, with respect to dividend rights and rights on liquidation, winding
up and dissolution, rank (i) on a parity with the Corporation’s Series A
Fixed Rate Cumulative Perpetual Stock issued on November 21, 2008 (“Series A Preferred Stock”), and
Series B Mandatory Convertible Cumulative Perpetual Preferred Stock (“Series B Preferred Stock”), and
with each class or series of equity securities of the Corporation the terms of
which do not expressly provide that such class or series will rank senior or
junior to the Series C Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution of the Corporation (collectively
referred to as “Parity Securities”), and (ii) senior
to the Corporation’s common stock, no par value per share (the “Common Stock”), and each other class
or series of capital stock of the Corporation outstanding or established on or
after the Effective Date by the Corporation the terms of which do not expressly
provide that it ranks on a parity with or senior to the Series C Preferred
Stock as to dividend rights and rights on liquidation, winding-up and
dissolution of the Corporation (collectively referred to as “Junior Securities”). The Corporation
has the power to authorize and/or issue additional shares or classes or series
of Junior Securities or Parity Securities without the approval of the Holders;
provided, however, that for as long as the Series C Preferred Stock
remains outstanding, no preferred stock of the Corporation that would rank
senior to the Series C Preferred Stock may be issued without, in each
case, the express approval of the Holders of at least two-thirds of the issued
and outstanding shares of Series C Preferred Stock voting as a single
class.

 

1

 

Section 3. 
Definitions. The following initially
capitalized terms shall have the following meanings, whether used in the
singular or the plural:

 

(a)           “Additional Stock”
has the meaning set forth in Section 10(a)(viii)(F).

 

(b)           “Affiliate”
of any specified Person means any other Person directly or indirectly
controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, “control” when used with respect
to any specified Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms “controlling” and “controlled”
have meanings correlative to the foregoing.

 

(c)           “Applicable Conversion
Price” means the Conversion Price in effect at any given time.

 

(d)           “Business Day”
means any day that is not Saturday or Sunday and that, in the City of New York
and in the State of California, is not a day on which banking institutions
generally are authorized or obligated by law or executive order to be closed.

 

(e)           “Certificate of
Determination” means this Certificate of Determination of
Heritage Commerce Corp, dated June 17, 2010.

 

(f)            “Closing Price”
of the Common Stock (or other relevant capital stock or equity interest) on any
date of determination means the closing sale price or, if no closing sale price
is reported, the last reported sale price of the shares of the Common Stock (or
other relevant capital stock or equity interest) on the NASDAQ Global Select
Market on such date. If the Common Stock (or other relevant capital stock or
equity interest) is not traded on the NASDAQ Global Select Market on any date
of determination, the Closing Price of the Common Stock (or other relevant
capital stock or equity interest) on such date of determination means the
closing sale price as reported in the composite transactions for the principal
U.S. national or regional securities exchange on which the Common Stock (or
other relevant capital stock or equity interest) is so listed or quoted, or, if
no closing sale price is reported, the last reported sale price on the principal
U.S. national or regional securities exchange on which the Common Stock is so
listed or quoted, or if the Common Stock (or other relevant capital stock or
equity interest) is not so listed or quoted on a U.S. national or regional
securities exchange, the last quoted bid price for the Common Stock (or other
relevant capital stock or equity interest) in the over-the-counter market as
reported by Pink OTC Markets Inc. or similar organization, or, if that bid
price is not available, the market price of the Common Stock (or other relevant
capital stock or equity interest) on that date as determined by a nationally
recognized independent investment banking firm retained by the Corporation for
this purpose, subject to the joint approval of the Board of Directors of the
Corporation and the Holders.  The
Corporation shall cause at its expense the investment bank to perform the
determinations and notify the Corporation and the Holders of the results no
later than ten Business Days from the time it receives the engagement. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.

 

For
purposes of this Certificate of Determination, all references herein to the “Closing Price” and “last reported sale price” of the
Common Stock (or other relevant capital stock or equity interest) on the NASDAQ
Global Select Market shall be such closing sale price and last reported sale
price as reflected on the website of the NASDAQ Global Select Market
(www.nasdaq.com) and as reported by Bloomberg Professional Service; provided
that in the event that there is a discrepancy between the closing price and the
last reported sale price as reflected on the website of the NASDAQ Stock Market
and as reported by Bloomberg Professional Service, the closing sale price and
the last reported sale price on the website of the NASDAQ Stock Market shall
govern.

 

(g)           “Common Stock”
has the meaning set forth in Section 2.

 

(h)           “Common Stock Equivalents”
means securities representing rights convertible into or exchangeable for, or
entitling the holder thereof to purchase or receive directly or indirectly,
shares of Common Stock.

 

2

 

(i)            “Conversion Price”
means for each share of Series C Preferred Stock, $3.75; provided that if
the Shareholder Approval are not obtained by the six month anniversary of the
Effective Date, the Conversion Price shall be reduced by ten percent (10%)
(subject to further adjustment or limitation from time to time in a manner
consistent with the provisions of Section 10).

 

(j)            “Corporation”
means Heritage Commerce Corp, a California corporation.

 

(k)           “Current Market Price”
means, on any date, the average of the daily Closing Price per share of the
Common Stock on each of the five consecutive Trading Days preceding the earlier
of the day before the date in question and the day before the Ex-Date with
respect to the issuance or distribution giving rise to an adjustment to the
Conversion Price pursuant to Section 10.

 

(l)            “Distributed Property”
has the meaning set forth in Section 10(a)(iv).

 

(m)          “Distribution”
has the meaning set forth in Section 4(c).

 

(n)           “Dividend Rate”
means for purposes of Section 4(b) an annual rate equal to twenty
percent (20%) per annum.

 

(o)           “Effective Date”
means the date on which shares of the Series C Preferred Stock are first
issued.

 

(p)           “Exchange Property”
has the meaning set forth in Section 11(a).

 

(q)           “Ex-Date”,
when used with respect to any issuance or distribution, means the first date on
which the Common Stock trades without the right to receive the issuance or
distribution giving rise to an adjustment to the Conversion Price pursuant to Section 10.

 

(r)            “Filing Date”
has the meaning set forth in Section 10(a)(viii)(A).

 

(s)           “First Dilutive Issuance”
has the meaning set forth in Section 10(a)(viii)(A).

 

(t)            “Holder”
means the Person in whose name the shares of the Series C Preferred Stock
are registered, which may be treated by the Corporation as the absolute owner
of the shares of Series C Preferred Stock for the purpose of making
payment and settling the related conversions and for all other purposes.

 

(u)           “Junior Securities”
has the meaning set forth in Section 2.

 

(v)           “Liquidation Preference”
means, as to the Series C Preferred Stock, $1,000 per share (as adjusted
for any split, subdivision, combination, consolidation, recapitalization or
similar event with respect to the Series C Preferred Stock).

 

(w)          “Mandatory Conversion Date”
means, with respect to shares of Series C Preferred Stock of any Holder,
at any time following receipt of the Shareholder Approval and the date of the
consummation of the transfer by such Holder of shares of Series C
Preferred Stock to a non-affiliate in a Widely Dispersed Offering.

 

(x)            “Notice of Mandatory
Conversion” has the meaning set forth in Section 9(a).

 

(y)           “Parity Securities”
has the meaning set forth in Section 2.

 

(z)            “Permitted Rights Offering”
means an offering of up to $10 million of aggregate offering price of Common
Stock pursuant to subscription rights distributed pro rata to the then existing
holders of record of Common Stock at a price per share of Common Stock not less
than $3.75, and the associated declaration, issuance and exercise of the
subscription rights with respect to such offering and shares of Common Stock
issuable in connection with the exercise of any such rights pursuant to the
terms of the Securities Purchase Agreement.

 

3

 

(aa)         “Person”
means a legal person, including any individual, corporation, estate,
partnership, joint venture, association, joint-stock company, limited liability
company or trust.

 

(bb)         “Series A Preferred
Stock” has the meaning set forth in Section 2.

 

(cc)         “Series B Preferred
Stock” has the meaning set forth in Section 2.

 

(dd)         “Series C Preferred
Stock” has the meaning set forth in Section 1.

 

(ee)         “Record Date”
has the meaning set forth in Section 4(a)(iii).

 

(ff)           “Reorganization Event”
has the meaning set forth in Section 11(a).

 

(gg)         “Section 4(b) Dividend
Payment Date” has the meaning set forth in Section 4(b)(i).

 

(hh)         “Section 4(b) Dividend
Period” has the meaning set forth in Section 4(b)(ii).

 

(ii)           “Securities Purchase
Agreement” means the agreement by and among the Corporation and
the purchasers named therein dated June 18, 2010.

 

(jj)           “Shareholder Approval”
means the vote of a majority of the Common Stock present and voting and the
vote of at least a majority of the outstanding shares of the Series C
Preferred Stock to approve the issuance of Common Stock upon conversion of the Series C
Preferred Stock for purposes of Rule 5635 of the NASDAQ Stock Market
Rules.

 

(kk)         “Subsequent Dilutive
Issuance” has the meaning set forth in Section 10(a)(viii)(A).

 

(ll)           “Trading Day”
means a day on which the shares of Common Stock:

 

(i)            are not suspended from trading on any national or
regional securities exchange or association or over-the-counter market at the
close of business; and

 

(ii)           have traded at least once on the national or
regional securities exchange or association or over-the-counter market that is
the primary market for the trading of the Common Stock.

 

(mm)       “Trading Market”
means whichever of the New York Stock Exchange, the NYSE Amex, the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the
date in question.

 

(nn)         “Voting Securities”
means, at any time, shares of any class of capital stock of this Corporation
that are entitled to vote generally in the election of directors.

 

(oo)         “Widely Dispersed Offering”
means (a) a widespread public distribution, including pursuant to a
registration statement filed with and declared effective by the SEC or pursuant
to Rule 144 under the Securities Act, (b) a transfer in which no
transferee (or group of associated transferees ) after giving effect to such
transfer, would own more than 2% of any class of Voting Securities or (c) a
transfer to a transferee that controls or is acquiring control of more than 50%
of the Voting Securities.

 

Section 4. 
Dividends.

 

(a)           From and after the Effective Date, and when as
declared by the Board of Directors or a duly authorized committee of the Board
of Directors, out of funds legally available thereafter, the Corporation pays
dividends in cash or shares of Common Stock (other than a Permitted Rights
Offering), then the Corporation shall pay a similar dividend in cash or shares
of Common Stock or make a similar distribution of shares of Common Stock based
on the number of shares of Common Stock that the shares of Series C
Preferred Stock are then 

 

4

 

convertible
on the applicable record date for such distribution in accordance with
Section 4(a), provided, however, that prior to the Shareholder Approval,
Holders shall be entitled to cumulative dividends of the type and in the
amounts determined as set forth in Section 4(b).

 

(b)           From and after the Effective Date and prior to the
Shareholder Approval, the Holders shall be entitled to receive, only if, when
and as declared by the Board of Directors or a duly authorized committee of the
Board of Directors, out of funds legally available therefor, cumulative
dividends of the type and in the amounts determined as set forth in this Section 4(b),
and no more, provided, however, that notwithstanding any other provision in
this Section 4 other than Section 4(c), if the Shareholder Approval
occurs before the six month anniversary of the Effective Date, then no accrued
dividends shall be payable under this Section 4(b).

 

(i)            Commencing on the Effective Date, dividends shall
accrue and be payable semi-annually in arrears with the first such dividend
payable on the six month anniversary of the Effective Date and continuing on
each six (6) month anniversary thereafter (each, a “Section 4(b) Dividend
Payment Date”) or, if any such day is not a Business Day, the
next Business Day, if, when and as declared by the Board of Directors or a duly
authorized committee of the Board of Directors. Dividends payable pursuant to
this Section 4(b), if, when and as declared by the Board of Directors or a
duly authorized committee of the Board of Directors, will be, for each
outstanding share of Series C Preferred Stock, payable in cash at an
annual rate equal to the Dividend Rate multiplied by the sum of (A) the
Liquidation Preference plus (B) all accrued and unpaid dividends for any
prior Section 4(b) Dividend Period that are payable on such share of Series C
Preferred Stock, payable in cash.

 

(ii)           Dividends payable pursuant to this Section 4(b) will
be computed on the basis of a 360-day year of twelve 30-day months and, for any
Section 4(b) Dividend Period greater or less than a full
Section 4(b) Dividend Period, will be computed on the basis of the
actual number of days elapsed in the period divided by 360. Each period from
and including a Section 4(b) Dividend Payment Date to but excluding
the following Section 4(b) Dividend Payment Date is herein referred
to as a “Section 4(b) Dividend Period”.

 

(iii)          Each dividend will be payable to Holders of record
as they appear in the records of the Corporation on the applicable record date
(each, a “Record Date”), which with
respect to dividends payable pursuant to this Section 4(b), shall be on
the fifteenth day of the month immediately prior to the month in which the
relevant Section 4(b) Dividend Payment Date occurs.

 

(iv)          Dividends on the Series C Preferred Stock
pursuant to this Section 4(b) are cumulative. To the extent that the
Board of Directors does not declare and pay dividends on the Series C
Preferred Stock for a Section 4(b) Dividend Period prior to the
related Section 4(b) Dividend Payment Date, in full or otherwise,
such unpaid dividend shall accrue and shall cumulate from such scheduled
Section 4(b) Dividend Payment Date, shall compound on each subsequent
Section 4(b) Dividend Payment Date and shall be payable semi-annually
in arrears on each subsequent Section 4(b) Dividend Payment Date. As
used herein, the term “accrued”
includes both accrued and accumulated dividends.

 

(v)           So long as any shares of Series C Preferred
Stock remain outstanding, if all dividends on all outstanding shares of the Series C
Preferred Stock for any Section 4(b) Dividend Period have not been
declared and paid, or declared and funds set aside therefor, the Corporation
shall not (x) declare or pay dividends with respect to, or make any
distributions on, or, directly or indirectly, redeem, purchase or acquire any
of its Junior Securities or (y) directly or indirectly, redeem, purchase
or acquire any of its Parity Securities, other than, in each case, (i) redemptions,
purchases or other acquisitions of Junior Securities or Parity Securities in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of any one or more employees, officers,
directors or consultants or in connection with a dividend reinvestment plan, (ii) any
declaration of a dividend in connection with any shareholders’ rights plan, or
the issuance of rights, stock or other property under any shareholders’ rights
plan, or the redemption or repurchase of rights pursuant thereto, (iii) conversions
or exchanges of Junior Securities or Parity Securities for Junior Securities or
Parity Securities, respectively, and (iv) any purchase of fractional
interests in shares of the Corporation’s capital stock pursuant to the
conversion or exchange provisions of such capital stock or the securities being
converted or exchanged. If dividends payable pursuant to Section 4(b) for
any Section 4(b) Dividend Payment Date are not paid in full, or
declared and funds set aside therefor on the shares of the Series C
Preferred Stock and there are issued and outstanding shares of Parity
Securities with the same Section 4(b) Dividend Payment Date (or, in
the case of Parity Securities having dividend 

 

5

 

payment
dates different from the Section 4(b) Dividend Payment Dates, on a
dividend payment date falling within a Section 4(b) Dividend Period
applicable to such Section 4(b) Dividend Payment Date), then all
dividends declared on shares of the Series C Preferred Stock and such
Parity Securities on such date or dates, as the case may be, shall be declared
pro rata so that the respective amounts of such dividends shall bear the same
ratio to each other as full semi-annual dividends per share payable on the
shares of the Series C Preferred Stock pursuant to this Section 4(b) and
all such Parity Securities otherwise payable on such Section 4(b) Dividend
Payment Date (or, in the case of Parity Securities having dividend payment
dates different from the Section 4(b) Dividend Payment Dates, on a
dividend payment date falling within a Section 4(b) Dividend Period
applicable to such Section 4(b) Dividend Payment Date) (subject to
such dividends on such Parity Securities having been declared by the Board of
Directors out of legally available funds and including, in the case of any such
Parity Securities that bear cumulative dividends, all accrued and unpaid
dividends) bear to each other.

 

(vi)          If the Shareholder Approval are obtained by the
Corporation on or prior to the Record Date for any declared dividend applicable
to any Section 4(b) Dividend Period, the Holder of such share of Series C
Preferred Stock will have the right to receive accrued dividends on the Series C
Preferred Stock prior to the Shareholder Approval with respect to such
Section 4(b) Dividend Period, and this shall not affect any rights to
receive any accrued and unpaid dividends on the Series C Preferred Stock
attributable to any Section 4(b) Dividend Period completed prior to
such Record Date. If after the Record Date for any declared dividend applicable
to any Section 4(b) Dividend Period and prior to the relevant Section 4(b) Dividend
Payment Date, such Holder shall receive that dividend on the relevant Section 4(b) Dividend
Payment Date if such Holder was the Holder of record on the Record Date for
that dividend.

 

(vii)         Notwithstanding anything contained in this
Section 4(b) to the contrary, if the Shareholder Approval are
obtained by the Corporation before the six month anniversary the Effective Date
then no accrued dividends payable under the terms of this Section 4(b) shall
be payable.

 

(c)           Subject to the limitations of Section 4(b)(v),
if applicable, so long as any shares of Series C Preferred Stock are
outstanding, the Corporation shall not declare, pay or set apart for payment
any dividend or make any Distribution on any Common Stock, unless at the time
of such dividend or Distribution the Corporation simultaneously pays a dividend
or makes a Distribution on each outstanding share of Series C Preferred
Stock in the same form of consideration as received by the holders of the
Common Stock in an amount equal to the product of (i) the dividend payable
or Distribution to be made on each share of Common Stock and (ii) the
number of shares of Common Stock issuable upon conversion of a share of Series C
Preferred Stock (assuming receipt of the Shareholder Approval and, if
necessary, regulatory approvals), calculated on the record date for
determination of holders entitled to receive such dividend or Distribution. For
purposes hereof, “Distribution” shall mean the
transfer of cash, securities or other assets or property, including, without
limitation, evidences of indebtedness, shares of capital stock or securities
(including, without limitation, any dividend or distribution of (i) shares
of capital stock of any class or series, or similar equity interests, of or
relating to a subsidiary or other business unit in a “spin-off” transaction or (ii) rights
or warrants to purchase shares of Common Stock (other than rights issued
pursuant to a shareholders’ rights plan, a dividend reinvestment plan, other
similar plans or a Permitted Rights Offering), without consideration, whether
by way of dividend or otherwise.

 

Section 5. 
Liquidation.

 

(a)           Subject to Section 5(b), in the event the
Corporation voluntarily or involuntarily liquidates, dissolves or winds up, the
Holders at the time shall be entitled to receive liquidating distributions per
share of Series C Preferred Stock in an amount equal to the Liquidation
Preference, plus an amount equal to (i) any accrued and unpaid dividends
(regardless of whether any dividends are actually declared) and (ii) any
authorized and declared but unpaid dividends thereon, to and including the date
of such liquidation, out of assets legally available for distribution to the
Corporation’s shareholders, before any distribution of assets is made to the
holders of the Common Stock.  After
payment of the full amount of such liquidation distribution, the Holders shall
not be entitled to any further participation in any distribution of assets by
the Corporation.

 

(b)           In the event the Corporation voluntarily or
involuntarily liquidates, dissolves or winds up before the Shareholder
Approval, the Holders at the time shall be entitled to receive, for each share
of the Series C Preferred Stock, the sum of (i) liquidating
distributions in an amount equal to the Liquidation Preference, plus any 

 

6

 

accrued
but unpaid dividends thereon to and including the date of such liquidation, out
of assets legally available for distribution to the Corporation’s shareholders,
before any distribution of assets is made to the holders of the Common Stock or
any other Junior Securities and (ii) after all distributions have been
made to Holders pursuant to clause (i) of this sentence, liquidating
distributions, as determined by the Corporation (or the trustee or other Person
or Persons administering its liquidation, dissolution or winding-up in
accordance with applicable law) as of a date that is at least ten (10) Business
Days before the first liquidating distribution is made on Series C
Preferred Stock, that would be made on the number of shares of Common Stock
equal to the Liquidation Preference divided by the Applicable Conversion Price
as if all of the outstanding shares of Series C Preferred Stock and Series B
Preferred Stock had been converted into Common Stock on such date of
determination, out of assets legally available for distribution to the
Corporation’s shareholders, simultaneous with any distribution of assets made
to the holders of the Common Stock.

 

(c)           In the event the assets of the Corporation available
for distribution to shareholders upon any liquidation, dissolution or
winding-up of the affairs of the Corporation, whether voluntary or involuntary,
shall be insufficient to pay in full the amounts payable with respect to all
outstanding shares of the Series C Preferred Stock and the corresponding
amounts payable on any Parity Securities, the Holders and the holders of such
Parity Securities shall share ratably in any distribution of assets of the
Corporation in proportion to the full respective liquidating distributions to
which they would otherwise be respectively entitled.

 

(d)           Except as provided in Section 11, the
Corporation’s consolidation or merger with or into any other entity, the
consolidation or merger of any other entity with or into the Corporation, or
the sale of all or substantially all of the Corporation’s property or business
will not constitute its liquidation, dissolution or winding up.

 

Section 6. 
Maturity. The Series C Preferred
Stock shall be perpetual unless converted in accordance with this Certificate
of Determination.

 

Section 7. 
Redemptions.

 

(a)           Redemption by the Holder. Holders of Series C
Preferred Stock will have no right to require redemption of any shares of Series C
Preferred Stock.

 

(b)           No Redemption by the Corporation. The Series C
Preferred Stock shall not be redeemable by the Corporation at any time. The Series C
Preferred Stock shall not be subject to any sinking fund or other obligation to
redeem, repurchase or retire the Series C Preferred Stock.

 

Section 8. 
Mandatory Conversion.  Effective as of the close of business on the
Mandatory Conversion Date with respect to the shares of Series C Preferred
Stock of a Holder, all such Holder’s shares of Series C Preferred Stock shall
automatically convert into shares of Common Stock held by the transferee in a
Widely Dispersed Public Offering. The number of shares of Common Stock into
which a share of Series C Preferred Stock shall be convertible shall be
determined by dividing (i) the Liquidation Preference, plus the aggregate
sum of all accrued and unpaid dividends by (ii) the Applicable Conversion
Price (subject to the conversion procedures of Section 9 hereof).  Upon conversion, the transferee shall receive
cash in lieu of fractional shares in accordance with Section 13 hereof.

 

Section 9. 
Conversion Procedures.

 

(a)           Each Holder shall promptly provide written notice to
the Corporation within three Business Days of its intent to transfer its Series C
Preferred Stock in a Widely Dispersed Offering and, promptly upon receipt of
each required regulatory approval applicable to the transferee, if any, such
transferee shall provide written notice to the Corporation of such
receipt.  Upon occurrence of the
Mandatory Conversion Date with respect to shares of Series C Preferred
Stock of any Holder, the Corporation shall provide notice of such conversion to
the Holder (such notice a “Notice of Mandatory
Conversion”).  In addition
to any information required by applicable law or regulation, the Notice of
Mandatory Conversion with respect to such Holder shall state, as appropriate:

 

(i)            the Mandatory Conversion Date applicable to such
Holder;

 

7

 

(ii)           the number of shares of Common Stock to be issued
upon conversion of each share of Series C Preferred Stock held of record
by such Holder and subject to such mandatory conversion;

 

(iii)          the place or places where certificates for shares of
Series C Preferred Stock held of record by such Holder are to be
surrendered for issuance to the transferee of certificates representing shares
of Common Stock; and

 

(iv)          information concerning the proposed transferee
sufficient to allow the Corporation’s transfer agent to effect issuance of
shares of Common Stock to such transferee.

 

(b)           Effective immediately prior to the close of business
on a Mandatory Conversion Date, with respect to any shares of Series C
Preferred Stock to be converted on such Mandatory Conversion Date, dividends
shall no longer be declared on any such shares of Series C Preferred Stock
and such shares of Series C Preferred Stock shall cease to be outstanding,
in each case, subject to the right of the Holder to receive (i) any
accrued and unpaid dividends on such shares to the extent provided in
Section 4 and (ii) any other payments to which such Holder is
otherwise entitled pursuant to Section 11 or Section 13 hereof, as
applicable.

 

(c)           Prior to the close of business on a Mandatory
Conversion Date, with respect to any share of Series C Preferred Stock to
be converted on such Mandatory Conversion Date, the shares of Common Stock
issuable upon conversion thereof or other securities issuable upon conversion
of such share of Series C Preferred Stock shall not be deemed outstanding
for any purpose, and the Holder thereof shall have no rights with respect to
such shares of Common Stock or other securities issuable upon conversion
(including voting rights, rights to respond to tender offers for the Common
Stock or other securities issuable upon conversion and rights to receive any
dividends or other distributions on the Common Stock or other securities
issuable upon conversion) by virtue of holding such share of Series C
Preferred Stock, except to the extent provided in Section 4(c).

 

(d)           Shares of Series C Preferred Stock duly
converted in accordance with this Certificate of Determination, or otherwise
reacquired by the Corporation, will resume the status of authorized and
unissued preferred stock, undesignated as to series and available for future
issuance. The Corporation may from time to time take such appropriate action as
may be necessary to reduce the authorized number of shares of Series C
Preferred Stock; provided, however, that the Corporation shall not take any
such action if such action would reduce the authorized number of shares of Series C
Preferred Stock below the number of shares of Series C Preferred Stock
then outstanding.

 

(e)           The Person or Persons entitled to receive the Common
Stock and/or cash, securities or other property issuable upon conversion of Series C
Preferred Stock shall be treated for all purposes as the record holder(s) of
such shares of Common Stock and/or securities as of the close of business on
the relevant Mandatory Conversion Date with respect thereto. In the event that
a Holder shall not by written notice designate the name in which shares of
Common Stock and/or cash, securities or other property (including payments of
cash in lieu of fractional shares) to be issued or paid upon conversion of
shares of Series C Preferred Stock should be registered or paid or the
manner in which such shares should be delivered, the Corporation shall be
entitled to withhold issuance of the Common Stock until some time as the Holder
provides the requested information.

 

Section 10. 
Anti-Dilution Adjustments.

 

(a)           Prior to the Corporation obtaining the Shareholder
Approval, the Conversion Price shall be subject to the following adjustments:

 

(i)            Stock Dividends and Distributions. If the Corporation
pays dividends or other distributions on the Common Stock in shares of Common
Stock, then the Conversion Price in effect immediately prior to the Ex-Date for
such dividend or distribution will be multiplied by the following fraction:

 

·                                          the numerator
is the number of shares of Common Stock outstanding immediately prior to the
Ex-Date for such dividend or distribution, and

 

8

 

·                                          the denominator
is the sum of (1) the number of shares of Common Stock outstanding
immediately prior to the Ex-Date for such dividend or distribution plus (2) the
total number of shares of Common Stock constituting such dividend or
distribution.

 

For
the purposes of this Section 10(a)(i), the number of shares of Common
Stock at the time outstanding shall not include shares acquired by the
Corporation. If any dividend or distribution described in this Section 10(a)(i) is
declared but not so paid or made, the Conversion Price shall be readjusted,
effective as of the date the Board of Directors publicly announces its decision
not to make such dividend or distribution, to such Conversion Price that would
be in effect if such dividend or distribution had not been declared (but giving
effect to any intervening adjustments that may have been made with respect to
the Series C Preferred Stock).

 

(ii)           Subdivisions, Splits and Combinations of the Common
Stock. If the Corporation subdivides, splits or combines the shares of
Common Stock, then the Conversion Price in effect immediately prior to the
effective date of such share subdivision, split or combination will be
multiplied by the following fraction:

 

·                                          the numerator
is the number of shares of Common Stock outstanding immediately prior to the
effective date of such share subdivision, split or combination, and

 

·                                          the denominator
is the number of shares of Common Stock outstanding immediately after the
opening of business on the effective date of such share subdivision, split or
combination.

 

For
the purposes of this Section 10(a)(ii), the number of shares of Common
Stock at the time outstanding shall not include shares acquired by the
Corporation. If any subdivision, split or combination described in this Section 10(a)(ii) is
announced but the outstanding shares of Common Stock are not subdivided, split
or combined, the Conversion Price shall be readjusted, effective as of the date
the Board of Directors publicly announces its decision not to subdivide, split
or combine the outstanding shares of Common Stock, to such Conversion Price
that would be in effect if such subdivision, split or combination had not been
announced (but giving effect to any intervening adjustments that may have been
made with respect to the Series C Preferred Stock).

 

(iii)          Issuance of Stock Purchase Rights. If the
Corporation issues to all or substantially all holders of the shares of Common
Stock rights or warrants (other than rights or warrants issued pursuant to a
dividend reinvestment plan or share purchase plan or other similar plans)
entitling them to subscribe for or purchase the shares of Common Stock at less
than the Current Market Price on the date fixed for the determination of
shareholders entitled to receive such rights or warrants, then the Conversion
Price in effect immediately prior to the Ex-Date for such distribution will be
multiplied by the following fraction:

 

·                                          the numerator
is the sum of (1) the number of shares of Common Stock outstanding
immediately prior to the Ex-Date for such dividend or distribution plus (2) the
number of shares of Common Stock equal to the aggregate price payable to
exercise such rights or warrants divided by the Current Market Price on the
date fixed for the determination of shareholders entitled to receive such
rights or warrants, and

 

·                                          the denominator
is the sum of (1) the number of shares of Common Stock outstanding
immediately prior to the Ex-Date for such dividend or distribution plus (2) the
total number of shares of Common Stock issuable pursuant to such rights or
warrants.

 

For
the purposes of this Section 10(a)(iii), the number of shares of Common
Stock at the time outstanding shall not include shares acquired by the
Corporation. The Corporation shall not issue any such rights or warrants in
respect of shares of the Common Stock acquired by the Corporation. In the event
that such rights or warrants described in this Section 10(a)(iii) are
not so issued, the Conversion Price shall be readjusted, effective as of the
date 

 

9

 

the
Board of Directors publicly announces its decision not to issue such rights or
warrants, to the Conversion Price that would then be in effect if such issuance
had not been declared (but giving effect to any intervening adjustments that
may have been made with respect to the Series C Preferred Stock). To the
extent that such rights or warrants are not exercised prior to their expiration
or shares of Common Stock are otherwise not delivered pursuant to such rights
or warrants upon the exercise of such rights or warrants, the Conversion Price
shall be readjusted to such Conversion Price that would then be in effect had
the adjustment made upon the issuance of such rights or warrants been made on
the basis of the delivery of only the number of shares of Common Stock actually
delivered (but giving effect to any intervening adjustments that may have been
made with respect to the Series C Preferred Stock). In determining the
aggregate offering price payable for such shares of Common Stock, there shall
be taken into account any consideration received for such rights or warrants
and the value of such consideration (if other than cash, to be determined in
good faith by the Board of Directors). If an adjustment to the Conversion Price
is required under this Section 10(a)(iii), delivery of any additional
shares of Common Stock that may be deliverable upon conversion as a result of
an adjustment required under this Section 10(a)(iii) shall be delayed
to the extent necessary in order to complete the calculations provided in this
Section 10(a)(iii).

 

(iv)          Debt or Asset Distributions. If the
Corporation distributes to all or substantially all holders of shares of Common
Stock evidences of indebtedness, shares of capital stock, securities, cash or
other assets (excluding any dividend or distribution referred to in Section 10(a)(i),
any rights or warrants referred to in Section 10(a)(iii), any dividend or
distribution paid exclusively in cash, any consideration payable in connection
with a tender or exchange offer made by the Corporation or any of its
subsidiaries, and any dividend of shares of capital stock of any class or
series, or similar equity interests, of or relating to a subsidiary or other
business unit in the case of certain spin-off transactions as described below)
(such evidences of indebtedness, shares of capital stock, securities, cash or
other assets, the “Distributed Property”), then
the Conversion Price in effect immediately prior to the Ex-Date for such
distribution will be multiplied by the following fraction:

 

·                                          the numerator
is the Current Market Price per share of Common Stock on such date minus the
fair market value of the portion of the distribution applicable to one share of
Common Stock on such date as determined in good faith by the Board of
Directors, and

 

·                                          the denominator
is the Current Market Price per share of Common Stock on such date;

 

provided
that, if the fair market value of the portion of the distribution applicable to
one share of Common Stock on such date as determined in good faith by the Board
of Directors is equal to or greater than the Current Market Price per share of
Common Stock on such date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Holder shall receive on the date on which
the Distributed Property is distributed to holders of Common Stock, for each
share of Series C Preferred Stock, the amount of Distributed Property such
Holder would have received had such Holder’s Series C Preferred Stock been
converted into such number of shares of Common Stock that such Holder’s shares
of Series C Preferred Stock would then be convertible on the Ex-Date for
such distribution.

 

In
a “spin-off,” where the Corporation makes a distribution to all or
substantially all holders of shares of Common Stock consisting of capital stock
of any class or series, or similar equity interests of, or relating to, a
subsidiary or other business unit, the Conversion Price will not be adjusted,
but in lieu of such adjustment each Holder shall receive the same distribution
as a holder of Common Stock would as though such Holder’s shares of Series C
Preferred Stock had been converted into such number of shares of Common Stock
that such Holder’s shares of Series C Preferred Stock would then be
convertible.

 

In
the event that such distribution described in this Section 10(a)(iv) is
not so paid or made, the Conversion Price shall be readjusted, effective as of
the date the Board of Directors publicly announces its decision not to pay or
make such dividend or distribution, to the Conversion Price that would then be
in effect if such dividend or distribution had not been declared (but giving effect
to any intervening adjustments that may have been made with respect to the Series C
Preferred Stock). If an adjustment to the Conversion Price is required under
this Section 10(a)(iv), delivery of any additional shares of Common Stock
that may be deliverable upon conversion as a 

 

10

 

result
of an adjustment required under this Section 10(a)(iv) shall be
delayed to the extent necessary in order to complete the calculations provided
for in this Section 10(a)(iv).

 

(v)           Cash Distributions. If the Corporation makes a
distribution consisting exclusively of cash to all holders of the Common Stock,
excluding (a) any cash dividend or distribution on the Common Stock to the
extent a corresponding cash dividend or distribution pursuant to Section 4
is paid on the Series C Preferred Stock, (b) any dividend or
distribution in connection with the Corporation’s liquidation, dissolution or
winding up, and (c) any consideration payable in connection with a tender
or exchange offer made by the Corporation or any of its subsidiaries, then in
each event, the Conversion Price in effect immediately prior to the Ex-Date for
such distribution will be multiplied by the following fraction:

 

·                                          the numerator
is the Closing Price per share of Common Stock on the Trading Day immediately
preceding the Ex-Date minus the amount per share of Common Stock of the cash
distribution, as determined pursuant to the introduction to this Section 10(a)(v),
and

 

·                                          the denominator
is the Closing Price per share of Common Stock on the Trading Day immediately
preceding the Ex-Date.

 

In
the event that any distribution described in this Section 10(a)(v) is
not so made, the Conversion Price shall be readjusted, effective as of the date
the Board of Directors publicly announces its decision not to pay such
distribution, to the Conversion Price which would then be in effect if such
distribution had not been declared (but giving effect to any intervening
adjustments that may have been made with respect to the Series C Preferred
Stock).

 

Notwithstanding
the foregoing, if the amount per share of Common Stock of the cash
distribution, as determined pursuant to the introduction to this Section 10(a)(v),
is equal to or greater than the Closing Price per share of Common Stock on the
Trading Day immediately preceding the Ex-Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder shall have the
right to receive on the date on which the relevant cash dividend or
distribution is distributed to holders of Common Stock, for each share of
Series C Preferred Stock, the amount of cash such Holder would have
received had such Holder’s Series C Preferred Stock been converted into
such number of shares of Common Stock that such Holder’s shares of Series C
Preferred Stock would then be convertible on the Ex-Date for such distribution.

 

(vi)          Self Tender Offers and Exchange Offers. If the
Corporation or any of its subsidiaries successfully completes a tender or
exchange offer for the Common Stock where the cash and the value of any other
consideration included in the payment per share of the Common Stock exceeds the
Closing Price per share of the Common Stock on the Trading Day immediately
succeeding the expiration of the tender or exchange offer, then the Conversion
Price in effect at the close of business on such immediately succeeding Trading
Day will be multiplied by the following fraction:

 

	
   

  	
        OS-l x
  SP     

  
	
   

  	
  AC + (SP x OS-2)

  
	
  where,

  	
   

  
	
   

  	
   

  
	
  SP
  =

  	
  the
  Closing Price per share of Common Stock on the Trading Day immediately
  succeeding the expiration of the tender or exchange offer.

  
	
   

  	
   

  
	
  OS-1
  =

  	
  the
  number of shares of Common Stock outstanding immediately prior to the
  expiration of the tender or exchange offer, including any shares validly
  tendered and not withdrawn.

  
	
   

  	
   

  
	
  OS-2
  =

  	
  the
  number of shares of Common Stock outstanding immediately after the expiration
  of the tender or exchange offer, giving effect to consummation of the
  acquisition of all shares validly tendered or exchanged (and not withdrawn)
  in connection with such tender or exchange.

  

 

11

 

	
  AC
  =

  	
  the
  aggregate cash and fair market value of the other consideration payable in
  the tender or exchange offer, as determined by the Board of Directors.

  

 

In
the event that the Corporation, or one of its subsidiaries, is obligated to
purchase shares of Common Stock pursuant to any such tender offer or exchange
offer, but the Corporation, or such subsidiary, is permanently prevented by
applicable law from effecting any such purchases, or all such purchases are
rescinded, then the Conversion Price shall be readjusted to be such Conversion
Price that would then be in effect if such tender offer or exchange offer had
not been made (but giving effect to any intervening adjustments that may have
been made with respect to the Series C Preferred Stock). Except as set
forth in the preceding sentence, if the application of this Section 10(a)(vi) to
any tender offer or exchange offer would result in a decrease in the Conversion
Price, no adjustment shall be made for such tender offer or exchange offer
under this Section 10(a)(vi).

 

(vii)         Rights Plans. To the extent that the
Corporation has a shareholders’ rights plan in effect with respect to the
Common Stock on a Mandatory Conversion Date, upon conversion of any shares of
the Series C Preferred Stock, the transferee will receive, in addition to
the shares of Common Stock, the rights under the rights plan, unless, prior to
such Mandatory Conversion Date, the rights have separated from the shares of
Common Stock, in which case the Conversion Price will be adjusted at the time
of separation as if the Corporation had made a distribution to all holders of
the Common Stock as described in Section 10(a)(iv) above, subject to
readjustment in the event of the expiration, termination or redemption of such
rights.

 

(viii)        Other Issuances of Additional Stock.

 

(A)          If the Corporation shall issue (or be deemed to have
issued), after the date of filing of this Certificate of Determination (the “Filing Date”), any Additional Stock
(as defined below in Section 10(a)(viii)(F)) without consideration or for
a consideration per share less than the Conversion Price for the Series C
Preferred Stock in effect immediately prior to the issuance of such Additional
Stock, the Conversion Price for such series in effect immediately prior to each
such issuance of Additional Stock shall forthwith (except as otherwise provided
in this Section 10(a)(viii)) be adjusted to a price equal to (calculated
to the nearest cent) the product obtained by multiplying the Conversion Price
for the Series C Preferred Stock in effect immediately prior to such
issuance of Additional Stock by a fraction, the numerator of which is equal to
the sum of (x) the total number of shares of Common Stock outstanding
(including any shares of Common Stock previously deemed to have been issued
pursuant to Section 10(a)(viii)(E)(l) or Section 10(a)(viii)(E)(2) (to
the extent not actually issued)) immediately prior to such issuance of
Additional Stock plus (y) the number of shares of Common Stock that the
aggregate consideration received by this Corporation for such issuance of
Additional Stock would purchase at the Conversion Price for Series C
Preferred Stock in effect immediately prior to such issuance of Additional
Stock, and the denominator of which is equal to the sum of (x) the total
number of shares of Common Stock outstanding (including any shares of Common
Stock previously deemed to have been issued pursuant to Section 10(a)(viii)(E)(l) or
Section 10(a)(viii)(E)(2) (to the extent not actually issued))
immediately prior to such issuance of Additional Stock plus (y) the number
of shares of Additional Stock issued. In the event that the Corporation issues
or sells, or is deemed to have issued or sold, Additional Stock (the “First Dilutive Issuance”), then in
the event that the Corporation issues or sells, or is deemed to have issued or
sold, Additional Stock other than the First Dilutive Issuance as a part of the
same transaction or series of related transactions as the First Dilutive
Issuance (a “Subsequent Dilutive Issuance”),
then and in each such case upon a Subsequent Dilutive Issuance, the Conversion
Price shall be reduced to the Conversion Price that would have been in effect
had the First Dilutive Issuance and each Subsequent Dilutive Issuance all
occurred on the closing date of the First Dilutive Issuance.

 

(B)           Except to the limited extent provided for in Section 10(a)(viii)(E)(3) or
Section 10(a)(viii)(E)(4), no adjustment of the Conversion Price for Series C
Preferred Stock pursuant to this subsection (viii) shall have the effect
of increasing any such Conversion Price above the Conversion Price in effect
immediately prior to such adjustment.

 

(C)           In the case of the issuance of Additional Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any discounts, commissions or other expenses allowed, paid or
incurred by the Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.

 

12

 

(D)          In the case of the issuance of Additional Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined in good
faith by the Corporation’s Board of Directors irrespective of any accounting
treatment.

 

(E)           In the case of the issuance after the Filing Date of
(i) options to purchase or rights to subscribe for Common Stock, (ii) securities
by their terms convertible into or exchangeable for Common Stock or (iii) options
to purchase or rights to subscribe for securities by their terms convertible
into or exchangeable for Common Stock, the following provisions shall apply for
all purposes of this Section 10(a)(viii):

 

(1)           The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential anti-dilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in
Section 10(a)(viii)(C) and Section 10(a)(viii)(D)) if any,
received by the Corporation upon the issuance of such options or rights plus
the minimum exercise price provided in such options or rights (without taking
into account potential anti-dilution adjustments) for the Common Stock covered
thereby.

 

(2)           The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange (assuming the satisfaction
of any conditions to convertibility or exchangeability, including without
limitation, the passage of time, but without taking into account potential
anti-dilution adjustments) for any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration, if any, received by the Corporation for any such securities
and related options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Corporation (without taking into
account potential anti-dilution adjustments) upon the conversion or exchange of
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in Section 10(a)(viii)(C) and
Section 10(a)(viii)(D)).

 

(3)           In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to this Corporation
upon exercise of such options or rights or upon conversion of or exchange for
such convertible or exchangeable securities, including, but not limited to, a
change resulting from the anti­dilution provisions thereof, the Conversion
Price for the Series C Preferred Stock, to the extent in any way affected
by or computed using such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such securities.

 

(4)           Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price for the Series C Preferred Stock, to the extent in
any way affected by or computed using such options, rights or securities or
options or rights related to such securities, shall be recomputed to reflect
the issuance of only the number of shares of Common Stock (and convertible or
exchangeable securities that remain in effect) actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities (but giving effect to any intervening adjustments that may have been
made with respect to the Series C Preferred Stock).

 

(5)           The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to Section 10(a)(viii)(E)(l) or
Section 10(a)(viii)(E)(2) shall be appropriately adjusted to reflect
any change, termination or expiration of the type described in either
Section 10(a)(viii)(E)(3) or Section 10(a)(viii)(E)(4).

 

13

 

(F)           “Additional Stock”
shall mean any shares of Common Stock issued (or deemed to have been issued
pursuant to Section 10(a)(viii)(E)) by this Corporation after the Filing
Date, other than:

 

(1)           shares of Common Stock or Common Stock Equivalents
issued pursuant to an event or transaction described in Section 10(a)(i) or
Section 10(a)(ii);

 

(2)           shares of Common Stock issued pursuant to an event
or transaction described in Section 10(c)(iii);

 

(3)           shares of Common Stock issued or issuable upon
conversion of shares of Series C Preferred Stock;

 

(4)           shares of Common Stock issued (or deemed to have
been issued pursuant to Section 10(a)(viii)(E)) in connection with a
Reorganization Event; and

 

(5)           shares of Common Stock issued or issuable upon
conversion of shares of Series B Preferred Stock.

 

(b)           The Corporation may make such decreases in the
Conversion Price, in addition to any other decreases required by this Section 10,
if the Board of Directors deems it advisable to avoid or diminish any income
tax to holders of the Common Stock resulting from any dividend or distribution
of shares of Common Stock (or issuance of rights or warrants to acquire shares
of Common Stock) or from any event treated as such for income tax purposes or
for any other reason.

 

(c)           (i)            All adjustments to the Conversion Price shall be
calculated to the nearest 1/10 of a cent. No adjustment in the Conversion Price
shall be required if such adjustment would be less than $0.01; provided, that
any adjustments which by reason of this subparagraph are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment; provided further that on the applicable Mandatory Conversion Date
adjustments to the Conversion Price will be made with respect to any such
adjustment carried forward and which has not been taken into account before
such date.

 

(ii)           No adjustment to the Conversion Price shall be made
if Holders may participate in the transaction that would otherwise give rise to
an adjustment, as a result of holding the Series C Preferred Stock
(including, without limitation, pursuant to Section 4 hereof), without
having to convert the Series C Preferred Stock, as if they held the full
number of shares of Common Stock into which a share of the Series C
Preferred Stock may then be converted.

 

(iii)          The Conversion Price shall not be adjusted:

 

(A)          with respect to a Permitted Rights Offering;

 

(B)           upon the issuance of any shares of Common Stock
pursuant to any present or future plan providing for the reinvestment of
dividends or interest payable on the Corporation’s securities and the
investment of additional optional amounts in shares of Common Stock under any
such plan;

 

(C)           upon the issuance of any shares of Common Stock or
rights, options or warrants to purchase those shares pursuant to any present or
future employee, director or consultant benefit plan, compensation plan or
program of or assumed by the Corporation or any of its subsidiaries (including
the Corporation’s 1994 Tandem Stock Option Plan and Amended and Restated 2004
Equity Plan);

 

(D)          upon the issuance of any shares of Common Stock
pursuant to any option, warrant (including the Warrant issued to the U.S.
Treasury on November 21, 2008) and any anti-dilution adjustments required
thereunder, right or exercisable, exchangeable or convertible security
outstanding as of the date shares of the Series C Preferred Stock were
first issued and not substantially amended thereafter;

 

14

 

(E)           for accrued and unpaid dividends on the
Series A Preferred Stock, the Series B Preferred Stock or the
Series C Preferred Stock.

 

(d)           Whenever the Conversion Price is to be adjusted in
accordance with Section 10(a) or Section 10(b), the Corporation
shall: (i) compute the Conversion Price in accordance with Section 10(a) or
Section 10(b), taking into account the $0.01 threshold set forth in Section 10(c) hereof;
(ii) as soon as practicable following the occurrence of an event that
requires an adjustment to the Conversion Price pursuant to Section 10(a) or
Section 10(b), taking into account the $0.01 threshold set forth in Section 10(c) hereof
(or if the Corporation is not aware of such occurrence, as soon as practicable
after becoming so aware), provide, or cause to be provided, a written notice to
the Holders of the occurrence of such event; and (iii) as soon as
practicable following the determination of the revised Conversion Price in
accordance with Section 10(a) or Section 10(b) hereof,
provide, or cause to be provided, a written notice to the Holders setting forth
in reasonable detail the method by which the adjustment to the Conversion Price
was determined and setting forth the revised Conversion Price.

 

(e)           Notwithstanding anything contained in this
Section 10 to the contrary, from and after the date Corporation obtains
the Shareholder Approval, the Corporation shall not have any obligation to
adjust the Conversion Price under the terms of this Section 10, provided,
however, that if the Corporation shall (i)) subdivide its outstanding shares of
Common Stock into a greater number of shares, then the Corporation shall
similarly subdivide its outstanding shares of Series C Preferred Stock; (ii) combine
its outstanding shares of Common Stock into a smaller number of shares of
Common Stock, then the Corporation shall similarly combine its outstanding
shares of Series C Preferred Stock (except for a Permitted Rights
Offering).

 

Section 11. 
Reorganization Events.

 

(a)           In the event that, for so long as any shares of Series C
Preferred Stock remain outstanding, there occurs:

 

(i)                                     any
consolidation, merger or other similar business combination of the Corporation
with or into another Person, in each case pursuant to which the Common Stock
will be converted into cash, securities or other property of the Corporation or
another Person;

 

(ii)                                  any sale,
transfer, lease or conveyance to another Person of all or substantially all of
the property and assets of the Corporation, in each case pursuant to which the
Common Stock will be converted into cash, securities or other property of the
Corporation or another Person;

 

(iii)                               any
reclassification of the Common Stock into securities including securities other
than the Common Stock; or

 

(iv)                              any statutory
exchange of the outstanding shares of Common Stock for securities of another
Person (other than in connection with a merger or acquisition);

 

(any
such event specified in this Section 11(a), a “Reorganization
Event”), then each share of Series C Preferred Stock
outstanding immediately prior to such Reorganization Event shall, at the option
of the Holders, either convert into the kind of securities, cash and other
property receivable in such Reorganization Event by the holder (excluding the
counterparty to the Reorganization Event or an Affiliate of such counterparty)
of that number of shares of Common Stock into which the share of Series C
Preferred Stock would then be convertible (such securities, cash and other
property, the “Exchange Property”) plus an
amount in cash equal to any accrued and unpaid dividends on such Series C
Preferred Stock, or be entitled to receive liquidating distributions in
accordance with Section 5 as if such Reorganization Event were a
liquidation of the Corporation.

 

(b)           In the event that holders of the shares of Common
Stock have the opportunity to elect the form of consideration to be received in
such transaction, the Holders shall likewise be allowed to make such an
election.

 

15

 

(c)           The above provisions of this Section 11 shall
similarly apply to successive Reorganization Events and the provisions of Section 10,
if applicable, shall apply to any shares of capital stock of the Corporation
(or any successor) received by the holders of the Common Stock in any such
Reorganization Event.

 

(d)           The Corporation (or any successor) shall, within
seven (7) days of the consummation of any Reorganization Event, provide
written notice to the Holders of such consummation of such event and of the
kind and amount of the cash, securities or other property that constitutes the
Exchange Property. Failure to deliver such notice shall not affect the
operation of this Section 11.

 

(e)           The Corporation shall not enter into any agreement
for a transaction constituting a Reorganization Event unless such agreement
does not interfere with or prevent (as applicable) (i) conversion of the Series C
Preferred Stock into the Exchange Property or (ii) the ability of Holders
to receive, at their option, a liquidating distribution in accordance with Section 5,
in each case, in a manner that is consistent with and gives effect to this Section 11.

 

Section 12. 
Voting Rights.

 

(a)           Holders will not have any voting rights (including
no right to elect any directors), except (i) voting rights, if any,
required by law and (ii) voting rights described in Section 12(b).

 

(b)           So long as any shares of Series C Preferred
Stock are outstanding, in addition to any other vote or written consent of
shareholders required by law or by the Articles of Incorporation, the vote or
written consent of the Holders of at least two-thirds of the then outstanding
shares of shares of Series C Preferred Stock at the time outstanding and
entitled to vote thereon, voting as a single class, given in person or by
proxy, either in writing without a meeting or by vote at any meeting called for
the purpose, will be necessary for effecting or validating any of the following
actions, whether or not such approval is required by California law:

 

(i)                                     Any amendment,
alteration or repeal (including by means of a merger, consolidation or
otherwise) of any provision of the Corporation’s Articles of Incorporation
(including this Certificate of Determination) or the Corporation’s Bylaws that
would significantly and adversely affects the rights or preferences of the Series C
Preferred Stock; provided, however, that for all purposes of this
Section 12(b)(i), (1) any increase in the amount of the Corporation’s
authorized but unissued shares of preferred stock, (2) any increase in the
amount of the Corporation’s authorized or issued Series C Preferred Stock,
and (3) to the extent allowed by California law, the creation and
issuance, or an increase in the authorized or issued amount, of other series of
preferred stock of the Corporation ranking equally with or junior to the Series C
Preferred Stock, either or both with respect to the payment of dividends
(whether such dividends are cumulative or non-cumulative) and/or the
distribution of assets upon the liquidation, dissolution or winding up of the
Corporation, will not, in and of itself, be deemed to materially and adversely
affect the rights, preferences, privileges or voting powers of the Series C
Preferred Stock and except as otherwise provided under California law, Holders
will have no right to vote solely by such an increase, creation or issuance; or

 

(ii)                                  So long as any
shares of Series C Preferred Stock are outstanding, the Holder shall be
entitled to vote, with a number of votes equal to that number of shares of
Common Stock into which such Holder’s shares of Series C Preferred Stock
would then be convertible, together with the holders of Common Stock acting as
a single class, in person or by proxy, either in writing without a meeting or
by vote at any meeting called for the purpose, for effecting or validating any
consummation of any Reorganization Event, as defined in Section 11 above.

 

(c)           Notwithstanding the foregoing, Holders shall not
have any voting rights if, at or prior to the effective time of the act with
respect to which such vote would otherwise be required, all outstanding shares
of Series C Preferred Stock shall have been converted into shares of
Common Stock.

 

(d)           If the Board of Governors of the Federal Reserve
System determines that the Series C Preferred Stock is classified as “voting
stock” for the purposes of the Bank Holding Company Act of 1956, as amended,
the Holders and the Corporation will make such reasonable modifications to the
voting rights in this Section 12 so that the Series C Preferred Stock
is no longer considered “voting stock.”

 

16

 

(e)           Without the vote or written consent of the holders
of the Series C Preferred Stock, so long as such action does not adversely
affect the rights, preferences, privileges and voting powers, and limitations
and restrictions thereof, of the Series C Preferred Stock, the Corporation
may amend, alter, supplement or repeal any terms of the Series C Preferred
Stock:

 

(i)                                     to cure any
ambiguity, or to cure, correct or supplement any provision contained in this
Certificate of Determination that may be ambiguous, defective or inconsistent;
or

 

(ii)                                  to make any
provision with respect to matters or questions relating to the Series C
Preferred Stock that is not inconsistent with the provisions of this
Certificate of Determination.

 

(f)            The rules and procedures for calling and
conducting any meeting of the holders of Series C Preferred Stock
(including, without limitation, the fixing of a record date in connection
therewith), the solicitation and use of proxies at such a meeting, the
obtaining of written consents and any other aspect or matter with regard to
such a meeting or such written consents shall be governed by the requirements
of the Articles of Incorporation, the Bylaws, applicable law and any national
securities exchange or other trading facility, if any, on which the Series C
Preferred Stock or Common Stock is listed or traded at the time.

 

Section 13. 
Fractional Shares.

 

(a)           No fractional shares of Common Stock will be issued
as a result of any conversion of shares of Series C Preferred Stock.

 

(b)           In lieu of any fractional share of Common Stock
otherwise issuable in respect of any mandatory conversion pursuant to Section 8
hereof, the Corporation shall pay an amount in cash to the transferee (computed
to the nearest cent) equal to the fair value of a fraction, which fair value
shall be determined based upon the same fraction of the Closing Price of the
Common Stock determined as of the second Trading Day immediately preceding the
applicable Mandatory Conversion Date.

 

(c)           If more than one share of the Series C
Preferred Stock is surrendered for conversion at one time by or for the same
transferee, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of the
Series C Preferred Stock so surrendered.

 

Section 14. 
Reservation of Common Stock.

 

(a)           The Corporation shall at all times reserve and keep
available out of its authorized and unissued Common Stock solely for issuance
upon the conversion of shares of Series C Preferred Stock as provided in
this Certificate of Determination free from any preemptive or other similar
rights, such number of shares of Common Stock as shall from time to time be
issuable upon the conversion of all the shares of Series C Preferred Stock
(assuming receipt of the Shareholder Approval and, if necessary, regulatory
approvals), then outstanding, based on the Applicable Conversion Price. For
purposes of this Section 14(a), the number of shares of Common Stock that
shall be deliverable upon the conversion of all outstanding shares of Series C
Preferred Stock shall be computed as if at the time of computation all such
outstanding shares were held by a single Holder and there was no regulatory
impediment to such conversion.

 

(b)           All shares of Common Stock delivered upon conversion
of the Series C Preferred Stock shall be duly authorized, validly issued,
fully paid and non-assessable, free and clear of all liens, claims, security
interests and other encumbrances.

 

(c)           Prior to the delivery of any securities that the
Corporation shall be obligated to deliver upon conversion of the Series C
Preferred Stock, the Corporation shall use its reasonable best efforts to
comply with all federal and state laws and regulations thereunder requiring the
registration of such securities with, or any approval of or consent to the
delivery thereof by, any governmental authority.

 

17

 

(d)           The Corporation hereby covenants and agrees that it
will list and keep listed on the Trading Market, so long as the Common Stock
shall be so listed on the Trading Market, all the Common Stock issuable upon
conversion of the Series C Preferred Stock.

 

Section 15. 
Replacement Certificates.  The Corporation shall replace any mutilated
certificate at the Holder’s expense upon surrender of that certificate to the
Corporation. The Corporation shall replace certificates that become destroyed,
stolen or lost at the Holder’s expense upon delivery to the Corporation of
satisfactory evidence that the certificate has been destroyed, stolen or lost,
together with any indemnity that may be required by the Corporation.

 

Section 16. 
Miscellaneous.

 

(a)           All notices referred to herein shall be in writing,
and, unless otherwise specified herein, all notices hereunder shall be deemed
to have been given upon the earlier of receipt thereof or five (5) Business
Days after the mailing thereof if sent by registered or certified mail (unless
first-class mail shall be specifically permitted for such notice under the
terms of this Certificate of Determination) with postage prepaid, addressed: (i) if
to the Corporation, to its office at 150 Almaden Boulevard, San Jose,
California 95113, Attention: President and Chief Executive Officer, with a copy
to the Corporation’s Corporate Secretary, or (ii) if to any Holder, to
such Holder at the address of such Holder as listed in the stock record books
of the Corporation, or (iii) to such other address as the Corporation or
any such Holder, as the case may be, shall have designated by notice similarly
given.

 

(b)           The Corporation shall pay any and all stock transfer
and documentary stamp taxes that may be payable in respect of any issuance or
delivery of shares of Series C Preferred Stock or shares of Common Stock
or other securities issued on account of Series C Preferred Stock pursuant
hereto or certificates representing such shares or securities. The Corporation
shall not, however, be required to pay any such tax that may be payable in
respect of any transfer involved in the issuance or delivery of shares of Series C
Preferred Stock or Common Stock or other securities in a name other than that
in which the shares of Series C Preferred Stock with respect to which such
shares or other securities are issued or delivered were registered, or in
respect of any payment to any Person other than a payment to the registered
holder thereof, and shall not be required to make any such issuance, delivery
or payment unless and until the Person otherwise entitled to such issuance,
delivery or payment has paid to the Corporation the amount of any such tax or
has established, to the satisfaction of the Corporation, that such tax has been
paid or is not payable.

 

(c)           All payments on the shares of Series C
Preferred Stock shall be subject to withholding and backup withholding of tax
to the extent required by applicable law, subject to applicable exemptions, and
amounts withheld, if any, shall be treated as received by the holders thereof.

 

(d)           No share of Series C Preferred Stock shall have
any rights of preemption whatsoever under this Certificate of Determination as
to any securities of the Corporation, or any warrants, rights or options issued
or granted with respect thereto, regardless of how such securities, or such
warrants, rights or options, may be designated issued or granted.

 

(e)           The shares of Series C Preferred Stock shall
not have any voting powers, preferences or relative, participating, optional or
other rights, or qualifications, limitations or restrictions thereof, other
than as set forth herein or in the Corporation’s Articles of Incorporation or
as provided by applicable law.

 

(f)            The Corporation covenants not to treat the Series C
Preferred Stock as preferred stock for purposes of Section 305 of the
Internal Revenue Code of 1986, as amended, except as otherwise required by
applicable law.

 

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[SIGNATURE PAGE FOLLOWS]

 

18

 

We
further declare 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 our own knowledge.

 

 

	
   

  	
   

  	
  /s/
  Lawrence McGovern

  
	
   

  	
   

  	
  Lawrence
  McGovern,

  
	
   

  	
   

  	
  Executive
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Debbie Reuter

  
	
   

  	
   

  	
  Debbie
  Reuter,

  
	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  	
   

  
	
  Date:
  June 17, 2010.

  	
   

  	
   

  

 

Certificate of Determination — Series C

 

S-1

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