Amendment No. 1 to Schedule 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U3oVhm+7XtDRCZbT7L6iFpXGA9eoF0z9BNq719pc9O2Gsg3BeKWDZdJk1QzjQwY1 wFZmFv86oLOorR/L4YB16g== 0001021408-02-014931.txt : 20021206 0001021408-02-014931.hdr.sgml : 20021206 20021206130302 ACCESSION NUMBER: 0001021408-02-014931 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20021206 GROUP MEMBERS: CHRISTOPHER P. HENDY GROUP MEMBERS: REDWOOD HOLDINGS, INC. GROUP MEMBERS: REDWOOD WEST COAST, LLC GROUP MEMBERS: THOMAS A. DONELAN SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SYNBIOTICS CORP CENTRAL INDEX KEY: 0000719483 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 953737816 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-37439 FILM NUMBER: 02850682 BUSINESS ADDRESS: STREET 1: 11011 VIA FRONTERA CITY: SAN DIEGO STATE: CA ZIP: 92127 BUSINESS PHONE: 6194513771 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: RUYAN JERRY L CENTRAL INDEX KEY: 0000903266 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: MERIDIAN DIAGNOSTICS INC STREET 2: 3471 RIVER HILLS DRIVE CITY: CINCINNATI STATE: OH ZIP: 45244 BUSINESS PHONE: 5132713700 MAIL ADDRESS: STREET 1: MERIDIAN DIAGNOSTICS INC STREET 2: 3471 RIVER HILLS DRIVE CITY: CINCINNATI STATE: OH ZIP: 45244 SC 13D/A 1 dsc13da.htm AMENDMENT NO. 1 TO SCHEDULE 13D Amendment No. 1 to Schedule 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13D

UNDER THE SECURITIES EXCHANGE ACT OF 1934

(AMENDMENT NO. 1)

SYNBIOTICS CORPORATION

(Name of Issuer)

Common Stock

(Title of Class of Securities)

871566105

(CUSIP Number)

Christopher P. Hendy

Redwood West Coast, LLC

9468 Montgomery Road

Cincinnati, Ohio 45242

(513) 984-9730

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

November 27, 2002

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box ¨.

(Continued on the following pages)

CUSIP No. 871566105


1.	Name of Reporting Persons I.R.S. Identification Nos. of above persons (entities only) Redwood West Coast, LLC

2.	Check the Appropriate Box if a Member of a Group	(a) x (b) ¨

3.	SEC Use Only

4.	Source of Funds WC

5.	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)	¨

6.	Citizenship or Place of Organization Delaware limited liability company

NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7. Sole Voting Power 0 8. Shared Voting Power 21,796,668 – See Item 5(b) 9. Sole Dispositive Power 0 10. Shared Dispositive Power 21,796,668 – See Item 5(b)

11.	Aggregate Amount Beneficially Owned by Each Reporting Person 21,796,668 – See Item 5(a)

12.	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares	¨

13.	Percent of Class Represented by Amount in Row (11) 54.8%

14.	Type of Reporting Person OO

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CUSIP No. 871566105


1.	Name of Reporting Persons I.R.S. Identification Nos. of above persons (entities only) Jerry L. Ruyan

2.	Check the Appropriate Box if a Member of a Group	(a) x (b) ¨

3.	SEC Use Only

4.	Source of Funds PF

5.	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)	¨

6.	Citizenship or Place of Organization United States

NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7. Sole Voting Power 255,000 8. Shared Voting Power 21,796,668 – See Item 5(b) 9. Sole Dispositive Power 255,000 10. Shared Dispositive Power 21,796,668 – See Item 5(b)

11.	Aggregate Amount Beneficially Owned by Each Reporting Person 22,051,668 – See Item 5(a)

12.	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares	¨

13.	Percent of Class Represented by Amount in Row (11) 55.5%

14.	Type of Reporting Person IN

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CUSIP No. 871566105


1.	Name of Reporting Persons I.R.S. Identification Nos. of above persons (entities only) Thomas A. Donelan

2.	Check the Appropriate Box if a Member of a Group	(a) x (b) ¨

3.	SEC Use Only

4.	Source of Funds PF

5.	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)	¨

6.	Citizenship or Place of Organization United States

NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7. Sole Voting Power 0 8. Shared Voting Power 21,796,668 – See Item 5(b) 9. Sole Dispositive Power 0 10. Shared Dispositive Power 21,796,668 – See Item 5(b)

11.	Aggregate Amount Beneficially Owned by Each Reporting Person 21,796,668 – See Item 5(a)

12.	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares	¨

13.	Percent of Class Represented by Amount in Row (11) 54.8%

14.	Type of Reporting Person IN

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CUSIP No. 871566105


1.	Name of Reporting Persons I.R.S. Identification Nos. of above persons (entities only) Christopher P. Hendy

2.	Check the Appropriate Box if a Member of a Group	(a) x (b) ¨

3.	SEC Use Only

4.	Source of Funds PF

5.	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)	¨

6.	Citizenship or Place of Organization United States

NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7. Sole Voting Power 0 8. Shared Voting Power 21,796,668 – See Item 5(b) 9. Sole Dispositive Power 0 10. Shared Dispositive Power 21,796,668 – See Item 5(b)

11.	Aggregate Amount Beneficially Owned by Each Reporting Person 21,796,668 – See Item 5(a)

12.	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares	¨

13.	Percent of Class Represented by Amount in Row (11) 54.8%

14.	Type of Reporting Person IN

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CUSIP No. 871566105


1.	Name of Reporting Persons I.R.S. Identification Nos. of above persons (entities only) Redwood Holdings, Inc. 31-1574894

2.	Check the Appropriate Box if a Member of a Group	(a) x (b) ¨

3.	SEC Use Only

4.	Source of Funds WC & AF

5.	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)	¨

6.	Citizenship or Place of Organization Ohio corporation

NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7. Sole Voting Power 0 8. Shared Voting Power 21,796,668 – See Item 5(b) 9. Sole Dispositive Power 0 10. Shared Dispositive Power 21,796,668 – See Item 5(b)

11.	Aggregate Amount Beneficially Owned by Each Reporting Person 21,796,668 – See Item 5(a)

12.	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares	¨

13.	Percent of Class Represented by Amount in Row (11) 54.8%

14.	Type of Reporting Person CO

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This Schedule 13D is filed by Redwood West Coast, LLC, Jerry L. Ruyan, Thomas A. Donelan, Christopher P. Hendy and Redwood Holdings, Inc. Messrs. Ruyan, Hendy and Donelan are members of, and serve on the Management Committee of, Redwood West Coast, LLC. Pursuant to the terms of the Operating Agreement for Redwood West Coast, LLC, all shared voting and shared dispositive authority over the securities reflected in this Schedule 13D related to the shares of Series C Preferred Stock is vested in the Management Committee. Additionally, Messrs. Hendy and Donelan are Co-Managers of Redwood West Coast, LLC. The shares reflected in this Schedule 13D filing related to the shares of Series C Preferred Stock were issued in the name of Redwood West Coast, LLC.

Item 1. Security and Issuer.

This Schedule 13D relates to the Common Stock of Synbiotics Corporation, a California corporation. Synbiotics’ principal executive offices are located at 11011 Via Frontera, San Diego, California 92127.

Item 2. Identity and Background.

Redwood West Coast, LLC

(a)

Redwood West Coast, LLC.

(b)

9468 Montgomery Road, Cincinnati, Ohio 45242.

(c)

Redwood West Coast, LLC is a Delaware limited liability company organized to acquire voting securities of Synbiotics constituting at least a majority of its outstanding voting power and thereafter to hold such securities and control the operations of Synbiotics. Jerry L. Ruyan, Thomas A. Donelan and Christopher P. Hendy are members of Redwood West Coast, LLC. Pursuant to the Operating Agreement for Redwood West Coast, LLC, all authority is vested in the Management Committee which is comprised of Messrs. Ruyan, Hendy and Donelan. Messrs. Hendy and Donelan are Co-Managers of Redwood West Coast, LLC. Redwood West Coast, LLC’s business address is 9468 Montgomery Road, Cincinnati, Ohio 45242.

(d)

Redwood West Coast, LLC, during the last five years, has not been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors.

(e)

Redwood West Coast, LLC, during the last five years, has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction which resulted in Redwood West Coast, LLC being at any time subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f)

Delaware limited liability company.

Jerry L. Ruyan

(a)

Jerry L. Ruyan.

(b)

9468 Montgomery Road, Cincinnati, Ohio 45242.

(c)

Mr. Ruyan is primarily engaged in the business of investing in businesses which he believes will improve with better management. He conducts his investment activities from the address listed in (b) above. Mr. Ruyan also serves on the Board of Directors of Hemagen Diagnostics, Inc., a Delaware corporation. Hemagen’s principal business address is 9033 Red Branch Road, Columbia, Maryland 21045.

(d)

Mr. Ruyan, during the last five years, has not been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors.

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(e)

Mr. Ruyan, during the last five years, has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction which resulted in Mr. Ruyan being at any time subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f)

United States citizen.

Thomas A. Donelan

(a)

Thomas A. Donelan.

(b)

9468 Montgomery Road, Cincinnati, Ohio 45242.

(c)

Redwood Holdings, Inc., 9468 Montgomery Road, Cincinnati, Ohio 45242. Mr. Donelan serves on the Management Committee of Redwood West Coast, LLC and the Board of Directors of Synbiotics. Mr. Donelan is a Co-Manager of Redwood West Coast, LLC.

(d)

Mr. Donelan, during the last five years, has not been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors.

(e)

Mr. Donelan, during the last five years, has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction which resulted in Mr. Donelan being at any time subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f)

United States citizen.

Christopher P. Hendy

(a)

Christopher P. Hendy.

(b)

9468 Montgomery Road, Cincinnati, Ohio 45242.

(c)

Redwood Holdings, Inc., 9468 Montgomery Road, Cincinnati, Ohio 45242. Mr. Hendy serves on the Management Committee of Redwood West Coast, LLC and the Board of Directors of Synbiotics. Mr. Hendy is a Co-Manager of Redwood West Coast, LLC.

(d)

Mr. Hendy, during the last five years, has not been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors.

(e)

Mr. Hendy, during the last five years, has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction which resulted in Mr. Hendy being at any time subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f)

United States citizen.

Redwood Holdings, Inc.

(a)

Redwood Holdings, Inc.

(b)

9468 Montgomery Road, Cincinnati, Ohio 45242

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(c)

Redwood Holdings, Inc. is a 100% owned subsidiary of an employee stock ownership plan, the beneficial owners of which are Jerry L. Ruyan – 49.9%, Thomas A. Donelan – 24.9% and Christopher P. Hendy – 24.9% Redwood Holdings, Inc.’s address is Redwood Holdings, Inc., 9468 Montgomery Road, Cincinnati, Ohio 45242.

(d)

Redwood Holdings, Inc., during the last five years, has not been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors.

(e)

Redwood Holdings, Inc., during the last five years, has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction which resulted in Redwood Holdings, Inc. being at any time subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f)

Ohio corporation.

Item 3. Source and Amount of Funds or Other Consideration.

On October 31, 2002, pursuant to a Stock Swap Agreement, Redwood West Coast, LLC exchanged 2,800 shares of Series B Preferred Stock of Synbiotics Corporation for 2,800 shares of Series C Preferred Stock of Synbiotics Corporation. Messrs. Ruyan, Donelan and Hendy are members of Redwood West Coast, LLC and serve on its Management Committee. All company authority, including voting and dispositive power over the Series C Preferred Stock, is vested in the Management Committee. Messrs. Hendy and Donelan are Co-Managers of Redwood West Coast, LLC.

During the period November 20, 2002 through November 27, 2002, Mr. Ruyan directly purchased, for his own personal account, 255,000 shares of common stock of Synbiotics Corporation in open market transactions utilizing his own personal funds.

Item 4. Purpose of Transaction.

The shares of Series C Preferred Stock, which are convertible into shares of Common Stock that are the subject of this Schedule 13D, were acquired by Redwood West Coast, LLC pursuant to a Stock Swap Agreement dated October 31, 2002 between Redwood West Coast, LLC and Synbiotics Corporation. Pursuant to the terms of the Stock Swap Agreement, Redwood West Coast, LLC exchanged its 2,800 shares of Series B Preferred Stock of Synbiotics Corporation for 2,800 shares of Series C Preferred Stock of Synbiotics Corporation. These shares are convertible into 21,796,668 shares of Common Stock at any time. In addition, under certain circumstances as set forth in the Stock Swap Agreement, Redwood West Coast, LLC may be issued additional shares of Series C Preferred Stock by Synbiotics Corporation.

Each share of Series C Preferred Stock is convertible into such number of shares of Common Stock as is determined by dividing each share of Series C Preferred Stock, valued at $1,000, by the conversion price – initially set at $0.12846 (these conversion features are identical to that of the Series B Convertible Preferred Stock). The conversion price is subject to adjustment as set forth in the Certificate of Determination, as amended, establishing the Series C Preferred Stock including, without limitation, adjustments for stock splits, dividends and issuances by Synbiotics Corporation of additional shares of its Common Stock at prices below the applicable conversion price.

Holders of Series C Preferred Stock are entitled to vote with the holders of the Common Stock, as a single class, on each matter submitted to the shareholders of Synbiotics Corporation. Each share of Series C Preferred Stock represents that number of votes that equals the number of shares of Common Stock into which such shares of Series c Preferred Stock may be converted at the applicable conversion price. The voting rights granted to the holders of Series C Preferred Stock apply at all times. In addition, holders of Series C Preferred Stock, voting as a single class, have the ability to amend certain terms of such preferred stock. Accordingly, the Reporting Persons are deemed to have shared voting power over all of the shares reflected in this Schedule 13D related to the Series C Preferred Stock.

Redwood West Coast, LLC acquired the Series C Preferred Stock shares reflected in this Schedule 13D for purposes of controlling Synbiotics Corporation. The Reporting Persons may also acquire additional Synbiotics securities from time to time. Synbiotics Corporation has restructured its Board of Directors so that Redwood West Coast, LLC designees occupy 2 of the 3 seats on its Board. The Redwood West Coast, LLC Board seats are held by Messrs. Hendy and Donelan.

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The shares of Common Stock acquired directly by Mr. Ruyan are for his own personal account.

Except as set forth above, the Reporting Persons do not have any plans or proposals which relate to or would result in:

4.1

The acquisition by any person of additional securities of the issuer, or the disposition of securities of the issuer;

4.2

An extraordinary corporation transaction, such as a merger, reorganization or liquidation, involving the issuer or any of its subsidiaries;

4.3

A sale or transfer of a material amount of assets of the issuer or of any of its subsidiaries;

4.4

Any change in the present board of directors or management of the issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board;

4.5

Any material change in the present capitalization or dividend policy of the issuer;

4.6

Any other material change in the issuer’s business or corporate structure;

4.7

Changes in the issuer’s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the issuer by any person;

4.8

Causing a class of securities of the issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association;

4.9

Causing a class of equity securities of the issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act; or

4.10

Any action similar to any of those enumerated above.

Item 5. Interest in Securities of Issuer.

Redwood West Coast, LLC, Jerry L. Ruyan, Thomas A. Donelan, Christopher P. Hendy and Redwood Holdings, Inc.

Pursuant to the Stock Swap Agreement and as set forth above in Item 4, the 2,800 shares of Series C Preferred Stock acquired by Redwood West Coast, LLC are convertible into 21,796,668 shares of Synbiotics Corporation Common Stock. According to its Form 10-Q filed with the Securities and Exchange Commission on November 8, 2002, as of November 8, 2002, Synbiotics Corporation had 17,953,514 shares of its Common Stock outstanding. After factoring in the conversion of the Series C Preferred Stock held by Redwood West Coast, LLC, the Reporting Persons, except Mr. Ruyan, are deemed to beneficially own 54.8% of the outstanding Common Stock of Synbiotics Corporation. After factoring in the conversion of the Series C Preferred Stock held by Redwood West Coast, LLC, and the 255,000 shares of Common Stock held in his personal account, Mr. Ruyan is deemed to beneficially own 55.5% of the outstanding Common Stock of Synbiotics Corporation.

(a)

See pages 2 - 6, nos. 11 and 13. No. 11 includes 21,796,668 shares issuable upon conversion of the Synbiotics Corporation Series C Preferred Stock. Such shares of preferred stock are convertible within 60 days. The Reporting Persons have shared voting power and shared dispositive power over all of the shares related to the Series C Preferred Stock reflected in this filing.

(b)

See pages 2 - 6, nos. 7 -10. Nos. 8 and 10 include 21,796,668 shares of Common Stock issuable upon conversion of the Synbiotics Corporation Series C Preferred Stock. Such shares of preferred stock are convertible within 60 days. The Reporting Persons have shared voting power and shared dispositive power over all of the shares related to the Series C Preferred Stock reflected in this filing. Mr. Ruyan has sole voting power and sole dispositive power over all the shares he holds in his personal account reflected in this filing.

(c)

Other than as set forth above, the Reporting Persons have made no transactions with respect to Synbiotics Corporation securities in the last 60 days.

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(d)

None.

(e)

Not Applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with respect to Securities of the Issuer.

Messrs. Hendy, Donelan, Ruyan and Redwood Holdings, Inc. are parties to Redwood West Coast, LLC’s Operating Agreement which vests all company authority in the Management Committee, which is comprised of Messrs. Hendy, Donelan and Ruyan.

Item 7. Material to be filed as Exhibits.

Stock Swap Agreement dated October 31, 2002 between Synbiotics Corporation and Redwood West Coast, LLC.

Certificate of Determination of Preferences of Series C Preferred Stock of Synbiotics Corporation, a California corporation, filed October 31, 2002.

After reasonable inquiry and to the best of each of the undersigned’s knowledge and belief, each of the undersigned does hereby certify that the information set forth in this statement is true, complete and correct.


/s/ Jerry L. Ruyan
Jerry L. Ruyan Dated: December 6, 2002


/s/ Thomas A. Donelan
Thomas A. Donelan Dated: December 6, 2002


/s/ Christopher P. Hendy
Christopher P. Hendy Dated: December 6, 2002

REDWOOD WEST COAST, LLC

By:		/s/ Christopher P. Hendy
Christopher P. Hendy, Co-Manager Dated: December 6, 2002

REDWOOD HOLDINGS, INC.

By:		/s/ Thomas A. Donelan
Thomas A. Donelan, President Dated: December 6, 2002

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EX-1 3 dex1.htm STOCK SWAP AGREEMENT Stock Swap Agreement

Exhibit 1

STOCK SWAP AGREEMENT

This Stock Swap Agreement is made on October 31, 2002 between Synbiotics Corporation (“Synbiotics”) and Redwood West Coast, LLC (“Redwood”).

Synbiotics will issue 2,800 shares of its Series C Preferred Stock to Redwood in exchange for 2,800 shares of outstanding Series B Preferred Stock of Synbiotics owned by Redwood. This swap shall occur immediately after the execution and delivery of this Agreement and is intended to qualify as a tax-free reorganization under Internal Revenue Code Section 368(a)(1)(E).

Redwood represents, warrants and covenants to Synbiotics that:

1. The Series B Preferred Stock it shall deliver is free and clear of all liens, security interests, encumbrances and adverse claims.

2. It is acquiring the Series C Preferred Stock (and any underlying Common Stock) for its own account for investment, and not with a view to any resale or distribution.

3. It understands that the Series C Preferred Stock (and any underlying Common Stock) cannot now be publicly traded, and constitutes “restricted securities” as well as “controlled securities” under Rule 144, and will bear an appropriate securities-law legend.

Synbiotics represents, warrants and covenants to Redwood that:

1. The Series C Preferred Stock is duly authorized, its issuance to Redwood in this transaction has been duly authorized, and, upon issuance to Redwood in this transaction, it will be validly issued, fully paid and nonassessable.

2. The Common Stock underlying the Series C Preferred Stock is duly authorized and has been duly reserved and, upon issuance of such Common Stock upon conversion of the Series C Preferred Stock in accordance with its terms, will be duly authorized, validly issued, fully paid and nonassessable.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

This Stock Swap Agreement shall be governed by California law. It cannot be amended except in writing. It constitutes the entire agreement of the parties with regard to the subject matter hereof, and supersedes all prior and contemporaneous agreements, negotiations, promises, understandings and arrangements with regard to such subject matter.

SYNBIOTICS CORPORATION

By:		/s/ CHRISTOPHER P. HENDY
		Vice President

REDWOOD WEST COAST, LLC

By:		/s/ THOMAS A. DONELAN
		Thomas A. Donelan, Co-Managing Member

As the equity owners of Redwood, each of the undersigned represents that, to the extent it or he is for the purpose of blue sky laws treated as a purchaser of the Series C Preferred Stock (and the underlying Common Stock), it or he is acquiring the securities for its or his own account for investment, and not with a view to resale or distribution thereof.

THOMAS A. DONELAN IRA #06-2936

By:		/s/ THOMAS A. DONELAN, TRUSTEE

		/s/ CHRISTOPHER P. HENDY
		Christopher P. Hendy

		/s/ THOMAS A. DONELAN
		Thomas A. Donelan

		/s/ JERRY RUYAN
		Jerry Ruyan

		/s/ ALAN R. HENDY
		Alan R. Hendy

[SIGNATURE PAGE TO STOCK SWAP AGREEMENT]

IRA ACCOUNT #06-3400 CHRISTOPHER P. HENDY

By:		/s/ CHRISTOPHER P. HENDY

IRA ACCOUNT #781-90000-201 JERRY L. RUYAN

By:		/s/ JERRY L. RUYAN

REDWOOD HOLDINGS INC.

By:		/s/ THOMAS A. DONELAN
		President

PROVIDENT BANK, Trustee of the Keating, Muething & Klekamp P.L.L. 401(k) Profit Sharing Plan F.B.O. Gary Kreider

By:		/s/ WILLIAM A. HARDING

[SIGNATURE PAGE TO STOCK SWAP AGREEMENT]

EX-2 4 dex2.htm CERTIFICATE OF DETERMINATION Certificate of Determination

Exhibit 2

CERTIFICATE OF DETERMINATION

OF PREFERENCES OF

SERIES C PREFERRED STOCK

OF SYNBIOTICS CORPORATION

a California corporation

Christopher P. Hendy and Keith A. Butler hereby certify that:

A. They are the Vice President and Secretary, respectively, of Synbiotics Corporation, a California corporation (the “Corporation”).

B. Pursuant to the authority given by the Corporation’s Articles of Incorporation, as amended to date, the Board of Directors of the Corporation has duly adopted the resolution attached as Exhibit “A,” incorporated by reference as if fully set forth herein.

C. The authorized number of shares of Preferred Stock of the Corporation is 25,000,000. Of these, the authorized number of shares of Series A Junior Participating Preferred Stock is 200,000 and the authorized number of shares of Series B Preferred Stock is 4,000; and there are no other series of Preferred Stock (other than the Series C Preferred Stock, created hereby). The authorized number of shares of such Series C Preferred Stock of the Corporation is 4,000, none of which has been issued.

IN WITNESS WHEREOF, the undersigned certify under penalty of perjury that they have read the foregoing Certificate of Determination and know the contents thereof, and that the statements therein are true and correct of their own knowledge.

Executed in San Diego, California on October 24, 2002.

		/s/ CHRISTOPHER P. HENDY
		Christopher P. Hendy Vice President

		/s/ KEITH A. BUTLER
		Keith A. Butler Secretary

Exhibit A

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issue of a series of Preferred Stock of the Corporation consisting of Four Thousand (4,000) shares designated as “Series C Preferred Stock,” and does hereby fix the rights, preferences, privileges, and restrictions and other matters relating to said Series C Preferred Stock as follows:

Series C Preferred Stock

Article 1

Number of Shares; Designation

The series of Preferred Stock established hereby shall be designated the “Series C Preferred Stock” and the authorized number of shares of Series C Preferred Stock shall be 4,000.

Article 2

Dividends

Section 2.1 The holders of the shares of the Series C Preferred Stock shall be entitled to receive, out of the assets of the Corporation legally available therefor and as and when declared by the Board of Directors, dividends at the rate of $75.00 per share per year (subject to appropriate adjustments in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), payable quarterly on the last day of the months of January, April, July and October in each year (each a “Dividend Payment Date”). Such dividends shall accrue and be cumulative (whether or not in any quarterly dividends period there shall be funds of the Corporation legally available for the payment of such dividends), from the date of the last quarterly dividend date to which dividends were declared and paid on the Series C Preferred Stock of the Corporation. Each such dividend shall be paid to the holders of record of shares of Series C Preferred Stock as they appear on the stock register of the Corporation on the 15th day of the month next preceding the payment date thereof. Dividends on account of arrears for any past dividend periods may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board of Directors.

Section 2.2

(A) All dividends payable pursuant to this Article 2 shall be paid in cash; provided, that if any dividends remain unpaid for thirty (30) days (the “Late Dividend Date”) past the applicable Dividend Payment Date (all such dividends are referred to as “Late Dividends”), the Majority Holders (as defined in Section 2.4) may elect, by delivering written notice of such election to the Corporation between the Late Dividend Date and the tenth day after the Late Dividend Date, to receive, in lieu of the Late Dividend, shares of Common Stock as set forth in subsection (B) below. If no such written notice is delivered within such period, the Late Dividend shall be deferred until the next succeeding Late Dividend Date (whether or not dividends are paid with respect to the next succeeding Dividend Payment Date).

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(B) If the Majority Holders timely make the written election described in subsection (A) above, all the holders of Series C Preferred Stock shall forthwith receive, in lieu of a Late Dividend, shares of Common Stock with a Fair Market Value (as defined in Section 2.4) equal to such accrued and unpaid dividends (a “Series C Common Stock Dividend”). The Corporation may issue fractional shares of Common Stock as Series C Common Stock Dividends. All shares of Common Stock issued pursuant to a Series C Common Stock Dividend will upon issue be duly authorized, validly issued, fully paid and nonassessable.

(C) The Corporation shall not, in the event of a deferral (or successive deferral) of a Late Dividend pursuant to Section 2.2(A) or in the event of the payment of a Series C Common Stock Dividend pursuant to Section 2.2(B), for a period of ninety (90) days following the date of such deferral or the date of payment of any Series C Common Stock Dividend, as the case may be, pay any cash dividend on any share of stock of any class or series of stock other than Series C Preferred Stock.

(D) The Majority Holders shall have the options set forth in Section 2.2(A) with respect to each Late Dividend on the Series C Preferred Stock. With respect to accrued but unpaid dividends relating to Late Dividends deferred under Section 2.2(A), the Majority Holders, at the next succeeding Late Dividend Date, may (by again not delivering timely written notice of election to receive a Series C Common Stock Dividend) again defer receipt in the manner provided in Section 2.2(A) or the Majority Holders may so elect, with respect to any or all accrued but unpaid Late Dividends, that all holders of Series C Preferred Stock shall receive Series C Common Stock Dividends at the price determined in the manner set forth in Section 2.4(A). The Majority Holders may elect (by again not delivering timely written notice of election to receive a Series C Common Stock Dividend) to defer any Late Dividends or may elect that all holders of Series C Preferred Stock shall receive Series C Common Stock Dividends with respect to each Late Dividend notwithstanding any election of or status regarding other unpaid Old Dividends (as defined in Section 2.2(E)) or Late Dividends, as the case may be.

(E) The aggregate amount of $161,095.89 (the “Old Dividends”) as of the date of original issuance of the Series C Preferred Stock shall, for all purposes, be treated as Late Dividends on the Series C Preferred Stock. In furtherance and not in limitation of the foregoing, with respect to Old Dividends, the Majority Holders shall be entitled to make the election provided in Section 2.2(A) on the first Late Dividend Date after the date of issuance of the Series C Preferred Stock, and at the next succeeding Late Dividend Date, may elect again (by again not delivering timely written notice of election to receive a Series C Common Stock Dividend) to defer receipt of the Old Dividends in the manner provided in Section 2.2(A) or may elect, with respect to any or all accrued but unpaid Old Dividends, that all holders of Series C Preferred Stock shall receive Series C Common Stock at the price determined in the manner set forth in Section 2.4(A). On each Late Dividend Date, the Majority Holders may elect (by again not delivering timely written notice of election to receive a Series C Common Stock Dividend) to defer any unpaid Old Dividends or may elect that all holders of Series C Preferred Stock shall receive Series C Common Stock Dividends with respect to such Old Dividends notwithstanding any election of or status regarding other unpaid Old Dividends or Late Dividends, as the case may be.

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Section 2.3 Dividends payable on the Series C Preferred Stock for each full quarterly dividends period shall be computed by dividing the annual rate by four. Dividends payable on the Series C Preferred Stock for any period less than a full quarterly dividend period and for the initial dividend period, shall be computed on the basis of a 360-day year of four 90-day quarters and the actual number of days elapsed on the period for which payable, including the date of payment.

Section 2.4 For purposes of this Article 2:

(A) “Fair Market Value” means, through January 31, 2003, a price of $0.12846 per share of Common Stock and thereafter, the average closing price of the Common Stock for the twenty (20) trading days preceding a Dividend Payment Date. The “Fair Market Value” determined for any period shall apply to any shares of Common Stock issued as Series C Common Stock Dividends prior to the next succeeding Dividend Payment Date. Notwithstanding the foregoing, in no event shall Fair Market Value be deemed to be less than $0.12846. Fair Market Value, and the numbers stated in this Section 2.4(A), shall be subject to appropriate adjustment upon any stock split or reverse stock split of Common Stock or any dividend of Common Stock upon Common Stock, in the same manner as contemplated by Sections 5.5 and 5.6.

(B) “Majority Holders” means those holders owning shares of Series C Preferred Stock having a Liquidation Value (as defined in Article 3) in excess of fifty percent (50%) of all outstanding shares of Series C Preferred Stock as evidenced by a writing submitted to the Corporation signed by such Majority Holders.

Article 3

Liquidation, Dissolution or Winding Up

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series C Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any other class or series of stock of the Corporation ranking on liquidation prior and in preference to the Series C Preferred Stock, but before any payment shall be made to the holders of any other class or series of stock of the Corporation ranking junior on liquidation to the Series C Preferred Stock by reason of their ownership thereof, an amount equal to $1,000 per share (the “Liquidation Value”) of Series C Preferred Stock plus any accrued but unpaid dividends (whether or not declared), and no more. If upon any such liquidation, dissolution or winding up of the Corporation the remaining assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the holders of shares of Series C Preferred Stock the full amount to which they shall be entitled, the holders of shares of Series C Preferred Stock and any class or series of stock ranking on liquidation on a parity with the Series C Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The Series C Preferred Stock and the Series B Preferred Stock shall rank pari passu upon liquidation.

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Article 4

Voting

Section 4.1 Each holder of outstanding shares of Series C Preferred Stock shall be entitled to the number of votes equal to the number of whole shares of Common Stock into which the shares of Series C Preferred Stock held by such holder are convertible (as adjusted from time to time pursuant to Article 5 below), at each meeting of shareholders of the Corporation (and written actions of shareholders in lieu of meetings) with respect to any and all matters presented to the shareholders of the Corporation for their action or consideration. The voting rights granted in the immediately preceding sentence to the holders of Series C Preferred Stock shall apply even if, at the record date, meeting date and/or effective date of such action, the Corporation does not have sufficient authorized but unissued shares of Common Stock to permit the conversion in full, as of any such date, of the Series C Preferred Stock into Common Stock (as provided in Article 5 below). Except as provided by law, with respect to votes to be taken exclusively by the holders of Series C Preferred Stock as provided herein, by the provisions of Section 4.1, Section 4.2 or Section 4.3 below, or by the provisions establishing any other series of Preferred Stock, holders of Series C Preferred Stock and of any other outstanding series of Preferred Stock shall vote together with the holders of Common Stock as a single class.

Section 4.2 The Corporation shall not amend, alter or repeal preferences, rights, powers or other terms of the Series C Preferred Stock so as to affect adversely the Series C Preferred Stock, without the written consent or affirmative vote of the holders of at least sixty-six and two-thirds percent of the then outstanding shares of Series C Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. For this purpose, without limiting the generality of the foregoing, the authorization or issuance of any series of Preferred Stock which is on a parity with or has preference or priority over the Series C Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Corporation shall be deemed to affect adversely the Series C Preferred Stock.

Section 4.3 Unless the consent of the holders of not less than sixty-six and two-thirds percent of the outstanding Series C Preferred Stock, voting separately as a single class, in person or by proxy, either in writing without a meeting or at a special or annual meeting of shareholders called for the purpose, is obtained:

(A) the Corporation shall not sell all or substantially all of the Corporation’s assets or effect a merger or consolidation or any other transaction resulting in the acquisition of a majority of the then outstanding voting stock of the Corporation by another corporation or entity;

(B) except as set forth in Article 6, neither the Corporation nor any of its subsidiaries or affiliates shall declare, agree to declare, pay or agree to pay dividends or make any other distribution on (other than 100% to the Corporation), or redeem, any shares of any class or series of its equity securities other than with respect to the Series C Preferred Stock, unless all dividends accrued on shares of the Series C Preferred Stock shall have been declared and paid;

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(D) the Corporation shall not, by amendment of its Articles of Incorporation or Bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, take any action which adversely affects (directly or indirectly) the rights of the holders of the Series C Preferred Stock.

Article 5

Conversion

The holders of the Series C Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

Section 5.1 Each share of Series C Preferred Stock shall be convertible, at the option of the holder thereof, at any time, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $1,000.00 by the Conversion Price (as defined below) in effect at the time of conversion. The Conversion Price at which shares of Common Stock shall be deliverable upon conversion of Series C Preferred Stock without the payment of additional consideration by the holder thereof (the “Conversion Price”) shall initially be $0.12846. Such initial Conversion Price, and the rate at which shares of Series C Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

In the event of a liquidation of the Corporation, the Conversion Rights shall terminate at the close of business on the first full day preceding the date fixed for the payment of any amounts distributable on liquidation to the holders of Series C Preferred Stock.

Section 5.2 No fractional shares of Common Stock shall be issued upon conversion of the Series C Preferred Stock. In lieu of fractional shares, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price.

Section 5.3 Mechanics of Conversion.

(A) In order to convert shares of Series C Preferred Stock into shares of Common Stock after the Common Increase Date, the holder shall surrender the certificate or certificates for such shares of Series C Preferred Stock at the office of the transfer agent (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares represented by such certificate or certificates. Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent or the Corporation shall be the conversion date (“Conversion Date”). The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such holder, or to his

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nominees, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share.

(B) The Corporation shall at all times after the Common Increase Date during which the Series C Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series C Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series C Preferred Stock.

(C) Upon any such conversion, no adjustment to the Conversion Price shall be made for any accrued and unpaid dividends on the Series C Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion. All accrued but unpaid dividends through the Conversion Date will be paid by the Corporation to the holder at the same time that certificates representing the Common Stock are delivered upon conversion.

(D) All shares of Series C Preferred Stock, which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive dividends (except for accrued but unpaid dividends through the Conversion Date), notices and to vote, shall immediately cease and terminate on the Conversion Date, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and accrued but unpaid dividends through the Conversion Date. Any shares of Series C Preferred Stock so converted shall be retired and cancelled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the number of shares of authorized Series C Preferred Stock accordingly.

(E) If the conversion is in connection with an underwritten offer of securities registered pursuant to the Securities Act of 1933, the conversion may, at the option of any holder tendering Series C Preferred Stock for conversion, be conditioned upon the closing with the underwriter of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock issuable upon such conversion of the Series C Preferred Stock shall not be deemed to have converted such Series C Preferred Stock until immediately prior to the closing of the sale of securities.

Section 5.4 Adjustments to Conversion Price.

(A) Special Definitions. For purposes of this Section 5.4, the following definitions shall apply:

(1) “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities, excluding rights or options granted to employees, directors or consultants of the Corporation pursuant to an option plan adopted by the Board of Directors to acquire up to that number of shares of Common Stock as is equal to ten (10%) percent of the Common Stock outstanding (provided that, for purposes of this Section 5.4(A)(1), all shares of Common Stock issuable upon (1) exercise of options granted or available for grant under plans approved

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by the Board of Directors or (2) conversion of shares of Preferred Stock shall be deemed to be outstanding).

(2) “Original Issue Date” shall mean the date on which the first share of Series C Preferred Stock is first issued.

(3) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock.

(4) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 5.4(C) below, deemed to be issued) by the Corporation after the Original Issue Date and other than shares of Common Stock issued or issuable:

(i) as a dividend or distribution on Series C Preferred Stock;

(ii) by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock, subject to Section 5.5 or Section 5.6 or excluded from the definition of Additional Shares of Common Stock by the foregoing clause (i);

(iii) upon the exercise of options excluded from the definition of “Option” in Section 5.4(A)(1);

(iv) upon exercise of Options which were outstanding on the Original Issue Date, the conversion of Convertible Securities which were outstanding on the Original Issue Date, or in lieu of cash stay bonuses which were granted before 2001;

(v) in connection with equipment leases, loans, acquisitions of businesses, strategic alliances, or licenses or acquisitions of technology or marketing rights; or

(vi) upon conversion of shares of Preferred Stock.

(5) “Rights to Acquire Common Stock” (or “Rights”) shall mean all rights issued by the Corporation to acquire common stock whatever by exercise of a warrant, option or similar call or conversion of any existing instruments, in either case for consideration fixed, in amount or by formula, as of the date of issuance.

(B) No Adjustment of Conversion Price. No adjustment in the number of shares of Common Stock into which the Series C Preferred Stock is convertible shall be made, by adjustment in the applicable Conversion Price thereof: (a) unless the consideration per share (determined pursuant to Section 5.4(E)) below for an Additional Share of Common Stock issued or deemed to be issued by the Corporation is less than the applicable Conversion Price in effect on the date of, and immediately prior to, the issue of such additional shares, or (b) if prior to such issuance, the Corporation receives written notice from the holders of at least sixty-six and two-

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thirds percent of the then outstanding shares of Series C Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance of Additional Shares of Common Stock.

(C) Issue of Securities Deemed Issue of Additional Shares of Common Stock. If the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or other Rights to Acquire Common Stock, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options, Rights or, in the case of Convertible Securities, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue, provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 5.4(E) hereof) of such Additional Shares of Common Stock would be less than the applicable Conversion Price in effect on the date of and immediately prior to such issue, or such record date, as the case may be, and provided further that in any such case in which Additional Shares of Common Stock are deemed to be issued:

(1) No further adjustment in the Conversion Price shall be made upon the subsequent issue of shares of Common Stock upon the exercise of such Options or Rights or conversion or exchange of such Convertible Securities;

(2) Upon the expiration or termination of any unexercised Option or Right, the Conversion Price shall be readjusted as if such Option or Right had never been issued; and

(3) In the event of any change in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any Option, Right or Convertible Security, including, but not limited to, a change resulting from the anti-dilution provisions thereof, the Conversion Price then in effect shall forthwith be readjusted to such Conversion Price as would have obtained had the adjustment that was made upon the issuance of such Option, Right or Convertible Security not exercised or converted prior to such change been made upon the basis of such change, but no further adjustment shall be made for the actual issuance of Common Stock upon the exercise or conversion of any such Option, Right or Convertible Security.

(D) Adjustment of Conversion Price upon Issuance of Additional Shares of Common Stock. If the Corporation shall at any time after the Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 5.4(C), but excluding shares issued as a dividend or distribution as provided in Section 5.6 or upon a stock split or combination as provided in Section 5.5), without consideration or for a consideration per share less than the applicable Conversion Price in effect on the date of and immediately prior to such issue, then and in such event, such Conversion Price shall be reduced, concurrently with such issue to a price (calculated to the nearest cent) determined by multiplying such Conversion Price by a fraction, (a) the numerator of which shall be (1) the number of shares of Common Stock outstanding immediately prior to such issue plus (2) the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would

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purchase at such Conversion Price; and (b) the denominator of which shall be (1) the number of shares of Common Stock outstanding immediately prior to such issue plus (2) the number of such Additional Shares of Common Stock so issued. Notwithstanding the foregoing, the applicable Conversion Price shall not be reduced if the amount of such reduction would be an amount less than $.005, but any such amount shall be carried forward and reduction with respect thereto made at the time of and together with any subsequent reduction which, together with such amount and any other amount or amounts so carried forward, shall aggregate $.005 or more. For purposes of this Section 5.4(D), all shares of Common Stock issuable upon conversion of Preferred Stock shall be deemed to be outstanding.

(E) Determination of Consideration. For purposes of this Section 5.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

(1) Cash and Property: Such consideration shall:

(i) insofar as it consists of cash, be computed at the aggregate of cash received by the Corporation, without reduction for amounts paid or payable for accrued interest or accrued dividends;

(ii) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors; and

(iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors.

(2) Options, Rights and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 5.4(C), relating to Options, Rights and Convertible Securities, shall be determined by dividing

(i) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options, Rights or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or Rights or the conversion or exchange of such Convertible Securities, by

(ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or Rights or the conversion or exchange of such Convertible Securities.

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Section 5.5 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the record date for the subdivision or combination.

Section 5.6 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time, or from time to time after the Original Issue Date shall make or issue, a dividend or other distribution payable in Additional Shares of Common Stock, then and in each such event the Conversion Price shall be decreased as of the time of such issuance, by multiplying the Conversion Price by a fraction:

(A) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance, and

(B) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

Section 5.7 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of shares of the Series C Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Series C Preferred Stock been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period, under this paragraph with respect to the rights of the holders of the Series C Preferred Stock.

Section 5.8 Adjustment for Reclassification, Exchange, or Substitution. If the Common Stock issuable upon the conversion of the Series C Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event the holder of each share of Series C Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series C Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein.

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Section 5.9 Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation (except mergers not involving any change in or any issuance of securities of the Corporation) with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation (other than a consolidation, merger or sale which is treated as a liquidation pursuant to Article 3),

(A) if the surviving entity shall consent in writing to the following provisions, then each share of Series C Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series C Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Article 5 set forth with respect to the rights and interest thereafter of the holders of the Series C Preferred Stock, to the end that the provisions set forth in this Article 5 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series C Preferred Stock; or

(B) if the surviving entity shall not so consent, then each holder of Series C Preferred Stock may, after receipt of notice specified in Section 5.12, elect to convert such Stock into Common Stock as provided in this Article 5 or to accept the distributions to which he would have been entitled under Article 3 if such consolidation, merger or sale had been treated as a liquidation pursuant to such Article 3.

Section 5.10 No Impairment. The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Article 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series C Preferred Stock against impairment.

Section 5.11 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Article 5, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder, if any, of Series C Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based and shall file a copy of such certificate with its corporate records. The Corporation shall, upon the written request at any time of any holder of Series C Preferred Stock, furnish or cause to be furnished to such holder a similar certificate setting forth (1) such adjustments and readjustments, (2) the Conversion Price then in effect, and (3) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Series C Preferred Stock. Despite such adjustment or readjustment, the form of each or all Series C Preferred Stock Certificates, if the same shall reflect the initial or any subsequent conversion price, need not be changed in order for the adjustments or readjustments to be valued in accordance with the provisions hereof, which shall control.

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Section 5.12 Notice of Record Date. In the event:

(A) that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation;

(B) that the Corporation subdivides or combines its outstanding shares of Common Stock;

(C) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation (except mergers not involving any change in or any issuance of securities of the Corporation), or of the sale of all or substantially all of the assets of the Corporation; or

(D) of the involuntary or voluntary dissolution, liquidation or winding up of the Corporation;

then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Series C Preferred Stock, and shall cause to be mailed to the holders of the Series C Preferred Stock at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten days prior to the record date specified in (1) below or twenty days before the date specified in (2) below, a notipce stating:

(1) the record date of such dividend, distribution, subdivision or combination, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or

(2) the date on which such reclassification, consolidation, merger, sale, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution or winding up.

Article 6

Repurchase of Shares

Each holder of any outstanding shares of Series C Preferred Stock shall be deemed to have consented, for purposes of Sections 502, and 503 of the California Corporations Code, to distributions made by the Corporation in connection with the repurchase of shares of Common Stock issued to or held by the employees, officers, directors, consultants or other persons performing services for the Corporation upon termination of their employment or services pursuant to agreements between the Corporation and such persons providing for the Corporation’s right of such repurchase.

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