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CARESIDE, INC.
CERTIFICATE OF DESIGNATIONS
SERIES B CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General
Corporation Law of the State of Delaware)
Careside, Inc., a corporation organized and existing under the laws of
the State of Delaware (hereinafter called the "Corporation"), hereby certifies
that pursuant to the authority contained in Article Fourth of the Corporation's
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of Delaware (the "DGCL") the following
resolution was duly adopted by the Unanimous Written Consent of the Board of
Directors of the Corporation dated September 11, 2000, creating a series of its
Preferred Stock designated as Series B Convertible Preferred Stock (the "Series
B Preferred Stock").
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Corporation (hereinafter called the "Board of
Directors") in accordance with the provisions of the Corporation's Certificate
of Incorporation, as amended to date (hereinafter called the "Certificate of
Incorporation"), the Board of Directors hereby creates a series of Preferred
Stock designated Series B Convertible Preferred Stock and hereby states the
designation and number of shares, and fixes the relative rights, powers and
preferences thereof, and the limitations or restrictions thereof, as follows:
Section 1. Series B Preferred Stock. Of the Five Million (5,000,000)
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Preferred Shares that the Corporation has authority to issue, 162,914 have
previously been designated shares of Series A Convertible Preferred Stock, with
a stated value of $7.50 per share, and 350 are hereby designated shares of
Series B Preferred Stock, with a stated value of $5,000.00 per share (the
"Series B Stated Value").
Section 2. Dividends.
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(A) The holder of each share of Series B Preferred Stock shall be
entitled to receive cumulative dividends equal to five percent (5%) of the
Series B Stated Value per annum per share. Dividends shall accrue daily and
shall be paid on the outstanding Series B Preferred Stock on each anniversary
date of the Original Issuance Date (as defined below) and shall be paid either,
as so elected by the Board of Directors of the Corporation, (1) out of funds
legally available for that purpose, in cash, (2) by issuing a number of
additional shares (or partial shares) of the Series B Preferred Stock for each
such share (or partial share) of Series
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B Preferred Stock then outstanding equal to the dividend then payable on each
such share (or partial share) of Series B Preferred Stock for the dividend
period then ended (expressed as a dollar amount) divided by the Series B Stated
Value (a "Payment-in-Kind"), or (3) any combination thereof. Except to the
extent paid in conjunction with an Optional Redemption (as defined below), no
dividends shall be paid upon, or declared and set apart for, any share of Series
B Preferred Stock unless at the same time a like proportionate dividend shall be
paid upon or declared and set apart for all shares of Series B Preferred Stock
then outstanding. Dividends paid on the shares of Series B Preferred Stock in an
amount less than the total amount of such dividends at the time of accrual on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. Dividends not paid shall accrue additional
interest of five percent (5%) of the unpaid dividend and may also be paid, as so
elected by the Board of Directors of the Corporation, in cash, as a Payment-in-
Kind, or any combination thereof.
(B) No dividends or other distributions of any nature (other than
stock dividends payable in shares of the Common Stock (as defined herein)) shall
be declared and/or paid on any Common Shares, or any other shares ranking junior
to the Series B Preferred Stock unless and until all accrued and unpaid
dividends on the Series B Preferred Stock have been paid in full.
Section 3. Rights on Liquidation, Dissolution, Winding Up. In the event of
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any liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, the holders of shares of Series B Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its shareholders, whether from capital, surplus or
earnings, before any payment shall be made to the holders of any stock ranking
on liquidation junior to the Series B Preferred Stock (with respect to rights on
liquidation, dissolution or winding up, the shares of Series B Preferred Stock
shall rank junior to the Series A Convertible Preferred Stock and senior to all
other shares of capital stock of the Corporation, including, without limitation,
Common Shares) an amount equal to the Series B Stated Value per share, plus all
accrued and unpaid dividends thereon (the "Liquidation Preference"). If upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation available for distribution to its shareholders shall be insufficient
to pay the holders of shares of Series B Preferred Stock the full amounts to
which they respectively shall be entitled, the holders of shares of Series B
Preferred Stock shall share ratably in any distribution of assets. In the event
of any liquidation, dissolution or winding up of the Corporation, after payment
shall have been made to the holders of shares of Series B Preferred Stock of the
full amount to which they shall be entitled as aforesaid, the holders of any
class or classes of stock ranking on liquidation junior to the Series B
Preferred Stock shall be entitled, to the exclusion of and without participation
by the holders of shares of Series B Preferred Stock, to share, according to
their respective rights and preferences, in all remaining assets of the
Corporation available for distribution to its shareholders.
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Section 4. Optional Redemption.
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(A) At any time, upon providing an Optional Redemption Notice (as
defined below), the Corporation may redeem all or any portion of the then
outstanding shares of Series B Preferred Stock (the "Optional Redemption"). In
the event the Corporation redeems a portion of the then outstanding Series B
Preferred Stock, the redemption shall be made pro rata among all of the holders
of shares of Series B Preferred Stock. The redemption of the Series B Preferred
Stock shall be at a per share redemption price (the "Optional Redemption Price")
equal to the sum of (i) one hundred fifteen percent (115%) of the aggregate
Series B Stated Value of the redeemed shares plus (ii) all accrued and unpaid
dividends on the redeemed shares. At any time, following the Original Issuance
Date, the Corporation may deliver to the holders of the Series B Preferred Stock
a notice (the "Optional Redemption Notice") by facsimile and first-class
certified mail, postage prepaid, to holders of record of the outstanding shares
of Series B Preferred Stock to be delivered at their respective addresses as the
same shall appear on the books of the Corporation. Such notice shall specify the
date on which such Series B Preferred Stock shall be delivered (the "Optional
Redemption Date"), which date shall be not less than thirty (30) days thereafter
(such minimum thirty (30) day period from the date of the Optional Redemption
Notice to the Optional Redemption Date is hereinafter referred to as the
"Optional Redemption Notice Period"). The total amount payable per share of
Series B Preferred Stock on the Optional Redemption Date is hereinafter referred
to as the "Optional Redemption Price."
(B) The Optional Redemption Price for any shares of Series B
Preferred Stock redeemed pursuant to Section 4(A) on any Optional Redemption
Date shall be payable as follows: on such Optional Redemption Date, the
Corporation shall pay to each holder of shares of Series B Preferred Stock being
redeemed the Optional Redemption Price being paid to such holder for such Series
B Preferred Stock in cash. Simultaneously with its receipt of such cash payment,
each holder of Series B Preferred Stock shall deliver to the Corporation or its
agent the certificates representing the shares of Series B Preferred Stock being
redeemed; provided, that, upon the payment by the Corporation of the applicable
Optional Redemption Price, all rights in respect of the shares of Series B
Preferred Stock to be redeemed shall cease and terminate, and such shares shall
no longer be deemed to be outstanding, whether or not the certificates
representing such shares have been received by the Corporation.
(C) At any time during the Optional Redemption Notice Period, a
holder of Preferred Stock into Common Shares in accordance with the terms and
conditions set forth in Section 6 hereof. On the Conversion Date (as defined in
Section 6 hereof), the Corporation's Optional Redemption Notice, if any, and the
Corporation's right to provide an Optional Redemption Notice as set forth in
this Section 4 shall be null and void and of no effect whatsoever with respect
to any shares that are the subject of a Conversion Notice.
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(D) In the event that the Corporation does not redeem the Series B
Preferred Stock on the Optional Redemption Date, the shares of Series B
Preferred Stock that are the subject of the Optional Redemption Notice shall
automatically convert to a Convertible Debenture with a face value equal to one
hundred twenty-five per cent (125%) of the amount obtained by multiplying the
Optional Redemption Price by the number of shares of Series B Preferred Stock
that are the subject of the Optional Redemption Notice. Such Convertible
Debenture shall be immediately payable and shall have conversion terms as set
forth in Section 6 hereof.
(E) Once redeemed pursuant to the provisions of this Section 4,
shares of Series B Preferred Stock shall be canceled and not subject to
reissuance and such redeemed shares shall, without any action on the part of the
Corporation or the shareholders of the Corporation, be eliminated from the
authorized capital of the Corporation.
(F) No shares of Series B Preferred Stock shall be entitled to the
benefit of a sinking fund or purchase fund.
Section 5. Voting.
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(A) The holders of Series B Preferred Stock shall vote as a separate
voting group on, and the affirmative vote of a majority of the outstanding
shares of Series B Preferred Stock shall be required to authorize, any action
which would:
(1) in any manner to amend the terms of Sections 1 through 7,
constituting the terms of this Series B Preferred Stock, to alter or change the
designation or the powers, preferences or rights, or the qualifications,
limitations or restrictions of the Series B Preferred Stock (including by
merger, consolidation or otherwise);
(2) reclassify Common Shares, or any other shares of any class
or series of capital stock hereinafter created junior to the Series B Preferred
Stock into shares of any class or series of capital stock ranking, either as to
payment of dividends, distribution of assets (upon liquidation, dissolution,
winding up or otherwise) or redemption, prior to or on a parity with the Series
B Preferred Stock; or
(3) increase the authorized number of shares of Series B
Preferred Stock.
(B) If at any time any action is proposed by the Corporation which
requires the affirmative vote of the holders of the Series B Preferred Stock
pursuant to Section 5(A), the Chief Executive Officer (or any other officer) of
the Corporation shall call a special meeting of the holders of Series B
Preferred Stock for the purpose of voting on such proposed action. Such meeting
shall be held at the earliest practicable date at such place as specified in or
determined in
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accordance with the By-laws of the Corporation. Subject to the provisions of
Section 228 of the Delaware General Corporation Law, any action required or
permitted to be taken at any special meeting of the holders of Series B
Preferred Stock may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of such action without a meeting by less than
unanimous written consent shall be given to those holders of Series B Preferred
Stock who have not consented in writing.
Section 6. Conversion into Common Shares
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The holders of shares of Series B Preferred Stock shall have the
following conversion rights:
(A) Subject to the limitations set forth below, each share of Series
B Preferred Stock shall be convertible at any time until the second anniversary
of the Original Issuance Date, unless previously redeemed by the Corporation,
into a number of Common Shares equal to the Series B Stated Value plus all
accrued and unpaid dividends thereon, divided by the lower of (a) the average of
the lowest ten (10) Closing Sales Prices within the last thirty (30) days prior
to the date of the Conversion Notice (as hereafter defined) and (b) one hundred
twenty (120%) of the Closing Sales Price on the date of first issuance of the
Series B Preferred Stock (the "Conversion Price"). The holder may only convert a
number of shares of Series B Preferred Stock such that the aggregate number of
Common Shares issued to the holder after such conversion of the Series B
Preferred Stock hereunder and as a result of all prior conversions of Series B
Preferred Stock, shall not, when aggregated with the number of Common Shares
previously issued, or then issuable pursuant to an exercise notice received,
upon exercise of that certain Warrant to purchase up to four million (4,000,000)
shares of Common Stock dated September 13, 2000 and issued by the Corporation to
RoyCap, Inc., exceed 1,797,631 Common Shares (which number shall be adjusted for
stock splits and similar events) in violation of Section 713 of the Listing
Standards of the American Stock Exchange (the "20% Rule"), unless and until the
shareholders of the Corporation have approved such aggregate issuance of Common
Shares in excess of 1,797,631. Subject to Section 6(B) below, such conversion
shall be effected on the sixth (6th) business day following the date written
notice is received by the Corporation that such holder is exercising a
conversion right pursuant to this Section 6(A) (the "Conversion Notice"). The
Conversion Notice shall be sent by the holder of the Series B Preferred Stock to
the Corporation by facsimile or first class, certified mail, postage prepaid.
Conversion effected pursuant to this Section 6(A) shall be deemed to have been
effected on the sixth (6th) business day following the date the aforesaid
delivery is made, and such date is referred to herein as the "Conversion Date."
(B) Upon receipt of the Conversion Notice, if either (i) the
Conversion Price is less than three dollars ($3.00), or (ii) the Corporation is
not permitted to convert such shares by
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reason of the 20% Rule, the Corporation shall have six (6) business days
thereafter to provide an Optional Redemption Notice for the shares of Series B
Preferred Stock that are the subject of the Conversion Notice and shall be
deemed to have given such Optional Redemption Notice if conversion in accordance
with the Conversion Notice would cause a violation of the 20% Rule. If the
Corporation shall provide such an Optional Redemption Notice, the shares of
Series B Preferred Stock that are the subject of the Conversion Notice shall not
be converted but shall be redeemed in accordance with the terms and conditions
set forth in Section 4 hereof, including without limitation Section 4(D) hereof,
except that (i) the redemption shall apply to the shares of Series B Preferred
Stock that are the subject of the Conversion Notice and need not be made among
all the holders of Series B Preferred Stock and (ii) the provisions of Section
4(C) giving the holders of Series B Preferred Stock that are the subject of the
redemption the right to convert such Series B Preferred Stock during the
Optional Redemption Notice Period shall not apply.
(C) Any shares of Series B Preferred Stock which have been converted
shall be canceled and all dividends on converted shares shall cease to accrue
and the certificates representing shares of Series B Preferred Stock so
converted shall represent the right to receive (i) such number of Common Shares
into which such shares of Series B Preferred Stock are convertible, plus (ii)
cash payable for any fractional Common Share.
(D) Following exercise of the conversion rights pursuant to Sections
6(A), the holder of any shares of Series B Preferred Stock so converted shall
promptly deliver to the Corporation during regular business hours, at the office
of any transfer agent of the Corporation for the Series B Preferred Stock, or at
such other place as may be designated by the Corporation, the certificate or
certificates for the shares to be converted, duly endorsed or assigned in blank
or to the Corporation (if required by it), or if the holder notifies the
Corporation or its transfer agent that such certificate or certificates have
been lost, stolen or destroyed, upon the execution and delivery of an agreement
satisfactory to the Corporation to indemnify the Corporation from any losses
incurred by it in connection therewith, accompanied by written notice stating
the name or names (with address) in which the certificate or certificates for
the Common Stock are to be issued. As promptly as practicable thereafter, the
Corporation shall (x) issue and deliver to or upon the written order of such
holder, to the place and in the manner designated by such holder, a certificate
or certificates for the number of full Common Shares to which such holder is
entitled and a check or cash in respect of any fractional interest in a Common
Share as provided in Section 6(E) hereof. Each person in whose name the
certificate or certificates for Common Shares are to be issued shall be deemed
to have become a shareholder of record on the applicable Conversion Date unless
the transfer books of the Corporation are closed on that date, in which event
such holder shall be deemed to have become a shareholder of record on the next
succeeding date on which the transfer books are open, but the number of Common
Shares into which each share of Series B Preferred Stock shall be converted is
that number which was in effect on the applicable Conversion Date. Upon
conversion of only a portion of the number of shares covered by a certificate
representing shares of Series B Preferred Stock surrendered for
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conversion, or upon the written order of the holder of the certificate so
surrendered for conversion, the Corporation shall issue and deliver, at the
expense of the Corporation, a new certificate covering the number of shares of
Series B Preferred Stock, representing the unconverted portion of the
certificate so surrendered, which new certificate shall entitle the holder
thereof to dividends on the shares of Series B Preferred Stock, represented
thereby to the same extent as if the certificate theretofore covering such
unconverted shares had not been surrendered for conversion.
(E) No fractional Common Shares shall be issued upon conversion of
shares of Series B Preferred Stock. If more than one share of Series B Preferred
Stock shall be surrendered for conversion at any one time by the same holder,
the number of full Common Shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series B Preferred
Stock so surrendered. Instead of any fractional Common Shares which would
otherwise be issuable upon conversion of any shares of Series B Preferred Stock,
the Corporation shall pay a cash adjustment in respect of such fractional
interest in an amount equal to the Closing Sales Price of the Common Shares on
the Conversion Date multiplied by such fractional interest. Fractional interests
shall not be entitled to dividends, and the holders of fractional interests
shall not be entitled to any rights as shareholders of the Corporation in
respect of such fractional interests.
(F) The conversion rights for the Series B Preferred Stock shall be
subject to the following:
(1) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of Common Shares
upon conversion of shares of Series B Preferred Stock; provided, however, that
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the Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of the shares of Series
B Preferred Stock in respect of which such shares are being issued.
(2) The Corporation shall reserve and, at all times from and
after the Original Issuance Date, keep reserved free from preemptive rights, out
of its authorized but unissued Common Shares, solely for the purpose of
effecting the conversion of the shares of Series B Preferred Stock, sufficient
shares of Common Stock to provide for the conversion of all outstanding shares
of Series B Preferred Stock.
(3) All Common Shares which may be issued in connection with the
conversion provisions set forth herein will, upon issuance by the Corporation,
be validly issued, fully paid and nonassessable and free from all taxes, liens
or charges with respect thereto.
(4) Once converted pursuant to the provisions hereof, shares of
Series B Preferred Stock so converted shall be canceled and not subject to
reissuance, and such
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converted shares shall, without any action on the part of the Corporation or the
shareholders of the Corporation, be eliminated from the authorized capital of
the Corporation.
(G) On the second anniversary of the Original Issuance Date, any
remaining shares of Series B Preferred Stock will be purchased by the
Corporation at a price per share equal to the Series B Stated Value plus all
accrued and unpaid dividends thereon.
Section 7. Definitions
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(A) The term "Original Issuance Date" shall mean with respect to the
Series B Preferred Stock, September 13, 2000.
(B) The "Closing Sales Price" of Common Shares on any day means: (a)
if the principal market for the Common Shares is The New York Stock Exchange,
American Stock Exchange or any other national securities exchange or The Nasdaq
National Market, the closing sales price of the Common Shares on such day as
reported by such exchange or market, or on a consolidated tape reflecting
transactions on such exchange or market, or (b) if the principal market for the
Common Shares is not a national securities exchange or The Nasdaq National
Market and transactions in the Common Shares are quoted on the National
Association of Securities Dealers Automated Quotations System, the mean between
the closing bid and the closing asked prices for the Common Shares on such day
as quoted on such system, or (c) if transactions in the Common Shares are not
quoted on the National Association of Securities Dealers Automated Quotations
System, the price therefor reported by the National Quotation Bureau, Inc.;
provided that if none of (a), (b) or (c) above is applicable, or if no trades
have been made or no quotes are available for such day, the Closing Sales Price
of the Common Shares shall be determined, in good faith, by the Board of
Directors of the Corporation.
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IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Company by its Chairman of the Board of Directors and Chief
Executive Officer and attested by its Secretary this _____ day of September,
2000.
______________________________________
W. Vickery Stoughton
Chairman of the Board of Directors and
Chief Executive Officer
Attest:
________________________________
Thomas G. Grove
Secretary
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