EXHIBIT 4.2
CERTIFICATE OF THE DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
WESTMARK GROUP HOLDINGS, INC.
Westmark Group Holdings, Inc., hereinafter called the "Corporation,"
a corporation organized and existing under the laws of the State of Colorado,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of the Corporation, and pursuant to the provisions of
Title 7, Article 106, Section 201 of the Colorado Revised Statutes Annotated,
such Board of Directors by the unanimous written consent of its members dated
effective April 1, 1996 adopted a resolution providing for the issuance of a
series of 200,000 shares of Series A Convertible Preferred Stock, $4.00 stated
value per share, which resolution is as follows:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by the Articles of Incorporation, the Series A Convertible Preferred
Stock, $4.00 stated value per share ("Series A Preferred Stock"), is hereby
authorized and created, said series to consist of up to 200,000 shares. The
voting powers, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations or restrictions thereof
shall be as follows:
1. CASH DIVIDENDS ON SERIES A PREFERRED STOCK.
(a) The holders of the Series A Preferred Stock shall be entitled to
receive, out of the funds of the Corporation legally available therefor,
cumulative cash dividends at the annual rate of 8% per share, payable
quarterly, in arrears, commencing on the 30th day of June 1996. Dividends
on each share of Series A Preferred Stock shall begin to accrue and shall
cumulate from the date of original issue of such share ("Issue Date"),
whether or not declared, and shall be payable to the holder of such share
on the record date (as defined in Section 1(b) below). 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 of record on a record date fixed for such payment by the Board of
Directors of the Corporation or by a committee of such Board duly
authorized to fix such date by resolution designating such committee.
(b) Dividends on the Series A Preferred Stock shall be payable to
holders of record as they appear on the books of the Corporation as of the
close of business on any record date for the payment of dividends. The
record dates for payment of dividends shall be the 15th day of December,
March, June and September.
(c) Dividends payable on the Conversion Date (as defined in Section
2(b) below) of the Series A Preferred Stock shall be calculated on the
basis of the actual number of days elapsed (including the Conversion Date)
over a 365-day year.
2. CONVERSION OF SERIES A PREFERRED STOCK INTO COMMON STOCK.
(a) At any time on or after the Issue Date, each holder of shares of
Series A Preferred Stock may, at his option, convert any or all such
shares, plus all dividends accrued and unpaid on such Series A Preferred
Stock up to the Conversion Date, on the terms and conditions set forth in
this Section 2, into fully paid and non-assessable shares of the
Corporation's common stock, no par value ("Common Stock"). The number of
shares of Common Stock into which each share of Series A Preferred Stock
may be converted shall be determined by dividing $4.00 by the Conversion
Price (as defined herein) in effect at the time of conversion. The
"Conversion Price" per share at which shares of Common Stock shall be
initially issuable upon conversion of any shares of Series A Preferred
Stock shall be the lesser of (i) $1.50 or (ii) 84% of the closing bid
price per share of Common Stock as quoted by the principal national
securities exchange on which the Common Stock is listed or admitted to
trading or, if not listed or admitted to trading on any national
securities exchange, on the National Association of Securities Dealers
Automatic Quotations System, or, if the Common stock is not listed or
admitted to trading on any national securities exchange or quoted on the
National Association of Securities Dealers Automated Quotations System, in
the over-the-counter market as furnished by any New York Stock Exchange
member firm selected from time to time by the Corporation for that
purpose, on the trading day immediately preceding the Conversion Date.
(b) To exercise his conversion privilege, the holder of any shares of
Series A Preferred Stock shall surrender to the Corporation during regular
business hours at the principal executive offices of the Corporation or
the offices of the transfer agent for the Series A 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 for transfer
to the Corporation (if required by it), accompanied by written notice
stating that the holder irrevocably elects to convert such shares.
Conversion shall be deemed to have been effected on the date when such
delivery is made, and such date is referred to herein as the "Conversion
Date." Within three (3) business days after the date on which such
delivery is made, the Corporation shall issue and send (with receipt to be
acknowledged) to the holder thereof or the holder's designee, at the
address designated by such holder, a certificate or certificates for the
number of full shares of Common Stock to which the holder is entitled as a
result of such conversion, and cash with respect to any fractional
interest of a share of Common Stock as provided in paragraph (c) of this
Section 2. The holder shall be deemed to have become a stockholder of
record of the number of shares of Common Stock into which the shares of
Series A Preferred Stock have been converted on the
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applicable Conversion Date unless the transfer books of the Corporation
are closed on that date, in which event he shall be deemed to have become
a stockholder of record of such shares on the next succeeding date on
which the transfer books are open, but the Conversion Price shall be that
in effect on the Conversion Date. Upon conversion of only a portion of the
number of shares of Series A Preferred Stock represented by a certificate
or certificates surrendered for conversion, the Corporation shall within
three (3) business days after the date on which such delivery is made,
issue and send (with receipt to be acknowledged) to the holder thereof or
the holder's designee, at the address designated by such holder, a new
certificate covering the number of shares of Series A Preferred Stock
representing the unconverted portion of the certificate or certificates so
surrendered.
(c) No fractional shares of Common Stock or scrip shall be issued
upon conversion of shares of Series A Preferred Stock. If more than one
share of Series A Preferred Stock shall be surrendered for conversion at
any one time by 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 Series A Preferred Stock so surrendered.
Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion of any shares of Series A Preferred Stock, the
Corporation shall make an adjustment in respect of such fractional
interest equal to the fair market value of such fractional interest, to
the nearest 1/100th of a share of Common Stock, in cash at the Current
Market Price (as defined below) on the business day preceding the
effective date of the conversion. The "Current Market Price" of publicly
traded shares of Common Stock or any other class of Common Stock or other
security of the Corporation or any other issuer for any day shall be
deemed to be the daily "Closing Price" for the trading day immediately
preceding the Conversion Date. The "Current Market Price" of the Common
Stock or other class of capital stock or securities of the Corporation or
any other issuer which is not publicly traded shall mean the fair value
thereof as determined by an independent investment banking firm or
appraisal firm experienced in the valuation of such securities or
properties selected in good faith by the Board of directors of the
Corporation or a committee thereof or, if no such investment banking or
appraisal firm is, in the good faith judgment of the Board of directors of
the Corporation or such committee, available to make such determination,
as determined in good faith judgment of the Board of Directors or such
committee. The "Closing Price" shall mean the last reported sales price on
the principal securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the National Association of Securities
Dealers Automatic Quotations System, or, if the Common stock is not listed
or admitted to trading on any national securities exchange or quoted on
the National Association of Securities Dealers Automated Quotations
System, in the over-the-counter market as furnished by any New York Stock
Exchange member firm selected from time to time by the Corporation for
that purpose.
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(d) The Corporation shall pay any and all issue and other taxes that
may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of Series A Preferred Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which the Series A
Preferred Stock so converted were registered, and no such issue and
delivery shall be made unless and until the person requesting such issue
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.
(e) The Corporation shall at all times reserve for issuance and
maintain available, out of its authorized but unissued Common Stock,
solely for the purpose of effecting the conversion of the Series A
Preferred Stock, the full number of shares of Common Stock deliverable
upon the conversion of all Series A Preferred Stock from time to time
outstanding. The Corporation shall from time to time (subject to obtaining
necessary director and stockholder action), in accordance with the laws of
the State of its incorporation, increase the authorized number of shares
of its Common Stock if at any time the authorized number of shares of its
Common Stock remaining unissued shall not be sufficient to permit the
conversion of all of the shares of Series A Preferred Stock at the time
outstanding.
(f) If any shares of Common Stock to be reserved for the purpose of
conversion of shares of Series A Preferred Stock require registration or
listing with, or approval of, any governmental authority, stock exchange
or other regulatory body under any federal or state law or regulation or
otherwise, including registration under the Securities Act of 1933, as
amended, and appropriate state securities laws, before such shares may be
validly issued or delivered upon conversion, the Corporation will in good
faith and as expeditiously as possible meet such registration, listing or
approval, as the case may be.
(g) All shares of Common Stock which may be issued upon conversion of
the shares of Series A Preferred Stock will upon issuance by the
Corporation be validly issued, fully paid and non-assessable and free from
all taxes, liens and charges with respect to the issuance thereof.
(h) The Conversion Price in effect shall be subject to adjustment
from time to time as follows:
(i) STOCK SPLITS, DIVIDENDS AND COMBINATIONS. In the event that
the Corporation shall at any time subdivide the outstanding shares of
Common Stock, or shall pay or make a dividend or distribution on any
class of capital stock of the Corporation in Common Stock, the
Conversion Price in effect immediately prior to such subdivision or
the issuance of such dividend shall be proportionately decreased, and
in case the Corporation shall at any time
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combine the outstanding shares of Common Stock, the Conversion Price
in effect immediately prior to such combination shall be
proportionately increased, effective at the close of business on the
date of such subdivision, dividend or combination, as the case may
be.
(ii) NON-CASH DIVIDENDS, STOCK PURCHASE RIGHTS, CAPITAL
REORGANIZATIONS AND DISSOLUTIONS. In the event:
(A) that the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive
a dividend, or any other distribution, payable otherwise than in
cash; or
(B) that the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to
subscribe for or purchase any shares of stock of any class or
other securities, or to receive any other rights; or
(C) of any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation (other
than a subdivision or combination of its outstanding shares of
Common Stock), consolidation or merger of the Corporation with
or into another corporation, share exchange for all outstanding
shares of Common Stock under a plan of exchange to which the
Corporation is a party, or conveyance of all or substantially
all of the assets of the Corporation to another corporation; or
(D) of the voluntary of involuntary dissolution,
liquidation or winding up of the Corporation;
then, and in such case, the Corporation shall cause to be mailed to
the holders of record of the outstanding Series A Preferred stock, at
least ten days prior to the date hereinafter specified, a notice
stating the date on which (x) a record is to be taken for the purpose
of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, share
exchange, conveyance, dissolution, liquidation, or winding up is to
take place and the date, if any is to be fixed, as of which holders
of Corporation securities of record shall be entitled to exchange
their shares of Corporation securities for securities or other
property deliverable upon such reclassification, reorganization,
consolidation, merger, share exchange, conveyance, dissolution,
liquidation, or winding up.
(i) The Corporation will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, share exchange, dissolution, issue or sale of
securities or any other voluntary action, avoid
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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 time
in good faith assist in the carrying out of all the provisions of
paragraph 2(h) 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 A Preferred Stock against impairment.
(j) Upon the occurrence of each adjustment or readjustment of the
Conversion Price pursuant to paragraph 2(h), the Corporation at its
expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof, and prepare and furnish to each holder
of Series A Preferred Stock a certificate signed by the chief financial
officer of the Corporation setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect, and (iii)
the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of his
shares.
(k) In case any shares of Series A Preferred Stock shall be converted
pursuant to Section 2(a) hereof, the shares so converted shall be restored
to the status of authorized but unissued shares of preferred stock,
without designation as to class or series, and may thereafter be reissued,
but not as shares of Series A Preferred Stock.
3. REDEMPTION OF SERIES A PREFERRED STOCK.
(a) Subject to the provisions of this Section 3, the Series A
Preferred Stock shall be redeemable in whole, or in part, at the option of
the Corporation by resolution of the Board of Directors at any time after
the Issue Date, at the stated value per share, plus all dividends accrued
and unpaid on such Series A Preferred Stock up to the date fixed for
redemption, upon giving the notice hereinafter provided.
(b) Not less than thirty nor more than sixty days prior to the date
fixed for redemption of the Series A Preferred Stock, a notice in writing
shall be given by mail to the holders of record of the Series A Preferred
Stock at their respective addresses as the same shall appear on the stock
books of the Corporation. Such notice shall state: (i) the redemption
date; (ii) the redemption price, and the amount of dividends on the Series
A Preferred Stock that will be accrued and unpaid to the date fixed for
redemption; (iii) the place or places where certificates for shares are to
be surrendered for payment of the redemption price; (iv) that the
dividends on shares to be redeemed will cease to accrue on such redemption
dates; (v) the conversion rights of the shares to be redeemed; (vi) the
period within which the conversion rights may be exercised; and (vii) the
Conversion Price, and the number of shares of Common Stock issuable upon
conversion of a share of Series A Preferred Stock at the time.
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(c) After giving notice and prior to the close of business on the
business day prior to the redemption date, the holders of the Series A
Preferred Stock so called for redemption may convert such stock into
Common Stock in accordance with the conversion privileges set forth in
Section 2 hereof. Unless (i) the holder of shares of Series A Preferred
Stock to whom notice has been duly given shall have exercised its rights
to convert in accordance with Section 2 hereof; or (ii) the Corporation
shall default in the payment of the redemption price as set forth in such
notice, upon such redemption date such holder shall no longer have any
voting or other rights with respect to such shares, except the right to
receive the moneys payable upon such redemption from the Corporation
without interest thereon, upon surrender (and endorsement, if required by
the Corporation) of the certificates, and the shares represented thereby
shall no longer be deemed to outstanding as of the redemption date. In the
event a holder of Series A Preferred Stock provides the Corporation with
notice of conversion of all or a portion of such Series A Preferred Stock
into shares of Common Stock on or after any notice of redemption is
provided, the holder shall have been deemed to convert as of the
redemption date provided, however, that in the event the Corporation shall
default in the payment of the redemption price as set forth in such
redemption notice, the conversion shall not be effective unless the holder
of the Series A Preferred Stock electing to convert provides written
notice to the Corporation within 20 days of the purported redemption date
of his desire to effect such conversion.
(d) After October 1, 1996, the holder of the Series A Preferred Stock
shall have the right to cause the Company to redeem, in whole or in part,
the shares of Series A Preferred Stock at the stated value per share, plus
all dividends accrued and unpaid on such Series A Preferred Stock, upon
providing written notice to the Corporation at its record office. Upon
receipt of such written notice, the Corporation shall have twenty business
days within which to effectuate the redemption.
(e) The Series A Preferred Stock may not be redeemed and the
Corporation may not purchase or otherwise acquire any shares of Series A
Preferred Stock unless full dividends of on all outstanding shares of
Series A Preferred Stock shall have been paid in full for all past
dividend periods.
(f) All shares of Series A Preferred Stock so redeemed shall have the
status of authorized but unissued preferred stock, but such shares so
redeemed shall not be reissued as shares of Series A Preferred Stock.
(g) No holder of shares of Series A Preferred Stock shall have the
right to require the Corporation to redeem all or any portion of such
shares.
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4. VOTING.
(a) Except as otherwise required by law, the shares of Series A
Preferred Stock shall not be entitled to vote on any matters presented at
any annual or special meeting of stockholders of the Corporation or to be
taken by written consent of the stockholders of the Corporation.
5. LIQUIDATION RIGHTS.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of
Series A Preferred Stock then outstanding shall be entitled or receive out
of assets of the Corporation available for distribution to stockholders,
after payment in full of the liquidation distribution to which holders of
the preferred stock with a liquidation preference are entitled, but before
any distribution of assets is made to holders of Common Stock or of any
other class of capital stock of the Corporation ranking junior to the
Series A Preferred Stock as to liquidation, an amount equal to $4.00 per
share, plus accumulated and unpaid dividends thereon to the date fixed for
distribution. It is understood that the Series A Preferred Stock shall be
junior in rank to the Series B Preferred Stock. If upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
amounts payable with respect to the Series A Preferred Stock and any other
shares of stock of the Corporation ranking as to any such distribution on
a parity with the Series A Preferred Stock are not paid in full, the
holders of the Series A Preferred Stock and of such other shares shall
share ratably in any such distribution of assets of the Corporation in
proportion to the full respective preferential amounts to which they are
entitled. After payment of the full amount of the liquidating distribution
to which they are entitled, the holders of shares of Series A Preferred
Stock shall not be entitled to any further participation in any
distribution of assets by the Corporation.
(b) Neither the consolidation of nor merging of the Corporation with
or into any other corporation or corporations, nor the sale or lease of
all or substantially all of the assets of the Corporation shall be deemed
to be a liquidation, dissolution or a winding up of the Corporation within
the meaning of any of the provisions of this Section 4.
(c) In the event of a voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, the Corporation shall,
within 10 days after the date the Board of Directors approves such action,
or within 20 days prior to any stockholders' meeting called to approve
such action, or within 20 days after the commencement of any involuntary
proceeding, whichever is earlier, give each holder of shares of Series A
Preferred Stock initial written notice of the proposed action. Such
initial written notice shall describe the material terms and conditions of
such
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proposed action, including a description of the stock, cash, and property
to be received by the holders of shares of Series A Preferred Stock upon
consummation of the proposed action and the date of delivery thereof. If
any material change in the facts set forth in the initial notice shall
occur, the Corporation shall promptly give written notice to each holder
of shares of Series A Preferred Stock of such material change. The
Corporation shall not consummate any voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation before the expiration of 30
days after the mailing of the initial notice or 10 days after the mailing
of any subsequent written notice, whichever is later; provided that any
such 30-day or 10-day period may be shortened upon the written consent of
the holders of all of the outstanding shares of Series A Preferred Stock.
(d) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation which will involves the
distribution of assets other than cash, the Corporation shall promptly
engage competent independent appraisers to determine the value of the
assets to be distributed to the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock. The Corporation shall,
upon receipt of such appraiser's valuation, give prompt written notice to
each holder of shares of Series A Preferred Stock of the appraiser's
valuation.
6. LIMITATIONS.
(a) So long as any shares of Series A Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote or
the written consent of the holders of at least 66-2/3% of the outstanding
shares of Series A Preferred Stock, voting separately as a class:
(i) Amend, alter or repeal any provision of the Certification of
Incorporation or Bylaws of the Corporation so as to affect adversely
the relative rights, preferences, qualifications, limitations or
restrictions of the Series A Preferred Stock.
(b) The provisions of this paragraph 6 shall not in any way limit the
right and power of the Corporation to:
(i) Increase the total number of authorized shares of Common
Stock; or
(ii) Issue bonds, notes, mortgages, debentures, and preferred
stock ranking senior to the terms of the Series A Preferred Stock and
other obligations, and to incur indebtedness to banks and to other
lenders.
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IN WITNESS WHEREOF, Westmark Group Holdings, Inc. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by NORMAN J.
BIRMINGHAM, its chief executive officer, and attested by DAWN DRELLA, its
secretary, this ____ day of ________________, 1996.
WESTMARK GROUP HOLDINGS, INC.
By NORMAN J. BIRMINGHAM
Chief Executive Officer
ATTEST:
By DAWN DRELLA, Secretary
STATE OF __________ |
|
COUNTY OF _________ |
BE IT REMEMBERED that on this _______ day of ___________, 1996, personally
came before me, a Notary Public in and for the County and State aforesaid,
NORMAN J. BIRMINGHAM, Chief Executive Officer of Westmark group holdings, Inc.,
a Colorado corporation, and he duly executed said certificate before me and
acknowledged the said certificate to be his act and deed and the act and deed of
said Corporation and the facts stated therein are true; and that the seal
affixed to said certificate and attested by the Secretary of said corporation is
the corporate seal of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day
and year aforesaid.
NOTARY PUBLIC, IN AND FOR
THE STATE OF _____________
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