EXHIBIT 4.4
CERTIFICATE OF THE DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS OF
SERIES C 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 March 29, 1996 adopted a resolution providing for the issuance of a
series of 500,000 shares of Series C Convertible Preferred Stock, $3.50 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 C Convertible Preferred
Stock, $3.50 stated value per share ("Series C Preferred Stock"), is hereby
authorized and created, said series to consist of up to 500,000 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 C PREFERRED STOCK.
(a) The holders of the Series C 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 10%
per share, payable quarterly, in arrears, commencing on the 30th day of
June 1996. Dividends on each share of Series C 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 C 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 C 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 C PREFERRED STOCK INTO COMMON STOCK.
(a) At any time on or after December 15, 1997, each holder of
shares of Series C Preferred Stock may, at his option, convert any or
all such shares, plus all dividends accrued and unpaid on such Series C
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 C
Preferred Stock may be converted shall be determined by dividing $3.50
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 C 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 C 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 C
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 C
Preferred Stock have been converted on the
2
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 C 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 C 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 C Preferred Stock. If more
than one share of Series C 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 C
Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any
shares of Series C 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.
3
(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 C 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 C 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
C Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all Series C 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 C 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 C 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 C 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
4
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 C
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
5
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 C 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 C 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 C 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 C Preferred Stock.
3. REDEMPTION OF SERIES C PREFERRED STOCK.
(a) Subject to the provisions of this Section 3, the Series C
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 C 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 C Preferred Stock, a notice in
writing shall be given by mail to the holders of record of the Series C
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 C 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 C Preferred
Stock at the time.
6
(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 C 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 C 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 C Preferred Stock provides the Corporation with notice of
conversion of all or a portion of such Series C 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 C 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) The Series C Preferred Stock may not be redeemed and the
Corporation may not purchase or otherwise acquire any shares of Series
C Preferred Stock unless full dividends of on all outstanding shares of
Series C Preferred Stock shall have been paid in full for all past
dividend periods.
7
(e) All shares of Series C 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 C
Preferred Stock.
(f) No holder of shares of Series C Preferred Stock shall have
the right to require the Corporation to redeem all or any portion of
such shares.
4. VOTING.
(a) Except as otherwise required by law, the shares of Series
C 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 C 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 C Preferred Stock as to liquidation, an
amount equal to $3.50 per share, plus accumulated and unpaid dividends
thereon to the date fixed for distribution. It is understood that the
Series C Preferred Stock shall be junior in rank to the Series B
Preferred Stock and shall rank senior to the Series A Preferred Stock.
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the amounts payable with respect to the
Series C Preferred Stock and any other shares of stock of the
Corporation ranking as to any such distribution on a parity with the
Series C Preferred Stock are not paid in full, the holders of the
Series C 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 C 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 C Preferred Stock initial written notice of the
proposed action. Such initial written notice shall describe the
material terms and conditions of such proposed action, including a
description of the stock, cash, and property to be received by the
holders of shares of Series C 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 C 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
8
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 C 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 C 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 C Preferred Stock of the appraiser's
valuation.
6. LIMITATIONS.
(a) So long as any shares of Series C 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 C 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 C
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 C
Preferred Stock and other obligations, and to incur
indebtedness to banks and to other lenders.
9
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 23 day of May, 1996.
WESTMARK GROUP HOLDINGS, INC.
By /s/ NORMAN J. BIRMINGHAM
NORMAN J. BIRMINGHAM
Chief Executive Officer
ATTEST:
By /s/ DAWN DRELLA
DAWN DRELLA, Secretary
10