CERTIFICATE OF DESIGNATIONS
OF RIGHTS AND PREFERENCES OF THE
SERIES B CONVERTIBLE PREFERRED STOCK OF
CFI MORTGAGE, INC.
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
The undersigned, being the Chief Executive Officer of CFI Mortgage, Inc., a
corporation organized and existing under and by virtue of the laws of the State
of Delaware (hereinafter the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That pursuant to authority expressly granted and vested in the Board
of Directors of said Corporation by the provisions of the Certificate of
Incorporation, said Board of Directors adopted the following resolution
determining the designations, powers, preferences and rights of its Series B
Convertible Preferred Stock :
RESOLVED: That the designations, powers, preferences and rights of the
Series B Convertible Preferred Stock be, and hereby are, as set forth below:
1. Number of Shares of Series B Convertible Preferred Stock. Of the
10,000,000 shares of authorized Preferred Stock, $.01 par value ("Preferred
Stock") of the Corporation, one thousand (1,000) shares shall be designated and
known as "Series B Convertible Preferred Stock."
2. Voting.
(a) Each holder of outstanding shares of Series B Convertible Preferred
Stock at each meeting of stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration shall
be entitled to the number of votes equal to the number of whole shares of Common
Stock, as hereinafter defined, into which the shares of Series B Convertible
Preferred Stock held by such holder are convertible on the record date
established for such meeting. Except as provided by law, by the provisions of
Subparagraph 2(b) below, or by the provisions establishing any other series of
Preferred Stock, holders of Series B Convertible Preferred Stock shall vote
together with the holders of all other classes and series of securities of the
Corporation as a single class.
(b) The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers of the Series B Convertible Preferred Stock so as
to affect adversely the Series B Convertible Preferred Stock, without the
written consent or affirmative vote of the holders of at least a majority of the
then outstanding shares of Series B Convertible Preferred Stock to be affected
by amendment, alteration or repeal, 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 with preference or priority over or on
a parity with the Series B Convertible 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
designated class of Series B Convertible Preferred Stock.
3. Dividends.
The holders of shares of Series B Convertible Preferred Stock shall be
entitled to receive, before any cash dividend shall be declared and paid upon or
set aside for the Common Stock or any other class or series of capital stock
designated as junior in right to receive dividends or distributions upon
liquidation of the Corporation ("Junior Stock") in any fiscal year of the
Corporation, out of funds legally available for that purpose, cumulative
dividends (computed from the Original Issuance Date, as defined herein) payable
in cash or Common Stock (at the sole election of the Corporation) in an amount
per share for such fiscal year equal to $60.00. Such dividend shall be payable
only upon conversion or redemption of the Series B Preferred Stock or
liquidation as set forth in Section 5 hereof. In the event that the Corporation
shall elect to pay any such dividend payment in the form of Common Stock, such
Common Stock shall be valued at the Conversion Price on the dividend payment
date, as defined in Section 7 below.
4. [NOT USED]
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5. Liquidation. In the event of a voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, the holders of shares of Series B
Convertible Preferred Stock shall be entitled to receive out of the assets of
the Corporation legally available for distribution to holders of its capital
stock, before any payment or distribution shall be made to holders of Common
Stock or any other class of stock ranking junior to Series B Convertible
Preferred Stock, an amount per share equal to $1,000 (the "Stated Value") of
such shares of Series B Convertible Preferred Stock plus all dividends which
have accrued and are unpaid and therefore are in arrears. If upon such
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of Series B
Convertible Preferred Stock shall be insufficient to permit payment to the
holders of Series B Convertible Preferred Stock of the amount distributable as
aforesaid, then the entire assets of the Corporation to be so distributed shall
be distributed ratably among the holders of Series B Convertible Preferred
Stock. Upon any such liquidation, dissolution or winding up of the Corporation,
after the holders of Series B Convertible Preferred Stock shall have been paid
in full the amounts to which they shall be entitled, the remaining net assets of
the Corporation may be distributed to the holders of stock ranking on
liquidation junior to the Series B Convertible Preferred Stock. Written notice
of such liquidation, dissolution or winding up, stating a payment date, the
amount of the liquidation payments and the place where said liquidation payments
shall be payable, shall be given by mail, postage prepaid or by telex or
facsimile to non-U.S. residents, not less than 10 days prior to the payment date
stated therein, to the holders of record of Series B Convertible Preferred
Stock, such notice to be addressed to each such holder at its address as shown
by the records of the Corporation. For purposes hereof, the Common Stock and any
Junior Stock shall rank on liquidation junior to the Series B Convertible
Preferred Stock.
6. Restrictions. At any time when shares of Series B Convertible Preferred
Stock are outstanding, except where the vote or written consent of the holders
of a greater number of shares of the Corporation is required by law or by the
Corporation's Certificate of Incorporation, as amended, without the approval of
the holders of at least a two-thirds majority of the then outstanding shares of
Series B Convertible Preferred Stock given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a series, the
Corporation will not modify the terms of the Series B Convertible Preferred
Stock.
7. Optional Conversion. The holders of shares of Series B Convertible
Preferred Stock shall have the following conversion rights:
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(a) Right to Convert; Conversion Price. Subject to the terms, conditions,
and restrictions of this Paragraph 7, the holder of any share or shares of
Series B Convertible Preferred Stock shall have the right to convert each such
share of Series B Convertible Preferred Stock (except that upon any liquidation
of the Corporation, the right of conversion shall terminate at the close of
business on the business day fixed for payment of the amount distributable on
the Series B Convertible Preferred Stock) into an amount of shares of Common
Stock equal to the Stated Value of such share or shares of Series B Convertible
Preferred Stock divided by an amount (the "Conversion Price") equal to (i) the
average closing bid price of the Common Stock, as reported by the Nasdaq Stock
Market, Inc. (or the principal market for the Corporation's Common Stock if such
Common Stock is not then listed on the Nasdaq Stock Market, Inc.) during the
period of five trading days immediately preceding the date of conversion (the
"Conversion Date") (the "Market Price"), multiplied by (ii) eighty-five percent
(85%). To illustrate, if the Market Price on the Conversion Date is $6.00 and
100 shares of Series B Convertible Preferred Stock are being converted, the
Stated Value for which would be $100,000, then the Conversion Price shall be
$5.10 per share of Common Stock ($6.00 x .85), whereupon the Stated Value of
$100,000 of Series B Convertible Preferred Stock would entitle the holder
thereof to convert the 100 shares of Series B Convertible Preferred Stock into
19,607 shares of Common Stock ($100,000 divided by $5.10 equals 19,607).
However, in no event shall the Conversion Price be less than the "Minimum
Conversion Price", which shall initially be $5.00 per share, subject to
adjustment as provided by Sections 7(f) and (g). The Minimum Conversion Price
shall not apply to mandatory conversions pursuant to Section 8.
(b) Conversion Date. The holder of any share or shares of Series B
Convertible Preferred Stock may not convert more than one-half of such shares
for a period of at least thirty (30) calendar days following the date upon which
the Series B Convertible Preferred Stock was originally issued (the "Original
Issuance Date").
(c) Notice of Conversion. The right of conversion shall be exercised by the
holder thereof by giving written notice (the "Conversion Notice") to the
Corporation that the holder elects to convert a specified number of shares of
Series B Convertible Preferred Stock representing a specified Stated Value
thereof into Common Stock and, if such conversion will result in the conversion
of all of such holder's shares of Series B Convertible Preferred Stock, by
surrender of a certificate or certificates for the shares so to be converted to
the Corporation at its principal office (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the holders
of the Series B Convertible Preferred Stock) at any time during its usual
business hours on the date set forth in the Conversion Notice, together with a
statement of the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued. The Conversion Notice
shall include therein the Stated Value of shares of Series B Convertible
Preferred Stock to be converted, and a calculation (i) of the Market Price, (ii)
the Conversion Price, and (iii) the number of shares of Common Stock to be
issued in connection with such conversion. The Corporation shall have the right
to review the calculations included in the Conversion Notice, and shall provide
notice of any discrepancy or dispute therewith within three business days of the
receipt thereof. Notice shall be deemed given if sent by first class mail, by
recognized overnight delivery service or by fax, to 561-687-8039, attention:
Chief Financial Officer.
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(d) Issuance of Certificates; Time Conversion Effected. Promptly, but in no
event more than three business days, after the receipt of the Conversion Notice
referred to in Subparagraph 7(c) and surrender of the certificate or
certificates for the share or shares of Series B Convertible Preferred Stock to
be converted, the Corporation shall issue and deliver, or cause to be issued and
delivered, to the holder, registered in such name or names as such holder may
direct, a certificate or certificates for the number of whole shares of Common
Stock into which such shares of Series B Convertible Preferred Stock are
converted. To the extent permitted by law, such conversion shall be deemed to
have been effected as of the close of business on the date on which such
Conversion Notice shall have been received by the Corporation, and at such time
the rights of the holder of such share or shares of Series B Convertible
Preferred Stock shall cease, and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby. Issuance of shares of Common Stock
issuable upon conversion which are requested to be registered in a name other
than that of the registered holder shall be subject to compliance with all
applicable federal and state securities laws.
(e) Fractional Shares; Dividends. No fractional shares shall be issued upon
conversion of Series B Convertible Preferred Stock into Common Stock. All
fractional shares shall be rounded down to the nearest whole share. Any accrued
but unpaid dividends shall be paid upon conversion.
(f) Reorganization or Reclassification. If any capital reorganization or
reclassification of the capital stock of the Corporation shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification, lawful and adequate
provisions shall be made whereby each holder of a share or shares of Series B
Convertible Preferred Stock shall thereupon have the right to receive, upon the
basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore receivable upon the conversion of
such share or shares of Series B Convertible Preferred Stock, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such Common Stock immediately theretofore receivable upon
such conversion had such reorganization or reclassification not taken place, and
in any such case appropriate provisions shall be made with respect to the rights
and interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the conversion rights) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
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(g) Adjustments for Splits, Combinations, etc. The Conversion Price and the
number of shares of Common Stock into which the Series B Convertible Preferred
Stock shall be convertible shall be adjusted for stock splits, stock dividends,
combinations, or other similar events. Additionally, an adjustment will be made
in the case of an exchange of Common Stock, consolidation or merger of the
Company with or into another corporation or sale of all or substantially all of
the assets of the Company in order to enable the holder of Series B Convertible
Preferred Stock to acquire the kind and the number of shares of stock or other
securities or property receivable in such event by a holder of the number of
shares of Common Stock that might otherwise have been issued upon the conversion
of the Series B Convertible Preferred Stock. No adjustment to the Conversion
Price will be made for dividends (other than stock dividends), if any, paid on
the Common Stock or for securities issued for fair value.
8. Mandatory Conversion.
(a) Mandatory Conversion Date. If at June 30, 2001 (the "Mandatory
Conversion Date"), there remain issued and outstanding any shares of Series B
Convertible Preferred Stock, then the Corporation shall be entitled to require
all (but not less than all) holders of shares of Series B Convertible Preferred
Stock then outstanding to convert their shares of Series B Convertible Preferred
Stock into shares of Common Stock at the then effective Conversion Price
pursuant to Subparagraph 7(a), except that there shall be no Minimum Conversion
Price. The Corporation shall provide written notice (the "Mandatory Conversion
Notice") to the holders of shares of Series B Convertible Preferred Stock of
such mandatory conversion. The Mandatory Conversion Notice shall include (i) the
Stated Value of the shares of Series B Convertible Preferred Stock to be
converted, (ii) the Conversion Price at June 30, 2001, and (iii) the number of
shares of the Corporation's Common Stock to be issued upon such mandatory
conversion at the then applicable Conversion Price.
(b) Surrender of Certificates. On or before the Mandatory Conversion Date,
each holder of shares of Series B Convertible Preferred Stock shall surrender
his or its certificate or certificates for all such shares to the Corporation at
the place designated in such Mandatory Conversion Notice (or an affidavit of
lost certificate in form and content reasonably satisfactory to the
Corporation), and shall thereafter receive certificates for the number of shares
of Common Stock to which such holder is entitled. On the Mandatory Conversion
Date, all rights with respect to the Series B Convertible Preferred Stock so
converted, including the rights, if any, to receive notices and vote, will
terminate. All certificates evidencing shares of Series B Convertible Preferred
Stock that are required to be surrendered for conversion in accordance with the
provisions hereof, from and after the Mandatory Conversion Date, shall be deemed
to have been retired and cancelled and the shares of Series B Convertible
Preferred Stock represented thereby converted into Common Stock for all
purposes, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. The Corporation may
thereafter take such appropriate action as may be necessary to reduce the
authorized Series B Convertible Preferred Stock accordingly.
9. Redemption of Series B Convertible Preferred Stock.
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(a) Right to Redeem Series B Convertible Preferred Stock. At any time, and
from time to time, the Corporation may, in its sole discretion, but shall not be
obligated to, redeem, in whole or in part, the then issued and outstanding
shares of Series B Convertible Preferred Stock, at a price (the "Redemption
Price") equal to the greater of (i) $1,350 per share of such Series B
Convertible Preferred Stock plus any accrued but unpaid dividends or (ii) the
Market Price of the Common Stock into which such share of Series B Convertible
Preferred Stock could be converted on the date of such notice plus any accrued
but unpaid dividends.
(b) Notice of Redemption. The Corporation shall provide each holder of
record of the Series B Convertible Preferred Stock being redeemed with written
notice of redemption (the "Redemption Notice") not less than 30 days prior to
any date stipulated by the Corporation for the redemption of the Series B
Convertible Preferred Stock (the "Redemption Date"). The Redemption Notice shall
contain (i) the Redemption Date, (ii) the number of shares of Series B
Convertible Preferred Stock to be redeemed from the holder to whom the
Redemption Notice is delivered, (iii) instructions for surrender to the
Corporation of the certificate or certificates representing the shares of Series
B Convertible Preferred Stock to be redeemed, and (iv) a procedure for the
holder to specify the number of shares of Series B Convertible Preferred Stock
to be converted into Common Stock pursuant to Paragraph 7.
(c) Right to Convert Series B Convertible Preferred Stock upon Receipt of
Redemption Notice. Upon receipt of the Redemption Notice, the recipient thereof
shall have the option, at its sole election, to specify what portion of the
Series B Convertible Preferred Stock called for redemption in the Redemption
Notice shall be redeemed as provided in this Paragraph 8 or converted into
Common Stock in the manner provided in Paragraph 7. If the holder of the Series
B Convertible Preferred Stock called for redemption elects to convert any of
such shares, then such conversion shall take place on the Redemption Date, in
accordance with the terms of Paragraph 7.
(d) Surrender of Certificates; Payment of Redemption Price. On or before
the Redemption Date, each holder of the shares of Series B Convertible Preferred
Stock to be redeemed shall surrender the required certificate or certificates
representing such shares to the Corporation, in the manner and at the place
designated in the Redemption Notice, and upon the Redemption Date, the
Redemption Price for such shares shall be paid by the Corporation via check to
the order of the person whose name appears on such certificate or certificates
as the owner thereof, and each such surrendered certificate shall be cancelled
and retired. If a certificate is surrendered and all the shares evidenced
thereby are not being redeemed, the Corporation shall issue new certificates to
be registered in the names of the person(s) whose name(s) appear(s) as the
owners on the respective surrendered certificates and deliver such certificate
to such person(s).
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(e) Deposit of Redemption Price. On the Redemption Date in respect to any
shares of Series B Convertible Preferred Stock, or prior thereto, the
Corporation shall deposit with any bank or trust company having a capital and
surplus of at least $50,000,000 or with its transfer agent for its Common Stock
(the "Depository"), a sum in good funds equal to (i) the aggregate Redemption
Price of all such shares called for redemption, less (ii) the aggregate
Redemption Price for those shares of Series B Convertible Preferred Stock in
respect of which the Corporation has received notice from the holder thereof of
its election, pursuant to Subparagraph 8(c), to convert shares of Series B
Convertible Preferred Stock into Common Stock. The Corporation shall provide
instructions and authority to the Depository to pay, on or after the Redemption
Date, the Redemption Price to the respective holders upon the surrender of their
share certificates. The deposit of the Redemption Price by the Corporation with
the Depository shall constitute full payment for the shares of Series B
Convertible Preferred Stock to be redeemed, and from and after that date of the
deposit, the redeemed shares shall be deemed to be no longer issued and
outstanding, and the holders thereof shall cease to be holders with respect to
such shares and shall have no rights with respect thereto, except the right to
receive from the Depository payment of the Redemption Price, without interest,
upon surrender of their certificates therefor. Any funds so deposited and
unclaimed at the end of one year from the Redemption Date shall be released and
delivered to the Corporation, after which the former holders of shares of Series
B Convertible Preferred Stock called for redemption shall be entitled to receive
payment of the Redemption Price in respect of their shares only from the
Corporation. If the Corporation shall fail to deposit the funds for the
aggregate Redemption Price with the Depository by the close of business on the
Redemption Date, then the Redemption Notice shall be void, and the Corporation
shall have no further right to redeem such shares at any later date.
10. Notices. In case at any time:
(a) the Corporation shall declare any dividend upon its Common Stock or any
Junior Stock payable in cash or stock or make any other pro rata distribution to
the holders of its Common Stock or Junior Stock; or
(b) the Corporation shall offer for subscription pro rata to the holders of
its Common Stock any additional shares of stock of any class or other rights; or
(c) there shall be any capital reorganization or reclassification of the
capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into, or a sale of all or substantially all its assets to,
another entity or entities; or
(d) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
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then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by telex or facsimile or by recognized overnight
delivery service to non-U.S. residents, addressed to each holder of any shares
of Series B Convertible Preferred Stock at the address of such holder as shown
on the books of the Corporation, (i) at least 30 days' prior written notice of
the date on which the books of the Corporation shall close or a record shall be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up and (ii) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, at least 30 days' prior written
notice of the date when the same shall take place. Such notice in accordance
with the foregoing clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the holders of
Common Stock shall be entitled thereto and (ii) shall also specify the date on
which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
11. Stock to be Reserved. The Corporation, upon the effective date of this
Certificate of Designations, has a sufficient number of shares of Common Stock
available to reserve for issuance upon the conversion of all outstanding shares
of Series B Convertible Preferred Stock. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Series B Convertible Preferred Stock
as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series B Convertible
Preferred. The Corporation convenants that all shares of Common Stock which
shall be so issued shall be duly and validly issued, fully paid and
non-assessable. The Corporation will take all such action as may be so taken
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
conversion rights if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Series B Convertible Preferred
Stock would exceed the total number of shares of Common Stock then authorized by
the Corporation's Certificate of Incorporation, as amended.
12. No Reissuance of Series B Convertible Preferred Stock. Shares of Series
B Convertible Preferred Stock which are converted into shares of Common Stock as
provided herein shall not be reissued.
13. Issue Tax. The issuance of certificates for shares of Common Stock upon
conversion of Series B Convertible Preferred Stock shall be made without charge
to the holder for any United States federal or state issuance, stamp or
documentary tax in respect thereof, provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
holder of the Series B Convertible Preferred Stock which is being converted.
14. Closing of Books. The Corporation will at no time close its transfer
books against the transfer of any Series B Convertible Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Series B Convertible Preferred Stock in any manner which interferes with the
timely conversion of such Series B Convertible Preferred Stock, except as may
otherwise be required to comply with applicable securities laws.
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15. Definition of Common Stock. As used in this Certificate of
Designations, the term "Common Stock" shall mean and include the Corporation's
authorized Common Stock, $.01 par value, as constituted on the date of filing of
these terms of the Series B Convertible Preferred Stock, and shall also include
any capital stock of any class of the Corporation thereafter authorized which
shall neither be limited to a fixed sum or percentage of par value in respect of
the rights of the holders thereof to participate in dividends nor entitled to a
preference in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Series B
Convertible Preferred Stock shall include only shares designated as Common Stock
of the Corporation on the date of filing of this instrument, or in case of any
reorganization, reclassification, or stock split of the outstanding shares
thereof, the stock, securities or assets provided for in Subparagraph 7(f) and
(g).
SECOND: That said determination of the designation, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof,
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relating to the Series B Convertible Preferred Stock, was duly made by the
Board of Directors pursuant to the provisions of the Corporation's Certificate
of Incorporation and in accordance with the provisions of Section151 of the
Delaware General Corporation Law. [intentionally blank]
IN WITNESS WHEREOF, this Certificate has been signed by Christopher C.
Castoro, its chief Executive Officer, this 30th day of June, 1998.
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Christopher C. Castoro,
Chief Executive Officer
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