EXHIBIT 4.2
CERTIFICATE OF DESIGNATION
ESTABLISHING
SERIES C CONVERTIBLE PREFERRED STOCK
OF
FIRSTPLUS FINANCIAL GROUP, INC.
Pursuant to Section 78.1955 of
the Nevada Revised Statutes
1. The name of the Corporation is FIRSTPLUS Financial Group, Inc., a
Nevada corporation (the "Corporation").
2. The Board of Directors of the Corporation duly adopted the following
resolutions at a meeting of the Board of Directors held on October 25, 2001:
WHEREAS, the Corporation's directors have reviewed and approved the
Designation of Preferences, Limitations and Rights of Series C Convertible
Preferred Stock of FIRSTPLUS Financial Group, Inc. (the "Certificate"), attached
hereto as Exhibit A and incorporated herein by reference, delineating the number
of shares, the voting powers, designations, preferences and relative,
participating, optional, redemption, conversion, exchange, dividend or other
special rights and qualifications, limitations or restrictions of a series of
Preferred Stock to be issued by the Corporation and designated Series C
Convertible Preferred Stock, par value $1.00 per share (the "Series C
Preferred");
RESOLVED, that 25,000 shares of authorized but unissued Preferred Stock
of the Corporation be designated Series C Preferred and authorized for issuance
and that the Series C Preferred have the rights, preferences, limitations and
restrictions set forth herein.
FURTHER RESOLVED, that the Chief Executive Officer, President or any
Vice President of the Corporation, individually or collectively, and the
Secretary or Assistant Secretary of the Corporation, individually or
collectively, be, and such officers hereby are, authorized, empowered and
directed to execute, acknowledge, attest, record and file with the Secretary of
State of the State of Nevada a Certificate of Designation in accordance with
Nevada General Corporate Law and to take all other actions that such officers
deem necessary to effectuate the Certificate of Designation and establish the
Series C Preferred.
3. The authorized number of shares of Preferred Stock of the
Corporation is 2,600,000 and the number of shares of the Series C Preferred,
none of which has been issued, is 25,000.
4. The resolutions set forth above have been duly adopted by all
necessary action on the part of the Corporation.
1
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation Establishing Series C Convertible Preferred Stock to be duly adopted
in accordance with the provisions of Section 78.1955 of the Nevada Revised
Statutes and the Articles of Incorporation of the Corporation and to be executed
in its corporate name on the 25th day of October, 2001.
FIRSTPLUS FINANCIAL GROUP, INC.
By: /s/ Daniel T. Phillips
------------------------------------------
Name: Daniel T. Phillips
Title: President and Chief Executive Officer
By: /s/ Daniel T. Phillips
-------------------------------------------
Name: Daniel T. Phillips
Title: Secretary
State of Texas )
)
County of Dallas )
The foregoing instrument was acknowledged before me, on the 25th day of
October 2001, by Daniel T. Phillips, President and Daniel T. Phillips, Secretary
of FIRSTPLUS Financial Group, Inc., a Nevada corporation, on behalf of the
corporation.
/s/ Lori Muncrief
-------------------------
Exhibit A
DESIGNATION OF PREFERENCES, LIMITATIONS AND RIGHTS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
FIRSTPLUS FINANCIAL GROUP, INC.
1. Series C Preferred Stock. The Series C Convertible Preferred Stock,
par value $1.00 per share (the "Series C Preferred"), will consist of 25,000
shares and will have the designations, preferences, voting powers, relative,
participating, optional or other special rights and privileges, and the
qualifications, limitations and restrictions as follows:
2. Dividends and Distributions. The holders of record of shares of
Series C Preferred shall be entitled to receive, when and if declared by the
Board of Directors of the Corporation, dividends out of funds legally available
therefor, which shall be prior and in preference to any declaration or payment
of any dividend or other distribution on any other class or series of Preferred
Stock or the common stock of the Corporation, par value $0.01 per share (the
"Common Stock"). In no event shall the holders of Series C Preferred ever be
entitled to share in the Residuals (as defined in Section 3(e)), by dividend or
otherwise, or have any rights whatsoever with respect thereto.
3. Liquidation Rights. In the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a
"Liquidation"), distributions shall be made in the following manner:
(a) Series C Preferred. The holders of Series C Preferred
shall be entitled to be paid (i) after the distribution of the Residuals (as
defined in Section 3(e)) into a trust or other entity for the benefit of the
Corporation's current shareholders and (ii) before any amount shall be paid to
the holders of Common Stock or any other class or series of capital stock of the
Corporation ranking junior to the Series C Preferred, out of the assets of the
Corporation available for distribution to holders of its capital stock an amount
per share equal to the Original Purchase Price for such share as appropriately
adjusted to reflect any stock split, stock dividend, combination,
recapitalization and the like (the "Liquidation Amount"). If the proceeds from a
Liquidation are not sufficient to pay to the holders of Series C Preferred the
full preference amount set forth above, then such holders shall instead be
entitled to receive the entire assets and funds of the Corporation legally
available for distribution to the holders of capital stock (after the
distribution of the Residuals into a trust or other entity for the benefit of
the Corporation's current shareholders), which assets and funds shall be
distributed ratably among the holders of the Series C Preferred in proportion to
the relative aggregate liquidation value of the number of shares of Series C
Preferred held by each holder.
(b) Remaining Assets. If assets are remaining after (i)
distribution of the Residuals into a trust or other entity for the benefit of
the Corporation's current shareholders and (ii) payment of the full preferential
amount with respect to the Series C Preferred, then the holders of the Common
Stock shall be entitled to share ratably in all such remaining assets and
surplus funds based on the number of shares of Common Stock held by each.
(c) Events Deemed a Liquidation. For purposes of this Section
3, the sale or other transfer in a single transaction or a series of related
transactions of all or substantially all of the assets of the Corporation, or
any other reorganization involving the merger or consolidation of the
Corporation shall be treated as a Liquidation, except for any merger or
consolidation in which (i) solely the Corporation and one or more of its wholly
owned subsidiaries is involved, (ii) the Corporation is the sole surviving
corporation, (iii) the holders of Series C Preferred outstanding immediately
prior to such transaction will hold the same number of shares of Series C
Preferred, with substantially identical designations, preferences, limitations,
and relative rights, immediately after such transaction as they held immediately
prior to such transaction, or (iv) the voting power of the number of Series C
Preferred outstanding immediately before such transaction will be at least 51%
of the total number of Series C Preferred issued and outstanding immediately
following such transaction (whether by conversion of securities issued pursuant
to such transaction or the exercise of rights to purchase securities issued
pursuant to such transaction).
(d) Valuation of Securities and Property. In the event the
Corporation proposes to distribute assets other than cash in connection with any
Liquidation, the value of the assets to be distributed to the holders of shares
of Series C Preferred shall be determined in good faith by the Board of
Directors. Any securities not subject to an investment letter or similar
restrictions on free marketability shall be valued as follows:
(i) if traded on a national securities exchange or
the NASDAQ National Market System ("NASDAQ"), the value shall be deemed
to be the average of the security's closing prices on such exchange or
NASDAQ over the thirty (30) trading day period ending three (3) days
prior to the distribution;
(ii) if actively traded over-the-counter (other than
NASDAQ), the value shall be deemed to be the average of the closing bid
prices over the thirty (30) day period ending three (3) days prior to
the distribution; or
(iii) if there is no active public market, the value
shall be the fair market value thereof as determined in good faith by
the Board of Directors.
The method of valuation of securities subject to an investment letter
or other restrictions on free marketability shall be adjusted to make an
appropriate discount from the market value determined as above in clauses (i),
(ii) or (iii) to reflect the fair market value thereof as determined in good
faith by the Board of Directors. The holders of at least two-thirds of the
issued and outstanding Series C Preferred shall have the right to challenge any
determination by the Board of Directors of fair market value pursuant to this
Section 3(d), in which case the determination of fair market value shall be made
by an independent appraiser or investment banker selected jointly by the Board
of Directors and the challenging parties, the cost of such appraisal to be borne
(a) by the challenging parties, if the fair market value as determined by such
appraisal does not exceed the determination of fair market value by the Board of
Directors by more than twenty-five percent (25%) and (b) by the Corporation, if
the fair market value as determined by such appraisal exceeds the determination
of fair market value by the Board of Directors by more than twenty-five percent
(25%).
(e) "Residuals" shall mean the Corporation's interest in those
certain derivative interests in mortgage-backed or asset-backed securitization
transactions which are assets of, or the cash flow rights owned by, the
Corporation and are held in a trust or other entity for the benefit of the
Corporation's creditors and current shareholders.
4. Conversion. The holders of Series C Preferred shall have conversion
rights as follows:
(a) Right to Convert. Each Share of Series C Preferred shall
initially be convertible, at the option of the holder thereof, at any time on or
after the first anniversary date of issuance thereof, into 1,800 shares of fully
paid and nonassessable Common Stock (the "Conversion Ratio"), subject to
adjustment in accordance with Section 4.
(b) Mechanics of Conversion. Before any holder of Series C
Preferred shall be entitled to convert the same into shares of Common Stock and
to receive certificates therefor, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the principal office of the Corporation
or of any transfer agent for the Series C Preferred, and shall give written
notice to the Corporation at such office that such holder elects to convert the
same. The Corporation shall as soon as practicable after such delivery, or after
such agreement and indemnification, issue and deliver at such office to such
holder of Series C Preferred, a certificate or certificates for the number of
shares of Common Stock to which it, he or she shall be entitled as aforesaid
and, at the option of the Corporation, either a check payable to the holder in
the amount of any declared but unpaid dividends then owed pursuant to Section 2
hereof, if any, or the number of fully paid and nonassessable shares of Common
Stock which results from dividing the fair market value of a share of Common
Stock (as determined in good faith by the Board of Directors) in effect at such
time into the aggregate of all such declared but unpaid dividends then owed.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Series C Preferred to
be converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
(c) Adjustments to Conversion Ratio.
(i) Subdivisions, Combinations, or Consolidations of
Common Shares. In the event the outstanding Common Stock shall be
subdivided, combined or consolidated, by share split, dividend,
combination or like event, into a greater or lesser number of Common
Shares, the Conversion Ratio of the Series C Preferred in effect
immediately prior to such subdivision, combination, consolidation,
share split or share dividend shall, concurrently with the
effectiveness of such subdivision, combination, consolidation, share
split or dividend be proportionately adjusted.
(ii) Reclassifications. In the case, at any time
after the date hereof, of any capital reorganization or any
reclassification of the stock of the Corporation (other than as a
result of a stock dividend or subdivision, split-up or combination of
shares), or the consolidation or merger of the Corporation with or into
another person (other than a consolidation or merger in which the
Corporation is the continuing entity and which does not result in any
change in the Common Stock, the shares of Series C Preferred shall,
after such reorganization, reclassification, consolidation or merger be
convertible into the kind and number of shares of stock or other
securities or property of the Corporation or otherwise to which such
holder would have been entitled if immediately prior to such
reorganization, reclassification, consolidation or merger such holder
had converted his shares of Series C Preferred into Common Stock. The
provisions of this Section 4(c)(ii) shall similarly apply to successive
reorganizations, reclassifications, consolidations or mergers.
(iii) Certificate as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the Conversion Price
of the Series C Preferred pursuant to this Section 4, the Corporation,
at its expense, shall promptly thereafter compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each
holder of Series C Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of any holder of Series C Preferred,
furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, if any and (ii)
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 the
Series C Preferred.
(d) Status of Converted Stock. In case any shares of Series C
Preferred shall be converted pursuant to Section 4 hereof, the shares so
converted shall be canceled, shall not be reissuable and shall cease to be a
part of the authorized capital stock of the Corporation.
(e) Fractional Shares. In lieu of any fractional shares in the
aggregate to which the holder of Series C Preferred would otherwise be entitled
upon conversion, the Corporation shall pay cash equal to such fraction
multiplied by the fair market value of one share of Common Stock as determined
by the Board of Directors in the good faith exercise of its reasonable business
judgment.
(f) No Impairment. The Corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all action as may be necessary or appropriate in order to protect the
conversion rights of the holders of Series C Preferred against impairment.
(g) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series C Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Series C Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series C Preferred, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
5. Voting Rights. Except as otherwise required by law, the holder of
each share of Series C Preferred issued and outstanding shall be entitled to
vote on all matters with the Common Stock as a single class, and not as a
separate class or series. Each share of Series C Preferred will entitle the
holder to the number of votes per share equal to the full number of shares of
Common Stock into which each share of Series C Preferred is convertible on the
record date for such vote, or, if no such record date is established, at the
date such vote is taken or any written consent of shareholders is solicited.
Except as otherwise expressly provided herein or as required by law, the holders
of Series C Preferred and Common Stock shall vote together and not as a separate
class on all matters to come before the shareholders of the Corporation.
Fractional votes by the holders of Series C Preferred shall not, however, be
permitted, and any fractional voting rights shall (after aggregating all shares
into which shares of Series C Preferred held by each holder could be converted)
be rounded to the nearest whole number.
6. Notices. Any notice required by the provisions of this Certificate
of Designations to be given to the holders of Series C Preferred shall be deemed
to have been sufficiently received (except as otherwise provided herein) (a)
upon receipt when personally delivered, (b) or one (1) day after sent by
overnight delivery or telecopy providing confirmation or receipt of delivery, or
(c) three (3) days after being sent by certified or registered mail, postage and
charges prepaid, return receipt requested, and addressed to each holder of
record at such holder's address appearing on the books of the Corporation.
7. Transferability. The Series C Preferred are expressly transferable
in whole or in part. Any transfer of the rights represented by this Certificate
of Designations shall be effected by the surrender of the Series C Preferred
stock certificate (the "Stock Certificate"), along with an assignment, properly
completed and executed by the registered holder thereof, at the principal
executive office of the Corporation, together with an appropriate investment
letter, if deemed reasonably necessary by counsel to the Corporation. Thereupon,
the Corporation shall issue in the name or names specified by the registered
holder of the Series C Preferred and, in the event of a partial transfer, in the
name of the registered holder of the Series C Preferred, a new Stock Certificate
or Stock Certificates evidencing the right to purchase such number of shares of
Series C Preferred as shall be equal to the number of shares of Series C
Preferred then purchasable thereunder.
[Signature page follows]
IN WITNESS WHEREOF, said FIRSTPLUS Financial Group, Inc. has caused
this Certificate to be executed by its President and Chief Executive Officer,
and attested by its Secretary, this 25th day of October, 2001.
FIRSTPLUS FINANCIAL GROUP, INC.
By: /s/ Daniel T. Phillips
--------------------------------------
Name: Daniel T. Phillips
President and Chief Executive Officer
ATTESTED:
By: /s/ Daniel T. Phillips
-----------------------------------------------------
Name: Daniel T. Phillips
Secretary