CERTIFICATE OF DESIGNATIONS AND PREFERENCES
OF THE
CUMULATIVE PREFERRED STOCK, SERIES A
(PAR VALUE $.01 PER SHARE)
OF
HAWTHORNE FINANCIAL CORPORATION
____________________________________
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
____________________________________
The undersigned duly authorized officer of Hawthorne Financial Corporation,
a corporation organized and existing under the General Corporation Law of the
State of Delaware (the "Company"), in accordance with the provisions of Section
103 thereof, and pursuant to Section 151 thereof, DOES HEREBY CERTIFY:
That the Certificate of Incorporation of the Company authorizes the
creation of up to 10,000,000 shares of the Company's preferred stock; and
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Company, the Board of Directors of the
Company, on October 5, 1995, approved the creation, issuance and voting powers
of a series of the Company's preferred stock, each designated as set forth
below:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Company by provisions of the Certificate of
Incorporation of the Company (the "Certificate of Incorporation"), and the
General Corporation Law of the State of Delaware, the issuance of a series of
the Company's preferred stock, par value $.01 per share (the "Preferred Stock"),
be, and the same hereby is, authorized, and the Board hereby fixes the powers,
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, of the
shares of such series (in addition to the powers, designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, set forth in the
Certificate
of Incorporation which may be applicable to the Preferred Stock) as follows:
1. DESIGNATION AND RANK. The designation of the series of Preferred
Stock authorized by this resolution shall be the Cumulative Preferred Stock,
Series A (the "Series A Preferred Stock"). The number of shares of Series A
Preferred Stock shall be 270. The Series A Preferred Stock shall be junior to
all outstanding indebtedness of the Company. The Series A Preferred Stock shall
rank prior to the Company's Common Stock, par value $.01 per share (the "Common
Stock"), and to all other classes and series of equity securities of the Company
now or hereafter authorized, issued or outstanding (the Common Stock and such
other classes and series of equity securities collectively may be referred to
herein as the "Junior Stock"), other than any classes or series of equity
securities of the Company expressly designated as ranking on a parity with (the
"Parity Stock") or senior to (the "Senior Stock") the Series A Preferred Stock
as to dividend rights and/or rights upon liquidation, winding up or dissolution
of the Company. The Series A Preferred Stock shall be subject to creation of
Senior Stock, Parity Stock and Junior Stock to the extent not expressly
prohibited by the Certificate of Incorporation or otherwise, and shall be
initially issued at a price of $50,000 per share.
2. DIVIDENDS.
(a) PAYMENT OF CASH DIVIDENDS. Holders of shares of Series A Preferred
Stock shall be entitled to receive when, as and if declared by the Company's
Board of Directors, out of funds legally available therefor, cumulative cash
dividends payable on the shares of the Series A Preferred Stock at a rate of 18%
per annum in respect of the Liquidation Preference (as defined in Section 6(a)
below) thereof ($9,000 per share per annum), and no more. If declared, such
cumulative cash dividends shall be payable quarterly in equal amounts (other
than in respect of the Initial Dividend Period, as defined below) in arrears on
March 15, June 15, September 15 and December 15 of each year or, if such day is
not a Business Day (as defined below), on the next Business Day (each of such
dates being a "Dividend Payment Date"), provided that the first Dividend Payment
Date shall be June 15, 1997. Each declared dividend shall be paid to the
holders of record of the Series A Preferred Stock at the close of business on
the date specified by the Board of Directors of the Company at the time such
dividend is declared; provided, however, that such date shall not be more than
50 days nor less than 10 days prior to the respective Dividend Payment Date
(each such date, a "Record Date"). The initial period for which dividends shall
be paid shall commence on the date of initial issuance of the Series A Preferred
Stock (the "Issue Date") and shall end on and include June 14, 1997 (the
"Initial Dividend Period").
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Thereafter, quarterly dividend periods (each, a "Quarterly Dividend Period")
shall commence on and include June 15, September 15, December 15 and March 15 of
each year and shall end on and include the date next preceding the first day of
the following Quarterly Dividend Period. The dividend for the 1Initial Dividend
Period shall be fully cumulative and shall accrue, without interest, from the
Issue Date. Dividends for a Quarterly Dividend Period also shall be fully
cumulative and shall accrue, without interest, from the first day of the
Quarterly Dividend Period. Dividends on the Series A Preferred Stock shall
accrue on a daily basis without regard to the occurrence of a Dividend Payment
Date and whether or not such dividends are declared by the Board of Directors of
the Company. For purposes hereof, "Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in the State of
California are authorized by law to close.
The amount of cash dividends payable per share of Series A Preferred Stock
for each full Quarterly Dividend Period shall be computed by dividing by four
the amount determined by multiplying the 18% annual dividend rate by the
Liquidation Preference of such share. The amount of any dividend payable for
any period shorter than a full Quarterly Dividend Period shall be computed on
the basis of a 360-day year composed of twelve 30-day months and the actual
number of days elapsed in the period for which payable.
Holders of the Series A Preferred Stock shall not be entitled to any
interest, or any sum of money in lieu of interest, in respect of any accrued but
unpaid dividends on the Series A Preferred Stock. Any cash dividend payment
made on the Series A Preferred Stock shall first be credited against the
earliest declared but unpaid cash dividend with respect to the Series A
Preferred Stock.
(b) PAYMENT OF STOCK DIVIDENDS. Subject to the second paragraph of this
Section 2(b), if the Board of Directors of the Company does not declare the full
amount of the cash dividend accrued in respect of the Initial Dividend Period or
any Quarterly Dividend Period (each, a "Dividend Period"), or the Company does
not pay the full amount of such dividend, if declared, in either case because
the Company does not have the financial capability to pay such dividend, the
Board of Directors of the Company may declare in lieu thereof a dividend,
payable with respect to all shares of Series A Preferred Stock held by a holder
thereof on the relevant Record Date, consisting of (i) the number of whole
shares of Common Stock which have an aggregate Common Stock Equivalent Value (as
defined below) equal to or, if not equal to, then closest to without being in
excess of, the dollar amount of dividends accrued on such shares of Series A
Preferred Stock with respect to any such Dividend Period, minus
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the amount of the cash dividend, if any, declared and paid on such shares for
such Dividend Period, and (ii) to the extent necessary, an amount of cash or a
fraction of a share of Common Stock (rounded to the nearest one-hundredth of a
whole number) which, based on the Common Stock Equivalent Value, will, when
combined with the aggregate Common Stock Equivalent Value of such number of
whole shares of Common Stock, equal the dollar amount of dividends accrued on
such shares of Series A Preferred Stock with respect to any such Dividend
Period, minus the amount of the cash dividend, if any, declared and paid on such
shares for such Dividend Period. The Dividend Period, Dividend Payment Date,
Record Date and other applicable terms of the payment of dividends in Common
Stock shall be determined by reference to Section 2(a). For purposes hereof,
the "Common Stock Equivalent Value" of a share of Common Stock shall mean the
product determined by multiplying (x) the average closing price of a share of
Common Stock during the 30 trading days preceding the applicable Dividend
Payment Date, as reported with respect to the exchange or national quotation
system in which such shares are then traded, by (y) .90. All shares of Common
Stock issued pursuant to this Section 2(b), at the time(s) they are issued, will
be duly authorized, validly issued and fully paid and nonassessable and not
subject to any preemptive rights.
In the event that the Company intends on any Dividend Payment Date to
declare and pay dividends on the Series A Preferred Stock in accordance with the
first paragraph of this Section 2(b), the Company will provide to each original
holder of 25 shares of Series A Preferred Stock or more, and each Affiliate (as
defined below) transferee of such holder (together an "Original Holder"),
written notice by first class mail, postage prepaid, mailed not less than 30
days prior to such Dividend Payment Date at such holder's address as the same
appears on the stock register of the Company, of its intention to pay dividends
on the Series A Preferred Stock in accordance with the first paragraph of this
Section 2(b) and stating the estimated number of shares of Common Stock which
would be issued to such Original Holder on such Dividend Payment Date.
Notwithstanding anything to the contrary contained herein, the Board of
Directors of the Company shall not declare and pay a dividend on any outstanding
Series A Preferred Stock on any Dividend Payment Date in accordance with the
first paragraph of this Section 2(b), and dividends with respect to the related
Dividend Period shall cumulate in accordance with Section 2(a), if any Original
Holder notifies the Company within 20 days of its receipt of such notice from
the Company, and in any event on or before the tenth day prior to such Dividend
Payment Date, that in the judgment of such Original Holder, after consultation
with counsel, the payment of dividends pursuant to the first paragraph of this
Section 2(b) would result in such Original Holder acquiring control of the
Company or being subject to a rebuttable presumption of control of the Company,
in each case as set forth at 12 C.F.R. Part 574
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or any successor thereto. For purposes hereof, "Affiliate" shall have the
meaning set forth in Rule 405 under the Securities Act of 1933, as amended, or
any successor thereto.
(c) PRIORITY AS TO DIVIDENDS. No full dividends shall be declared or paid
or set apart for payment on any class or series of stock ranking, as to
dividends, on a parity with or junior to the Series A Preferred Stock for any
period unless full dividends on all outstanding shares of Series A Preferred
Stock for all past Dividend Periods and for the then-current Dividend Period
shall have been or contemporaneously are declared and paid (or declared and a
sum sufficient for the payment thereof set apart for such payment). When
dividends are not paid in full (or declared and a sum sufficient for such full
payment so set apart) upon the Series A Preferred Stock and any other Preferred
Stock ranking on a parity as to dividends with the Series A Preferred Stock, all
dividends declared upon shares of Series A Preferred Stock and any other
Preferred Stock ranking on a parity as to dividends shall be declared pro rata
with respect thereto, so that in all cases the amount of dividends declared per
share on the Series A Preferred Stock and such other Preferred Stock shall bear
to each other the same ratio that accrued dividends for the then-current
Dividend Period per share on the shares of Series A Preferred Stock (including
any accumulation in respect of unpaid dividends from prior Dividend Periods) and
accrued dividends, including accumulations, if any, on such other Preferred
Stock, bear to each other.
Full dividends on the Series A Preferred Stock must be declared and paid or
set apart for payment for all past Dividend Periods and for the then-current
Dividend Period before (i) any cash dividend or other distribution (other than
in Common Stock or other Junior Stock) shall be declared or paid or set aside
for payment upon the Common Stock or any other Junior Stock, (ii) any Common
Stock or any other Junior Stock is redeemed, purchased or otherwise acquired by
the Company or any subsidiary of the Company for any consideration (or any
moneys are paid to or made available for a sinking fund for the redemption of
any shares of any such stock) except by conversion into or exchange for Junior
Stock or (iii) any Series A Preferred Stock or Parity Stock is redeemed,
purchased or otherwise acquired by the Company or any subsidiary of the Company
for any consideration (or any moneys are paid to or made available for a sinking
fund for the redemption of any shares of any such stock) otherwise than pursuant
to a pro rata offer to purchase or a concurrent redemption of all, or a pro rata
portion, of the outstanding shares of Series A Preferred Stock and Parity Stock
(except by conversion into or exchange for Junior Stock).
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No cash dividends shall be paid on the Series A Preferred Stock if such
payment would violate the terms of any instrument governing indebtedness of the
Company.
3. REDEMPTION.
(a) OPTIONAL REDEMPTION. Subject to the applicable restrictions set forth
in this Section 3 and applicable law, the shares of Series A Preferred Stock may
be redeemed, in whole or in part, at the election of the Company, upon notice as
provided in Section 3(c), by resolution of its Board of Directors, at any time
or from time to time, in cash at a redemption price equal to the per share
Liquidation Preference thereof plus all accrued and unpaid dividends to (but not
including) the date fixed for redemption, provided that no shares of Series A
Preferred Stock may be redeemed pursuant to this Section 3(a) if such redemption
would violate the terms of any instrument governing indebtedness of the Company.
If less than all of the outstanding shares of Series A Preferred Stock shall be
redeemed, the particular shares to be redeemed shall be allocated by the Company
among the respective holders of Series A Preferred Stock pro rata, by lot or by
a substantially equivalent method selected by the Board of Directors of the
Company.
(b) MANDATORY REDEMPTION. In the event of a Change in Control (as defined
below), the Company shall, at the election of a holder of Series A Preferred
Stock, redeem all, but not less than all, of such holder's shares of Series A
Preferred Stock in cash at a redemption price equal to the per share Liquidation
Preference thereof plus accrued and unpaid dividends thereon to (but not
including) the date fixed for redemption, which shall be the date of
consummation of the Change in Control. For purposes hereof, a Change in Control
shall mean the occurrence of any of the following events after the date of
issuance of the Series A Preferred Stock: (i) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of more than 50% of the aggregate voting power of all classes of
capital stock of the Company entitled to vote generally in an election of
directors; (ii) the Company is merged with or into another corporation or
another corporation is merged with or into the Company with the effect that
immediately after such transaction the stockholders of the Company immediately
prior to such transaction hold less than a majority in interest of the total
voting power entitled to vote in the election of directors, managers or trustees
of the entity surviving the transaction; or (iii) all or substantially
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all of the assets of the Company or the Hawthorne Savings, F.S.B., or any
successor thereto, are sold to any person or persons (as an entirety in one
transaction or a series of related transactions).
(c) NOTICE OF REDEMPTION. In the event the Company shall redeem shares of
Series A Preferred Stock, notice of such redemption shall be given by first
class mail, postage prepaid, mailed not less than 30 days nor more than 60 days
prior to the redemption date, to each holder of record of the shares to be
redeemed at such holder's address as the same appears on the stock register of
the Company; provided, however, that no failure to give such notice nor any
defect therein shall affect the validity of the proceeding for the redemption of
any shares of Series A Preferred Stock to be redeemed, except as to the holder
to whom the Company has failed to give said notice or except as to the holder
whose notice was defective. Each such notice shall state: (i) the redemption
date; (ii) the total number of shares of Series A Preferred Stock to be redeemed
and the number of shares of Series A Preferred Stock to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue upon such
redemption; and (vi) whether such redemption is being made pursuant to Section
3(b) hereof and, if so, providing for an election by each holder as to whether
it chooses to have its shares of Series A Preferred Stock redeemed.
(d) EFFECT OF REDEMPTION. If such notice of redemption shall have been so
mailed, and if on or before the redemption date specified in such notice all
funds necessary for such redemption shall have been set aside by the Company
separate and apart from its other funds, in trust for the account of the holders
of the shares so to be redeemed, so as to be and continue to be available
therefor, then, on and after said redemption date, notwithstanding that any
certificate for shares of the Series A Preferred Stock so called for redemption
shall not have been surrendered for cancellation, the shares represented thereby
so called for redemption shall be deemed to be no longer outstanding, the
dividends thereon shall cease to accrue, and all rights with respect to such
shares of the Series A Preferred Stock so called for redemption shall forthwith
cease and terminate, except only the right of the holders thereof to receive out
of the funds so set aside in trust the redemption price thereof and any accrued
and unpaid dividends, but without interest, upon surrender (and endorsement or
assignment for transfer, if required by the Company) of their certificates.
(e) STATUS OF SHARES REDEEMED. Shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired for
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value by the Company, shall, after such acquisition, have the status of
authorized and unissued shares of Preferred Stock and may be reissued by the
Company at any time as shares of any series of Preferred Stock other than as
shares of Series A Preferred Stock.
4. VOTING RIGHTS.
(a) GENERAL VOTING RIGHTS. Except as expressly provided hereinafter in
this Section 4, or as otherwise from time to time required by applicable law,
the Series A Preferred Stock shall have no voting rights.
(b) VOTING RIGHTS ON CERTAIN MATTERS. So long as any shares of Series A
Preferred Stock shall be outstanding and unless the consent or approval of a
greater number of shares shall then be required by law, without first obtaining
the approval of the holders of at least two-thirds of the number of shares of
the Series A Preferred Stock at the time outstanding (voting separately as a
class together with the holders of shares (on a one vote per share basis) of any
Parity Stock upon which like voting rights have been conferred and are
exercisable ("Voting Parity Stock")) given in person or by proxy at a meeting at
which the holders of such shares shall be entitled to vote separately as a
class, the Company shall not either directly or indirectly or through merger or
consolidation with any other company, (i) authorize, create or issue, or
increase the authorized or issued amount, of any class or series of stock
ranking senior to, or on a parity with, the shares of the Series A Preferred
Stock in respect of the payment of dividends or distributions upon redemption,
liquidation, dissolution or winding up of the Company, or any securities
convertible into such a senior or parity security, or (ii) approve any amendment
to (or otherwise alter or repeal) its Certificate of Incorporation (or this
resolution) so as to adversely affect the rights, powers or preferences of the
Series A Preferred Stock. An amendment which increases the number of authorized
shares of any class or series of Preferred Stock or authorizes the creation or
issuance of other classes or series of Preferred Stock, in each case ranking
junior to the Series A Preferred Stock with respect to the payment of dividends
and distribution of assets upon liquidation, dissolution or winding up, or
substitutes the surviving entity in a merger or consolidation for the Company,
shall not be considered to be such an adverse change.
(c) ONE VOTE PER SHARE. In connection with any matter on which holders of
the Series A Preferred Stock are entitled to vote as provided in Section 4(b)
above, or any matter on which
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the holders of the Series A Preferred Stock are entitled to vote as one class or
otherwise pursuant to law or the provisions of the Certificate of Incorporation,
each holder of Series A Preferred Stock shall be entitled to one vote for each
share of Series A Preferred Stock held by such holder.
5. NO SINKING FUND. No sinking fund will be established for the
retirement or redemption of shares of Series A Preferred Stock.
6. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of shares of Series A Preferred Stock shall be entitled to receive, out
of the assets of the Company available for distribution to stockholders, an
amount in cash equal to $50,000 for each share outstanding (the "Liquidation
Preference"), plus an amount equal to all accrued and unpaid dividends thereon
to (but not including) the date fixed for liquidation, dissolution or winding
up, and no more, before any distribution shall be made to the holders of the
Common Stock or any other class of stock or series thereof ranking junior to the
Series A Preferred Stock with respect to the distribution of assets. If upon
such voluntary or involuntary dissolution, liquidation or winding up of the
affairs of the Company the net assets of the Company shall be insufficient to
permit payment in full of the amounts required to be paid to the holders of the
Series A Preferred Stock and to the holders of any class of stock or series
thereof ranking on a parity with the Series A Preferred Stock in respect of the
distribution of assets, then a pro rata portion of the full amount required to
be paid upon such dissolution, liquidation or winding up shall be paid to (a)
the holders of Series A Preferred Stock and (b) the holders of any class of
stock or series thereof ranking on a parity with the Series A Preferred Stock in
respect of the distribution of assets. Such pro rata portion shall be
calculated upon the ratio that the total amount available for distribution to
such holders bears to the total distribution required to be made on the Series A
Preferred Stock and such parity stock.
(b) Nothing contained in this Section 6 shall be deemed to prevent
redemption of shares of the Series A Preferred Stock by the Company in the
manner provided in Section 3. Neither the merger nor consolidation of the
Company into or with any other company, nor the merger or consolidation of any
other company into or with the Company, nor a sale, transfer or lease of all or
any part of the assets of the Company, shall be deemed to be a
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liquidation, dissolution or winding up of the Company within the meaning of this
Section 6.
(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable, shall be given
by mail, postage prepaid, no less than 30 days prior to the payment date stated
therein, to the holders of record of the Series A Preferred Stock at their
respective addresses as the same shall appear on the stock register of the
Company.
IN WITNESS WHEREOF, Hawthorne Financial Corporation has caused this
Certificate to be signed by Scott A. Braly, its President and Chief Executive
Officer, and attested by James D.
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Sage, its Senior Vice President and Corporate Secretary, this 7th day of
December 1995.
Attest: HAWTHORNE FINANCIAL CORPORATION
/s/ James D. Sage By: /s/ Scott A. Braly
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Name: James D. Sage Name: Scott A. Braly
Title: Senior Vice President Title: President and Chief
and Corporate Secretary Executive Officer
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