CERTIFICATE OF DESIGNATION
FOR SERIES B CONVERTIBLE PREFERRED STOCK
SAINT ANDREWS GOLF CORPORATION
SAINT ANDREWS GOLF CORPORATION, a Nevada corporation (the "Corporation"),
hereby certifies to the Secretary of State of the State of Nevada as follows:
RESOLVED: That the Board of Directors of the Corporation, by unanimous
written consent dated September 22, 1998, in lieu of meetings of such Board,
pursuant to Article IV of the Articles of Incorporation, adopted resolutions
approving, proposing and declaring advisable, the establishment of a series or
series of preferred stock of the Corporation in the form of this Certificate
of Designation and the Board of Directors hereby establishes and states the
designation and number of such shares, and fixes the relative rights and
preferences, designations, voting powers, qualification and limitation thereof
as follows:
There is hereby established a series of Preferred Stock of the corporation
designated "Series B Convertible Preferred Stock," par value $.001 per share.
The number of shares of this series of Convertible Preferred Stock shall be
250,000 shares. The powers, designations, preferences and relative,
participating, optional or other special rights of the shares of this series
of Convertible Preferred Stock and the qualifications, limitations and
restrictions of such preferences and rights shall be as follows:
1. Dividend Provisions. No dividends shall be paid on any share of
Common Stock or any other series of Preferred Stock unless a dividend is paid
with respect to all outstanding shares of Series B Convertible Preferred Stock
in an amount for each such share of Series B Convertible Preferred Stock equal
to (a) in the case of a dividend with respect to the Common Stock, the
aggregate amount of such dividends for all shares of Common Stock into which
each such share of Series B Convertible Preferred Stock could then be
converted and (b) in the case of a dividend with respect to the Preferred
Stock, (i) if such Preferred Stock is convertible into Common Stock, the
aggregate amount of such dividends (calculated on the basis per share of
Common Stock into which such Preferred Stock is convertible) for all shares of
Common Stock into which each such share of Series B Convertible Preferred
Stock could then be converted or (ii) if such Preferred Stock is not
convertible into Common Stock, an aggregate amount of such dividends
calculated in accordance with the following formula: aggregate dividends =
[then current liquidation value of Preferred divided by then current liquida-
tion value of Series B Convertible Preferred Stock] x dividend per share of
Preferred Stock x number of shares of Series B Convertible Preferred Stock then
outstanding. Such dividends shall be payable only when, as, and if declared
payable to holders of Common Stock or Preferred Stock, as the case may be, by
the Board of Directors and shall be noncumulative. In the event the
Corporation shall declare a distribution (other than any distributions
described above) payable in securities of other persons, evidences or
indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights to purchase any such securities or
evidences of indebtedness, then, in each such case the holders of the Series B
Convertible Preferred Stock shall be entitled to a proportionate equitable
share of any such distribution in accordance with provisions set forth above
as though the holders of the Series B Convertible Preferred Stock were the
holders of the number of shares of Common Stock of the corporation into which
their respective shares of Series B Convertible Preferred Stock are
convertible or holders of the Preferred Stock as of the record date fixed for
the determination of the holders of Common Stock of the Corporation entitled
to receive such distribution.
2. Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holder of
each share of Series B Convertible Preferred Stock shall be entitled to
receive, out of the assets of the Corporation available for distribution to
its stock holders, pro rata with the holders of the Series A Convertible
Preferred Stock with respect to their preference amount before any payment or
distribution shall be made on the Common Stock or any other series of
Preferred Stock as the case may be, an amount per share equal to $10.00. If
the assets and funds to be distributed among the holders of the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock shall
be insufficient to permit the payment of the full aforesaid preferential
amount to such holders, then the entire assets and funds of the corporation
legally available for the distribution shall be distributed among the holders
of the Series A Convertible Preferred Stock and the Series B Convertible
Preferred Stock in proportion to the aggregate preferential amount of all
shares of Series A Convertible Preferred Stock and the Series B convertible
Preferred Stock held by them. After payment has been made to the holders of
the Series A Convertible Preferred Stock and the Series B Convertible
Preferred Stock, the remaining assets of the Corporation available for
distribution to the holders of the Common Stock shall be distributed, among
the holders of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock and Common Stock pro rata based on the number of
Shares of Common Stock held by each at the time of such liquidation (assuming
conversion of all such Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock).
(b) For purposes of this Section 2, a merger or consolidation of the
Corporation with or into any other corporation or corporations, or the merger
of any other corporation or corporations into the Corporation, or the sale or
any other corporate reorganization, in which shareholders of the corporation
receive distributions as a result of such consolidation, merger, sale of
assets or reorganization, shall be treated as a liquidation, dissolution or
winding up of the Corporation, unless the stockholders of the Corporation hold
more than fifty percent (50%) of the voting equity securities of the successor
or surviving corporation immediately following such consolidation, merger,
sale of assets or reorganization in which event such consolidation, merger,
sale of assets, or reorganization shall not be treated as a liquidation,
dissolution or winding up.
3. Conversion. The Series B Convertible Preferred Stock may be
converted into shares of the Corporation's Common Stock on the following terms
and conditions (the "Conversion Rights"):
(a) Option to Convert. Commencing immediately, holders of the
Series B Convertible Preferred Stock shall have the right to convert all or a
portion of their shares into shares of Common Stock at any time or from time
to time upon notice to the Corporation on the terms and conditions set forth
herein prior to the date fixed for redemption of such shares.
(b) Mechanics of Conversion. Upon the election of a holder of the
Series B Convertible Preferred Stock to convert shares of such Preferred
Stock, the holder of the shares of Series B Convertible Preferred Stock which
are converted shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or any authorized transfer agent
for such stock together with a written statement that he elects to convert his
2
preferred stock to common stock. The Corporation or the transfer agent shall
promptly issue and deliver at such office to such holder of Series B
Convertible Preferred Stock a certificate or certificate for the number of
shares of Common Stock to which such holder is thereby entitled. The
effective date of such conversion shall be a date not later than 30 days after
the date upon which the holder provides written notice of his election to
convert to the Corporation or transfer agent.
(c) Conversion Ratio. Each share of Series B Convertible Preferred
Stock may be converted into one (1) fully paid and nonassessable share of
Common Stock (subject to adjustment pursuant to Section 3(d) below). In the
event that upon conversion of shares of Series B Convertible Preferred Stock a
holder shall be entitled to a fraction of a share of Common Stock, no
fractional share shall be issued and in lieu thereof the Corporation shall pay
to the holder cash equal to the fair value of such fraction of a share.
(d) Adjustment of Conversion Rate. If the Corporation shall at any
time, or from time to time, after the effective date hereof effect a
subdivision of the outstanding Common Stock and not effect a corresponding
subdivision of the Series B Convertible Preferred Stock, or if the Corporation
at any time or from time to time after the effective date hereof shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, then and in each such event the number of shares of
Common Stock issuable upon conversion of the Series B Convertible Preferred
Stock shall be proportionately increased as of the time of such issuance or,
in the event such a record date shall have been fixed, as of the close of
business on such record date.
(e) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, 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 of the
provisions of this Section 3 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 B Convertible Preferred Stock against impairment.
(f) Reservations 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 B Convertible Preferred Stock, such number
of its shares of Common Stock as shall time to time be sufficient to effect
the conversion of all outstanding shares of Series B Convertible Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all
outstanding shares of Series B Convertible Preferred Stock, the Corporation
will take such corporate action as is necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
4. Status of Converted or Reacquired Stock. In case any shares of
Series B Convertible Preferred Stock shall be converted pursuant to Section 3
hereof, the shares so converted shall cease to be a part of the authorized
capital stock of the Corporation.
5. Voting Rights. Each share of Series B Convertible Preferred Stock
entitles the holder to one (1) vote and with respect to each such vote, a
holder of shares of Series B Convertible Preferred Stock shall have full
voting rights and powers equal to the voting rights and powers of a holder of
3
shares of Common Stock, share for share, and shall be entitled to notice of
any shareholders' meeting in accordance with the Bylaws of the Corporation,
and shall be entitled to vote with holders of Common Stock and Series A
Convertible Preferred Stock together as a single class.
6. Redemption Provisions. To the extent permitted under the Nevada
Business Corporation Act, shares of the Series B Convertible Preferred Stock
are redeemable as follows:
(a) Redemption at Option of Corporation. If there is a registration
statement covering the issuance of the Common Stock upon the conversion of the
Series B Convertible Preferred Stock which has been declared effective by the
Securities and Exchange Commission, and both of the following two conditions
have been satisfied:
(i) The Corporation has $1,000,000 of pre-tax income for a
fiscal year according to the audited year-end financial statements; and
(ii) If the closing bid price of the Corporation's common stock
for twenty consecutive trading days equals or exceeds $15.00,
the Corporation may redeem shares of Series B Convertible Preferred Stock.
If fewer than all of the outstanding shares of Series B
Convertible Preferred Stock are to be redeemed, the Company will select those
to be redeemed pro rata or by lot or in such other manner as the Board of
Directors may determine.
(b) Redemption Price. The redemption price per share under this
Section 6 shall be $12.50 per share.
(c) Notice of Redemption. Notice to the holders of shares of Series
B Convertible Preferred Stock to be redeemed shall be given not earlier than
60 days nor later than 30 days before the date fixed for redemption. The
notice of redemption to each stockholder whose shares of Series B Convertible
Preferred Stock are to be redeemed shall specify the number of Series B
Convertible Preferred Stock of such stockholder to be redeemed, the date fixed
for redemption and the redemption price at which shares of Series B
Convertible Preferred Stock are to be redeemed, and shall specify where
payment of the redemption price is to be made upon surrender of such shares,
shall state the conversion rate then in effect, and that the Conversion Rights
of such shares shall cease and terminate at the close of business on the date
fixed for redemption.
7. Preferences Generally. Except as otherwise set forth in this Section
7, the Series B Convertible Preferred Stock shall be pari passu with the
Series A Convertible Preferred Stock. The Corporation shall not authorize or
issue any securities having any rights or preferences senior or preferential
to or pari passu with those of the Series B Convertible Preferred Stock
without the vote of the holders of a majority of the Series B Convertible
Preferred Stock, voting separately as a class, in addition to any other vote
required by law.
8. Notices. Any notice required to be given to holders of shares of
Series B Convertible Preferred Stock shall be deemed given upon deposit in the
United States mail, postage prepaid, addressed to such holder of record at his
address appearing on the books of the corporation, or upon personal delivery
of the aforementioned address.
RESOLVED: This Certificate of Designation effected herein is authorized by
the vote of the Board of Directors on September 22, 1998.
4
RESOLVED: The resolutions effected herein were duly adopted in accordance
with the applicable provisions of NRS 78.1955.
IN WITNESS WHEREOF, Saint Andrews Golf Corporation has caused this Certificate
of Designation to be signed and acknowledged by its President and Secretary
this 30th day of September 1998.
ATTEST: SAINT ANDREWS GOLF CORPORATION
/s/ Ron Boreta By: /s/ Ron Boreta
Ron Boreta, Secretary Ron Boreta, President
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I, Virginia M. Anglada, a Notary Public, hereby certify that on the 30th
day of September 1998, personally appeared before me Ron Boreta, who being by
me first duly sworn, declared that he signed the foregoing document as both
President and Secretary of the corporation named therein and that he is above
the age of eighteen years and that the statements contained therein are true
and correct to the best of his knowledge and belief.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Virginia M. Anglada
Notary Public
[ S E A L ]
My commission expires: April 21, 2002
5