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EXHIBIT 3(a)(ii)
CERTIFICATE OF DESIGNATION
OF
% NONCUMULATIVE EXCHANGEABLE
PREFERRED STOCK, SERIES A
OF
D&N CAPITAL CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
D&N CAPITAL CORPORATION, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES that
the following resolution was duly adopted by the Board of Directors of the
Corporation on [____________], 1997, pursuant to authority conferred upon the
Board of Directors by the provisions of the Restated Certificate of
Incorporation of the Corporation which authorizes the issuance of up to
2,500,000 shares of preferred stock, $25.00 par value per share (the "Preferred
Stock"):
RESOLVED that the issue of [1,210,000] shares of [___]% Noncumulative
Exchangeable Preferred Stock, Series A, $25.00 par value, of the
Corporation is hereby authorized and the designation, preferences,
relative, participating, optional and other special rights, and
qualifications, or restrictions of all 1,210,000 shares of this
Series, in addition to those set forth in the Restated Certificate of
Incorporation of the Corporation are hereby fixed as follows:
1. Designation. The designation of this Series shall be [___]%
Noncumulative Exchangeable Preferred Stock, Series A (hereinafter referred to
as this "Series"), and the number of shares constituting this Series shall be
[1,210,000]. Shares of this Series shall have a liquidation preference of
$25.00 per share. The number of authorized shares of this Series may be reduced
by further resolution duly adopted by the Board of Directors of the Corporation
or a duly authorized committee thereof and by the filing of a certificate
pursuant to the provisions of the General Corporation Law of the State of
Delaware stating that such reduction has been so authorized, but the number of
authorized shares of this Series shall not be increased.
2. Dividends.
(a) For each quarterly dividend period (a "Dividend Period")
dividends payable on each share of this Series shall be
payable at a rate of [___]% per annum of the liquidation
preference per share divided by four. Each Dividend Period
shall commence on the January 1, April 1, July 1 and October 1
following the last day of the preceding Dividend Period and
shall end on and include the day next
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preceding the first day of the next Dividend Period.
Dividends are noncumulative and shall be payable, when, as,
and if, declared by the Board of Directors or by a duly
authorized committee thereof, on March 31, June 30, September
30 and December 31 of each year, commencing on [JUNE 30,
1997]. Each such dividend shall be paid to the holders of
record of shares of this Series as they appear on the stock
register of the Corporation on such record date, not exceeding
45 days preceding the payment date thereof, as shall be fixed
by the Board of Directors of the Corporation or by a duly
authorized committee thereof.
(b) Dividends payable on this Series for any Dividend Period less
than a full Dividend Period, shall be computed on the basis of
a 360-day year consisting of twelve 30-day months and the
actual number of days elapsed in the period.
(c) Dividends shall be noncumulative. If the Board of Directors of
the Corporation fails to declare a dividend on the Preferred
Stock for a Dividend Period, then holders of the Preferred
Stock will have no right to receive a dividend for that
Dividend Period, and the Corporation will have no obligation
to pay a dividend for that Dividend Period, whether or not
dividends are declared and paid for any future Dividend Period
with respect to either the Preferred Stock or the common
stock, par value $300.00 per share, of the Corporation (the
"Common Stock").
(d) If full dividends on the Preferred Stock for any Dividend
Period shall not have been declared and paid, or declared and
a sum sufficient for the payment thereof shall not have been
set apart for such payments, no dividends shall be declared or
paid or set aside for payment and no other distribution shall
be declared or made or set aside for payment upon the Common
Stock or any other capital stock of the Corporation ranking
junior to or on a parity with the Preferred Stock as to
dividends or amounts upon liquidation, nor shall any Common
Stock or any other capital stock of the Corporation ranking
junior to or on a parity with the Preferred Stock as to
dividends or amounts upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any monies to
be paid to or made available for a sinking fund for the
redemption of any such stock) by the Corporation (except by
conversion into or exchange for other capital stock of the
Corporation ranking junior to the Preferred Stock as to
dividends and amounts upon liquidation), until such time as
dividends on all outstanding Preferred Stock have been (i)
declared and paid or declared and a sum sufficient for the
payment thereof has been set apart for payment for three
consecutive dividend periods and (ii) declared and paid or
declared and a sum sufficient for the payment thereof has been
set apart for payment for the fourth consecutive Dividend
Period. Notwithstanding the above, nothing in this
subparagraph shall prevent the Corporation from treating an
amount consented to by the holder of the Common Stock under
the provisions of section 565 of the Internal Revenue Code of
1986, as amended (the "Code"), as a dividend for purposes of
the dividends paid deduction under section 561 of the Code.
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(e) When dividends are not paid in full (or a sum sufficient for
such full payment is not set apart) upon the Preferred Stock
and the shares of any other series of capital stock ranking on
a parity as to dividends with the Preferred Stock, all
dividends declared upon the Preferred Stock and any other
series of capital stock ranking on a parity as to dividends
with the Preferred Stock shall be declared pro rata so that
the amount of dividends declared per share on the Preferred
Stock and such other series of capital stock shall in all
cases bear to each other the same ratio that full dividends,
for the then-current Dividend Period, per share on the
Preferred Stock (which shall not include any accumulation in
respect of unpaid dividends for prior Dividend Periods) and
full dividends, including required or permitted accumulations,
if any, on such other series of capital stock bear to each
other.
(f) Holders of the Preferred Stock shall not be entitled to any
dividend, whether payable in cash, property or stock, in
excess of full dividends, as herein provided, on the Preferred
Stock. No interest, or sum of money in lieu of interest, shall
be payable in respect of any dividend payment or payments on
the Preferred Stock which may be in arrears.
3. Redemption.
(a) The shares of this Series are not redeemable prior to
[________], 2002, except upon the occurrence of a Tax Event
(as defined in paragraph (b) below). The Corporation, at its
option, may redeem shares of this Series, as a whole or in
part, at any time or from time to time, on or after [_______],
2002, at a redemption price of $25.00 per share, plus the
accrued and unpaid dividends for the most recent quarter
thereon to the date fixed for redemption.
(b) The Corporation will have the right, at any time upon the
occurrence of a Tax Event and with the prior written approval
of the OTS, to redeem the shares of this Series, in whole, but
not in part, at a redemption price of $25.00 per share, plus
the accrued and unpaid dividends for the most recent quarter
to the date fixed for redemption. "Tax Event" means the
receipt by the Corporation of an opinion of a nationally
recognized law or accounting firm experienced in such matters
to the effect that, as a result of (i) any amendment to,
clarification of, or change (including any announced
prospective change) in, the laws or treaties (or any
regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting
taxation, (ii) any judicial decision, official administrative
pronouncement, published or private ruling, regulatory
procedure, notice or announcement (including any notice or
announcement of intent to adopt such procedures or
regulations) ("Administrative Action") or (iii) any amendment
to, clarification of, or change in the official position or
the interpretation of such Administrative Action or any
interpretation or pronouncement that provides for a position
with respect to such Administrative Action that differs from
the theretofore generally accepted position, in each case, by
any legislative body, court, governmental authority or
regulatory body, irrespective of the manner in which
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such amendment, clarification or change is made known, which
amendment, clarification, or change is effective or such
pronouncement or decision is announced on or after the date of
issuance of the shares of this Series, there is more than an
insubstantial risk that (a) dividends paid or to be paid by
the Corporation with respect to the Common Stock and Preferred
Stock of the Corporation are not, or will not be, fully
deductible by the Corporation for United States federal income
tax purposes or (b) the Corporation is, or will be, subject to
more than a de minimis amount of other taxes, duties or other
governmental charges.
(c) In the event that fewer than all the outstanding shares of
this Series are to be redeemed, the number of shares to be
redeemed shall be determined by the Board of Directors of the
Corporation or a duly authorized committee thereof and the
shares to be redeemed shall be determined by lot or pro rata
as may be determined by the Board of Directors of the
Corporation or such duly authorized committee thereof or by
any other method as may be determined by the Board of
Directors of the Corporation or such duly authorized committee
thereof in its sole discretion to be equitable, provided that
such method satisfies any applicable requirements of the
Nasdaq System on which this Series is listed.
(d) In the event the Corporation shall redeem shares of this
Series, notice of such redemption shall be given by first
class mail, postage prepaid, mailed not less than 30 or 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 Corporation.
Each such notice shall state: (i) the redemption date; (ii)
the number of shares of this Series to be redeemed and, if
fewer than all the shares held by such holder are to be
redeemed, the number of such shares 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; and (v) that quarterly
dividends on the shares to be redeemed will cease to accrue on
the redemption date.
(e) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the
Corporation in providing money for the payment of the
redemption price) quarterly dividends on the shares of this
Series so called for redemption shall cease to accrue, and
said shares shall no longer be deemed to be outstanding, and
all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation
the redemption price) shall cease. Upon surrender in
accordance with said notice of the certificates for any shares
so redeemed (properly endorsed or assigned for transfer, if
the Board of Directors of the Corporation or a duly authorized
committee thereof shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at
the redemption price aforesaid. In case fewer than all the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
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(f) Any shares of this Series which shall at any time have been
redeemed shall, after such redemption, have the status of
authorized but unissued shares of Preferred Stock, without
designation as to series until such shares are once more
designated as part of a particular series by the Board of
Directors of the Corporation or a duly authorized committee
thereof.
(g) Notwithstanding the foregoing provisions of this Section 3,
unless full dividends on the Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof has been set apart for payment
for the then-current Dividend Period, no shares of this Series
shall be redeemed unless all outstanding shares of this Series
are simultaneously redeemed, and the Corporation shall not
purchase or otherwise acquire any shares of this Series;
provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of this Series pursuant to a
purchase or exchange offer made on the same terms to holders of
all outstanding shares of this Series.
4. Automatic Exchange.
(a) Subject to the terms and conditions of this Section 4, each
share of Preferred Stock will be exchanged automatically (the
"Automatic Exchange") for one share of [___]% Noncumulative
Preferred Stock, Series A, $25.00 par value per share (a "Bank
Preferred Share"), of D&N Bank (the "Bank"). The issuance of the
Bank Preferred Shares has been duly authorized by the board of
directors of the Bank. Prior to or contemporaneously with the
filing of this Certificate of Designation with the Delaware
Division of Corporations, the Bank shall file with the OTS a
Certificate of Designation establishing the Bank Preferred
Shares. The preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of the Bank Preferred
Shares shall be substantially identical to the preferences,
conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and
conditions of the Preferred Stock established by this
Certificate of Designation.
(b) The Automatic Exchange will occur only if the appropriate
regulatory agency directs in writing (a "Directive") an exchange
of the Preferred Stock for Bank Preferred Shares because (i) the
Bank becomes "undercapitalized" under prompt corrective action
regulations, (ii) the Bank is placed into conservatorship or
receivership or (iii) the appropriate regulatory agency, in its
sole discretion, anticipates the Bank's becoming
"undercapitalized" in the near term (the "Exchange Event").
(c) Upon the Exchange Event, each holder of the Preferred Stock
shall be unconditionally obligated to surrender to the Bank the
certificates representing each share of the Preferred Stock of
such holder, and the Bank shall be unconditionally obligated to
issue to such holder in exchange for each share of Preferred
Stock a certificate representing one Bank Preferred Share.
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(d) The Automatic Exchange shall occur as of 8:00 a.m. Eastern
Time on the date for such exchange set forth in the Directive,
or, if such date is not set forth in the Directive, as of 8:00
a.m. on the earliest possible date such exchange could occur
consistent with the Directive (the "Time of Exchange"), as
evidenced by the issuance by the Bank of a press release. As of
the Time of Exchange, all of the Preferred Stock required to be
exchanged will be deemed canceled without any further action by
the Corporation, all rights of the holders of the Preferred Stock
as stockholders of the Corporation shall cease, and such persons
shall thereupon and thereafter be deemed to be and shall be for
all purposes the holders of Bank Preferred Shares. Notice of the
occurrence of the Exchange Event shall be given by first-class
mail, postage prepaid, mailed within 30 days of such event, to
each holder of record of the Preferred Stock, at such holder's
address as the same appears on the stock register of the
Corporation. Each such notice shall indicate the place or places
where certificates for the Preferred Stock are to be surrendered
by the holders thereof, and the Bank shall deliver to each such
holder certificates for Bank Preferred Shares upon surrender of
certificates for the Preferred Stock. Until such replacement
stock certificates are delivered (or in the event such
replacement certificates are not delivered), certificates
previously representing the Preferred Stock shall be deemed for
all purposes to represent Bank Preferred Shares.
(e) Any Preferred Stock purchased or redeemed by the Corporation
in accordance with Section 3 hereof prior to the Time of Exchange
shall not be deemed outstanding and shall not be subject to the
Automatic Exchange. In the event of the Automatic Exchange, any
accrued and unpaid dividends for the most recent quarter on the
Preferred Stock as of the Time of Exchange would be deemed to
be accrued and unpaid dividends on the Bank Preferred Shares.
5. Conversion. The holders of shares of this Series shall not
have any rights to convert such shares into shares of any other class or series
of capital stock of the Corporation.
6. Liquidation Rights.
(a) Upon the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, the holders of the shares of this
Series shall be entitled to be paid or have funds set aside for
such payment out of the assets of the Corporation available for
distribution to its stockholders, before any payment or
distribution shall be made on the Common Stock or on any other
class of stock ranking junior to this Series upon liquidation,
the amount of $25.00 per share, plus accrued and unpaid
dividends for the most recent quarter thereon.
(b) After the payment to the holders of the shares of this Series
of the full preferential amounts provided for in this Section 6,
the holders of this Series as such shall have no right or claim
to any of the remaining assets of the Corporation.
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(c) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, the amounts
payable with respect to the stated value of the shares of this
Series and any other shares of stock of the Corporation
ranking as to any such distribution on a parity with the
shares of this Series are not paid in full, the holders of the
shares of this Series and of such other shares will share
ratably in any such distribution of assets of the Corporation
in proportion to the full respective liquidating distributions
to which they are entitled.
(d) Neither the sale of all or substantially all the
property or business of the Corporation, nor the
merger or consolidation of the Corporation into or
with any other corporation or the merger or
consolidation of any other corporation into or with
the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary,
for the purposes of this Section 6.
(e) Upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of this Series then
outstanding shall be entitled to be paid out of the assets of
the Corporation available for distribution to its stockholders
all amounts to which such holders are entitled pursuant to
paragraph (a) of this Section 6 before any payment shall be
made to the holder of any class of capital stock of the
Corporation ranking junior to this Series upon liquidation.
7. Ranking. For purposes of this resolution, any stock of any
class or classes of the Corporation shall be deemed to rank:
(a) prior to the shares of this Series, either as to dividends or
upon liquidation, if the holders of such class or classes
shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of
the Corporation, as the case may be, in preference or priority
to the holders of shares of this Series;
(b) on a parity with shares of this Series, either as to dividends
or upon liquidation, whether or not the dividend rates,
dividend payment dates or redemption or liquidation prices per
share or sinking fund provisions, if any, be different from
those of this Series, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of
the Corporation, as the case may be, without preference or
priority, one over the other, as between the holders of such
stock and the holders of shares of this Series; and
(c) junior to shares of this Series, either as to dividends or
upon liquidation, if such class shall be Common Stock or if
the holders of shares of this Series shall be entitled to
receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of
shares of such class or classes.
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8. Voting Rights. The shares of this Series shall not have any
voting powers either general or special, except that:
(a) If at the time of any annual meeting of the Corporation's
stockholders for the election of directors there is a default
in preference dividends on the Preferred Stock, the number of
directors constituting the Board of Directors of the
Corporation shall be increased by two (if not already
increased by two due to a default in preference dividends),
and the holders of the Preferred Stock of all series (whether
or not the holders of such series of Preferred Stock would be
entitled to vote for the election of directors if such default
in preference dividends did not exist), shall have the right
at such meeting, voting together as a single class without
regard to series, to the exclusion of the holders of Common
Stock, to elect two additional directors of the Corporation to
fill such newly created directorships. Each director elected
by the holders of shares of the Preferred Stock (a "Preferred
Director") shall continue to serve as such director until the
later of: (i) the full term for which he shall have been
elected or (ii) the payment of four consecutive quarterly
dividends on the Preferred Stock. So long as a default in any
preference dividends on the Preferred Stock shall exist, any
vacancy in the office of a Preferred Director may be filled by
an instrument in writing signed by the remaining Preferred
Director and filed with the Corporation. Each director
appointed as aforesaid by the remaining Preferred Director
shall be deemed, for all purposes hereof, to be a Preferred
Director. Whenever the term of office of the Preferred
Directors shall end and a default in preference dividends
shall no longer exist, the number of directors constituting
the Board of Directors shall be reduced by two. For the
purposes hereof, a "default in preference dividends" on the
Preferred Stock shall be deemed to have occurred whenever the
Corporation has failed to pay or declare and set aside for
payment a quarterly dividend during any of the four preceding
quarterly dividend periods on all shares of Preferred Stock of
any series then outstanding; and
(b) Without the consent of the holders of shares entitled to cast
at least 66- 2/3% of the votes entitled to be cast by the
holders of the total number of shares of Preferred Stock then
outstanding, voting together as a single class without regard
to series, the holders of shares of this series being entitled
to cast one vote per share thereon, the Corporation may not:
(i) create any class or series of stock which shall have
preference as to dividends or distribution of assets
over any outstanding series of Preferred Stock other
than a series which shall not have any right to
object to such creation; or
(ii) alter or change the provisions of the Corporation's
Restated Certificate of Incorporation (including this
Certification of Designation) so as to adversely
affect the voting powers, preferences or special
rights of the holders of Preferred Stock; provided,
however, that if such creation or such
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alteration or change would adversely affect the
voting power, preferences or special rights of one or
more, but not all, series of Preferred Stock at the
time outstanding, consent of the holders of shares
entitled to cast at least 66-2/3% of the votes
entitled to be cast by the holders of all of the
shares of all such series so affected, voting
together as a single class, shall be required in lieu
of the consent of the holders of shares entitled to
cast at least 66-2/3% of the votes entitled to be
cast by the holders of the total number of shares of
Preferred Stock at the time outstanding.
9. Approval of Independent Directors.
(a) For so long as any shares of this Series are outstanding, the
Corporation may not take the following actions without first
obtaining the approval of a majority of the Independent
Directors. "Independent Director" means any director of the
Corporation who is either (i) not a current director (except a
Preferred Director), officer or employee of the Corporation,
D&N Financial Corporation, D&N Bank (the "Bank") or any
affiliate of the Bank; (ii) the owner of not more than one
percent of the outstanding common stock of D&N Financial
Corporation; or (iii) a Preferred Director. The actions which
require the prior approval of a majority of the Independent
Directors include:
(i) the issuance of a series of Preferred Stock on a
parity with the shares of this Series;
(ii) the incurrence of debt for borrowed money in
excess of 20% of the aggregate amount of net
proceeds received in connection with the issuance
of any Preferred Stock and Common Stock;
(iii) the modification of the general distribution policy
or the declaration of any distribution in respect of
Common Stock for any year if, after taking into
account any such proposed distribution, total
distributions on the shares of this Series and on the
Common Stock would exceed an amount equal to the sum
of 105% of the Corporation's "REIT taxable income"
(excluding capital gains) for such year plus net
capital gains of the Corporation for that year;
(iv) the acquisition of real estate assets other than
mortgage loans or mortgage securities
representing interests in or obligations backed
by pools of mortgage loans that (A) qualify as
real estate assets under Section 856(c)(6)(B) of
the Code, (B) are rated investment grade or
better by at least one nationally recognized
independent rating organization, (C) are not
interest-only, principal-only or high-risk
securities and (D) represent interests in or
obligations backed by pools of mortgage loans;
(v) the redemption of any shares of Common Stock;
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(vi) the termination or material modification of, or
election not to renew, the Advisory Agreement, dated
[_______], 1997, between the Corporation and the Bank
or any servicing agreement entered into in connection
with the purchase of mortgage loans, the subcontracting
of any duties under the Advisory Agreement or any
servicing agreement to persons who are not affiliates
of the Bank;
(vii) any dissolution, liquidation or termination of the
Corporation prior to [_____________], 2002;
(viii) any material amendment to or modification of any
agreements pursuant to which the Corporation purchases
its real estate mortgage assets; and
(ix) the determination to revoke the Corporation's status
as a real estate investment trust ("REIT").
(b) In assessing the benefits to the Corporation of any proposed
action requiring their consent, the Independent Directors shall
take into account the interests of holders of both the Common
Stock and the Preferred Stock, including, without limitation, the
holders of shares of this Series. In considering the interests
of the holders of the Preferred Stock, including without
limitation holders of shares of this Series, the Independent
Directors shall owe the same duties which the Independent
Directors owe to holders of Common Stock.
10. Status as a Reporting Company. For so long as any shares of this
Series are outstanding, the Corporation shall comply with the reporting
requirements of the Securities Exchange Act of 1934, as amended.
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