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Exhibit 4.1
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED SHARES OF
MERITAGE HOSPITALITY GROUP INC.
Pursuant to Section 450.1302 of the
Michigan Business Corporation Act
The undersigned DOES HEREBY CERTIFY that the following resolution was
duly adopted by the Board of Directors of Meritage Hospitality Group Inc., a
Michigan corporation (the "Corporation"), at a meeting duly convened and held,
at which a quorum was present and acting throughout, or pursuant to consent
resolution:
RESOLVED, that pursuant to the authority conferred on the Board of
Directors of the Corporation by Article III, Section 3 of the Corporation's
Articles of Incorporation, as amended, and pursuant to Section 450.1302 of the
Michigan Business Corporation Act, the President or a Vice President and
Secretary or Assistant Secretary of the Corporation be, and they hereby are,
authorized and directed to execute and to file with the Secretary of State of
Michigan, a Certificate of Designation fixing the designation, powers,
preferences and rights of a new series of Preferred Shares to consist of 200,000
Preferred Shares, par value $.01 per share, to be designated as Series A
Convertible Preferred Shares of the Corporation, and the qualifications,
limitations or restrictions thereof, as follows:
1. Each of such Shares shall have an annual dividend rate of $.90 per
Share and no more. The right to payment of dividends shall be
cumulative. Said annual dividend shall be payable in equal quarterly
installments upon the 1st day of each January, April, July and October
in each year to holders of record as of the 15th day of the preceding
month commencing January 1, 1997, before any sum shall be set apart or
applied to the redemption or purchase of, or any dividends (other than
dividends of Common Shares) shall be declared or paid upon or set
apart for, Common Shares. The first of such quarterly dividend
payments shall be prorated to reflect the number of days in the
quarter during which the particular Shares were outstanding.
2. Upon any dissolution, liquidation or winding up of the Corporation,
the holders of each of said Shares, shall be entitled to receive,
before any payment to holders of Common Shares, all accrued but unpaid
dividends, plus a liquidation value of $10.00 per share and no more.
The consolidation or merger of the Corporation, at any time, with
another corporation, or a sale of substantially all of the assets of
the Corporation, shall not be construed as a dissolution, liquidation
or winding up of the Corporation within the meaning hereof.
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3. The Series A Convertible Preferred Shares shall be convertible
into Common Shares of the Corporation at a conversion price of
$7.00 for each Common Share, (taking such Preferred Shares at
the liquidation value of $10.00 per share) upon the following
terms and conditions:
3.1 In case the Common Shares issuable upon conversion of
the Series A Convertible Preferred Shares at any time
outstanding shall be subdivided into a greater or
combined into a lesser number of Common Shares
(whether with or without par value), and whether by
stock split or stock dividend, the conversion price
shall be decreased in the case of a subdivision or
increased in the case of a combination to an amount
which shall bear the same relation to the conversion
price in effect immediately prior to such subdivision
or combination, and shall bear the total number of
Common Shares outstanding immediately after such
subdivision or combination.
3.2 No adjustments shall be made for dividends accrued on
any Shares that shall be issuable upon the conversion
of such Shares.
3.3 In case of a merger or consolidation of the
Corporation with or into another corporation, or the
reclassification of its Common Shares (other than by
way of split-up or contraction), the holders of
Series A Convertible Preferred Shares shall
thereafter be entitled to receive upon conversion the
kind and amount of shares of stock and securities and
property which they would have received had they
converted such Series A Convertible Preferred Shares
into Common Shares of the Corporation as of the
record date for determination of common shareholders
entitled to participate in such merger,
consolidation, or reclassification.
3.4 The holder of any shares of Series A Convertible
Preferred Shares may convert such Shares by
surrendering the certificate or certificates to any
transfer agent of the Corporation or to the Secretary
of the Corporation duly endorsed in blank transfer
and accompanied by written notice of election to
convert such Shares, or a portion thereof, executed
on the form set forth on such certificates or on such
other form as may be provided from time to time by
the Corporation. No fractional Common Shares shall be
issued upon the conversion of any Series A
Convertible Preferred Shares but, in lieu thereof,
the Corporation shall pay an amount in cash equal to
the current market value of such fractional interest
computed on the basis of the value of the Common
Shares at the time the preferred shares are
surrendered for conversion as determined in such
reasonable manner as the Corporation may adopt. In
case of the voluntary
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dissolution, liquidation or winding up of the
Corporation, all conversion rights of the holders of
Series A Convertible Preferred Shares shall terminate
on a date fixed by the Board of Directors, but not
more than Thirty (30) days prior to the record date
for determining the holders of the Common Shares
entitled to receive any distribution upon such
dissolution, liquidation and winding up.
3.5 The right of the holder to convert the Series A
Convertible Preferred Shares shall commence upon
issuance of such Shares.
3.6 The Corporation may cause the Series A Convertible
Preferred Shares to be converted at its option at any
time if the average of the closing sale prices for
the Corporation's Common Shares is at least 120
percent of the then effective conversion price, as
described above, for at least 20 trading days within
the period of 30 consecutive trading days ending no
earlier than 5 trading days prior to the date of the
notice of conversion.
4. VOTING. Holders of the Series A Convertible Preferred Shares
shall have no voting rights except as provided by law and
except that if at any time the Corporation fails to make SIX
consecutive quarterly dividend payments thereon, the number of
directors constituting its Board of Directors will be increased
by two and the holders of the Shares, voting as a class with
each Share having one vote, will be entitled to elect two
directors to the Board as long as any arrearages in dividend
payments remain outstanding. Upon payment by the Corporation of
all such dividend arrearages, the two directors elected pursuant
to this provision will cease to be directors and the holders of
Shares will have no further right to elect directors on account
of such arrearages.
5. The Corporation shall not, except upon the affirmative vote of
the holders of two-thirds of the Series A Convertible Preferred
Shares outstanding at the time, amend these articles of
incorporation in any manner that would result in the Series A
Convertible Preferred Shares being subordinate in terms of
preference as to payments of dividends or payments on liquidation
to any other Preferred Shares of the Corporation.