EXHIBIT 99.8
SERIES B CONVERTIBLE PERPETUAL PREFERRED
STOCK PURCHASE AGREEMENT
This Series B Convertible Perpetual Preferred Stock Purchase Agreement
(this "AGREEMENT") is made as of December 13, 2001, by and among National
Mercantile Bancorp, a California corporation (the "NMB"), and the purchasers of
NMB's Series B Convertible Perpetual Preferred Stock listed on Exhibit A hereto
who are signatories of this Agreement (individually, a "PURCHASER" and
collectively, the "PURCHASERS").
In consideration of the mutual promises and covenants herein, the
receipt and sufficiency are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
1. AUTHORIZATION AND SALE OF SERIES B CONVERTIBLE PERPETUAL PREFERRED STOCK
1.1. AUTHORIZATION OF SERIES B PREFERRED STOCK. NMB has authorized the
sale and issuance to the Purchasers of an aggregate of 1,000 shares (the
"SHARES") of its Series B Convertible Perpetual Preferred Stock, no par value
(the "SERIES B PREFERRED"), having the rights, preferences, privileges and
restrictions as set forth in the Certificate of Determination of NMB in
substantially the form attached hereto as Exhibit B (the "CERTIFICATE OF
DETERMINATION").
1.2. SALE AND ISSUANCE OF SERIES B PREFERRED. Subject to the terms and
conditions hereof, NMB hereby severally issues and sells to each Purchaser, and
each Purchaser hereby severally buys from NMB, at a per share purchase price of
$1,000 (the "PER SHARE PRICE"), the number of Shares specified opposite the name
of each Purchaser in the column designated "Number of Shares" on Exhibit A.
2. REPRESENTATIONS AND WARRANTIES OF NMB
NMB represents and warrants to the Purchasers that, as of the date
hereof:
2.1. CORPORATE POWER. NMB has all requisite legal and corporate power
and authority to execute and deliver this Agreement and to authorize, sell and
issue the Shares hereunder, to issue the shares of common stock of NMB (the
"COMMON STOCK") into which the Shares are convertible (the "CONVERSION STOCK")
in accordance with the terms and conditions set forth in the Certificate of
Determination, and to enter into, carry out and perform its obligations under
the terms of this Agreement.
2.2. AUTHORIZATION. This Agreement has been duly authorized by all
necessary or proper corporate action, has been duly executed and delivered by
NMB, and constitutes a valid, legal and binding obligation of NMB, enforceable
in accordance with its terms. Other than the filing of the Certificate of
Determination with the California Secretary of State, all corporate action on
the part of NMB, its directors and its shareholders necessary for the
authorization, sale, issuance and delivery of the Shares and the Conversion
Stock has been taken. The Shares, when issued in compliance with the provisions
of this Agreement, will be validly issued, fully paid and nonassessable, and
will have the rights, preferences, privileges and restrictions described in the
Certificate of Determination; the Conversion Stock has been duly and validly
reserved and, when issued in compliance with the Certificate of Determination,
will be validly issued, fully paid and nonassessable; and the Shares and the
Conversion Stock will be free of any liens or encumbrances,
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other than any liens or encumbrances created by or imposed upon the holders;
provided, however, that the Shares and the Conversion Stock may be subject to
restrictions on transfer under state or federal securities laws, restrictions
set forth in this Agreement and restrictions under Article XIII of the Articles
of Incorporation of NMB.
2.3. SEC FILINGS. Except as separately disclosed to Purchasers' counsel
in writing: (a) since December 31, 2000, NMB has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the United States Securities and Exchange Commission (the "SEC") pursuant to the
Securities Act (as defined below) or reporting requirements of the Securities
Exchange Act of 1934, as amended (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits) incorporated by reference therein,
being hereinafter referred to herein as the "SEC FILINGS"); and (b) as of their
respective dates, the SEC Filings complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to the
SEC Filings, and none of the SEC Filings, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; Since NMB's most recent SEC Filing, there has been no
material adverse change in the assets, liabilities, business, properties,
operations, financial condition or results of operations of NMB
2.4. CAPITALIZATION. As of the date hereof, the authorized capital
stock of NMB consists of (a) 10,000,000 shares of Common Stock, of which, as of
December 10, 2001 (i) 1,623,467 shares are issued and outstanding, (ii) 512,542
shares are reserved for issuance under NMB's stock option plans, (iii) 245,227
shares are reserved for issuance upon exercise of outstanding warrants; and (iv)
1,501,160 shares are reserved for issuance upon conversion of NMB's Series A
Noncumulative Perpetual Convertible Preferred Stock (the "SERIES A"); and (b)
1,000,000 shares of Preferred Stock, 990,000 of which have been designated
Series A, of which, as of December 10, 2001, 750,580 shares are issued and
outstanding, and 1,000 of which have been designated as Series B Convertible
Perpetual Preferred Stock, none of which are issued and outstanding prior to the
issuance of the Shares. All of such outstanding shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable. Except for the rights
under the Private Purchase Agreement between NMB and Xxxxxx Company dated as of
February 6, 1997 and amended on April 30, 1997 (the "PRIVATE PURCHASE
AGREEMENT"), there are no preemptive rights or similar rights to subscribe for
or to purchase, or any restriction upon the voting or transfer of, the Shares or
any shares of capital stock pursuant to NMB's charter, by-laws or any agreement
or other instrument to which NMB is a party or by which NMB is bound. Except as
contemplated in this Agreement, the offering or sale of the Shares as provided
by this Agreement does not give rise to any rights for or relating to
antidilution which could result in any change in the number of shares of capital
stock to be issued by NMB. There are no outstanding subscriptions, options,
warrants, calls, contracts, demands, commitments, plans of recapitalization,
convertible securities or other agreements or arrangements of any character or
nature whatever, except as contemplated by this Agreement and the SEC Filings,
under which NMB is or may be obligated to issue capital stock or other
securities of any kind representing an ownership interest or contingent
ownership interest in NMB. Except for (i) the Registration Rights Agreement (the
"REGISTRATION RIGHTS AGREEMENT") between NMB and Xxxxxx Company, dated June 30,
1997, (ii) the Registration Rights Agreement dated December 31, 1995 between NMB
and California State Teachers' Retirement System, (iii)
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the Registration Rights Agreement dated June 30, 1997 between NMB and Wildwood
Enterprises Inc. Profit Sharing Plan and Trust, and (iv) the Agreement dated
December 13, 2001 by and among NMB, South Bay Bank, National Association, and
the holders of the Series A 10% Noncumulative Convertible Perpetual Preferred
Stock of South Bay Bank, there are no agreements or arrangements under which NMB
is obligated to register the sale of any shares of its capital stock under the
Securities Act or any state securities laws.
2.5. LITIGATION. Except as disclosed in the SEC Filings, there is no
action, suit, claim, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of NMB, threatened against or affecting NMB, its
subsidiaries, or any of its officers or directors acting as such, that could,
individually or in the aggregate, have a material adverse effect on (a) the
assets, liabilities, financial condition, prospects or results of operation of
NMB's business, taken as a whole or (b) the ability of NMB to perform its
obligations pursuant to the transactions contemplated by this Agreement or under
the agreements or instruments to be entered into or filed in connection
herewith.
2.6. COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
execution, delivery and performance of and compliance with this Agreement and
the issuance of the Shares and the Conversion Stock have not resulted and will
not result in any violation of, or conflict with, or constitute a default under,
the Articles of Incorporation or Bylaws of NMB, and have not and will not result
in any violation of, or conflict with, or constitute a default under, any
agreements to which NMB or its subsidiaries are a party or by which they are
bound, or any statute, rule, or regulation, or any decree of any court or
governmental agency or body having jurisdiction over NMB, its subsidiaries or
any of their properties, except for such violations, conflicts, or defaults
which would not individually or in the aggregate, have a material adverse effect
on (a) the assets, liabilities, financial condition, prospects or results of
operation of NMB's business, taken as a whole or (b) the ability of NMB to
perform its obligations pursuant to the transactions contemplated by this
Agreement or under the agreements or instruments to be entered into or filed in
connection herewith.
2.7. GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any court or governmental
authority or the National Association of Securities Dealers, Inc. ("NASD") on
the part of NMB is required in connection with the valid execution and delivery
of this Agreement, or the offer, sale or issuance of the Shares or the
Conversion Stock, or the consummation of any other transaction contemplated
hereby, except (a) the filing of the Certificate of Determination in the office
of the California Secretary of State; and (b) listing of the Conversion Stock
with the NASD.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to, and agrees
with, NMB as follows:
3.1. That such Purchaser is an "accredited investor" as defined in
Regulation D under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), and that such Purchaser is acquiring the Shares for such Purchaser's own
account for investment and not with a view to, or for resale in connection with,
a distribution of the Shares within the meaning of the Securities Act. In that
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regard, such Purchaser understands that (a) the Shares have not been registered
under the Securities Act or under any state securities laws and are therefore
restricted securities; (b) the Shares may not be sold or transferred unless they
are registered under the Securities Act or an exemption from such registration
is available.
3.2. Such Purchaser understands that an investment in the Shares
involves risk, and such Purchaser has the financial ability to bear the economic
risk of this investment in the Shares, including a complete loss of such
investment.
3.3. Such Purchaser has such knowledge and experience in financial and
business matters that such Purchaser is capable of evaluating the merits and
risks of an investment in the Shares and in protecting such Purchaser's own
interests in connection with this transaction, and such Purchaser has had the
opportunity to investigate the business and affairs of NMB and to ask questions
of its officers and employees, and has availed such Purchaser of such
opportunity either directly or through such Purchaser's authorized
representatives.
3.4. Such Purchaser understands and agrees that each certificate
evidencing the Securities will bear the following legend:
3.5. "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
3.6. Such Purchaser further agrees that NMB may place stop orders on
the certificate evidencing the Shares with the transfer agent, if any, to the
same effect as the legend set forth in Section 3.4 above. The legend and stop
transfer notice referred to above shall be removed only upon such Purchaser
furnishing to NMB an opinion of counsel, which may include counsel to a
Purchaser (reasonably satisfactory to NMB), to the effect that such legend may
be removed.
3.7. Such Purchaser acknowledges that transfers of the Shares are
restricted by Article XIII of the Articles of Incorporation of NMB and that
certificates evidencing the Shares will bear the legend required by such Article
XIII.
4. COVENANTS OF NMB
4.1. NMB agrees to at all times have authorized and reserved for
issuance a sufficient number of shares of Common Stock to allow for the
conversion of the Shares. If at any time the number of shares of Common Stock
authorized and reserved for issuance is below the number of Conversion Stock
issuable upon conversion of the Shares (based on the current conversion price of
the Shares then in effect), NMB will promptly take all corporate action
necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of shareholders to authorize
additional shares to meet NMB's obligations under this Section 4.1, in the case
of an insufficient number of authorized shares, and using its reasonable best
efforts to obtain shareholder approval of an increase in such authorized number
of shares
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4.2. NMB and the Purchasers, each of whom is also a party to the
Registration Rights Agreement, hereby agree to amend Section 1.7 of the
Registration Rights Agreement to read in its entirety as follows:
"1.7 "Registrable Securities" shall mean such Common Stock as
hereafter may be issued or are issuable upon conversion of the Shares
or conversion of shares of Series B Convertible Perpetual Preferred
Stock, and any securities of the Company issued successively in
exchange for or in respect of any of the foregoing, whether as a result
of any successive stock split or reclassification of, or stock dividend
on, any of the foregoing or otherwise; provided, however, that such
shares of Common Stock or securities shall cease to be Registrable
Securities when (i) a registration statement registering such shares of
Common Stock or securities, as the case may be, under the Securities
Act has been declared effective and such shares of Common Stock or
securities, as the case may be, have been sold or otherwise transferred
by the Holder thereof pursuant to such effective registration statement
or (ii) such shares of Common Stock or securities, as the case may be,
are sold pursuant to Rule 144 (or any successor provision) promulgated
under the Securities Act under circumstances in which any legend borne
by such shares of Common Stock or securities relating to restrictions
on transferability thereof, under the Securities Act or otherwise, is
removed by the Company."
4.3. NMB will use its best efforts to obtain and, so long as any
Purchaser owns any of the Shares or the Conversion Stock, maintain, the listing
and trading of its Common Stock (including the Conversion Shares) on Nasdaq, the
American Stock Exchange or the New York Stock Exchange and will comply in all
respects with NMB's reporting, filing and other obligations under the bylaws or
rules of the NASD and such exchanges, as applicable. Until a Purchaser
transfers, assigns or sells all of the Shares and the Conversion Stock owned by
it, NMB will promptly provide to each Purchaser copies of any notices it
receives regarding the continued eligibility of the Common Stock for listing on
Nasdaq or other principal exchange or quotation system on which the Common Stock
is listed. The foregoing "best efforts" covenant shall not be deemed to prohibit
NMB entering into and consummating mergers, consolidations, reorganizations or
"going private" transactions in which the Purchasers' Shares or Conversion Stock
are converted, sold, transferred, redeemed or exchanged for cash, property or
other securities and otherwise in accordance with: (i) NMB's Articles of
Incorporation; (ii) NMB's Bylaws; (iii) the Private Purchase Agreement; (iv) the
Registration Rights Agreement; and (v) applicable law.
5. MISCELLANEOUS
5.1. GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of California without regard to conflict of laws
provisions.
5.2. ENTIRE AGREEMENT. This Agreement contains the sole and entire
agreement and understanding of the parties with respect to the entire subject
matter of this Agreement, and any and all prior discussions, negotiations,
commitments and understandings, whether oral or otherwise, related to the
subject matter of this Agreement are hereby merged herein. Notwithstanding the
foregoing, except as set forth in Section 4.2, nothing in this Agreement shall
be deemed to modify or affect the rights of the Purchasers as assignees of the
rights of Xxxxxx Company under (i) the
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Registration Rights Agreement and (ii) the Private Purchase Agreement, which
agreements remain in full force and effect. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby.
5.3. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by facsimile
transmission, by hand or by messenger, addressed: if to a Purchaser, to the
address or fax number listed after such Purchaser's name on the Schedule of
Purchasers attached hereto as Exhibit A or at such other address as such
Purchaser shall have furnished to NMB, and if to NMB, to:
National Mercantile Bancorp
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: President
Fax: (000) 000-0000
or at such other address as NMB shall have furnished to the
Purchasers,
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when received if
delivered personally, if sent by facsimile, the first business day after the
date of confirmation that the facsimile has been successfully transmitted to the
facsimile number for the party notified, or, if sent by mail, at the earlier of
its receipt or 72 hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
5.4. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which together
shall constitute one instrument.
5.5. TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
5.6. CAPTIONS. The various captions of this Agreement are for reference
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
5.7. ASSIGNMENT. All the terms and provisions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto.
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The foregoing agreement is hereby executed effective as of the date
first set forth above.
"NMB" "PURCHASERS"
National Mercantile Bancorp
By: /s/ Xxxxx X. Xxxxxxxxxx /s/ Xxxxx X. Xxxxxx
-------------------------------------- ---------------------------
Xxxxx X. Xxxxxxxxxx, President and Xxxxx X. Xxxxxx
Chief Executive Officer
/s/ Xxxxxx X. Xxxxxx
---------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxx
---------------------------
Xxxxxxx X. Xxxxxx
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EXHIBIT A
To Series B Convertible Perpetual Preferred Stock Purchase Agreement
SCHEDULE OF PURCHASERS
------------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS NUMBER
OF SHARES
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Xxxxx X. Xxxxxx 334
00 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx 333
00 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 333
00 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
------------------------------------------------------------------------------------------------------------------------
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EXHIBIT B
To Series B Convertible Perpetual Preferred Stock Purchase Agreement
CERTIFICATE OF DETERMINATION
CERTIFICATE OF DETERMINATION
OF
RIGHTS, PREFERENCES AND PRIVILEGES
OF
SERIES B CONVERTIBLE PERPETUAL PREFERRED STOCK
OF
NATIONAL MERCANTILE BANCORP
a California Corporation
The undersigned, Xxxxx X. Xxxxxxxxxx and Xxxx X. Xxxxxxx, hereby
certify that:
I. They are the duly elected and acting President/Chief Executive
Officer and Secretary, respectively, of National Mercantile Bancorp, a
California corporation (the "Corporation");
II. The authorized number of Series B Convertible Preferred Stock of
the Corporation is 1,000, none of which has been issued.
III. Pursuant to authority given by the Corporation's Articles of
Incorporation, the Board of Directors of the Corporation has duly adopted the
following recitals and resolutions:
"WHEREAS, the Articles of Incorporation of the Corporation provide for
1,000,000 shares of a class of shares known as "Preferred Stock," issuable from
time to time in one or more series;
WHEREAS, pursuant to the Corporation's Amended and Restated Articles of
Incorporation, filed with the Secretary of State on June 20, 1997, the
Corporation created a series of the class of its authorized Preferred Stock
designated as "Series A Noncumulative Convertible Perpetual Preferred Stock"
(the "SERIES A PREFERRED Stock");
WHEREAS, the Board of Directors of the Corporation is authorized to
determine the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock, to fix the number of
shares constituting any such series and to determine the designation thereof or
any of them; and
WHEREAS, the Board of Directors of the Corporation desires, pursuant to
its authority as aforesaid, to determine and fix the rights, preferences,
privileges and restrictions relating to a new series of Preferred Stock and the
number of shares constituting and the designation of said new series;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
fixes and determines the designation of, the number of shares constituting, and
the rights, preferences, privileges and restrictions relating to, said new
series of Preferred Stock to be designated as Series B Convertible Perpetual
Preferred Stock (the "SERIES B PREFERRED STOCK"), which shall consist of 1,000
shares with a stated value of $1,000 per share. The 9,000 shares of the
Preferred Stock that are not designated as either Series A Preferred Stock or
Series B Preferred Stock shall continue to be issuable from time to time in one
or more series, and the Board of Directors of the Corporation shall continue to
be authorized to determine or alter the rights, preferences,
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privileges and restrictions of such 9,000 undesignated shares of Preferred
Stock, and to fix the number of shares constituting any such series and to
determine the designation thereof or any of them. The rights, preferences,
privileges and restrictions granted to or imposed upon the new series of
Preferred Stock designated as Series B Preferred Stock are as follows:
(A) Voting Privileges of Series B Preferred Stock.
(1) Except as provided herein or required by law, the holders of Series
B Preferred Stock shall not have the right to vote on any matters
submitted to the shareholders.
(2) In addition to any vote required by the California Corporation Law,
the Corporation shall not, without the affirmative vote or written
consent of the holders (acting together as a class) of not less than a
majority of the then outstanding shares of Series B Preferred Stock:
(a) authorize, create or issue any additional shares of Series
B Preferred Stock or shares of any class or series of stock
having any preference or priority superior to or on parity
with the Series B Preferred Stock with respect to the payment
or distribution of assets upon the dissolution or liquidation,
voluntary or involuntary, of the Corporation;
(b) declare or pay any dividend on its Common Stock or on any
other class or series of capital stock of the Corporation
ranking junior to the Series B Preferred Stock;
(c) repurchase, redeem or otherwise acquire for any
consideration any shares of its Common Stock or shares of any
other class or series of capital stock of the Corporation
ranking junior to the Series B Preferred Stock; or
(d) amend, alter or repeal any provisions of the Amended and
Restated Articles of Incorporation of the Corporation, amend,
alter or repeal any provisions of this Certificate of
Determination of Rights and Preferences, or adopt, amend,
alter or repeal any Certificate of Determination of Rights and
Preferences with respect to any class or series of capital
stock, in each case, so as to adversely affect the rights,
preferences and privileges relating to Series B Preferred
Stock or the holders thereof or waive any of the rights
granted to the holders of the Series B Preferred Stock hereby.
(B) Dividends. Except as contemplated by paragraph (E) below, the holders of the
Series B Preferred Stock shall not be entitled to receive any dividends.
(C) Liquidation Preference. In the event of an involuntary or voluntary
liquidation or dissolution of the Corporation at any time, the holders of shares
of Series B Preferred Stock shall be entitled to receive out of the assets of
the Corporation, an amount per share of Series B Preferred Stock equal to the
Liquidation Amount of the Series B Preferred Stock. The "LIQUIDATION AMOUNT" per
share of Series B Preferred Stock as of any date shall be equal to the sum of
$1,000 (the "BASE AMOUNT") (appropriately adjusted to reflect stock splits,
stock dividends, reorganizations, consolidations and similar changes hereafter
effected and relating to
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the Series B Preferred Stock) plus an amount (calculated on the basis of a
365-day year and actual days elapsed to payment) equal to 8.5% per annum of the
Base Amount (as such Base Amount may be adjusted to reflect stock splits, stock
dividends, reorganizations, consolidations and similar changes hereafter
effected), which shall accrue commencing with the date of issue of the Series B
Preferred Stock. Notwithstanding the foregoing, in the event of either an
involuntary or a voluntary liquidation or dissolution of the Corporation,
payment shall be made first to the holders of shares of Series A Preferred Stock
in the amounts set forth in the Corporation's Articles of Incorporation before
any payment of the Liquidation Amount shall be made or any assets distributed to
the holders of the Series B Preferred Stock, Common Stock or any other class or
series of capital stock of the Corporation ranking junior to the Series A
Preferred Stock. If all amounts payable to the holders of the Series A Preferred
Stock pursuant to the Corporation's Articles of Incorporation have been paid,
then payment in the amounts herein fixed shall be made to the holders of the
Series B Preferred Stock before payment shall be made or any assets distributed
to the holders of the Common Stock or any other class or series of capital stock
of the Corporation ranking junior to the Series B Preferred Stock with respect
to payment upon dissolution or liquidation of the Corporation. If upon any
liquidation or dissolution of the Corporation the assets available for
distribution shall be insufficient to pay the holders of all outstanding shares
of Series B Preferred Stock and any other class or series of capital stock
ranking on a parity with the Series B Preferred Stock as to payments upon
dissolution or liquidation of the Corporation the full amounts to which they
respectively shall be entitled, then such assets or the proceeds thereof shall
be distributed among such holders ratably in accordance with the respective
amounts which would be payable on such shares if all amounts payable thereon
were paid in full.
At any time, in the event of the merger, consolidation or
reorganization of the Corporation with or into any other entity or entities (in
which merger, consolidation or reorganization any shareholders of the
Corporation receive distributions of cash, securities or other property), or the
sale, transfer or other disposition of all or substantially all of the assets of
the Corporation, or a series of related similar such transactions, then such
transactions shall be deemed, for purposes of determining the amounts to be
received by the holders of the Series B Preferred Stock in any such transaction,
and for purposes of determining the priority of receipt of such amounts as
between the holders of the Series B Preferred Stock and the holders of other
classes or series of capital stock, to be a liquidation or dissolution of the
Corporation; provided, however, the foregoing shall not apply to (i) any
transaction as to which the holders of a majority of the outstanding Series B
Preferred Stock shall have waived by affirmative vote or written consent the
application of this paragraph; and (ii) any merger or consolidation with an
affiliate of the Corporation the sole purpose of which is to change the
Corporation's domicile solely within the United States and in which holders of
capital stock exchange such securities for a pro rata amount of substantially
identical securities of a successor corporation.
Nothing hereinabove set forth shall affect in any way the right of each
holder of shares of Series B Preferred Stock to convert such shares in
accordance with paragraph (E) below.
(D) Redemption.
(1) The Corporation, in its sole option, may redeem all shares of
Series B Preferred Stock, at any time, from funds legally available
therefor at the Liquidation Amount per
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share as of the date of redemption (the "REDEMPTION DATE"). In the
event that the Corporation elects to redeem any shares of Series B
Preferred Stock, it must redeem all of the outstanding shares of Series
B Preferred Stock.
(2) Notice of any redemption pursuant to this subparagraph (D) shall be
mailed at least 30, but not more than 60, days in advance of the
Redemption Date to the holders of record of shares of Series B
Preferred Stock so to be redeemed at their respective addresses as the
same shall appear on the books of the Corporation. To facilitate the
redemption of shares of Series B Preferred Stock, the Board of
Directors of the Corporation may fix a record date for the
determination of holders of shares of Series B Preferred Stock to be
redeemed not more than 60 days prior to the Redemption Date. Each such
notice shall state: (i) the Redemption Date and the number of shares to
be redeemed from such holder; (ii) the redemption price; (iii) whether
the shares of Series B Preferred Stock called for redemption may be
converted and the applicable conversion price; and (iv)the place or
places where certificates for such shares are to be surrendered for
payment of the redemption price.
(3) As of the Redemption Date, notwithstanding that any certificates
for such shares shall not have been surrendered for cancellation, the
shares represented thereby shall no longer be deemed outstanding,
rights to receive distributions shall cease to accrue, and all rights
of the holders of the Series B Preferred Stock called for redemption,
as shareholders of the Corporation with respect to such shares, shall
cease and terminate, except the right to receive the redemption price,
without interest, upon the surrender of their respective certificate;
provided, however, that if the Corporation defaults in payment of the
redemption price for any reason, the rights of the holders of Series B
Preferred Stock shall continue until the Corporation cures the default.
(4) Redemption of any shares of Series B Preferred Stock is subject to
the prior approval of any federal regulatory agency with jurisdiction
over such matters, to the extent required by law.
(5) No redemption hereunder made in contemplation of a Transaction (as
defined in paragraph (E) below) shall be effective, without the
affirmative vote or written consent of the holders of a majority of the
then outstanding Series B Preferred Stock, unless the amount per share
of Common Stock, which would be payable in a Transaction to a holder of
Series B Preferred Stock, were such holder to convert such Series B
Preferred Stock into shares of Common Stock as provided in paragraph
(E), would be less than the Liquidation Amount per share payable in
such redemption.
(E) Conversion Right.
(1) At any time after the earlier of (i) June 30, 2005 or (ii) the
following events (an "EARLY CONVERSION EVENT"): the execution of a
definitive agreement relating to a merger, consolidation or
reorganization of the Corporation with or into any other entity or
entities in which the holders of the Corporation's capital stock
receive cash, property or securities (other than securities issued by
any party to the merger, consolidation or reorganization which result
in the holders of the Corporation's voting capital stock prior
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to the merger, consolidation or reorganization holding not less than
66.67% of the voting power of the surviving entity) the execution of a
definitive agreement relating to any sale, transfer or other
disposition of all or substantially all the Corporation's assets, or
adoption of any plan or arrangement relating to dissolution or
liquidation of the Corporation (such merger, consolidation or
reorganization, sale, transfer or disposition of assets or dissolution
or liquidation being collectively referred to herein as a
"TRANSACTION"), each holder of the Series B Preferred Stock will have
the right, exercisable at the option of the holder, to convert some or
all of such holder's shares of Series B Preferred Stock into Common
Stock at the conversion price in effect at the time of conversion,
determined as hereinafter provided. The price at which shares of Common
Stock shall be delivered upon conversion (the "CONVERSION PRICE") shall
initially be $7.04 per share of Common Stock; provided, however, that
such initial Conversion Price shall be subject to adjustment from time
to time in certain instances as hereinafter provided. The number of
shares of Common Stock to be issued upon conversion for each share of
Series B Preferred shall be determined by dividing the Liquidation
Amount per share then in effect by the Conversion Price then in effect.
In the case of the call for redemption of the shares of Series B
Preferred Stock, such right of conversion shall cease and terminate as
to the shares designated for redemption on the Redemption Date thereof;
provided, however, that no such call for redemption shall affect a
notice of conversion validly given by a holder prior to the Redemption
Date. Within 10 days after an Early Conversion Event and at least 20
days prior to consummation of a Transaction, as defined below, and not
less than 20 days prior to the record date or the date on which the
Corporation's transfer books are closed in respect thereto, the
Corporation shall give each holder of Series B Preferred Stock written
notice, by first-class, postage prepaid, addressed to the registered
holders of Series B Preferred Stock at the addresses of such holders as
shown on the books of the Corporation, of an Early Conversion Event,
which notice shall contain a summary of the principal terms of the
proposed Transaction. If the notice of an Early Conversion Event is
mailed prior to June 30, 2005, each holder of the Series B Preferred
Stock shall have the right, exercisable at any time prior to the third
business day prior to the closing of the Transaction, to request that
its shares of Series B Preferred Stock be converted into shares of
Common Stock. The conversion shall be deemed to occur immediately prior
to the Transaction. However, in the event that any Transaction
scheduled to close prior to June 30, 2005 is not consummated for any
reason, then the requested conversions will not be effected and each
holder's Series B Preferred Stock stock certificate will be promptly
returned to the holder.
(2) To convert shares of Series B Preferred Stock into shares of Common
Stock, the holder thereof shall surrender at the principal executive
office of the Corporation both (i) the certificate or certificates
therefor, duly endorsed to the Corporation or in blank, and (ii)
provide written notice addressed to the Corporation that such holder
elects to convert such shares. If the notice of conversion is received
by the Corporation after June 30, 2005, the shares of Series B
Preferred Stock shall be deemed to have been converted immediately
prior to the close of business on the day of the surrender of such
shares for conversion as herein provided, and the person entitled to
receive the shares of Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder of such shares of
Common Stock at such time. If the notice of conversion is received by
the Corporation on or before June 30, 2005, such conversion shall be
deemed effective in
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accordance with subparagraph (E)(1) above. As promptly as practicable
on or after the conversion date, the Corporation shall issue and
deliver or cause to be issued and delivered at such office a
certificate or certificates for the number of shares of Common Stock
issuable upon such conversion.
(3) In case the Corporation shall (i) declare a dividend upon the
Common Stock payable in Convertible Securities, or in any rights or
options to purchase Common Stock or Convertible Securities, or (ii)
declare any other dividend or make any other distribution upon the
Common Stock payable otherwise than out of earnings or earned surplus,
then thereafter each holder of shares of Series B Preferred Stock upon
the conversion thereof will be entitled to receive the number of shares
of Common Stock into which such shares of Series B Preferred Stock have
been converted and, in addition and without payment therefor, each
dividend described in clause (i) above and each dividend or
distribution described in clause (ii) above which such holder would
have received by way of dividends or distributions if continuously
since such holder became the record holder of such shares of Series B
Preferred Stock such holder (a) had been the record holder of the
number of shares of Common Stock then received, and (b) had retained
all dividends or distributions in stock or securities (including Common
Stock or Convertible Securities, and any rights or options to purchase
any Common Stock or Convertible Securities) payable in respect of such
Common Stock or in respect to any stock or securities paid as dividends
or distributions and originating directly or indirectly from such
Common Stock. For the purposes of the foregoing, a dividend or
distribution other than in cash shall be considered payable out of
earnings or earned surplus only to the extent that such earnings or
earned surplus are charged an amount equal to the fair value of such
dividend or distribution as determined by the Board of Directors of the
Corporation.
(4) In case the Corporation shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, or shall pay a
dividend on the Common Stock in shares of Common Stock, the Conversion
Price in effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Corporation shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased.
(5) If any capital reorganization or reclassification of the capital
stock of the Corporation, or consolidation or merger of the Corporation
with another corporation, or the sale of all or substantially all of
its assets to another corporation shall be effected in such a way that
holders of Common Stock shall be entitled to receive stock, securities
or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization, reclassification, consolidation,
merger or sale, and subject to subparagraph (C) above, lawful and
adequate provision shall be made whereby the holders of Series B
Preferred Stock shall thereafter have the right to receive, upon the
basis and upon the terms and conditions specified herein and in lieu of
the shares of the Common Stock immediately theretofore receivable upon
the conversion of Series B Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock
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equal to the number of shares of such stock immediately theretofore
receivable upon the conversion of Series B Preferred Stock had such
reorganization, reclassification, consolidation, merger or sale not
taken place, plus all declared dividends unpaid and accumulated or
accrued on the Series B Preferred Stock to the date of such
reorganization, reclassification, consolidation, merger or sale, and in
any such case appropriate provision shall be made with respect to the
rights and interests of the holders of Series B Preferred Stock to the
end that the provisions hereof (including without limitation provisions
for adjustments of the Conversion Price and of the number of shares
receivable upon the conversion of Series B Preferred Stock) shall
thereafter be applicable, as nearly as may be in relation to any shares
of stock, securities or assets thereafter receivable upon the
conversion of Series B Preferred Stock. The Corporation shall not
effect any such consolidation, merger or sale unless prior to the
consummation thereof the successor Corporation (if other than the
Corporation) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument
executed and mailed to the registered holders of Series B Preferred
Stock, at the last addresses of such holders appearing on the books of
the Corporation, the obligation to deliver to such holders such shares
of stock, securities or assets as, in accordance with the foregoing
provisions, such holders may be entitled to receive.
(6) Upon any adjustment of the Conversion Price, then and in each case
the Corporation shall give written notice thereof by first-class mail,
postage prepaid, addressed to the registered holders of Series B
Preferred Stock, at the addresses of such holders as shown on the books
of the Corporation, which notice shall state the Conversion Price
resulting from such adjustment and the increase or decrease, if any, in
the number of shares receivable at such price upon the conversion of
Series B Preferred Stock, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
(7) In case at any time:
(a) the Corporation shall pay any dividend payable in stock
upon its Common Stock or make any distribution (other than
regular cash dividends) to the holders of its Common Stock;
(b) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock
of any class or other rights;
(c) there shall be any capital reorganization, or
reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with, or sale of
all or substantially all of its assets to, another
corporation; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall
give written notice, by first-class mail, postage prepaid,
addressed to the registered holders of Series B Preferred
Stock at the addresses of such holders as shown on the books
of the
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Corporation, of the date on which (i) the books of the
Corporation shall close or a record shall be taken for such
dividend, distribution or subscription rights, or (ii) such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up shall take place, as
the case may be. Such notice also shall specify the date as of
which the holders of Common Stock of record shall participate
in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such
reorganization reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding up, as the case may be.
Such written notice shall be given at least 20 days prior to
the action in question and not less than 20 days prior to the
record date or the date on which the Corporation's transfer
books are closed in respect thereto.
(8) As used in this paragraph (E): (i) the term "COMMON STOCK" shall
mean and include the Corporation's presently authorized Common Stock
and also shall include any capital stock of any class of the
Corporation hereafter authorized which shall not be limited to a fixed
sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, provided that the shares receivable pursuant to conversion
of shares of Series B Preferred Stock shall include shares designated
as Common Stock of the Corporation as of the date of issuance of such
shares of Series B Preferred Stock; and (ii) the term "CONVERTIBLE
SECURITIES" shall mean securities of the Corporation convertible into
Common Stock.
(9) No fractional shares of Common Stock shall be issued upon
conversion, but, instead of any fraction of a share which would
otherwise be issuable, the Corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the
market price per share of Common Stock as of the close of business on
the day of conversion. "Market price" shall mean if the Common Stock is
traded on a securities exchange or on the Nasdaq Stock Market, the
closing price of the Common Stock on such exchange or the Nasdaq Stock
Market, or, if the Common Stock is otherwise traded in the
over-the-counter market, the closing bid price, in each case averaged
over a period of 20 consecutive business days prior to the date as of
which "market price" is being determined. If at any time the Common
Stock is not traded on an exchange or the Nasdaq Stock Market, or
otherwise traded in the over--the-counter market, the "market price"
shall be deemed to be the fully diluted book value per share determined
from the financial statements of the Corporation prepared in the
ordinary course of business as of the last day of the first month
ending not less than 45 days preceding the date as of which the
determination is to be made.
If more than one shares of the Series B Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number
of full shares of Common Stock issuable upon conversion thereof shall
be computed on the basis of the aggregate number of shares of the
Series B Preferred Stock so surrendered.
(F) Reacquired Shares. Any shares of Series B Preferred Stock redeemed by the
Corporation or converted by the holder thereof shall be retired and canceled and
added to the shares of
9
Preferred Stock. All such cancelled shares shall become authorized but unissued
shares of Preferred Stock undesignated as to series and may be reissued as part
of a new series of Preferred Stock to be created by resolution of the Board of
Directors of the Corporation.
(G) Transfer Restrictions. The restrictions on transfer of the capital stock of
the Corporation set forth in Article XIII of the Amended and Restated Articles
of Incorporation of the Corporation filed June 27, 1997 (the "RESTATED
ARTICLES") and the Amendment of the Articles of Incorporation of the Corporation
filed May 4, 2000, are applicable to the Series B Preferred Stock, and the
certificates evidencing shares of Series B Preferred Stock shall bear the legend
relating to such restrictions set forth in Paragraph C of Article XIII of the
Restated Articles.
(H) Limitations. Except as may otherwise be required by law, the shares of
Series B Preferred Stock shall not have any powers, preferences or relative,
participating, optional or other special rights other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) or otherwise in the Articles of Incorporation of the Corporation."
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct to our own knowledge.
Dated: December 13, 2001
/s/ Xxxxx X. Xxxxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxxxx, President and
Chief Executive Officer
/s/ Xxxx X. Xxxxxxx
------------------------------------
Xxxx X. Xxxxxxx, Secretary
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