EX-2 4 v78321ex2.txt EXHIBIT 2 EXHIBIT 2 CERTIFICATE OF DETERMINATION, PREFERENCES AND RIGHTS OF SERIES B EXCHANGEABLE PREFERRED STOCK OF LC ACQUISITION CORP., A CALIFORNIA CORPORATION Pursuant to Section 401 of the General Corporation Law of the State of California I. The undersigned, being the duly elected President and Secretary of LC Acquisition Corp., a corporation organized and existing under the General Corporation Law of the State of California, in accordance with the provisions of Section 401 thereof (the "Corporation"), certify that pursuant to authority given by the Corporation's Amended and Restated Articles of Incorporation, the Board of Directors of the Corporation has duly adopted the following recitals and resolutions: WHEREAS, the Amended and Restated Articles of Incorporation of the Corporation provide for a class of shares known as Preferred Stock, issuable from time to time in one or more series; and WHEREAS, the Board of Directors of the Corporation is authorized, within the limitations and restrictions stated in the Amended and Restated Articles of Incorporation, to determine or alter 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; and WHEREAS, the Corporation has not issued any shares of Series B Exchangeable Preferred Stock, and the Board of Directors of the Corporation desires, pursuant to its authority, to determine and fix the rights, preferences, privileges and restrictions of the Series B Exchangeable Preferred Stock and the number of shares constituting and the designation of the Series B Exchangeable Preferred Stock; NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority conferred upon the Board of Directors of this Corporation in accordance with the provisions of the Amended and Restated Articles of Incorporation, there is hereby established a series of the authorized preferred stock of the Corporation, which series shall be designated as "Series B Exchangeable Preferred Stock," and which shall consist of two million five hundred thousand (2,500,000) shares and shall have the following dividend rights, voting rights, terms of redemption, redemption prices, liquidation preferences and other rights, qualifications, limitations and restrictions. 1. Dividend Rights. Commencing one hundred eighty (180) days after the date of issuance of the Series B Exchangeable Preferred Stock and subject to the prior payment in full of all cumulative dividends to holders of the Series A Exchangeable Preferred Stock and other classes of stock at the time outstanding having prior rights as to dividends, the holders of the Series B Exchangeable Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, cumulative dividends at an 1 annual rate of $0.40 per share per annum. Such dividends shall be payable solely in Series B Exchangeable Preferred Stock of the corporation valued for this purpose at $4.00 per share. The Board of Directors shall not pay any dividend (other than those payable solely in the Common Stock of the corporation) to the holders of the Common Stock during any fiscal year of the corporation until it has paid all cumulative but unpaid dividends to the holders of the Series A Exchangeable Preferred Stock and Series B Exchangeable Preferred Stock. 2. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of this corporation, either voluntary or involuntary, subject to the prior payment in full of the liquidation preference of the Series A Exchangeable Preferred Stock and to the rights of Series of Preferred Stock that may from time to time come into existence, the holders of Series B Exchangeable Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of this corporation to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of $4.00 for each outstanding share of Series B Exchangeable Preferred Stock (the "Original Series B Issue Price") plus all cumulative but unpaid dividends. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series B Exchangeable Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of preferred stock that may from time to time come into existence, the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders of the Series B Exchangeable Preferred Stock in proportion to the amount of such stock owned by each such holder. (b) Upon the completion of the distribution required by subparagraph (a) of this Section 2 and any other distribution that may be required with respect to Series of Preferred Stock that may from time to time come into existence, if assets remain in this corporation, the remaining assets of this corporation shall be distributed to the holders of the Common Stock. (c) (i) For purposes of this Section 2, a liquidation, dissolution or winding up of this corporation shall be deemed to be occasioned by, or to include, (A) the acquisition of the corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the corporation); or (B) a sale of all or substantially all of the assets of the corporation; unless the corporation's shareholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the corporation's acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity. 2 (ii) In any of such events, if the consideration received by the corporation is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows: (A) Securities not subject to investment letter or other similar restrictions on free marketability: (1) If traded on a securities exchange or through NASDAQ-NMS, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty (30) day period ending three (3) days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the corporation and the holders of at least a majority of the voting power of all then outstanding shares of Series B Exchangeable Preferred Stock. (B) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A)(1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the corporation and the holders of at least a majority of the voting power of all then outstanding shares of such Series B Exchangeable Preferred Stock. (iii) In the event the requirements of this Section 2(c) are not complied with, this corporation shall forthwith either: (A) cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or (B) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series B Exchangeable Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Section 2(c)(iv) hereof. (iv) The corporation shall give each holder of record of Series B Exchangeable Preferred Stock written notice of such impending transaction not later than ten (10) days prior to the shareholders' meeting called to approve such transaction, or ten (10) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of 3 the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than ten (10) days after the corporation has given the first notice provided for herein or sooner than ten (10) days after the corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of Series B Exchangeable Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least a majority of the voting power of all then outstanding shares of such Preferred Stock. 3. Redemption. Subject to the provisions of the California General Corporation Law and to any other applicable restrictions on the right of a corporation to redeem its own shares, and subject to the redemption in full of all shares of Series A Exchangeable Preferred Stock, all shares of Series B Exchangeable Preferred Stock shall be redeemed within thirty (30) days of the acquisition by the corporation of shares of capital stock ("Acquired Shares") of a corporation organized under the laws of a state of the United States in a transaction that meets the following criteria: (a) The Acquired Shares shall be fully paid and nonassessable shares of a class of equity securities that is registered under Section 12 of the Securities Exchange Act of 1934, as amended, and is traded on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market Systems; (b) The issuers of the Acquired Shares shall have shareholders' equity of at least $25 million according to its most recent balance sheet filed with the Securities and Exchange Commission; (c) The net book value of the Acquired Shares shall be at least $8.00 per share according to the most recent balance sheet filed with the Securities and Exchange Commission; and (d) The number of Acquired Shares shall equal or exceed the number of shares of Series B Exchangeable Preferred Stock then outstanding. Upon redemption the corporation shall pay for each share redeemed one share of the Acquired Shares (the "Redemption Price"). Less than all of the Series B Exchangeable Preferred Stock at any time outstanding may not be redeemed. At least ten (10) days' previous notice by mail, postage prepaid, shall be given to the holders of record of the Series B Exchangeable Preferred Stock as of the date of mailing or as of a record date lawfully fixed. Such notice shall be addressed to each such shareholder at the address 4 of that holder appearing on the books of the corporation or given by that holder to the corporation for the purpose of notice, or if no such address appears or is given, at the place where the principal office of the corporation is located. The notice shall state the date fixed for redemption and the Redemption Price and shall call upon that holder to surrender to the corporation on the date fixed and at the place designated in the notice the holder's certificate or certificates representing shares of Series B Exchangeable Preferred Stock. On or after the date fixed for redemption and stated in that notice, each holder of shares of Series B Exchangeable Preferred Stock shall surrender the certificate evidencing the shares to the corporation at the place designated in the notice and shall thereupon be entitled to receive the Redemption Price. If the notice of redemption shall have been duly given and if on the date fixed for redemption the Acquired Shares necessary for the redemption shall be available to pay the Redemption Price, then, notwithstanding that the certificates evidencing any shares of Series B Exchangeable Preferred Stock shall not have been surrendered, dividends with respect to the Series B Exchangeable Preferred Stock shall cease to accrue after the date fixed for redemption and all rights with respect to shares of Series B Exchangeable Preferred Stock shall after that date cease and determine, except only the right of the holders to receive the Redemption Price upon surrender of those certificates. 4. Voting Rights. The holder of each share of Series B Exchangeable Preferred Stock shall have the right to one vote and shall be entitled to notice of any shareholders' meeting in accordance with the bylaws of this corporation, and shall be entitled to vote, together with holders of Series A Exchangeable Preferred Stock and Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. 5. Protective Provisions. Subject to the rights of Series A Exchangeable Preferred Stock, so long as three hundred fifty thousand (350,000) shares of Series B Exchangeable Preferred Stock are outstanding, this corporation shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series B Exchangeable Preferred Stock; (a) alter or change the rights, preferences or privileges of the shares of Series B Exchangeable Preferred Stock so as to materially and adversely affect such shares; (b) authorize, create or issue a senior or pari passu class of Preferred Stock; (c) amend this corporation's Articles of Incorporation or Bylaws so as to materially and adversely affect the shares of Series B Exchangeable Preferred Stock; or (d) redeem or repurchase Common Stock of this corporation. 6. Status of Redeemed Stock. In the event any shares of Series B Exchangeable Preferred Stock shall be redeemed pursuant to Section 3 hereof, the shares so redeemed shall be cancelled and shall not be issuable by the corporation. The Articles of Incorporation of this 5 corporation shall be appropriately amended to effect the corresponding reduction in the corporation's authorized capital stock. RESOLVED FURTHER, that the President or any Vice President and the Secretary or any Assistant Secretary of the Corporation are each authorized to do or cause to be done all such acts or things and to make, execute and deliver or cause to be made, executed and delivered all such agreements documents, instruments and certificates in the name and on behalf of the Corporation or otherwise as they deem necessary, desirable or appropriate to execute or carry out the purpose and intent of the foregoing resolutions the making, execution, or delivery being conclusive evidence thereof. II. The authorized number of shares of preferred stock of the Corporation is ten million (10,000,000) and the number of shares constituting Series B Exchangeable Preferred Stock, none of which has been issued, is two million five hundred thousand (2,500,000). IN WITNESS WHEREOF, the undersigned have executed this Certificate as of ____________________________, 2001. /s/ FLOYD W. KEPHART ---------------------------------------- Floyd W. Kephart, President /s/ ALESSANDRA SCORNAIENCHI ---------------------------------------- Alessandra Scornaienchi, Secretary The undersigned, Floyd W. Kephart and Alessandra Scornaienchi, the President and Secretary, respectively, of LC Acquisition Corp. each declare under penalty of perjury that the matters set out in the foregoing Certificate are true of his or her own knowledge. Executed at Washington, D.C. on November 6, 2001. /s/ FLOYD W. KEPHART ---------------------------------------- Floyd W. Kephart, President /s/ ALESSANDRA SCORNAIENCHI ---------------------------------------- Alessandra Scornaienchi, Secretary 6