Exhibit 4.2
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CARDINAL FINANCIAL CORPORATION
A. The name of the Corporation is Cardinal Financial Corporation.
B. The following resolution, setting forth the designation and
the number of shares of a series of Preferred Stock ($1.00 par value) of the
Corporation and the relative rights and preferences thereof, was duly adopted by
the Board of Directors of the Corporation at a meeting held on May 22, 2000:
RESOLVED, that 1,376,772 authorized but unissued shares of this
Corporation's Preferred Stock ($1.00 par value) are hereby designated as a
series of Preferred Stock called the 7.25% Cumulative Convertible Preferred
Stock, Series A (the "Series A Preferred Stock"), with the following voting
powers, rights and preferences:
1. Dividends.
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(a) The holders of the outstanding shares of Series A
Preferred Stock shall be entitled to receive, if, when and as declared by the
Board of Directors of the Corporation, out of any funds legally available
therefor, cash dividends at the rate and payable on the dates hereinafter set
forth. The rate of dividends payable on the Series A Preferred Stock shall be
$.3625 per share per annum and no more. Dividends shall be payable in equal
quarterly installments on the last day of March, June, September and December of
each year, commencing on the last day of the calendar quarter in which the
Corporation and Heritage Bancorp, Inc. merge. Dividends shall be cumulative and
accrue on the Series A Preferred Stock from and after the date of issuance
thereof. Dividends payable on the last day of the calendar quarter in which the
Corporation and Heritage Bancorp, Inc. merge or on any other date which is not
the last day of March, June, September or December shall be calculated on the
basis of a 360 day year and the actual number of days elapsed.
(b) No dividend whatsoever shall be declared or paid
upon, or any sum set apart for the payment of dividends upon any shares of
Parity Stock for any dividend period unless a like proportionate dividend for
the same dividend period (in proportion to the respective annual dividend rates
per share set forth in the Articles of Incorporation or the respective Articles
of Amendment) shall have been declared and paid upon, or declared and a
sufficient sum set apart for the payment of such dividend upon, all shares of
Series A Preferred Stock outstanding.
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(c) Unless Dividends Accrued on all outstanding shares of
Series A Preferred Stock and any outstanding shares of Parity Stock due for all
past dividend periods shall have been declared and paid, or declared and a sum
sufficient for the payment thereof set apart, and full dividends (to the extent
that the amount thereof shall have become determinable) on all outstanding
shares of such stock due on the respective next following payment dates shall
have been declare and a sum sufficient for the payment thereof set apart then
(i) no dividend (other than a dividend payable solely in Common Stock) shall be
declared or paid upon, or any sum set apart for the payment of dividends on any
shares of Junior Stock; (ii) no other distribution shall be made upon any shares
of Junior Stock; (iii) no shares of Junior Stock shall be purchased, redeemed or
otherwise acquired for value by the Corporation or by any Subsidiary; and (iv)
no monies shall be paid into or set apart or made available for a sinking or
other like fund for the purchase, redemption or other acquisition for value of
any shares of Junior Stock by the Corporation or any Subsidiary.
2. Voting Rights.
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The holders of the outstanding shares of Series A Preferred
Stock shall not be entitled to receive notice of, or to participate in, or to
vote on any matter at any meeting of the stockholders of the Corporation, except
to the extent that such holders are afforded a vote by the laws of the
Commonwealth of Virginia in existence at the time any matter requiring such vote
shall arise.
3. Liquidation.
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In the event of liquidation, dissolution or winding up of the
affairs of the Corporation, the holders of shares of Series A Preferred Stock
then outstanding shall be entitled to be paid in cash out of the net assets of
the Corporation, including its capital, a liquidation price of $5.00 per share,
plus Dividends Accrued to the date of payment, and no more, before any
distribution or payment shall be made to the holders of shares of Junior Stock
and after payment to the holders of the outstanding shares of Series A Preferred
Stock and to the holders of shares of other classes and series of Parity Stock
of the amounts to which they are respectively entitled, the balance of such
assets, if any, shall be paid to the holders of the Junior Stock according to
their respective rights. For the purposes of the preceding sentence, neither the
consolidation of the Corporation with nor the merger of the Corporation into any
other corporation nor the sale, lease or other disposition of all or
substantially all of the Corporation's properties and assets shall, without
further corporate action, be deemed a liquidation, dissolution or winding up of
the affairs of the Corporation. In case the net assets of the Corporation are
insufficient to pay the holders of the outstanding shares of Series A Preferred
Stock and other series of Parity Stock the full preferential amounts to which
they are respectively entitled, the entire net assets of the Corporation shall
be distributed ratably to the holders of the outstanding shares of Series A
Preferred Stock and other series of Parity Stock in proportion to the full
preferential amounts to which they are respectively entitled.
4. Conversion.
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(a) Each holder of any outstanding shares of Series A
Preferred Stock shall have the right, at any time, to convert any of such shares
into Common Stock of the Corporation. Furthermore, as to any shares of Series A
Preferred Stock called for redemption, each such holder shall have the right at
any time prior to the close of business on the fifth full business day preceding
the date fixed for redemption (unless default shall be made by the Corporation
in the payment of the redemption price in which case such right of conversion
shall continue without interruption), to convert any of such shares into shares
of Common Stock of the Corporation. The number of shares of Common Stock into
which each share of Series A Preferred Stock shall be convertible shall be equal
to the number arrived at by dividing $5.00, without any payment or adjustment
for Dividends Accrued, by the conversion price per share of the Common Stock
fixed or determined as hereinafter provided. Such conversion price shall
initially be $6.65 per share, subject to the adjustments hereinafter provided
(such price as adjusted at any time being hereinafter called the "Conversion
Price").
(b) The holder of any outstanding shares of Series A
Preferred Stock may exercise the conversion right provided in Paragraph (a)
above as to all or any portion of the shares that he holds by delivering to the
Corporation during regular business hours, at the principal office of the
Corporation's transfer agent or such other place as may be designated in writing
by the Corporation, the certificate or certificates for the shares to be
converted, duly endorsed or assigned in blank or endorsed or assigned to the
Corporation (if required by it), accompanied by written notice stating that the
holder elects to convert such shares and stating the name or names (with address
and applicable social security number or other tax identification number) in
which the certificate or certificates or shares of Common Stock are to be
issued. Conversion shall be deemed to have been effected on the date (the
Conversion Date) when such delivery is made. As promptly as practicable
thereafter the Corporation shall issue and deliver to or upon the written order
of such holder, at such office or other place designated by the Corporation, a
certificate or certificates for the number of full shares of Common Stock to
which he is entitled and a payment in cash of any dividends declared and unpaid
with respect to the shares of Series A Preferred Stock so surrendered up to the
dividend date that immediately precedes the Conversion Date. The person in whose
name the certificate or certificates for shares of Common Stock are to be issued
shall be deemed to have become a stockholder of record on the Conversion Date,
unless the transfer books of the Corporation are closed on that date, in which
event he shall be deemed to have become a stockholder of record on the next
succeeding date on which the transfer books are open; but the Conversion Price
shall be that in effect on the Conversion Date, unless the Conversion Date falls
after the date that the Corporation mails a notice of redemption under Section
5(c) and before the date fixed for redemption, in which case the Conversion
Price shall be that in effect on the date that such notice of redemption is
mailed.
(c) If, for twenty (20) consecutive trading days
beginning on or after the end of the forty second (42nd) calendar month
following the effective date of the merger of the Corporation and Heritage
Bancorp, Inc., the last sale price of the Common Stock exceeds 1.30 multiplied
by the Conversion Price, then, effective at 5:00 p.m. on the last day in such
twenty (20) day period, (y) all outstanding shares of Series A Preferred Stock
shall automatically convert into and become shares of Common Stock, as if each
holder of Series A Preferred Stock exercised the conversion right provided in
Section 4(a) and (z) all shares of Series A Preferred
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Stock, whether or not the certificates therefore shall have been surrendered for
cancellation, shall be deemed no longer to be outstanding for any purpose and
all rights with respect to such shares shall thereupon cease and determine,
except the right to receive certificates for shares of the Corporation's Common
Stock upon surrender of certificates for shares of Series A Preferred Stock the
same manner described in Section 4(b). Promptly following a conversion of shares
of Series A Preferred Stock pursuant to this Section 4(c) the Corporation shall
give written notice of such conversion by first class mail, postage prepaid to
the holders of Series A Preferred Stock at the last addresses shown by the
Corporation's stock transfer records. No delay or imperfection in such notice
will affect the automatic conversion of Series A Preferred Stock into shares of
Common Stock pursuant to this Section 4(c). For purposes of this Section 4(c)
and Section 4(f), the last sale price of the Corporation's Common Stock shall be
deemed to be the last sale price reported by NASDAQ or its successor, but if the
Common Stock is listed on a national stock exchange, the last sale price on any
date shall be deemed to be the last sale price on the exchange on which it
generally has the highest trading volume.
(d) The Corporation shall not issue any fraction of a
share upon conversion of shares of the Series A Preferred Stock. If more than
one share of the Series A Preferred Stock shall be surrendered for conversion at
any 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 total number of
the shares of Series A Preferred Stock so surrendered. If any fractional
interest in a share of Common Stock would be deliverable upon conversion, the
number of shares of Common Stock deliverable shall be rounded up to the nearest
full share.
(e) The issuance of Common Stock on conversion of
outstanding shares of Series A Preferred Stock shall be made by the Corporation
without charge for expenses or for any tax in respect of the issuance of such
Common Stock, but the Corporation shall not be required to pay any tax or
expense which may be payable in respect of any transfer involved in the issuance
and delivery of shares of Common Stock in any name other than that of the holder
of record on the books of the Corporation of the outstanding shares of Series A
Preferred Stock converted, and the Corporation shall not be required to issue or
deliver any certificate for shares of Common Stock unless and until the person
requesting the issuance shall have paid to the Corporation the amount of such
tax or shall have established to the satisfaction of the Corporation that such
tax has been paid.
(f) The Conversion Price shall be subject to the
following adjustments:
(i) Whenever the Corporation shall (A) pay a
dividend on its outstanding shares of Common Stock in shares of its Common Stock
or subdivide or otherwise split its outstanding shares of Common Stock, or (B)
combine its outstanding shares of Common Stock into a smaller number of shares,
the Conversion Price in effect at the effective date of the happening of such
event shall be adjusted so that the holders of the Series A Preferred Stock,
upon conversion of all thereof immediately following such event, would be
entitled to receive the same aggregate number of shares of Common Stock as they
would have been entitled to receive immediately following such event if such
shares of Series A Preferred Stock had been converted immediately prior to such
event, or if there is a record date in respect of such event, immediately prior
to such record date.
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(ii) In case the Corporation, after the date of
this resolution, shall issue rights, warrants or options to subscribe for or
purchase shares of Common Stock, or securities convertible into or exchangeable
for shares of Common Stock, at a price per share less than the lesser of the
Conversion Price or Current Market Value (as hereinafter defined) per share of
Common Stock and if such rights, warrants, options or securities are
exercisable, convertible or exchangeable for a period of more than thirty (30)
days after the date of their issuance, the Conversion Price shall be adjusted so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the issuance of such rights, warrants,
options or securities by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding at the close of business on the date of
issuance of such rights, warrants, options or securities plus the number of
shares which the aggregate exercise price of the shares of Common Stock called
for by all such rights, warrants, options or securities (excluding any
theretofore exercised, converted or exchanged) would purchase at such Current
Market Value and the denominator of which shall be the number of shares of
Common Stock outstanding at the close of business on the date of issuance of
such rights, warrants, options or securities plus the number of additional
shares of Common Stock called for by all such rights, warrants, options or
securities (excluding any theretofore exercised, converted or exchanged). Such
adjustment shall be made on the date that such rights, warrants or options are
issued. For the purposes of this Section 4(f), the "Current Market Value" per
share of Common Stock on any date shall be deemed to be the average of the last
sale price on each of the twenty (20) consecutive trading days commencing forty
(40) trading days before such date. A trading day, for the purpose of this
resolution, is a day on which securities are traded on the Nasdaq Stock Market
or, if the Common Stock is then listed on any national stock exchange, on such
exchange.
(iii) Whenever the Corporation shall make a
distribution to holders of Common Stock of evidences of its indebtedness or
assets (excluding dividends and distributions paid in cash out of funds
available for dividends in accordance with applicable law), the Conversion Price
immediately prior to such distribution shall be adjusted by multiplying such
Conversion Price by a fraction, (y) the numerator of which shall be the
denominator, hereinbelow described, less the fair value (as conclusively
determined in good faith by the Board of Directors of the Corporation) at the
time of such distribution of that portion of the evidences of indebtedness or
assets distributed which is applicable to one share of Common Stock, and (z) the
denominator of which shall be the Current Market Value per share of Common Stock
on the next full business day after the record date fixed for the determination
of the holders of the Common Stock entitled to such distribution. Such
adjustment shall be retroactively effective as of immediately after such record
date.
(g) Notwithstanding any of the foregoing provisions of
this Section 4, no adjustment of the Conversion Price shall be made if the
Corporation shall issue rights, warrants or options to purchase Common Stock, or
issue Common Stock, pursuant to one or more stock purchase plans, stock option
plans, stock purchase contracts, incentive compensation plans, or other
remuneration plans for employees (including officers) or any shareholder rights
plan of the Corporation or its Subsidiaries adopted or approved by the Board of
Directors of the Corporation before or after the adoption of this resolution.
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(h) In any case in which this Section 4 provides that an
adjustment of the Conversion Price shall become effective retroactively
immediately after a record date for an event, the Company may defer until the
occurrence of such event issuing to the holder of any shares of Series A
Preferred Stock converted after such record date and before the occurrence of
such event that number of shares of Common Stock issuable upon such conversion
that shall be in addition to the number of shares of Common Stock which were
issuable upon such conversion immediately before the adjustment in the
conversion price required in respect of such event.
(i) Anything in this Section 4 to the contrary
notwithstanding, no adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least $.25 in such
price; provided, however, that any adjustments which by reason of this paragraph
(h) are not required to be made shall be carried forward and taken into account
in making subsequent adjustments. All calculations under this Section 4 shall be
made to the nearest cent.
(j) Whenever the Conversion Price and subsequent changes
to be made therein are adjusted pursuant to this Section 4, the Corporation
shall (i) promptly place on file at its principal office and at the office of
each transfer agent for the Series A Preferred Stock, if any, a statement,
signed by the Chairman or President of the Corporation and by its Treasurer,
showing in detail the facts requiring such adjustment and a computation of the
adjusted Conversion Price, and shall make such statement available for
inspection by shareholders of the Corporation, and (ii) cause a notice to be
mailed to each holder of record of the outstanding shares of Series A Preferred
Stock stating that such adjustment has been made and setting forth the adjusted
Conversion Price. Unless the change in the Conversion Price is caused as a
result of action described in subparagraph (i) of paragraph (e) of this Section
4, it shall be accompanied by a letter from the Corporation's independent public
accountants stating that the change has been made in accordance with the
provisions of this resolution.
(k) In the event of any merger, share exchange or similar
transaction to which the Corporation is a party, except (i) a merger in which
the Corporation is the surviving corporation or (ii) a share exchange in which
the Corporation's shares are issued to shareholders of another corporation, the
plan of merger, plan of share exchange or comparable document shall provide that
each share of Series A Preferred Stock then outstanding shall be converted into
or exchanged for the kind and amount of stock, other securities and property
receivable upon such merger, share exchange or similar transaction by a holder
of the number of shares of Common Stock of the Corporation into which such share
of Series A Preferred Stock might have been converted immediately prior thereto.
(l) Shares of Common Stock issued on conversion of shares
of Series A Preferred Stock shall be issued as fully paid shares and shall be
nonassessable by the Corporation. The Corporation shall, at all times, reserve
and keep available for the purpose of effecting the conversion of the
outstanding shares of Series A Preferred Stock such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of all outstanding shares of Series A Preferred Stock.
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(m) Shares of Series A Preferred Stock converted as
provided herein shall not thereafter be reissued as shares of Series A Preferred
Stock, but, upon issuance by the State Corporation Commission of Virginia or any
successor thereof of a certificate of reduction or document of similar effect,
such shares shall become authorized and unissued shares of Preferred Stock which
may be designated as shares of any other series. No additional shares of
Preferred Stock, however, may be classified as Series A Preferred Stock.
5. Redemption.
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(a) The Corporation may, at its option at any time after
December 31, 2020 and from time to time thereafter, redeem all or any portion of
the outstanding shares of Series A Preferred Stock at a redemption price of
$5.00 per share, plus in each case Dividends Accrued to the date fixed for
redemption. Additionally and at the same redemption price, the Corporation may
redeem all or any portion of the Series A Preferred Stock after a merger, share
exchange or similar transaction to which the Corporation is a party is approved
by the holders of the Common Stock and not approved by holders of the Series A
Preferred Stock; provided such transaction is submitted to the holders of the
Series A Preferred Stock on terms that are in accordance with Section 4(k); and,
provided further, that no redemption may occur and no redemption notice may be
sent before the end of the forty second (42nd) month following the effective
date of the merger of the Corporation and Heritage Bancorp, Inc. unless such
notice states that the redemption price will be $5.00 per share, plus Dividends
Accrued to the date fixed for redemption, plus an amount equal to all dividends
that would accrue if the Series A Preferred Stock remained outstanding until the
end of the forty second (42nd) month following the effective date of the merger
of the Corporation and Heritage Bancorp, Inc. and no later.
(b) In case less than all of the outstanding shares of
Series A Preferred Stock are to be redeemed, not more than 60 days prior to the
date fixed for redemption the Corporation shall select the shares to be redeemed
by prorating the total number of shares to be so redeemed among all holders
thereof in proportion, as nearly as may be, to the number of shares registered
in their respective names, by lot or in such other equitable manner as the Board
of Directors may determine. The Corporation in its discretion may determine the
particular certificates (if there are more than one) representing shares
registered in the name of a holder which are to be redeemed.
(c) Not less than thirty (30) nor more than sixty (60)
days prior to the date fixed for any redemption pursuant to paragraph (a) of
this Section 5, notice of redemption shall be given by first class mail, postage
prepaid, to the holders of record of the outstanding shares of Series A
Preferred Stock to be redeemed at their last addresses as shown by the
Corporation's stock transfer records. The notice of redemption shall set forth
the number of shares to be redeemed, the date fixed for redemption, the
applicable redemption price (including the amount of Dividends Accrued to the
date fixed for redemption), and the place or places where certificates
representing shares to be redeemed may be surrendered. In case less than all
outstanding shares are to be redeemed, the notice of redemption shall also set
forth the numbers of the certificates representing shares to be redeemed and, in
case less than all shares represented by any such certificate are to be
redeemed, the number of shares represented by such certificate to be redeemed.
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(d) When a notice of redemption of any outstanding shares
of Series A Preferred Stock shall have been duly mailed as hereinabove provided,
on or before the date fixed for redemption the Corporation shall deposit in cash
funds sufficient to pay the redemption price (including Dividends Accrued to the
date fixed for redemption) of such shares in trust for the benefit of the
holders of the shares to be redeemed with any bank or trust company in the City
of Richmond, State of Virginia, having capital and surplus aggregating at least
$50,000,000 as of the date of its most recent report of financial condition and
named in such notice, to be applied to the redemption of the shares so called
for redemption against surrender of the certificates representing shares so
redeemed for cancellation. Except as set forth in Section 4(a), from and after
the time of such deposit all shares for the redemption of which such deposits
shall have been so made shall, whether or not the certificates therefor shall
have been surrendered for cancellation, be deemed no longer to be outstanding
for any purpose and all rights with respect to such shares shall thereupon cease
and determine except the right to receive payment of the redemption price
(including Dividends Accrued to the date fixed for redemption), but without
interest. Any interest accrued on such funds shall be paid to the Corporation
from time to time.
(e) The Corporation shall also have the right to acquire
outstanding shares of Series A Preferred Stock otherwise than by redemption,
pursuant to this Section 5, from time to time, for such consideration as may be
acceptable to the holders thereof; provided, however, that if all Dividends
Accrued on all outstanding shares of Series A Preferred Stock shall not have
been declared and paid or declared and a sum sufficient for the payment thereof
set apart neither the Corporation nor any Subsidiary shall so acquire any shares
of such series except in accordance with a purchase offer made on the same terms
to all the holders of the outstanding shares of Series A Preferred Stock.
(f) Shares of Series A Preferred Stock redeemed or
otherwise acquired by the Corporation shall not thereafter be disposed of as
shares of Series A Preferred Stock, but, upon issuance by the State Corporation
Commission of Virginia or successor thereof of a Certificate of Reduction or
document of similar effect, such shares shall become authorized and unissued
shares of Preferred Stock which may be designated as shares of any other series.
No additional shares of preferred stock, however, may be classified as Series A
Preferred Stock.
6. Definitions
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For the purposes of this resolution, the following terms shall
have the following meanings:
"Capital Stock" means the Capital Stock of any class or series
(however designated) of the Corporation.
"Common Stock" means the Common Stock of the Corporation
($1.00 par value) as constituted on the date of this Resolution, or shares of
any other class of Capital Stock into which such Common Stock is reclassified
after such date.
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"Dividends Accrued" means an amount equal to the sum of all
dividends required to be paid on the shares of Series A Preferred Stock from the
date of issue of the shares of Series A Preferred Stock to the date to which the
determination is to be made, whether or not such amount or any part thereof
shall have been declared as dividends and whether there shall be or have been
any funds out of which such dividends might legally be paid, less the amount of
dividends declared and paid and, if any dividends have been declared and set
apart for payment but not paid, the amount so set apart for the payment of such
dividends. Accrued Dividends for any period less than a full calendar quarter
shall be calculated on the basis of the actual number of days elapsed over a
360-day year.
"Junior Stock" means any Capital Stock ranking as to dividends
and as to rights in liquidation, dissolution or winding up of the affairs of the
Corporation junior to the Series A Preferred Stock.
"Parity Stock" means shares of any series of the Corporation's
Preferred Stock and any shares of Capital Stock ranking as to dividends and/or
as to the rights in liquidation, dissolution or winding up of the affairs of the
Corporation equally with the Series A Preferred Stock.
"Prior Stock" means any Capital Stock ranking as to dividends
or as to rights in liquidation, dissolution or winding up of the affairs of the
Corporation prior to the Series A Preferred Stock.
"Subsidiary" means any corporation, a majority of the
outstanding voting stock of which is owned, directly or indirectly, by the
Corporation or by the Corporation and one or more Subsidiaries.
CARDINAL FINANCIAL CORPORATION
By: /s/ L. Burwell Gunn, Jr.
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L. Burwell Gunn, Jr., President
By: /s/ Nancy K. Falck
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Nancy K. Falck, Secretary
