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EXHIBIT 3.2
ARTICLES SUPPLEMENTARY
SPECIALTY MORTGAGE TRUST, INC.
CLASS A CONVERTIBLE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
Specialty Mortgage Trust, Inc., a Maryland corporation
(hereinafter called the "Corporation"), having its principal office in
Baltimore, Maryland, hereby certifies to the Department of Assessments and
Taxation of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article VI of the Charter of the Corporation,
the Board of Directors has duly divided and classified 5,000,000 shares of the
capital stock of the Corporation into a series designated Class A Convertible
Preferred Stock and has provided for the issuance of such series.
SECOND: The terms of the Class A Convertible Preferred Stock as
set by the Board of Directors are as follows:
Section 1. Designation and Amount; Fractional Shares; Par Value.
There shall be a class of Preferred Stock of the Corporation designated as
"Class A Convertible Preferred Stock" and the number of shares constituting such
series shall be 5,000,000. The Class A Convertible Preferred Stock is issuable
solely in whole shares that shall entitle the holder thereof to exercise the
voting rights, to participate in the distributions and to have the benefit of
all other rights of holders of Class A Convertible Preferred Stock as set forth
herein and in the Charter. The par value of each share of Class A Convertible
Preferred Stock shall be $0.01. The shares of Class A Convertible Preferred
Stock are being offered for sale in a private placement (the "Placement").
Section 2. Dividends. The holders of Class A Convertible
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors out of funds legally available for such purpose, cash dividends in
such amounts as the Board of Directors may from time to time determine in order
to satisfy the dividend distribution requirements applicable to "real estate
investment trusts" under the provisions of the Internal Revenue Code of 1986, as
it may be amended, or for such other purpose as the Board of Directors may deem
appropriate.
In no event, so long as any Class A Convertible Preferred Stock
shall remain outstanding, shall any dividend whatsoever be declared or paid
upon, nor shall any distribution be made upon, any Common Stock or any other
class or series of capital stock that ranks junior to the Class A Convertible
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Preferred Stock as to dividends, nor (without the written consent of the holders
of 66 2/3% of the outstanding Class A Convertible Preferred Stock) shall any
shares of Common Stock or such other class or series of capital stock be
purchased or redeemed by the Corporation, nor shall any moneys be paid to or
made available for a sinking fund for the purchase or redemption of any shares
of Common Stock, unless in each instance the price paid for such purchase or
redemption does not exceed $0.01 per share (adjusted for any subsequent
dividends or distributions payable in Common Stock or such other class or series
of capital stock or any subdivision or combination or reclassification of Common
Stock or such other class or series of capital stock).
Section 3. Liquidation Preference. Subject to the prior payment
in full of the preferential amounts to which shares of any other series or class
of stock of the Corporation ranking, as to distributions upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary
(any such event, a "Liquidation"), senior to the Class A Convertible Preferred
Stock, are entitled in the event of any Liquidation, each holder of a Class A
Convertible Preferred Stock shall be entitled to receive, and be paid out of the
assets of the Corporation available for distribution to its stockholders, a
liquidation preference in the amount of $10.00 per share, plus all declared and
unpaid dividends on such share (the "Liquidation Preference"). If upon any
Liquidation the amounts payable with respect to the Liquidation Preference of
the Class A Convertible Preferred Stock and any shares of a class or series of
the Corporation's stock ranking on a parity with the Class A Convertible
Preferred Stock as to distributions upon such Liquidation ("Parity Stock") are
not paid in full, the holders of Class A Convertible Preferred Stock and of such
shares of Parity Stock will share pro rata in the amounts payable and other
property distributable with respect to such Liquidation so that the per share
amounts to which the holders of Class A Convertible Preferred Stock and the
holders of such shares of Parity Stock are entitled will in all cases bear to
each other the same ratio that the liquidation preferences of the Class A
Convertible Preferred Stock and such shares of Parity Stock bear to each other.
Following the payment of all of the Liquidation Preference, to the extent of any
remaining assets, the holders of the Class A Convertible Preferred Stock and the
holders of the Common Stock of the Corporation will share the remaining amounts
payable and other property distributable with respect to such Liquidation
equally per share, with each share of Class A Convertible Preferred Stock being
treated for such purposes as if it had been converted on the day immediately
prior to the commencement of the Liquidation into the number of shares of Common
Stock that would be issuable at such time pursuant to Section 4(a)(i). Neither a
consolidation or merger of the Corporation with or into another corporation, nor
a merger of any other corporation with or into the Corporation, nor the sale of
all or substantially all of the Corporation's property
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or business (other than in connection with a winding up of its business) will be
considered a Liquidation for purposes of this Section.
Section 4. Conversion Provisions.
(a) Conversion Events.
(i) Automatic Conversion. Notwithstanding anything to the
contrary contained in this Section, each share of Class A Convertible Preferred
Stock shall automatically be converted into that number of fully paid and
nonassessable shares of Common Stock, or such other securities and property as
hereinafter provided (calculated as to each conversion to the nearest 1/100th of
a share with .5/100 rounded upwards), equal to one times the ratio (the
"Conversion Ratio") of (A) $10.00 (the issue price per share of Class A
Convertible Preferred Stock), divided by (B) the Conversion Price. The
conversion shall occur upon the earlier to occur of the following: (i) the date
of the closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Corporation
to the public resulting in gross proceeds to the Corporation of at least $20
million and at a price per share of at least $10.00 or such lesser amount of
proceeds and/or lower price per share as may be approved by two-thirds of the
voting power of the Preferred Stock (a "Qualified IPO"), (ii) the date falling
two years from the last closing of the Offering when and if the return on equity
for the previous four quarters exceeds 13%, or (iii) the date falling three
years from the last closing of the Offering when and if the return on equity for
the previous four quarters exceeds 12%. Return on equity is calculated for the
previous four quarters by dividing the Company's Taxable Income for the period
by its Average Net Worth for the quarter. For such calculations, the "Taxable
Income" of the Company means the taxable income of the Company determined in
accordance with GAAP after the Manager's incentive compensation, but before the
deduction for dividends paid and net operating loss deductions arising from
losses in prior periods. A deduction for the Company's interest expenses for
borrowed money is taken when calculating Taxable Income. "Average Net Worth" for
any period means the arithmetic average of the sum of the net proceeds from any
offering of its equity securities by the Company, after deducting expenses and
costs relating to the offering, plus the Company's retained earnings (without
taking into account any losses incurred in prior periods and excluding amounts
reflecting taxable income to be distributed as dividends and amounts reflecting
valuation allowance adjustments) computed by taking the daily average of such
values during such period. Return on equity for purposes of this calculation is
not related to the actual distributions received by stockholders. For purposes
of the Class A Convertible Preferred Stock, "Conversion Price" shall initially
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mean $10.00 until such Conversion Price is adjusted in accordance with the
provisions of Section 4(d) hereof and thereafter shall mean the Conversion Price
in effect from time to time as adjusted. Except as specifically provided in
Section 4(d) hereof, there shall be no adjustment of the Conversion Price in
case of the issuance of any securities of the Corporation. All adjustments in
the Conversion Price shall be rounded to the nearest whole cent, with one-half
cent rounded upwards.
(ii) Optional Conversion. Each holder of shares of Class A
Convertible Preferred Stock shall have the right, at such holder's option, to
convert all or a portion of the shares held, at any time or from time to time
following the date occurring three years after the last closing under the
Placement into that number of fully paid and nonassessable shares of Common
Stock, or such other securities and property as hereinafter provided (calculated
as to each conversion to the nearest 1/100th of a share, with .5/100 rounded
upwards), determined by multiplying the aggregate number of shares of Class A
Convertible Preferred Stock being converted at such time by such holder, by the
Conversion Ratio.
(b) Conversion Procedures. Any holder of shares of Class A
Convertible Preferred Stock desiring to convert shares pursuant hereto shall
surrender the certificate or certificates evidencing such shares to the
Corporation at its principal office (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the holder
or holders of the Class A Convertible Preferred Stock) at any time during its
usual business hours which certificate or certificates, if the Corporation shall
so require, shall be duly endorsed to the Corporation or in blank, or
accompanied by proper instruments of transfer to the Corporation or in blank,
accompanied by (i) an irrevocable written notice to the Corporation that the
holder elects to convert such shares and specifying the name or names (with
address or addresses) in which a certificate or certificates evidencing shares
of Common Stock are to be issued and (ii) if required pursuant to Section 4(f),
an amount sufficient to pay any transfer or similar tax (or evidence reasonably
satisfactory to the Corporation demonstrating that such taxes have been paid).
The Corporation shall, as soon as practicable after effectiveness
of conversion of shares of Class A Convertible Preferred Stock and compliance
with the other conditions herein contained, deliver to the holder whose shares
of Class A Convertible Preferred Stock are so converted, or to the nominee or
nominees of such person, certificates evidencing the number of full shares of
Common Stock to which such person shall be entitled, together with a cash
payment in respect of any fraction of a share of Common Stock as hereinafter
provided. The conversion pursuant to Section 4(a)(i) shall be deemed to have
been effected at the time and on the date therein specified.
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Subject to the following provisions of this paragraph, each conversion pursuant
to Section 4(a)(ii) shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of Class
A Convertible Preferred Stock to be converted shall have been surrendered
together with the irrevocable written notice and the payment of taxes (if
applicable), all as provided in this Section 4(b), and the person or persons
entitled to receive the Common Stock deliverable upon conversion of such Class A
Convertible Preferred Stock shall be treated for all purposes as the record
holder or holders of such Common Stock at such time on such date, unless the
stock transfer books of the Corporation shall be closed on such date, in which
event such person or persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Ratio in effect on the date on which such shares shall have been
surrendered and the other conditions specified above have been satisfied.
Notwithstanding the preceding sentence, in the event that at the time of
surrender of shares of Class A Convertible Preferred Stock for conversion
pursuant to Section 4(a)(ii) the Corporation has an effective registration
statement covering such conversion to Common Stock, the holder so surrendering
shares for conversion shall have the right to rescind such election to convert
(by delivering a written notice to that effect to the Corporation at the office
at which such shares were surrendered) for a period ending at the close of
business on the fifth business day after the Corporation shall have mailed (for
overnight delivery if possible) to such holder at its last address as it shall
appear upon the stock transfer books of the Corporation a copy of the Prospectus
covering such conversion. No holder of Class A Convertible Preferred Stock shall
have any rights as a holder of Common Stock (or any other securities into which
the Class A Convertible Preferred Stock may become convertible) unless and until
such conversion has been effected.
The holder of a share of Class A Convertible Preferred Stock at
the close of business on a record date shall be entitled to receive the dividend
payable thereon on the corresponding dividend payment date notwithstanding the
conversion thereof during the period between the record date with respect to
such dividend and the corresponding dividend payment date or the Corporation's
default in the payment of the dividend due on such dividend payment date. Except
as provided in the preceding sentence, no payments or adjustments in respect of
dividends on shares of Class A Convertible Preferred Stock converted or on
account of any dividend on the Common Stock issued upon conversion shall be made
upon the conversion of any shares of Class A Convertible Preferred Stock.
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(c) No Fractional Shares. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon conversion
of Class A Convertible Preferred Stock. If a certificate or certificates
representing more than one share of Class A Convertible Preferred Stock shall be
surrendered for conversion at one time by the same record 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 Class A Convertible Preferred
Stock so surrendered by such record holder as provided in Section 4(b). In lieu
of any fractional share of Common Stock that would otherwise be issuable upon
conversion of any shares of Class A Convertible Preferred Stock, the Corporation
shall pay a cash adjustment in respect of such fractional share in an amount
equal to the same fraction of the current fair market value of the Common Stock
on the day immediately preceding the date of conversion, as determined by the
Board of Directors.
(d) Adjustments to Conversion Price; Fundamental Change.
(i) Changes in Capital Stock. If, after the issuance of
any shares of Class A Convertible Preferred Stock, the Corporation:
(A) subdivides its outstanding shares of Common
Stock into a greater number of shares; or
(B) combines its outstanding shares of Common Stock
into a smaller number of shares; or
(C) issues, by any dividend or distribution to the
holders of Common Stock, shares of Common Stock; or
(D) issues, by reclassification of its Common
Stock, any shares of its capital stock;
then the conversion rights and the Conversion Price in effect immediately prior
to such action shall be adjusted so that the holder of shares of Class A
Convertible Preferred Stock thereafter converted may receive the number of
shares of capital stock of the Corporation which such holder would have owned
immediately following such action if such holder had converted the shares of
Class A Convertible Preferred Stock immediately prior to such action. The
adjustment shall become effective immediately after the effective date of the
subdivision, combination, issuance or reclassification.
If after an adjustment a holder of shares of Class A Convertible
Preferred Stock upon conversion of such shares may receive shares of two or more
classes of capital stock of the
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Corporation, the Conversion Price shall thereafter be subject to adjustment upon
the occurrence of an action taken with respect to any such class of capital
stock as is contemplated by this Section 4(d) with respect to Common Stock, on
terms comparable to those applicable to Common Stock in this Section 4(d).
(ii) Anti-dilution Provision. If the Corporation shall
issue any class or series of capital stock of the Corporation that ranks junior
to the Class A Convertible Preferred Stock at a price per share less than the
greater of (A) $10.00 and (B) the Fair Market Value per share of such capital
stock (such greater amount being hereinafter referred to as the "Base Price"),
then the Conversion Price in effect at the opening of business on the day next
following such issuance shall be adjusted to equal the price determined by
multiplying (I) the Conversion Price in effect immediately prior to the opening
of business on the day next following such issuance by (II) a fraction, the
numerator of which shall be the sum of (x) the number of shares of all classes
and series of capital stock outstanding on the close of business on the day next
preceding the day of such issuance and (y) the number of shares that could be
purchased at the Base Price from the aggregate proceeds to the Corporation from
the issuance of such new shares of capital stock, and the denominator of which
shall be the sum of (xx) the number of shares of all classes and series of
capital stock outstanding on the close of business on the day next preceding the
day of such issuance and (yy) the number of additional shares of capital stock
being issued; provided, however, that no adjustment to the Conversion Price
shall be made as a result of a Qualified IPO. For purposes of this subsection,
"Fair Market Value" shall mean, as to any class or series of capital stock that
is not publicly traded, the fair value of the shares of such class or series as
determined reasonably and in good faith by a majority of the Board of Directors
of the Corporation including a majority of the Independent Directors (as defined
in the Corporation's Bylaws) and, as to publicly traded securities, shall mean
the average of the daily Current Market Prices of a share of such capital stock
during five (5) consecutive trading days selected by the Corporation commencing
not more than twenty (20) trading days before, and ending not later than the
effective day of the Conversion Price adjustment pursuant to this subsection.
"Current Market Price" of publicly traded securities for any day shall mean the
closing price, regular way on such day, or, if no sale takes place on such day,
the average of the reported closing bid and asked prices regular way on such
day, in either case as reported on the Nasdaq National Market or the principal
national securities exchange on which such securities are listed or admitted for
trading, or if not so quoted, listed or admitted, the average of the closing bid
and asked prices on such day in the over-the-counter market as reported by
Nasdaq.
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(iii) De Minimis Adjustments. If the amount of any
adjustment of the Conversion Price required pursuant to this Section 4(d) would
be less than one percent (1%) of the Conversion Price in effect at the time such
adjustment is otherwise so required to be made, no adjustment to the Conversion
Price shall be made and such amount shall be carried forward and an adjustment
with respect thereto made at the time of and together with any subsequent
adjustment which, together with such amount and any other amounts so carried
forward, shall aggregate at least one percent (1%) of such Conversion Price.
(iv) Reorganization. If a Change of Control shall occur
with respect to the Corporation or if the Corporation is a party to a
consolidation or a merger or other combination, or transfers all or
substantially all of its assets as an entirety (any such Change of Control,
consolidation, merger, combination or transfer being hereinafter referred to as
a "Fundamental Change"), each holder of Class A Convertible Preferred Stock
shall be given the option to elect to receive either (i) the kind and amount of
securities, cash or other assets which such holder would have received
immediately after the Fundamental Change if such holder had converted such
shares of Class A Convertible Preferred Stock immediately before the effective
date of the Fundamental Change or (ii) the Liquidation Preference of such shares
of Class A Convertible Preferred Stock. No later than the twentieth day after
the day the Corporation mails notice of a proposed Fundamental Change or the
occurrence of a Fundamental Change, as required under Section 4(g), each holder
of Class A Convertible Preferred Stock shall mail to the Corporation its
election to receive the amounts specified under either (i) or (ii) above. If no
election is timely mailed by a holder, the Corporation shall determine in its
sole discretion whether such holder receives the amounts under (i) or (ii). For
purposes of this subsection (d)(iv), a "Change of Control" shall be deemed to
occur if, and only if, during any period of two consecutive years (not including
any period prior to the initial closing of the Placement), individuals who at
the beginning of such period constitute the Board of Directors and any new
director, (i) whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved or (ii) whose election is to replace a person who ceases
to be a director due to heath, disability or age, cease for any reason to
constitute a majority of the Board of Directors.
(e) Adjustment Reports. Whenever any adjustment is required in
the shares into which any share of Class A Convertible Preferred Stock is
convertible, the Corporation shall cause a notice of such adjustment, setting
forth the adjusted Conversion Price and the calculation thereof to be mailed to
the holders of
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record of shares of Class A Convertible Preferred Stock at their address as
shown on the stock transfer books of the Corporation.
(f) Reservation of Shares; Transfer Taxes; Etc. The Corporation
shall at all times reserve and keep available, out of its authorized and
unissued stock, solely for the purpose of effecting the conversion of the Class
A Convertible Preferred Stock, such number of shares of its Common Stock free of
preemptive rights as shall from time to time be sufficient to effect the
conversion of all shares of Class A Convertible Preferred Stock from time to
time outstanding. The Corporation shall from time to time, in accordance with
the laws of the State of Maryland, increase the authorized number of shares of
Common Stock if at any time the number of shares of authorized and unissued
Common Stock shall not be sufficient to permit the conversion of all the then
outstanding shares of Class A Convertible Preferred Stock.
The Corporation shall pay any and all issue or other taxes that
may be payable in respect of any issue or delivery of Common Stock upon
conversion of the Class A Convertible Preferred Stock. The Corporation shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of Common Stock (or other securities
or assets) in a name other than that in which the shares of Class A Convertible
Preferred Stock so converted were registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Corporation the amount of such tax or has established, to the satisfaction of
the Corporation, that such tax has been paid.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation proposes to take any action that would
require an adjustment pursuant to Section 4(d) hereof; or
(ii) the Corporation proposes to take any action that
would require any person to make provisions in a certificate or
articles of incorporation or other constituent document as
contemplated by Section 4(d) hereof; or
(iii) of a proposed Liquidation or a Fundamental Change;
then the Corporation shall cause to be mailed to the holders of record of the
Class A Convertible Preferred Stock at their last addresses as they appear upon
the stock transfer books of the Corporation, at least twenty days prior to the
proposed effective date of the event being reported, or, if such event takes
place without prior notice to or knowledge of the Corporation, within
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five days after the actual effective date, a notice summarizing the material
terms of such event and stating the proposed or actual effective date (but no
failure to mail such notice or any defect therein or in the mailing thereof
shall effect the validity of the corporate action required to be specified in
such notice).
Section 5. Voting Rights. The holders of Class A Convertible
Preferred Stock and Common Stock shall vote together as a class for the election
of all the directors of the Corporation and, except as otherwise provided by
law, the Charter or the terms of the Class A Convertible Preferred Stock, on all
other matters to be voted on by the stockholders of the Corporation on the
following basis: (1) each holder of Class A Convertible Preferred Stock shall be
entitled to one vote for each share of Common Stock which would be issuable to
such holder upon the conversion of all the shares of Class A Convertible
Preferred Stock so held on the record date for the determination of stockholders
entitled to vote, and (2) each holder of Common Stock shall be entitled to one
vote per share; provided, however, that:
(i) the holders of Class A Convertible Preferred Stock and
the holders of Common Stock will be entitled to vote as separate
classes for any proposed merger, consolidation or sale of the
assets of the Company as an entirety, but only if at the time of
such proposal, one person or group of persons is the "beneficial
owner" (as determined under the rules of Regulation 13D-G under
the Securities Exchange Act of 1934, as amended) of more than 66
2/3% of the Preferred Stock;
(ii) the holders of Class A Convertible Preferred Stock
and the holders of Common Stock will be entitled to vote as
separate classes for any stock splits, reverse stock splits, or
other amendments to the Charter which in any way adversely
affects the respective preferences, qualifications, special or
relative rights or privileges of the Common Stock.
Section 6. Restrictions. At any time when shares of Class A
Convertible Preferred Stock are outstanding, except where the vote or written
consent of the holders of a greater number of shares of the Corporation is
required by law or by the Charter or the terms of the Class A Convertible
Preferred Stock, and in addition to any other vote required by law, without the
prior consent of the holders of sixty-six and two-thirds percent (66 2/3%) of
the outstanding Class A Convertible Preferred Stock, given in person or by
proxy, either in writing or at a special meeting called for that propose, at
which meeting the holders of the shares of such Class A Convertible Preferred
Stock shall vote together as a class:
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(a) The Corporation will not create or issue any additional class
or series of capital stock or any securities convertible into any additional
class or series of capital stock unless such additional class or series of
capital stock ranks junior to the Class A Convertible Preferred Stock both as to
dividends and as to the distribution of the assets on Liquidation or increase
the authorized amount of the Class A Convertible Preferred Stock or increase the
authorized amount of any additional class or series of capital stock unless the
same ranks junior to the Class A Convertible Preferred Stock both as to
dividends and as to the distribution of assets on Liquidation, whether any such
creation or authorization or increase shall be by means of amendment of the
Charter or the terms of the Class A Convertible Preferred Stock, merger,
consolidation or otherwise.
(b) The Corporation will not amend, alter or repeal the terms of
the Class A Convertible Preferred Stock in any way or amend the Charter in any
way which adversely affects the respective preferences, qualifications, special
or relative rights or privileges of the Class A Convertible Preferred Stock.
Section 7. Ranking Upon Liquidation. Any class or series of
capital stock of the Corporation shall be deemed to rank:
(i) senior to the Class A Convertible Preferred Stock, as
to dividends or upon Liquidation, if the holders of such class or
series shall be entitled to the receipt of dividends or of
amounts distributable upon Liquidation, as the case may be, in
preference or priority to the holders of Class A Convertible
Preferred Stock;
(ii) on a parity with the Class A Convertible Preferred
Stock, as to dividends or upon Liquidation, whether or not the
dividend rates, dividend payment dates or redemption or
Liquidation prices per share thereof are different from those of
the Class A Convertible Preferred Stock, if the holders of such
class or series of stock and the Class A Convertible Preferred
Stock shall be entitled to the receipt of dividends or of amounts
distributable upon Liquidation, as the case may be, in proportion
to their respective amounts of accumulated and unpaid dividends
per share or Liquidation prices, as the case may be, without
preferences or priority one over the other; and
(iii) junior to the Class A Convertible Preferred Stock,
as to dividends or upon Liquidation, if such stock shall be
Common Stock or any other class or series of capital stock of the
Corporation if the holders of Class A Convertible Preferred Stock
shall be
<PAGE> 12
entitled to receipt of dividends or of amounts distributable upon
Liquidation, as the case may be, in preference or priority to the
holders of shares of such other stock.
Section 8. Outstanding Shares. For purposes of the Class A
Convertible Preferred Stock, all shares of Class A Convertible Preferred Stock
issued by the Corporation shall be deemed outstanding except (i) shares of Class
A Convertible Preferred Stock converted into Common Stock and (ii) shares of
Class A Convertible Preferred Stock acquired or held by the Corporation or any
direct or indirect majority-owned subsidiary of the Corporation.
Section 9. Status of Acquired Shares. Shares of Class A
Convertible Preferred Stock received by the Corporation upon conversion pursuant
to Section 4 or otherwise acquired by the Corporation will be restored to the
status of authorized but unissued shares of capital stock, without designation
as to class, and may thereafter be issued, but not as shares of Class A
Convertible Preferred Stock except as otherwise permitted herein.
Section 10. No Redemption. The shares of Class A Convertible
Preferred Stock shall not be subject to redemption, either mandatorily or at the
option of the Corporation or the holder thereof, except as provided in Section
4(d)(iv) hereof or the Charter.
Section 11. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof.
Section 12. Time and Business Days. Wherever there are references
herein to "at the close of business" such references shall mean 5:00 p.m.
Pacific Standard or Daylight Time, as the case may be, on a business day.
References to "business day" shall mean days other than (i) Saturday or Sunday,
(ii) a legal holiday in the State of Nevada, or (iii) a day on which banking
institutions in the City of Reno are authorized or obligated by law or executive
order to be closed.
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IN WITNESS WHEREOF, the Corporation has caused these presents to
be signed in its name and on its behalf by its President and witnessed by its
Secretary on January 12, 1998.
WITNESS: SPECIALTY MORTGAGE TRUST, INC.
/s/ Grace C. Caudill /s/ Nello Gonfiantini III
-------------------------------- -----------------------------------
Grace C. Caudill Nello Gonfiantini III
Assistant Secretary President
THE UNDERSIGNED, President of Specialty Mortgage Trust, Inc., who
executed on behalf of the Corporation Articles Supplementary of which this
Certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles Supplementary to be the corporate act of
said Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ Nello Gonfiantini III
-----------------------------------
Nello Gonfiantini, III
President
