CERTIFICATE OF DESIGNATIONS
OF THE
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK
($1.00 Par Value)
OF
FORTUNE NATURAL RESOURCES CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted on January 31, 2002, by the Board of Directors of Fortune Natural
Resources Corporation, a Delaware corporation (the "Corporation"), acting
pursuant to the provisions of section 141(c) of the General Corporation Law of
the State of Delaware:
RESOLVED, that pursuant to authority expressly granted to and vested
in the Board by provisions of the Certificate of Incorporation of the
Corporation, as amended (the "Certificate of Incorporation"), the issuance
of a series of Preferred Stock, par value $1.00 per share, which shall
consist of up to 500,000 shares of Preferred Stock designated as Series A
Convertible Participating Preferred Stock, at a price of $10.00 per share,
be, and the same hereby is, authorized; and
RESOLVED FURTHER, that none of such stock shall be issued unless not
less than 150,000 shares have been subscribed and paid for (the "Minimum
Offering"); and
RESOLVED FURTHER, once the Minimum Offering number of shares have
been subscribed and paid for, such shares shall be issued, and thereafter,
additional shares shall be issued as soon as they have been subscribed and
paid for;
RESOLVED FURTHER, the Board hereby fixes the voting powers,
designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions
thereof, of the shares of such series (in addition to the voting powers,
designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions
thereof, set forth in the Certificate of Incorporation that may be
applicable to the Preferred Stock) as and the Board hereby fixes the
voting powers, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, of the shares of such series (in addition to the
voting powers, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, set forth in the Certificate of Incorporation that
may be applicable to the Preferred Stock) as follows:
Section 1. Designation; Amount.
-------------------
The designation of such series of the Preferred Stock authorization by
this resolution shall be the Series A Convertible Participating Preferred Stock
(the "Preferred Stock"). The maximum number of shares of Preferred Stock shall
be five hundred thousand (500,000) and the minimum number of shares of Preferred
Stock shall be one hundred fifty thousand (150,000) (the "Minimum Issue").
Section 2. Dividends.
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Section 2.01. Cash Dividends.
---------------
Subject to the possible increase in the percentage rate thereof as
provided in Section 2.03, below, holders of shares of Preferred Stock will be
entitled to receive, when and as declared by the Board out of assets of the
Corporation legally available for payment, an annual cash dividend equal to 8%
of the Stated Value of such shares (as defined in Section 5, below), payable in
arrears in quarterly installments on March 31, June 30, September 30 and
December 31, commencing March 31, 2002 (each a "dividend payment date"). In
addition, holders of shares of Preferred Stock will be entitled to receive the
Participating Dividend described in Section 2.02, below. Payment of such
dividends shall be made in accordance with the procedures set forth in Section
2.04, below.
Section 2.02. Participating Dividends.
-----------------------
So long as any of the Preferred Stock is outstanding, in addition to the
cash dividends provided for in Section 2.01, holders of the Preferred Stock
shall be entitled to receive Participating Dividends equal, in the aggregate, to
3% of the Net Participating Revenue (as defined below); provided that such
percentage shall be proportionately adjusted in accordance with the following
formula if fewer than or more than 400,000 shares of Preferred Stock are issued:
P = 3% x N/400,000
where:
P = the adjusted percentage
N = number of shares of Preferred Stock outstanding from time to time.
Such Participating Dividend shall be payable (a) in arrears on each dividend
payment date (as defined in Section 2.01, above), out of revenues actually
received during the quarter preceding the quarter in which the Participating
Dividend is paid, commencing on the first dividend payment date following the
first quarter in which the Corporation has Net Participating Revenue, and (b) in
proportion to the number of shares held by each such holder to the total shares
of Preferred Stock outstanding.
As used herein, "Net Participating Revenue" means the total revenues
derived by the Corporation during a calendar quarter from producing exploration
and development oil and gas wells in the Onshore Exploration Program (as defined
below), less applicable severance taxes.
As used herein, "Onshore Exploration Program" means any oil and gas
prospects within the areas of mutual interest derived from the proprietary,
re-processed Exxon seismic data in which the Corporation has a working (or
other) interest pursuant to an Exploration Agreement dated as of February 1,
2002, among the Corporation, Prime Operating Company, Channel Exploration, LLC,
Cymraec Exploration, Inc. and parties identified as the "Seismic Partners"
therein.
Section 2.03. Procedure; Payment.
------------------
Cash dividends on the Preferred Stock payable under Section 2.01 will be
cumulative and shall accrue, without interest, from the date of initial issuance
of the Preferred Stock. Cash dividends will be payable to holders of record as
they appear on the stock books of the Corporation on such record dates, not more
than 60 days nor less than ten (10) days preceding the payment dates thereof, as
shall be fixed by the Board (a "Record Date"). The holders of shares of the
Preferred Stock shall not be entitled to any dividends other than cash dividends
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or Participating Dividends as provided for in this Section 2. When cash
dividends are not paid in full upon the Preferred Stock and any other Parity
Preferred Stock (as defined in Section 11 below), all dividends declared upon
shares of Parity Preferred Stock will be declared pro rata so that in all cases
the amount of dividends declared per share on the Preferred Stock and such other
Parity Preferred Stock shall bear to each other the same ratio that accumulated
and unpaid dividends per share on the shares of Preferred Stock and such other
Parity Preferred Stock bear to each other. Except as set forth in the preceding
sentence, unless full cumulative cash dividends on the Preferred Stock have been
paid, no dividends other than in Common Stock of the Corporation may be paid or
declared and set aside for payment or other distribution made upon the Common
Stock or on any other stock of the Corporation ranking junior to or on a parity
with the Preferred Stock as to dividends, nor may any Common Stock or any other
stock of the Corporation ranking junior to or on a parity with the Preferred
Stock as to dividends be redeemed, purchased or otherwise acquired for any
consideration (or any payment made to or available for a sinking fund for the
redemption of any shares of such stock; provided, however, that any monies
theretofore deposited in any sinking fund with respect to any preferred stock of
the Corporation in compliance with the provisions of such sinking fund may
thereafter be applied to the purchase or redemption of such preferred stock in
accordance with the terms of such sinking fund regardless of whether at the time
of such application full cumulative dividends upon shares of the Preferred Stock
outstanding to the last dividend payment date shall have been paid or declared
and set apart for payment) by the Corporation (except by conversion into or
exchange for stock of the Corporation ranking junior to the Preferred Stock as
to dividends). Dividends payable for any partial dividend period shall be
calculated on the basis of a three hundred sixty-day (360-day) year of twelve
(12) thirty-day (30-day) months. As used herein, the term "Common Stock" shall
mean the common stock, $.01 par value, of the Corporation as the same exists at
the date of this Certificate of Designations or as such stock may be constituted
from time to time. Nothing in this Section 2.03 shall prohibit the payment of
Participating Dividends to the extent payable on the Preferred Stock.
Section 3. Liquidation Rights.
------------------
The shares of Preferred Stock shall rank prior to the shares of Common
Stock and the shares of any other class of stock of the Corporation ranking
junior to the Preferred Stock upon liquidation, so that in the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Preferred Stock shall be entitled to receive out
of the assets of the Corporation available for distribution to its stockholders,
whether from capital, surplus or earnings, before any distribution is made to
holders of shares of Common Stock or any other such junior stock, an amount
equal to TEN DOLLARS ($10.00) per share (the "Liquidation Preference" of a share
of Preferred Stock) plus an amount equal to all dividends (whether or not earned
or declared) accumulated and unpaid on the shares of Preferred Stock to the date
of final distribution. After payment of the full amount of the Liquidation
Preference and such dividends, the holders of shares of Preferred Stock will not
be entitled to any further participation in any distribution of assets by the
Corporation. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of shares of Parity Preferred Stock shall be insufficient to
pay in full the preferential amount aforesaid, then such assets, or the proceeds
thereof, shall be distributable among such holders ratably in accordance with
the respective amounts that would be payable on such shares if all amounts
payable thereon were payable in full. For purposes hereof, neither a
consolidation or merger of the Corporation with or into any other corporation,
nor a merger of any other corporation with or into the Corporation, nor a sale
or transfer of all or any part of the Corporation's assets for cash or
securities shall be considered a liquidation, dissolution or winding up of the
Corporation.
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Section 4. Conversion.
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Section 4.01 Conversion Privilege; Conversion Price;
Stock Purchase Warrants.
---------------------------------------
Subject to and upon compliance with the provisions of this Section 4, each
share of Preferred Stock shall, at the option of the holder, be convertible at
any time into that number of fully paid and non-assessable shares of Common
Stock obtained by dividing the Liquidation Preference of such share of Preferred
Stock being converted by the Conversion Price, determined as hereinafter
provided, and by surrender of such share so to be converted, such surrender to
be made in the manner provided in Section 4.02; provided, however, that the
right to convert shares called for redemption pursuant to Section 8 shall
terminate at the close of business on the fifth (5th) business day prior to the
date fixed for such redemption, unless the Corporation shall default in making
payment of the amount payable upon such redemption. The price at which Common
Stock shall be delivered upon conversion (the "Conversion Price") shall be $0.75
(the "Conversion Price") and shall be adjusted as hereinafter provided.
The right to convert the shares of Preferred Stock as provided in Section
5 is in addition to the conversion rights provided for in Section 4.01.
Section 4.02 Conversion Procedure.
--------------------
To convert shares of Preferred Stock, a Holder must:
(1) deliver a completed and signed written notice of election to convert
specifying the number (in whole shares) of the shares of Preferred
Stock to be converted and the name or names in which such holder
wishes the certificate or certificates for shares of Common Stock to
be issued to the conversion agent for the Preferred Stock appointed
for such purpose by the Corporation (the "Conversion Agent");
(2) surrender the certificate representing such shares of
Preferred Stock to the Conversion Agent;
(3) furnish appropriate endorsement and transfer documents, in form
satisfactory to the Corporation, duly executed by the holder or such
holder's duly authorized attorney; and
(4) pay any transfer or similar tax required by Section
4.04.
The date on which the Holder satisfies all such requirements is the
"Conversion Date". As soon as practicable thereafter, the Corporation shall
deliver through the Conversion Agent a certificate for the number of shares of
Common Stock issuable upon such conversion, a certificate for the number of
Stock Purchase Warrants issuable upon such conversion and a check for any
fractional shares of Common Stock. The person in whose name the certificates are
registered or in whose name the shares of Common Stock and Stock Purchase
Warrants are issued if other than the registered Holder of such shares of
Preferred Stock shall be treated as a shareholder of record of the Corporation
on and after the Conversion Date.
The holders of shares of Preferred Stock at the close of business on a
dividend payment record date shall be entitled to receive the dividend payable
on such shares (except that holders of shares called for redemption on a
redemption date between such record date and the dividend payment date shall not
be entitled to receive such dividend on such dividend payment date) on the
corresponding dividend payment date notwithstanding the conversion thereof or
the Corporation's default in payment of the dividend due on such dividend
payment date. A holder of shares of Preferred Stock on a dividend payment record
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date who (or whose transferee) tenders any of such shares for conversion into
shares of Common Stock on a dividend payment date will receive the dividend
payable by the Corporation on such shares of Preferred Stock on such date, and
the converting holder need not include payment in the amount of such dividend
upon surrender of shares of Preferred Stock for conversion. Except as provided
above, the Corporation shall make no payment or allowance for unpaid dividends
whether or not in arrears, on converted shares or for dividends on the shares of
Common Stock issued upon such conversion.
Upon surrender of a certificate representing shares of Preferred Stock
that is converted in part, the Corporation shall issue and the Conversion Agent
shall authenticate for the holder a new certificate representing shares of
Preferred Stock equal in number to the unconverted portion of the shares of
Preferred Stock surrendered.
If the last day on which shares of Preferred Stock may be converted is a
Legal Holiday (as defined below) in a place where a Conversion Agent is located,
the shares of Preferred Stock may be surrendered to that Conversion Agent on the
next succeeding day that is not a Legal Holiday. A "Legal Holiday" is a
Saturday, a Sunday, or a day on which banking institutions in the relevant
jurisdiction are not required to be open.
Section 4.03. Fractional Shares.
-----------------
The Corporation will not issue a fractional share of Common Stock upon
conversion of shares of Preferred Stock. If more than one (1) share of the
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares that shall be issuable upon conversion shall
be equal to the number obtained by multiplying the aggregate number of shares of
the Preferred Stock so surrendered by the Liquidation Preference, or Stated
Value (as hereinafter defined) in the case of a conversion pursuant to Section
5, and dividing such product by the then current Conversion Price. Instead of
any fractional interest in a share of Common Stock that would otherwise be
issuable upon conversion of any shares of the Preferred Stock, the Corporation
shall pay a cash adjustment in respect of such fractional interest to the
nearest one-hundredth (.01) of a share in an amount equal to the Market Price
(as defined below) of such fractional interest on the day immediately preceding
the Conversion Date (or, if such day is not a trading day, then on the
immediately preceding trading day). As used herein, "Market Price" means, as of
a particular date, the closing sales price of the Common Stock (or if no sale
price is quoted, the average on the close of trading on such date of the high
and low bid prices) as reported by the principal national stock exchange on
which the Common Stock is listed or, if the Common Stock is not listed on a
national stock exchange, as reported by NASDAQ, any regional stock exchange or
the National Quotation Bureau Incorporated or any successor thereof.
Section 4.04. Taxes on Conversion.
-------------------
If a Holder of shares of Preferred Stock converts them, the Corporation
shall pay any documentary, stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon the conversion. However, the Holder shall
pay any such tax that is due because the shares of Common Stock are issued in a
name other than the Holder's name.
Section 4.05. Corporation to Provide Stock.
----------------------------
The Corporation shall at all times reserve and have available, free from
preemptive rights, enough shares of Common Stock to permit the conversion of the
shares of Preferred Stock.
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Before taking any action that would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the shares of Preferred Stock, the Corporation will
take all corporate action that may, in the opinion of its counsel, be necessary
in order that the Corporation may validly and legally issue shares of such
Common Stock at such adjusted Conversion Price.
All shares of Common Stock that may be issued upon conversion of the
shares of Preferred Stock shall be validly issued, fully paid and nonassessable.
The Corporation covenants that if any shares of Common Stock to be
provided for the purpose of conversion of shares of Preferred Stock hereunder
require registration with or approval of any governmental authority under any
federal or state law before such shares may be validly issued upon conversion,
the Corporation will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be.
The Corporation further covenants that if at any time the Common Stock
shall be listed on the American Stock Exchange, the New York Stock Exchange or
any other national securities exchange or reported by the NASDAQ National Market
System, the Corporation will, if permitted by the rules of such exchange or the
NASDAQ National Market System, use all reasonable efforts to list and keep
listed or reported, so long as the Common Stock shall be so listed on such
exchange or reported by the NASDAQ National Market System, all Common Stock
issuable upon conversion of the shares of Preferred Stock.
Section 4.06. Adjustment for Change in Capital Stock.
--------------------------------------
If the Corporation:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into
a greater number of shares of Common Stock;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
(4) makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any
shares of its capital stock,
then the conversion privilege and the Conversion Price in effect immediately
prior to such action shall be adjusted so that the Holder of shares of Preferred
Stock thereafter converted may receive the number of shares of capital stock of
the Corporation that such Holder would have owned immediately following such
action if such Holder had converted the shares of Preferred Stock immediately
prior to such action.
Subject to Section 4.11, the adjustment shall become effective immediately
after the record date in the case of a dividend or distribution and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
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If after an adjustment a holder of shares of Preferred Stock, upon
conversion of such shares of Preferred Stock, may receive two (2) or more
classes of capital stock of the Corporation, the Board shall determine the
allocation of the adjusted Conversion Price between the classes of capital
stock. After such allocation, the conversion privilege and the Conversion Price
with respect to each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those with respect to Common Stock in this
Section 4.
Section 4.07. Adjustment for Other Distributions.
----------------------------------
If the Corporation distributes to all holders of its Common Stock any of
its assets or debt securities or any rights or warrants to purchase debt
securities, assets or other securities of the Corporation, the Conversion Price
shall be adjusted in accordance with the formula:
(M - F)
---------
C' = C x M
where:
C' = the adjusted Conversion Price.
C = the current Conversion Price.
M = the Current Market Price per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date of the assets, debt
securities, rights or warrants applicable to one share of Common
Stock. The Board shall determine the fair market value.
Subject to Section 4.10, the adjustment shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the distribution.
Section 4.08. Adjustment for Repurchases.
--------------------------
In the event the Corporation shall repurchase or redeem any of its
outstanding Common Stock at a premium over the Market Price per share on the
next trading day immediately following the consummation of such repurchase or
redemption (a "Repurchase"), then and in the case of each Repurchase the
Conversion Price in effect immediately prior thereto shall be adjusted in
accordance with the formula:
(O x M) - P
-----------
C' = C x (O - N) x M
where:
C' = the adjusted Conversion Price.
C = the current Conversion Price.
O = the number of shares of Common Stock outstanding immediately
before such Repurchase.
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M = the Market Price per share of Common Stock on the next trading day
immediately following the consummation of such Repurchase.
P = the aggregate purchase price of the Repurchase.
N = the number of shares of Common Stock repurchased or redeemed.
Subject to Section 4.10, such adjustment shall be made whenever any such
events shall happen, but shall also be effective retroactively as to shares of
Preferred Stock converted between the record date of any such event and the date
of the happening of any such event; provided, however, that the Conversion Price
shall not be so adjusted with respect to any Repurchase at a premium of less
than fifteen percent (15%) over the Market Price per share on the next trading
day immediately following consummation of such Repurchase until such time as the
Corporation shall have made Repurchases in one or more transactions aggregating
twenty percent (20%) of its Common Stock outstanding on December 31, 2001 (it
being understood, however, that a Repurchase, regardless of the premium, if any,
that results in aggregate Repurchases exceeding twenty percent (20%) shall
itself cause the Conversion Price to be adjusted with respect to such portion of
such Repurchase that causes the aggregate of all Repurchases to exceed such
percentage). For purposes of calculating whether Repurchases aggregating twenty
percent (20%) of the Corporation's outstanding Common Stock on December 31,
2001, have been made, (i) any Repurchase at a premium of fifteen percent (15%)
or more over the Market Price per share on the next trading day immediately
following consummation of such Repurchase and for which an adjustment to the
Conversion Price has been made pursuant to this Section 4.09 shall not be
included in such calculation and (ii) any Repurchase at a premium of less than
fifteen percent (15%) over the Market Price per share on the next trading day
immediately following the consummation of such Repurchase that is made
subsequent to a stock split or stock dividend by the Corporation shall be
included in such calculation except that the number of shares in such Repurchase
shall be deemed to be that number of shares that would have been so repurchased
or redeemed if the effects of each and every stock split or stock dividend that
occurs during the period that commences on December 31, 2001, and ends on the
date of such Repurchase were reversed.
Section 4.09. Current Market Price.
--------------------
For purposes of Sections 2.01, 4.01, 4.07 and 4.08, the current market
price per share of Common Stock (the "Current Market Price") on any date is the
average of the Market Prices of the Common Stock for thirty (30) consecutive
trading days commencing forty-five (45) trading days before the date in
question.
Section 4.10. When Adjustment May be Deferred.
-------------------------------
No adjustment in the Conversion Price need be made pursuant to Sections
4.06, 4.07, or 4.08 unless the adjustment would require an increase or decrease
of at least one percent (1%) in the Conversion Price. Any adjustments that are
not made pursuant to Sections 4.06, 4.07, or 4.08 shall be carried forward and
taken into account in the calculation of any subsequent adjustment pursuant to
Sections 4.06, 4.07, or 4.08.
All calculations under Section 4 shall be made to the nearest cent or to
the nearest one-one-hundredth (1/100th) of a share of Common Stock, as the case
may be.
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Section 4.11. When No Adjustment Required.
---------------------------
No adjustment need be made for rights to purchase Common Stock pursuant to
a Corporation plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no par value
of the Common Stock.
To the extent the shares of Preferred Stock become convertible into cash,
no adjustment need be made thereafter as to the cash. Interest will not accrue
on the cash.
Section 4.12. Notice of Adjustment.
--------------------
Whenever the Conversion Price is adjusted, the Corporation shall promptly
mail to holders of the Preferred Stock a notice of the adjustment. The
Corporation shall file with the Conversion Agent a certificate from the
Corporation's independent public accountants briefly stating the facts requiring
the adjustment and the manner of computing it. Absent manifest error, the
certificate shall be conclusive evidence that the adjustment is correct.
Section 4.13. Voluntary Reduction.
-------------------
The Corporation from time to time may make such reductions in the
Conversion Price, in addition to those required by Section 4, as it considers to
be advisable in order to avoid or diminish any income tax to any holder of
shares of Common Stock resulting from any dividend or distribution of stock or
issuance of rights or warrants to purchase or subscribe for stock or from any
event treated as such for income tax purposes or for any other reasons. The
Corporation shall have the power to resolve any ambiguity or correct any error
in Section 4, and its actions in so doing shall be final and conclusive.
Whenever the Conversion Price is reduced, the Corporation shall mail to
stockholders of the Preferred Stock a notice of the reduction. The Corporation
shall mail the notice at least 15 days before the date the reduced Conversion
Price takes effect. The notice shall state the reduced Conversion Price and the
period it will be in effect.
A voluntary reduction of the Conversion Price does not change or adjust
the Conversion Price otherwise in effect for purposes of Sections 4.6 through
4.08.
Section 4.14 Notice of Certain Transactions.
------------------------------
If:
(1) the Corporation takes any action that would require an adjustment in
the Conversion Price pursuant to Section 4.06, 4.07, or 4.08;
(2) there is pending a Corporate Change or Ownership Change; or
(3) there is a liquidation or dissolution of the Corporation,
the Corporation shall cause to be filed with the Conversion Agent and shall mail
to holders of the Preferred Stock a notice stating the proposed record date (or
other applicable determination date) for a dividend or distribution or the
proposed effective date of a subdivision, combination, consolidation, merger,
transfer, lease, liquidation, dissolution or Corporate Change or Ownership
Change and stating the alternative rights of such holders under Section 4 and
Section 5. The Corporation shall mail the notice at least fifteen (15) days
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before such date and thirty (30) days before such date in the case of a
Corporate Change or Ownership Change. Failure to mail the notice or any defect
in it shall not affect the validity of the transaction.
Section 4.15. Rights Upon Consolidation or Merger.
-----------------------------------
If either of the following shall occur, namely:
(1) any consolidation or merger to which the Corporation is a party, other
than a consolidation or merger in which the Corporation is a continuing
corporation and that does not result in any reclassification of, or change
(other than a change in par value or from par value to no par value or from no
par value to par value, or as a result of a subdivision or combination) in,
outstanding shares of Common Stock; or
(2) any sale or conveyance to another corporation of the assets of the
Corporation as an entirety or substantially as an entirety,
then the Board shall, by resolution (a copy of which shall be filed with the
Conversion Agent) adopted with respect thereto, provide (i) that the holder of
each share of the Preferred Stock then outstanding shall have the right to
convert such share into the kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reclassification,
change, consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock issuable upon conversion of such share of the Preferred
Stock immediately prior to such reclassification, change, consolidation, merger,
sale or conveyance, and (ii) that there be adjustments thereafter as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4.15 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales or conveyances.
Section 4.16. Automatic Conversion.
--------------------
If at any time while the Preferred Stock remains outstanding, the Market
Price of the Common Stock for any ten (10) consecutive trading day period equals
or exceeds 100% of the Conversion Price (as determined above), all of the
Preferred Stock then outstanding shall be converted into shares of Common Stock
at the then applicable Conversion Price in accordance with the provisions of
this Section 4.
Section 4.17. Corporation Determination Final.
-------------------------------
Any determination that the Corporation or the Board of Directors must make
pursuant to Section 4.05, 4.06, 4.07, 4.08, 4.11 or 4.15 is conclusive.
Section 4.18. Automatic Conversion.
--------------------
If at any time, the closing price of the Common Stock is more than $1.50
for a period of ten (10) consecutive trading days, the Preferred Stock shall
automatically convert into shares of Common Stock on the same basis as set forth
in Section 4.01 above.
Section 5. Special Conversion Rights Upon Corporate Change
or Ownership Change.
-------------------------------------------------
If a Corporate Change (as defined below) should occur with respect to the
Corporation, each holder of shares of the Preferred Stock shall have the right,
at the holder's option, for a period of forty-five (45) days after the mailing
of a notice by the Corporation that a Corporate Change has occurred, to convert
all, but not less than all, of such holder's shares of the Preferred Stock into
Marketable Stock (as defined below) with an Applicable Value (as defined below)
10
equal to the Stated Value (as defined below) of the Preferred Stock so
converted. The Corporation or successor corporation may, at its option, in lieu
of providing Marketable Stock upon any such conversion, provide the holders who
have elected to convert under this Section 5 with cash equal to the Stated Value
of the Preferred Stock for which conversion was elected; provided that any such
election by the Corporation shall apply to all shares of the Preferred Stock for
which the special conversion was elected. Shares of the Preferred Stock that are
not converted as provided above will remain convertible into the kind and amount
of securities, cash or other assets that the holders of the shares of the
Preferred Stock would have owned immediately after the Corporate Change if the
holders had converted the shares of the Preferred Stock immediately before the
effective date of the Corporate Change.
If an Ownership Change (as defined below) should occur with respect to the
Corporation, each holder of a share of the Preferred Stock shall have the right,
at the holder's option, for a period of forty-five (45) days after the mailing
of a notice by the Corporation that an Ownership Change has occurred, to convert
all, but not less than all, of such holder's shares of the Preferred Stock, into
Common Stock of the Corporation with an Applicable Value equal to the Stated
Value of the Preferred Stock so converted. The Corporation may, at its option,
in lieu of providing Common Stock upon any such conversion, provide the holders
who have elected to convert under this Section 5 with cash equal to the Stated
Value of the shares of Preferred Stock, for which the special conversion was
elected, would have been converted; provided that any such election by the
Corporation shall apply to all shares of the Preferred Stock for which the
special conversion was elected.
The conversion right provided in this Section 5 arising upon an Ownership
Change will only be applicable with respect to the first Ownership Change that
occurs after the date hereof.
If a Corporate Change or an Ownership Change shall occur, within 30 days
after the occurrence of such Corporate Change or Ownership Change, the
Corporation shall mail to each registered holder of a share of Preferred Stock a
notice (the "Special Conversion Notice") setting forth details regarding the
right of the holders to convert their shares of Preferred Stock as a result of
such Corporate Change or Ownership Change, as the case may be. The holder of a
share of Preferred Stock must exercise such conversion right within the
forty-five-day (45-day) period after the mailing of the Special Conversion
Notice by the Corporation. Such right must be exercised in accordance with
Section 4.02, provided that the Conversion Date for shares converted shall be
the forty-fifth (45th) day after the mailing of the Special Conversion Notice.
Within five (5) business days thereafter, the Corporation shall deliver a
certificate for the Marketable Stock issuable upon such conversion with a check
for any fractional shares otherwise issuable or the cash equal to the Stated
Value of the Preferred Stock, if the Corporation has so elected. Exercise of
such conversion right shall be irrevocable and no dividends on the shares of
Preferred Stock tendered for conversion shall accrue from and after the
Conversion Date.
The Special Conversion Notice shall state:
1. the event constituting the Corporate Change or Ownership Change;
2. the Conversion Date;
3. the Applicable Value;
4. the Conversion Price then in effect under Section 4 and the
continuing conversion rights, if any, under Section 4;
5. the name and address of the Paying Agent and Conversion Agent;
11
6. that holders who want to convert shares of Preferred Stock must
satisfy the requirements of Sections 4.02 and 4.04 and must exercise
such conversion right within the forty-five-day (45-day) period after
the mailing of such notice by the Corporation;
7. that exercise of such conversion right shall be irrevocable
and no dividends on shares of Preferred Stock (or portions
thereof) tendered for conversion shall accrue from and after the
Conversion Date; and
8. that the Corporation may, at its option, pay cash equal to the
Stated Value of all shares of Preferred Stock for which the
special conversion was elected.
As used herein, a "Corporate Change" with respect to the Corporation shall
be deemed to have occurred at such time as the Corporation shall enter into any
transaction of acquisition, merger, consolidation or amalgamation, or shall
convey, sell, lease, assign, transfer or otherwise dispose of, all or
substantially all of its property, business or assets, or make any material
change in the present method of conducting business, which acquisition, merger,
consolidation, amalgamation, sale, lease, transfer, or disposition does not
otherwise under the terms hereof result in an adjustment in the Conversion
Price, except:
(i) any Subsidiaries of the Corporation may be merged or consolidated
with or into the Corporation (provided that the Corporation shall be the
continuing or surviving corporation) or with or into any one (1) or more
wholly-owned Subsidiaries of the Corporation (provided that the
wholly-owned Subsidiary shall be the continuing or surviving corporation);
and
(ii) any wholly-owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation
or otherwise) to the Corporation or a wholly-owned Subsidiary of the
Corporation;
A Corporate Change will not, however, be deemed to occur with respect to any
transaction in which the consideration received by the holders of Common Stock
of the Corporation consists solely of Marketable Stock.
As used herein, an "Ownership Change" with respect to the Corporation
shall be deemed to have occurred at such time as any person, together with its
Affiliates (as defined below) and Associates (as defined below) is or becomes
the beneficial owner, directly or indirectly, of more than fifty percent (50%)
of the outstanding Common Stock of the Corporation pursuant to a transaction
that does not constitute a Corporate Change with respect to the Corporation. As
used herein, "Affiliate" means, as applied to any person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with, such person and "Associate" shall have the meaning ascribed
to such term in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934 (the "Exchange Act"), as in effect on the date
hereof.
As used herein, a person shall be deemed to have "beneficial ownership"
with respect to, and shall be deemed to "beneficially own," any securities of
the corporation in accordance with Section 13 of the Exchange Act and the rules
and regulations (including Rule 13d-3, Rule 13d-5 and any successor rules)
promulgated by the Securities and Exchange Commission thereunder; provided that
a person shall be deemed to have beneficial ownership of all securities that any
such person has a right to acquire whether such right is exercisable immediately
or only after the passage of time and without regard to the sixty-day (60-day)
limitation referred to in Rule 13d-3.
12
As used herein, the term "Marketable Stock" shall mean Common Stock or
common stock of any corporation that is the successor to all or substantially
all of the business or assets of the Corporation as a result of a Corporate
Change, as the case may be, that is (or will, upon distribution thereof, be)
listed on a national securities exchange or approved for quotation in the NASDAQ
National Market System or any similar system of automated dissemination of
quotations of securities prices in the United States.
As used herein, the "Applicable Value" of a share of the Common Stock or a
share of common stock of a corporation that is the successor to all or
substantially all of the business and assets of the Corporation as the result of
a Corporate Change, shall be the higher of the Market Value or the Reference
Value.
As used herein, the "Market Value" of a share of the Common Stock or a
share of common stock of a corporation that is the successor to all or
substantially all of the business and assets of the Corporation as the result of
a Corporate Change, shall be ninety-five per cent (95%) of the average of the
Market Price of such common stock for the five (5) business days ending on the
last business day preceding the date of Corporate Change or Ownership Change.
As used herein, the "Stated Value" of Preferred Stock converted during the
forty-five-day (45-day) period following the occurrence of a Corporate Change or
an Ownership Change, shall mean the Liquidation Preference (as provided in
Section 3 hereof) of the Preferred Stock so converted, together with any accrued
and unpaid dividends to the Conversion Date.
As used herein, the term "Reference Value" shall initially mean $1.00 per
share; provided, in the event of any adjustment to the Conversion Price pursuant
to Sections 4.06, 4.07, and 4.08, the Reference Value shall also be adjusted so
that the ratio of the Reference Value to the Conversion Price after giving
effect to any such adjustment shall always be the same as the ratio of $1.00 to
the initial Conversion Price (without giving effect to any adjustment);
provided, further, if the Market Value of a share of common stock of a
corporation that is the successor to all or substantially all of the business
and assets of the Corporation as the result of a Corporate Change is less than
the Reference Value (as calculated above), then the Reference Value shall be
equal to the amount determined by multiplying the Market Value per share of such
successor corporation's common stock by a fraction of which the numerator shall
be the Reference Value of the Common Stock (as calculated above) and the
denominator shall be the Market Value of the Common Stock.
Except where inconsistent with the provisions of this Section 5, the
procedures in Section 4 shall apply to any conversion under Section 5.
Section 6. Status of Converted or Redeemed Shares.
--------------------------------------
Upon any conversion of shares of Preferred Stock under Sections 4 or 5 or
redemption of shares of Preferred Stock under Section 8, the shares of Preferred
Stock so converted or redeemed shall have the status of authorized and unissued
shares of preferred stock, and the number of shares of preferred stock that the
Corporation shall have authority to issue shall not be decreased by the
conversion or redemption of shares of Preferred Stock; provided, however, such
converted or redeemed shares may not be reissued as shares of Preferred Stock.
Section 7. Voting Rights.
-------------
The holders of shares of Preferred Stock shall have no voting rights
whatsoever, except for any voting rights to which they may be entitled under the
laws of the State of Delaware, and except as follows:
13
Section 7.01 Right to Elect Directors; Voting on Other Matters.
--------------------------------------------------
If and whenever at any time or times dividends payable on the Preferred
Stock shall have been in arrears and unpaid in an aggregate amount equal to or
exceeding the amount of dividends payable thereon for two consecutive quarterly
periods, then the number of directors of the Corporation shall automatically be
increased by two (2), and the holders of the shares of the Preferred Stock shall
possess full voting powers (to the exclusion of the holders of all other series
and classes of capital stock of the Corporation), voting as a single class, to
elect two (2) new directors to fill such vacancies, the remaining directors to
be elected by any other series or class of stock entitled to vote therefor at
each meeting of stockholders held for the purpose of electing directors. Such
voting right to elect directors shall continue until such time as all cumulative
dividends accumulated on all the Preferred Stock shall have been paid in full
plus the dividends payable on four additional consecutive dividend payment
dates, at which time such voting right of the holders of the Preferred Stock
shall terminate, subject to revesting in the event of each and every subsequent
event of default of the character indicated above.
Whenever such voting right shall have vested, such right may be exercised
initially either at a special meeting of the holders of the Preferred Stock,
called as hereinafter provided, or at any annual meeting of stockholders held
for the purpose of electing directors, and thereafter at each successive annual
meeting.
At any time when such voting right shall have vested in the holders of the
Preferred Stock, and if such right shall not already have been initially
exercised, a proper officer of the Corporation shall, upon the written request
of the holders of record of ten percent (10%) in number of shares of the
Preferred Stock then outstanding, addressed to the Secretary of the Corporation,
call a special meeting of the holders of the Preferred Stock for the purpose of
electing directors. Such meeting shall be held at the earliest practicable date
upon the notice required for annual meetings of stockholders at the place for
holding of annual meetings of stockholders of the Corporation, or, if none, at a
place designated by the Secretary of the Corporation. If such meeting shall not
be called by the proper officers of the Corporation within thirty (30) days
after the personal service of such written request upon the Secretary of the
Corporation, or within thirty (30) days after mailing the same within the United
States of America, by registered mail, addressed to the Secretary of the
Corporation at its principal office (such mailing to be evidenced by the
registry receipt issued by the postal authorities), then the holders of record
of ten percent (10%) in number of shares of the Preferred Stock then outstanding
may designate in writing one (1) of their number to call such meeting at the
expense of the Corporation, and such meeting may be called by such person so
designated upon the notice required for annual meetings of stockholders and
shall be held at the same place as is elsewhere provided for in this Section
7.01. Any holder of the Preferred Stock shall have access to the stock books of
the Corporation for the purpose of causing a meeting of stockholders to be
called pursuant to the provisions of this section. Notwithstanding the
provisions of this section, however, no such special meeting shall be called
during a period within ninety (90) days immediately preceding the date fixed for
the next annual meeting of stockholders.
At any meeting held for the purpose of electing directors at which the
holders of the Preferred Stock shall have the right to elect directors as
provided herein, the presence in person or by proxy of the holders of
thirty-three and one-third percent (33-1/3%) of the then outstanding shares of
the Preferred Stock shall be required and be sufficient to constitute a quorum
of the Preferred Stock for the election of directors by the preferred stock. At
any such meeting or adjournment thereof (A) the absence of a quorum of holders
of the Preferred Stock shall not prevent the election of directors other than
those to be elected by the holders of the Preferred Stock and the absence of a
quorum or quorums of the holders of any other series or class of capital stock
entitled to elect such other directors shall not prevent the election of
directors to be elected by the holders of the Preferred Stock and (B) in the
14
absence of a quorum of the holders of any class of stock entitled to vote for
the election of directors, a majority of the holders present in person or by
proxy of such series or class shall have the power to adjourn the meeting for
the election of directors that the holders of such series or class are entitled
to elect, from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
The directors first elected pursuant to this Section 7.01 at a special
meeting shall serve until the next annual meeting or until their respective
successors shall be elected and shall qualify, and upon election at an annual
meeting, each such director shall be elected for a staggered term in accordance
with the Certificate of Incorporation of the Corporation; provided, however,
that when the right of the holders of the Preferred Stock to elect a director as
herein provided shall terminate, the term of office of such persons so elected
by the holders of the Preferred Stock shall terminate, and the number of
directors of the Corporation shall thereupon be such number as may be provided
in the Certificate of Incorporation and Bylaws of the Corporation irrespective
of any increase made pursuant to this Section 7.01.
Except as provided in the next preceding Section and other than removal
for cause, the directors elected by the holders of shares of Preferred Stock
shall (subject to the provisions of any applicable law) be subject to removal
only by the vote of the holders of the majority of the shares of Preferred Stock
voting together as a single class. Any vacancy in the Board occurring by reason
of such removal or otherwise may be filled by a vote of a majority of the shares
of Preferred Stock, voting together as a single class, in person or by proxy at
a meeting of stockholders called and held in accordance with the provisions set
forth above, and, if not so filled, such vacancy shall (subject to the
provisions of any applicable law) be filled by the remaining director elected by
the holders of the shares of Preferred Stock.
So long as any shares of Preferred Stock are outstanding, the Corporation
shall maintain at least two (2) available position on the Board within the
limits established by the Corporation's Certificate of Incorporation or Bylaws.
In addition to the right to elect directors as hereinabove provided in
this Section 7.01, until the cumulative dividends accumulated on the Preferred
Stock shall have been paid in full, the holders of the Preferred Stock shall
also have the right to vote on all matters presented to a vote of the holders of
the Common Stock, each share of Preferred Stock equaling thirteen and one-third
(13-1/3) shares of the Common Stock.
Section 7.02 Special Voting Rights.
---------------------
So long as any shares of the Preferred Stock remain outstanding, the
Corporation will not, either directly or indirectly or through merger or
consolidation with any other corporation, without the affirmative vote of the
holders of at least sixty-six and two-thirds (66 2/3%) in number of shares of
the Preferred Stock then outstanding, (A) create any series or class of stock
ranking prior to the Preferred Stock either as to dividends or upon liquidation
or increase the authorized number of shares of any series or class of stock
ranking prior to the Preferred Stock either as to dividends or upon liquidation,
(B) amend, alter or repeal any of the provisions of the Certificate of
Incorporation (including this resolution) so as to affect adversely the
preferences, special rights or powers of the Preferred Stock or (C) authorize
any reclassification of the Preferred Stock.
So long as any shares of the Preferred Stock remain outstanding, the
Corporation will not, either directly or indirectly or through merger or
consolidation with any other corporation, without the affirmative vote of the
holders of at a majority in number of shares of the Preferred Stock then
outstanding, create any series or class of Parity Preferred Stock (as defined in
Section 11 below).
15
Section 8. Redemption at Option of Corporation.
-----------------------------------
Section 8.01 Redemption.
----------
The shares of the Preferred Stock may be redeemed for cash at the option
of the Corporation, as a whole, or from time to time, in part, at any time upon
not less than thirty (30) nor more than sixty (60) days' prior notice mailed to
the holders of the shares to be redeemed, as provided for in Section 8.02, at a
redemption price of $25.00 per share of Preferred Stock, together with an amount
equal to all cash dividends (whether or not earned or declared) accumulated and
unpaid to the effective date fixed for redemption (the "Redemption Date").
If full cumulative dividends on the Preferred Stock have not been paid or
the funds necessary for the payment thereof shall not have been set aside by the
Corporation, separate and apart from its other funds, in trust for the pro rata
benefit of the holders thereof, the Preferred Stock may not be redeemed in whole
or in part and the Corporation may not purchase or acquire any shares of the
Preferred Stock otherwise than pursuant to a purchase or exchange offer made on
the same terms to all holders of the Preferred Stock. If less than all the
outstanding shares of Preferred Stock are to be redeemed, the shares to be
redeemed shall be selected by the Corporation and shall be a pro rata proportion
of the shares of Preferred Stock of all holders of Preferred Stock.
If a notice of redemption has been given pursuant to Section 8.02 and if,
on or before the Redemption Date, the funds necessary for such redemption shall
have been set aside by the Corporation, separate and apart from its other funds,
in trust for the pro rata benefit of the holders of the shares so called for
redemption, then, notwithstanding that any certificates for such shares have not
been surrendered for cancellation, on the Redemption Date dividends shall cease
to accrue on the shares of Preferred Stock to be redeemed, and at the close of
business on the Redemption Date the holders of such shares shall cease to be
stockholders with respect to such shares and shall have no interest in or claims
against the Corporation by virtue thereof and shall have no voting or other
rights with respect to such shares, except the right to receive the moneys
payable upon such redemption, without interest thereon, upon surrender (and
endorsement, if required by the Corporation) of their certificates, and the
shares evidenced thereby shall no longer be outstanding. Subject to applicable
escheat laws, any moneys so set aside by the Corporation and unclaimed at the
end of two years from the redemption date shall revert to the general funds of
the Corporation, after which reversion the holders of such shares so called for
redemption shall look only to the general funds of the Corporation for the
payment of the amounts payable upon such redemption. Any interest accrued on
funds so deposited shall be paid to the Corporation from time to time. Any funds
that have been deposited by the Corporation, or on its behalf, with a paying
agent or segregated and held in trust by the Corporation for the redemption of
shares converted into Common Stock on or prior to the Redemption Date shall
(subject to any right of the holder of such shares to receive the dividend
payable thereon as provided in Section 11 immediately upon such conversion be
returned to the Corporation or, if then held in trust of the Corporation, shall
be discharged from such trust.
Section 8.02 Notice.
------
Not less than thirty (30) nor more than sixty (60) days prior to the
Redemption Date, a notice shall be given by first class mail, postage prepaid,
to the holders of record of the shares of the Preferred Stock at their
respective addresses as the same shall appear on the books of the Corporation,
specifying the Redemption Date, the place where certificates for shares of the
Preferred Stock are to be surrendered and stating that dividends on shares of
the Preferred Stock will cease to accrue on and after the Redemption Date, but
neither failure to mail such notice, nor any defect therein or in the mailing
16
thereof, to any particular holder shall affect the sufficiency of the notice or
the validity of the proceedings for redemption with respect to the other
holders. Any notice that was mailed in the manner herein provided shall be
conclusively presumed to have been duly given whether or not the holder receives
the notice. Notwithstanding the foregoing, if notice of redemption has been
given pursuant to this Section 8.02 and any holder of shares of the Preferred
Stock shall, prior to the close of business on the last business day preceding
the redemption date, give written notice to the Corporation pursuant to Section
4 of the conversion of any or all of the shares to be redeemed that are held by
such holder, accompanied by a certificate or certificates for such shares, duly
endorsed or assigned to the Corporation, and any necessary transfer tax payment,
as required by Section 4 hereof, then such redemption shall not become effective
as to such shares to be converted and such conversion shall become effective as
provided in Section 4 hereof.
Section 8.03 Limitation on Redemption.
------------------------
If on the Redemption Date the Corporation has failed to pay or set aside,
separate and apart from its other funds in trust for the pro rata benefit of the
holders of shares of the Preferred Stock, all dividends accrued and unpaid on
shares of the Preferred Stock, then no shares of the Preferred Stock shall be
redeemed.
Section 9. Registration Rights.
-------------------
Within 90 days after the last date on which the Preferred Stock is offered
for purchase by the Corporation, the Corporation shall file a registration
statement under the Securities Act of 1933, as amended, and use its best efforts
to make such registration statement effective, and shall use its best efforts to
qualify or otherwise comply under applicable blue sky or other state securities
laws, with respect to the Common Stock into which the Preferred Stock is
convertible so as to permit or facilitate the sale and distribution of all or a
portion of such Common Stock by the holders thereof.
Section 10. Additional Rights of Holders.
----------------------------
Section 10.01. Accountings by Corporation.
--------------------------
Concurrently with each dividend payment date, commencing with the quarter
ended June 30, 2002, and continuing through the quarter ended December 31, 2003,
the Corporation shall provide to the Holders of the Preferred Stock an
accounting of its expenditures in conducting operations on the Onshore
Exploration Program up through the prior quarter. If the Corporation has not
expended at least the amount specified in the following table in conducting
operations on the Onshore Exploration Program during such period, the cash
dividend provided for in Section 2.01 shall be increased to 12% per annum
effective January 1, 2004, payable on each dividend payment date thereafter,
commencing March 31, 2004. The amounts to be expended are:
Shares of Preferred Stock Issued Expenditure Amount
150,000 $ 800,000
175,000 $1,025,000
200,000 $1,250,000
225,000 $1,475,000
250,000 $1,700.000
275,000 $1,925,000
300,000 $2,150,000
325,000 $2,375,000
350,000 $2,600,000
375,000 $2,825,000
400,000 $3,050,000
17
Section 10.02. Right of Audit.
--------------
The holders of record of ten percent (10%) in number of shares of the
Preferred Stock may request an audit of each of the following upon not less than
thirty (30) days' written notice to the Chief Financial Officer of the
Corporation: (a) the Corporations' expenditures in conducting operations on the
Onshore Exploration Program as provided in Section 10.01; and (b) the
calculation of the Net Participating Revenues used in determining the
participating dividends as provided in Section 2.02. Such audit shall be
conducted at the expense of such holders (including payment of any out-of-pocket
costs incurred by the Corporation in preparing for and attending any such audit,
which the Corporation shall have the right to do in its sole discretion) by such
certified public accountants as such holders may designate during normal
business hours at the offices of the Corporation; provided that the right of
audit granted under this Section 10.02 may not be exercised more frequently than
once in any twelve (12) month period.
Section 11. Actions not Requiring Consent.
-----------------------------
No consent of the holders of the Preferred Stock shall be required for (a)
the creation of any indebtedness of any kind of the Corporation, (b) the
creation, or increase or decrease in the amount, of any class or series of stock
of the Corporation not ranking prior as to dividends or upon liquidation to the
Preferred Stock or (c) any increase or decrease in the amount of authorized
Common Stock or any increase, decrease or change in the par value thereof or in
any other terms thereof.
Section 12. Permitted Amendments.
--------------------
Subject to the provisions of Section 8 hereof, the Board reserves the
right by subsequent amendment of this resolution from time to time to increase
or decrease the number of shares that constitute the Preferred Stock (but not
below the number of shares thereof then outstanding) and in other respects to
amend this resolution within the limitations provided by law, this resolution
and the Certificate of Incorporation.
Section 13. Rank.
----
For the purposes of this resolution, any stock of any series or class of
the Corporation shall be deemed to rank:
(a) prior to shares of the Preferred Stock, either as to dividends or
upon liquidation, if the holders of stock of such series or class shall be
entitled by the terms thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may
be, in preference or priority to the holders of shares of the Preferred
Stock;
(b) on a parity with shares of the Preferred Stock, either as to
dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation prices per share thereof be
different from those of the Preferred Stock, if the holders of stock of
such series or class shall be entitled by the terms thereof to the receipt
of dividends or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in proportion to their respective dividend
rates or liquidation prices, without preference or priority of one over
the other as between the holders of such stock and the holders of shares
of Preferred Stock (the term "Parity Preferred Stock" being used to refer
to any stock on a parity with the shares of Preferred Stock, either as to
dividends or upon liquidation as the context may require); and
18
(c) junior to shares of the Preferred Stock, either as to dividends
or upon liquidation, if such class shall be Common Stock or if the holders
of the Preferred Stock shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of stock of such
class or classes.
The Preferred Stock shall rank prior to all shares of capital stock
of the Corporation outstanding at the time of issuance of the Preferred
Stock, including the Series A Preferred Stock.
Section 14. No Preemptive Rights.
--------------------
The holders of shares of the Preferred Stock shall have no preemptive
rights, including preemptive rights with respect to any shares of capital stock
or other securities of the Corporation convertible into or carrying rights or
options to purchase any such shares.
IN WITNESS WHEREOF, Fortune Natural Resources Corporation has caused this
Certificate to be made under the seal of the Corporation, this 15th day of
March, 2002.
FORTUNE NATURAL RESOURCES CORPORATION
By: /s/ Ronald P. Nowak
---------------------------------
Ronald P. Nowak
President
[SEAL]
ATTEST:
/s/ Dean W. Drulias
- --------------------------
Dean W. Drulias
Secretary