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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): January 29, 2004
PARALLEL PETROLEUM CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-13305 75-1835108
(State or other jurisdiction (Commission File (IRS Employer
of Incorporation or organization) Number) Identification No.)
1004 N. Big Spring, Suite 400, Midland, Texas 79701
(Address of Principal Executive Offices) (Zip Code)
432-684-3727
(Registrant's telephone number, including area code)
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Item 5. Other Events.
DESCRIPTION OF CAPITAL STOCK
The description of the capital stock of Parallel Petroleum Corporation
set forth below is only a summary and is not intended to be complete. For a
complete description, please read our certificate of incorporation and bylaws,
which have been filed with the Securities and Exchange Commission.
General
Our authorized capital stock consists of 60,000,000 shares of common
stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par
value $0.10 per share, issuable in one or more series, with such dividend rates,
liquidation preferences, redemption, conversion and voting rights and such
further designations, powers, preferences, rights, limitations and restrictions
as may be fixed and determined by our Board of Directors, all without action of
our stockholders.
As of January 29, 2004, 25,259,720 shares of common stock and 957,000
shares of 6% convertible preferred stock were outstanding.
Common Stock
Subject to the preferential rights of any outstanding series of
preferred stock, the holders of our common stock are entitled to one vote for
each share held of record on all matters submitted to the stockholders. Since
the common stock does not have cumulative voting rights, the holders of more
than 50% of the shares may, if they choose to do so, elect all the directors of
Parallel and, in that event, the holders of the remaining shares will not be
able to elect any directors. Our certificate of incorporation does not allow the
stockholders to take action by written consent with less than unanimous consent.
The holders of our common stock are entitled to participate fully in dividends,
if any are declared by the Board of Directors out of legally available funds,
and in the distribution of assets in the event of liquidation. However, the
payment of any dividends and the distribution of assets to holders of our common
stock are and will be subject to any prior rights of outstanding shares of our
preferred stock. We have never paid cash dividends on our common stock. The
holders of our common stock have no preemptive or conversion rights, redemption
rights, or sinking fund provisions. Our common stock is not assessable.
Preferred Stock
Our Board of Directors may establish, in addition to the 6% convertible
preferred stock, without stockholder approval, one or more classes or series of
our preferred stock having the number of shares, designations, relative voting
rights, dividend rates, liquidation and other rights, preferences, and
limitations that our Board of Directors may designate. The purpose of
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authorizing the Board of Directors to determine these rights, preferences,
privileges and restrictions is to eliminate delays associated with a stockholder
vote on specific issuances. The issuance of any class of preferred stock, while
providing flexibility for many corporate purposes, could, among other things,
adversely affect the voting power of the holders of our common stock and, under
certain circumstances, make it more difficult for a third party to gain control
of us.
6% Convertible Preferred Stock
The following statements are brief summaries of certain provisions
relating to our outstanding shares of 6% convertible preferred stock:
Dividend Rights. Holders of our outstanding 6% convertible preferred
stock are entitled to receive, when and as declared by our Board of Directors
out of funds legally available therefor, cumulative cash dividends at the annual
rate of $.60 per share, payable semi-annually on the fifteenth day of June and
December in each year. Dividends are cumulative and are payable to holders of
record on such record dates as are fixed by Parallel's Board of Directors.
Except as provided below with respect to parity stock, no dividend may be
declared on any other series or class of stock ranking on a parity with or
junior to the preferred stock with respect to payment of dividends, unless
dividends on the preferred stock since the date of issue thereof to the date of
such distribution, whether accumulated or not, shall have been paid or declared
and set aside for payment. When dividends are not paid in full upon the 6%
convertible preferred stock and any parity stock, any dividends which are paid
will be paid pro rata among all shares of such stock. If full cumulative
dividends on the 6% convertible preferred stock have not been declared and paid
or set apart for payment, we may not declare or pay or set apart for payment any
dividends or make any other distributions of, or make any payment on account of
the purchase, redemption or retirement of, the common stock or any other stock
of Parallel ranking as to dividends or distributions of assets on liquidations,
dissolution or winding up of the company junior to the preferred stock (other
than, in the case of dividends or distributions, dividends or distributions paid
in shares of common stock or such other junior ranking stock), until full
cumulative dividends on the 6% convertible preferred stock are declared and paid
or set apart for payment.
Conversion Rights. The shares of 6% convertible preferred stock are
convertible, prior to redemption, into common stock at the initial conversion
price of $3.50 per share, each share of preferred stock being valued at $10.00
for the purpose of such conversion. The conversion price is subject to
adjustment of certain events, including (i) dividends and other distributions
payable in common stock on any class of capital stock of Parallel, unless such
payment increases the number of shares of outstanding common stock by less than
1%, (ii) the issuance to all holders of common stock of rights or warrants
entitling them to subscribe for or purchase common stock at less than the
current market price, (iii) subdivisions, combinations and reclassifications of
common stock, and (iv) distributions to all holders of common stock of evidences
of indebtedness or assets of Parallel (including securities, but excluding those
rights, warrants, dividends and distributions referred to above and dividends
and distributions paid in cash out of earned surplus).
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Liquidation Preference. Upon any liquidation, dissolution or winding up
of Parallel, whether voluntary or involuntary, the holders of preferred stock
have preference and priority over the common stock and any other class of series
of stock ranking junior to the preferred stock upon liquidation, dissolution or
winding up, for payment out of the assets of Parallel or proceeds thereof
available for distribution to stockholders of $10.00 per share plus all
dividends accrued and unpaid thereon, and after such payment the holders of
preferred stock shall be entitled to no other payments. If, in the case of any
such liquidation, dissolution or winding up of Parallel, the assets of the
company or proceeds thereof are insufficient to make the full liquidation
payment of $10.00 per share plus all accrued and unpaid dividends on the
preferred stock and full liquidation payments on any other preferred stock
ranking as to liquidation on a parity with the preferred stock, then such assets
and proceeds shall be distributed among the holders of the preferred stock and
any such other preferred stock ratably in accordance with the respective amounts
which would be payable upon liquidation, dissolution or winding up on such
shares of preferred stock and any such other preferred stock if all amounts
payable thereon were paid in full. A consolidation or merger of Parallel with or
into one or more corporations shall not be deemed to be a liquidation,
dissolution or winding up of the company.
Optional Cash Redemption. We may, at our option, redeem shares of
preferred stock for cash in whole at any time, or from time to time in part, at
a redemption price of $10.00 per share together with accrued and unpaid
dividends, upon written notice mailed to each holder of record of shares to be
redeemed not more than 60 days and not less than 30 days prior to the redemption
date.
Voting Rights. The preferred stock has no voting rights, except as set
forth below or as otherwise from time to time may be required by law.
So long as any shares of preferred stock remain outstanding, the
affirmative vote or consent of the holders of a majority of the shares of the
preferred stock outstanding at the time, given in person or by proxy, either in
writing or at a meeting (voting as a class with the holders of all other series
of preferred stock ranking on a parity with the preferred stock as to dividends
or upon liquidation, dissolution or winding up of Parallel and upon which like
voting rights have been conferred and are then exercisable), will be necessary
to permit, effect or validate the repeal, amendment or other change of any of
the provisions of the certificate of incorporation which would materially and
adversely affect any right, preference or privilege of the preferred stock or of
the holders thereof.
Rights to Purchase Series A Preferred Stock
On October 5, 2000, our Board of Directors declared a dividend
distribution of one Right for each outstanding share of our common stock to
stockholders of record at the close of business on October 16, 2000. Each Right
entitles the registered holder to purchase from Parallel one one-thousandth
(1/1,000) of a
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share of Series A. Preferred Stock, par value $0.10 per share (the "Preferred
Stock"), at a Purchase Price of $26.00 per one one-thousandth (1/1,000) of a
share, subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between Parallel and
Computershare Trust Company, Inc., as Rights Agent (the "Rights Agent").
Initially, the Rights will be attached to all common stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the common stock upon the earlier
of (i) ten (10) business days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of fifteen percent (15%)
or more of the outstanding shares of common stock (the "Stock Acquisition
Date"), or (ii) ten (10) business days (or such later date as the Board of
Directors shall determine) following the commencement of a tender or exchange
offer that would result in a person or group beneficially owning fifteen percent
(15%) or more of such outstanding shares of common stock. The date the Rights
separate is referred to as the "Distribution Date".
Until the Distribution Date, (i) the Rights will be evidenced by the
common stock certificates and will be transferred with and only with such common
stock certificates, (ii) new common stock certificates issued after October 16,
2000 will contain a notation incorporating the Rights Agreement by reference,
and (iii) the surrender for transfer of any certificates for common stock
outstanding will also constitute the transfer of the Rights associated with the
common stock represented by such certificates. Pursuant to the Rights Agreement,
we reserve the right to require prior to the occurrence of a Triggering Event
(as defined below) that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on October 5, 2010, unless earlier redeemed by
Parallel as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the common stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates will represent the Rights. Except in connection with shares of
common stock issued or sold pursuant to the exercise of stock options under any
employee plan or arrangements, or upon the exercise, conversion or exchange of
securities hereafter issued by Parallel, or as otherwise determined by the Board
of Directors, only shares of common stock issued prior to the Distribution Date
will be issued with Rights.
If (i) Parallel is the surviving corporation in a merger or other
business combination with an Acquiring Person (or any associate or affiliate
thereof) and its common stock remains outstanding and unchanged, (ii) any person
shall acquire beneficial ownership of more than fifteen percent (15%) of the
outstanding shares of common stock (except pursuant to (A) certain
consolidations or mergers involving Parallel or sales or transfers of the
combined assets, cash flow or earning power of Parallel and its subsidiaries or
(B) an offer for all outstanding shares of common stock at a price and upon
terms and conditions which the Board of Directors determines to be in the best
interests of Parallel and its stockholders), or (iii) there occurs a
reclassification
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of securities, a recapitalization of Parallel or any of certain business
combinations or other transactions (other than certain consolidations and
mergers involving Parallel and sales or transfers of the combined assets, cash
flow or earning power of Parallel and its subsidiaries) involving Parallel or
any of its subsidiaries which has the effect of increasing by more than one
percent (1%) the proportionate share of any class of the outstanding equity
securities of Parallel or any of its subsidiaries beneficially owned by an
Acquiring Person (or any associate or affiliate thereof), each holder of a Right
(other than the Acquiring Person and certain related parties) will thereafter
have the right to receive, upon exercise, common stock (or, in certain
circumstances, cash property or other securities of Parallel) having a value
equal to two times the Purchase Price of the Right. Notwithstanding any of the
foregoing, following the occurrence of any of the events described in this
paragraph, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void. The events described in this paragraph are referred to as "Flip-in
Events".
For example, at a Purchase Price of $26.00 per Right, each Right not
owned by an Acquiring Person (or by certain related parties or transferees)
following an event set forth in the preceding paragraph would entitle its holder
to purchase $52.00 worth of common stock (or other consideration, as noted
above) for $26.00. Assuming that the common stock had a per share market price
of $5.20 at such time, the holder of each valid Right would be entitled to
purchase 10 shares of common stock for $26.00.
If, at any time following the Stock Acquisition Date, (i) Parallel
enters into a merger or other business combination transaction in which Parallel
is not the surviving corporation, (ii) Parallel is the surviving corporation in
a consolidation, merger or similar transaction pursuant to which all or part of
the outstanding shares of common stock are changed into or exchanged for stock
or other securities of any other person or cash or any other property or (iii)
more than 50% of the combined assets, cash flow or earning power of Parallel and
its subsidiaries is sold or transferred (in each case other than certain
consolidations with, mergers with and into, or sales of assets, cash flow of
earning power by or to subsidiaries of Parallel as specified in the Rights
Agreement), each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the Purchase Price of the Right. The events described in this paragraph
are referred to as "Flip-over Events". Flip-in Events and Flip-over Events are
referred to collectively as "Triggering Events".
The Purchase Price payable, the number and kinds of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights, options or warrants
to subscribe for Preferred Stock or securities convertible into Preferred Stock
at less than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness,
cash (excluding regular quarterly cash dividends), assets (other than dividends
payable in Preferred Stock) or subscription rights or warrants (other than those
referred to in (ii) immediately above).
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With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least one percent (1%) of the
Purchase Price. No fractional shares of Preferred Stock are required to be
issued (other than fractions which are integral multiples of one one-thousandth
(1/1,000) of a share of Preferred Stock) and, in lieu thereof, Parallel may make
an adjustment in cash based on the market price of the Preferred Stock on the
trading date immediately prior to the date of exercise.
At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of fifty percent (50%) or more
of the outstanding shares of common stock, our Board of Directors may, without
payment of the Purchase Price by the holder, exchange the Rights (other than
Rights owned by such person or group, which will become void), in whole or in
part, for shares of common stock at an exchange ratio of one-half (1/2) the
number of shares of common stock (or in certain circumstances Preferred Stock)
for which a Right is exercisable immediately prior to the time of Parallel's
decision to exchange the Rights (subject to adjustment).
At any time until the Stock Acquisition Date, Parallel may redeem the
Rights in whole, but not in part, at a price of $0.001 per Right (payable in
cash, shares of common stock or other consideration deemed appropriate by the
Board of Directors). Immediately upon the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $0.001 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of Parallel, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to Parallel, stockholders may, depending upon the
circumstances, recognize taxable income if the Rights become exercisable for
common stock (or other consideration) of Parallel or for common stock of an
acquiring company as set forth above or if the Rights are redeemed.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors at any time during the period in which the Rights are
redeemable. At any time when the Rights are no longer redeemable, the provisions
of the Rights Agreement may be amended by the Board only if such amendment does
not adversely affect the interest of holders of Rights (excluding the interest
of any acquiring Person); provided, however, that no amendment may cause the
Rights again to become redeemable.
The foregoing description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the
Rights Agreement.
Warrants
We presently have outstanding warrants to purchase 300,000 shares of
common stock held by public investors. Each warrant may be exercised by the
holder thereof to purchase one
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share of common stock at the price of $6.00 per share, commencing on the date a
registration statement covering exercise is declared effective by the Securities
and Exchange Commission, but for a period of 30 days only. The warrants expire
upon conclusion of such 30-day exercise period. The warrants were originally
issued and sold in "units" (consisting of shares of common stock and warrants)
in connection with our initial public offering in 1980. The warrants contain
customary antidilution provisions so as to avoid dilution of the equity
interests represented by the underlying common stock upon the occurrence of
certain events such as share dividends and splits. In the event of liquidation,
dissolution or winding up of Parallel, holders of the warrants are not entitled
to participate in the assets of Parallel. Holders of the warrants have no voting
rights.
In addition to the outstanding warrants held by public investors as
described above, we issued common stock purchase warrants to a financial advisor
in November 2001 and in December 2003. The warrants issued in November 2001
entitle the holder to purchase an aggregate of 275,000 shares of our common
stock at an exercise price of $2.95 per share, the fair market value of the
common stock at the date of issuance. These warrants are exercisable during the
four-year period commencing one year after the initial issuance of the warrants,
and expire on November 20, 2006. In December 2003, we issued to the financial
advisor additional warrants to purchase an aggregate of 100,000 shares of our
common stock. The warrants have an exercise price of $3.98 per share, the fair
market value of the common stock at the date of issuance, and are exercisable
during the four-year period commencing one year after the initial issuance of
the warrants. These warrants expire on December 23, 2008. All of the warrants
grant to the holder thereof certain rights of registration for the common stock
issuable upon exercise of the warrants. The warrants contain customary
antidilution provisions so as to avoid dilution of the equity interests
represented by the underlying common stock upon the occurrence of certain events
such as share dividends and splits. In the event of liquidation, dissolution or
winding up of Parallel, holders of the warrants are not entitled to participate
in the assets of Parallel. Holders of the warrants have no voting rights.
Business Combinations under Delaware Law
We are a Delaware corporation and are governed by Section 203 of the
Delaware General Corporation Law. Section 203 prevents an interested
stockholder, which is a person who owns 15% or more of our outstanding voting
stock, from engaging in business combinations with us for three years following
the time the person becomes an interested stockholder. These restrictions do not
apply if:
o before the person becomes an interested stockholder, our board of
directors approves the transaction in which the person becomes an
interested stockholder or the business combination;
o upon completion of the transaction that results in the person becoming
an interested stockholder, the interested stockholder owns at least
85% of our outstanding voting stock at the time the transaction began,
excluding for purposes
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of determining the number of shares outstanding those shares owned by
persons who are directors and also officers and employee stock plans
in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or
o following the transaction in which the person became an interested
stockholder, the business combination is approved by our board of
directors and authorized at an annual or special meeting of our
stockholders, and not by written consent, by the affirmative vote of a
least two-thirds of our outstanding voting stock not owned by the
interested stockholder.
Delaware law defines the term "business combination" to encompass a
wide variety of transactions with, or caused by, an interested stockholder,
including mergers, asset sales and other transactions in which the interested
stockholder receives or could receive a benefit on other than a pro rata basis
with other stockholders. This law could have an anti-takeover effect with
respect to transactions not approved in advance by our Board of Directors,
including discouraging takeover attempts that might result in a premium over the
market price for the shares of the common stock.
Anti-takeover Effects of Provisions of Our Certificate of Incorporation and
Bylaws
Our certificate of incorporation, as amended, and our bylaws contain
provisions that might be characterized as anti-takeover provisions. These
provisions may deter or render more difficult proposals to acquire control of
our company, including proposals a stockholder might consider to be in his or
her best interest, impede or lengthen a change in membership of the Board of
Directors and make removal of our management more difficult.
Removal of Directors; Advance Notice Provisions for Stockholder Nominations
Any director may be removed from office, with or without cause, only by
the affirmative vote of a majority of the then outstanding shares entitled to
vote for an election of directors at any special meeting of stockholders duly
called and held for such purpose. Any stockholder wishing to submit a nomination
to the Board of Directors must follow the procedures outlined in our bylaws.
Unanimous Consent of Stockholders Required for Action by Written Consent
Under our certificate of incorporation, as amended, stockholder action
may be taken without a meeting only by unanimous written consent of all of our
stockholders.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare
Trust Company, Inc., 350 Indiana Street, Suite 800, Golden, Colorado 80401,
(303) 262-0600.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PARALLEL PETROLEUM CORPORATION
By: /s/ Larry C. Oldham
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Larry C. Oldham, President and
Chief Executive Officer
Dated: January 29, 2004
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