EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
PARALLEL PETROLEUM CORPORATION
"FIRST: The name of the corporation is PARALLEL PETROLEUM CORPORATION.
SECOND: The address of its registered office in the State of Delaware is No. 100
West Tenth Street, in the City of Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business of the Corporation and the objects and
purposes and business thereof proposed to be transacted, promoted or carried on
are as follows:
1. To transact any and all lawful business for which a corporation may
be incorporated under the laws of the State of Delaware.
2. To do everything necessary, proper, advisable or convenient for the
accomplishment of the purposes hereinabove set forth and to do all
things incidental thereto or connected therewith which are not
prohibited by the laws of the State of Delaware, by other laws or by
these Articles.
It is the intention that the purposes, objects and powers specified by
the foregoing clauses shall not, by reference to or inference from the terms of
any other clause in this Certificate of Incorporation, but each purpose, object
or power stated in the foregoing clauses shall be regarded as an independent
purpose, object or power.
FOURTH: The total number of shares of all classes that the Corporation shall
have authority to issue is 140,000,000 of which 40,000,000 shall be Preferred
Shares, par value $.10 per share, and 100,000,000 shall be Common Shares, $.01
par value per share.
The designations, preferences, limitations and relative rights of the
shares of each class that the Corporation shall have authority to issue are as
follows:
1. Preferred Shares.
The Corporation may divide and issue the Preferred Shares in series.
Preferred Shares of each series when issued shall be designated to distinguish
them from the shares of all other series. The Board of Directors is hereby
expressly vested with authority to divide the class of Preferred Shares into
series and to fix and determine the relative rights and preferences of the
shares of any such series so established to the full extent permitted by this
Certificate of Incorporation and the laws of the State of Delaware in respect of
the following:
(a) The number of shares to constitute such series, and the
distinctive designations thereof;
(b) The rate and preference of dividends, if any, the time of
payment of dividends, whether dividends are cumulative and the date
from which any dividend shall accrue;
(c) Whether shares may be redeemed and, if so, the redemption
price and the terms and conditions of redemption;
(d) The amount payable upon shares in event of involuntary
liquidation;
(e) The amount payable upon shares in event of voluntary
liquidation;
(f) Sinking fund or other provisions, if any, for the redemption
or purchase of shares;
(g) The terms and conditions on which shares may be converted,
if the shares of any series are issued with the privilege of
conversion;
(h) Voting rights, if any; and
(i) any other relative rights and preferences of shares of such
series, including, without limitation, any restriction on any increase
in the number of shares of any series theretofor authorized and nay
limitation or restriction of rights or powers to which shares of any
future series shall be subject.
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2. Common Shares.
(a) The rights of holders of Common Shares to receive dividends
or to share in the distribution of assets in the event of liquidation,
dissolution or winding up of the affairs of the Corporation shall be
subject to the preferences, limitations and relative rights of the
Preferred Shares fixed in the resolution or resolutions which may be
adopted from time to time by the Board of Directors of the Corporation
providing for the issuance of one or more series of the Preferred
Shares.
(b) The holders of the Common Shares shall be entitled to vote
for each Common Share held by them of record at the time for
determining the holders thereof entitled to vote.
FIFTH: The names and mailing addresses of the incorporators are:
Name Address
---------- ------------------
Frank S. Delay 500 Metro Building
119 North Colorado
Midland, Texas
79701
Larry C. Oldham 500 Metro Building
119 North Colorado
Midland, Texas
79701
SIXTH: The names and mailing addresses of the persons who are to serve as the
directors (until their successors are duly elected and qualified) are:
Name Address
---------- ------------------
Frank S. Delay 500 Metro Building
119 North Colorado
Midland, Texas
79701
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<page>
Name Address
---------- ------------------
E. R. Duke 500 Metro Building
119 North Colorado
Midland, Texas
79701
Larry C. Oldham 500 Metro Building
119 North Colorado
Midland, Texas
79701
Charles R. Pannill 500 Metro Building
119 North Colorado
Midland, Texas
79701
Glenn A. Smith 500 Metro Building
119 North Colorado
Midland, Texas
79701
SEVENTH: The corporation is to have perpetual existence.
EIGHTH: The Board of Directors shall have power to enact, alter, amend and
repeal such By-Laws not inconsistent with the laws of the State of Delaware and
this Certificate of Incorporation as it may deem best for the management of the
Corporation.
NINTH: Cumulative voting shall not be allowed in the election of directors.
TENTH: Shareholders shall not have a preemptive right to subscribe for, purchase
or acquire additional unissued or treasury shares of the Corporation or
securities convertible into shares or carrying share purchase warrants or
privileges as the same may be issued from time to time by the corporation.
ELEVENTH: Elections of directors need not be by written ballot unless the
by-laws of the corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation.
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TWELFTH: Any action required by statute to be taken at any annual or special
meeting of stockholders, or any action which may be taken at any annual or
special meeting of stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of all of the outstanding stock of the
Corporation.
THIRTEENTH: The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statue, and all rights conferred upon stockholders
herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate, hereby
declaring and certifying that this is our act and deed and the facts herein
stated are true, and accordingly heave hereunto set our hands this 6th day of
June, 1984.
/s/ Frank S. Delay
--------------------------------
FRANK S. DELAY
/s/ Larry C. Oldham
--------------------------------
LARRY C. OLDHAM
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CERTIFICATE OF CHANGE OF ADDRESS OF
REGISTERED OFFICE AND OF REGISTERED AGENT
PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE
To: DEPARTMENT OF STATE
Division of Corporations
Townsend Building
Federal Street
Dover, Delaware 19903
Pursuant to the provisions of Section 134 of Title 8 of the Delaware
Code, the undersigned Agent for service of process, in order to change the
address of the registered office of the corporations for which it is registered
agent, hereby certifies that:
1. The name of the agent is: The Corporation Trust Company
2. The address of the old registered office was:
100 West Tenth Street
Wilmington, Delaware, 19801
3. The address to which the registered office is to be changed is:
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
The new address will be effective on July 30, 1984.
4. The names of the corporations represented by said agent are set forth
on the list annexed to this certificate and made a part hereof by
reference.
IN WITNESS WHEREOF, said agent has caused this certificate to
be signed on its behalf by its Vice-President and Assistant Secretary
this 25th day of July, 1984.
THE CORPORATION TRUST COMPANY
(Name of Registered Agent)
By: /S/ Virginia Colwell
----------------------------------
(Vice-President)
ATTEST:
/S/ Mark Murray
- --------------------------
(Assistant Secretary)
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CERTIFICATE OF MERGER
MERGING
PARALLEL PETROLEUM CORPORATION
A TEXAS CORPORATION
INTO
PARALLEL PETROLEUM CORPORATION
A DELAWARE CORPORATION
(Pursuant to Section 252 of the General Corporation
Law of the State of Delaware)
1. The names of the constituent corporations and the states under the
laws of which they are respectively organized are:
Name of Corporation State
------------------------------ -----
Parallel Petroleum Corporation Texas
Parallel Petroleum Corporation Delaware
2. An Agreement of Merger has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with section 252(c) of the General Corporation Law of the State of Delaware.
3. The name of the surviving corporation is Parallel Petroleum
Corporation, a Delaware corporation.
4. The Certificate of Incorporation of Parallel Petroleum Corporation
shall be the Certificate of Incorporation of the surviving corporation.
5. The executed Agreement of Merger is on file at the principal place
of business of Parallel Petroleum Corporation.
Parallel Petroleum Corporation
119 North Colorado
Metro Building
Suite 500
Midland, Texas 79701
6. A copy of the Agreement of Merger will be furnished by Parallel
Petroleum Corporation, on request and without cost, to any stockholder of any
constituent corporation.
7. The authorized capital stock of Parallel Petroleum Corporation,
Texas, is 120,000,000 shares.
IN WITNESS WHEREOF, said Parallel Petroleum Corporation, a Delaware
corporation, has caused its corporate seal to be affixed and this certificate to
be signed by Frank S. Delay, its President, and Larry C. Oldham, its Secretary,
this 17th day of December, A.D., 1984.
(Corporate Seal) By: /s/ Frank S. Delay
-----------------------------
Frank S. Delay, President
ATTEST:
/s/ Larry C. Oldham
- ---------------------------
Larry C. Oldham, Secretary
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STATE OF TEXAS )
)
COUNTY OF MIDLAND )
Be it remembered that on this 17th day of December, A.D., 1984,
personally came before me, Phyllis D. Evans, a notary public in and for the
county and state aforesaid, Frank S. Delay, President of Parallel Petroleum
Corporation, a corporation of the State of Delaware, the corporation described
in and which executed the foregoing Certificate, known to me personally to be
such, and he, the said Frank S. Delay, as such President, duly executed said
Certificate before me and acknowledged the said Certificate to be his act and
deed and the act and deed of said corporation; that the signatures of the said
President and of the Secretary of said corporation to said foregoing Certificate
are in the handwriting of the said President and Secretary of said corporation,
respectively, and that the seal affixed to said Certificate is the common or
corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of this office
the day and year aforesaid.
(Notarial Seal) /s/ Phyllis D. Evans
-----------------------------------
Name: Phyllis D. Evans
-----------------------------
Notary Public in and for said
County and State
My Commission Expires:
11/24/85
- ----------------------
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PARALLEL PETROLEUM CORPORATION
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIAL PREFERRED STOCK --
$.30 CUMULATIVE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151 of the Delaware
General Corporation Law
RESOLVED, by the Board of Directors of Parallel Petroleum Corporation,
a Delaware corporation (the "Company"), that pursuant to authority expressly
granted to and vested in the Board of Directors by the provisions of the
Certificate of Incorporation of the Company, the Board of Directors hereby
creates a series of the class of authorized Serial Preferred Stock, $.10 par
value ("Preferred Stock"), of the Company, and authorizes the issuance thereof,
and hereby fixes the designations and amount thereof, and the voting powers,
preferences and relative, participation, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof (in addition to the designations, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof (in addition to the
designations, preferences and relative, participating and other special rights,
and the qualifications, limitations or restrictions thereof, set forth in the
Certificate of Incorporation of the Company, which are applicable to the Serial
Preferred Stock of all series) as follows:
1.1 Designation and Amount. The shares of such series shall be
designated ".$30 Cumulative Convertible Preferred Stock" (such series being
hereinafter sometimes called "this Series"), and the number of shares
constituting such Series shall initially be 174,669. The number of authorized
shares of this Series may be reduced by further resolution duly adopted by the
Board of Directors of the Company and by the filing of a certificate pursuant to
the provisions of the General Corporation Law of the State of Delaware stating
that such reduction has been so authorized, but the number of authorized shares
of this Series shall not be increased. Shares in this Series have a par value of
$.10 per share.
1.2 Dividends. The holders of shares of this Series shall be entitled
to receive, out of the funds of the Company legally available therefore and as
and when declared by the Board of Directors, cash dividends at the rate of $.30
per share per annum, payable semi-annually on the first day of the months of May
and November in each year, commencing November 1, 1986, except that if such date
is a Saturday, Sunday or legal holiday then such dividend shall be payable on
the first immediately preceding day which is not a Saturday, Sunday or legal
holiday. Such dividends shall be cumulative (whether or not in any semi-annual
dividend period there shall be funds of the Company legally available for the
payment of such dividends), commencing on the date of original issue and shall
be payable for any period less than a full semi-annual period on the basis of a
year of 360 days with equal 30 day months. Dividends shall be payable to holders
of record, as they appear on the stock books of the Company on such record dates
as may be declared by the Board of Directors, not more than sixty (60) days nor
less than ten (10) days preceding the payment dates for such dividends.
Dividends in arrears may be declared and paid at any time, without reference to
any regular dividend payment date, to holders of record on such date, not
exceeding sixty (60) days preceding the payment date thereof, as may be fixed by
the Board of Directors of the Company. Except as provided below with regard to
any class of stock ranking on a parity with the Preferred Stock as to payment of
dividends. In no event, so long as this Series shall remain outstanding, shall
any dividend whatsoever be declared or paid upon, nor shall any distribution be
made or ordered in respect of, any class of stock of the Company ranking on a
parity with or junior to this Series with respect to payment of dividends,
unless dividends on this Series since the date of issue thereof to the date of
such distribution shall have been paid or declared and set apart for payment.
When dividends are not paid in full upon the shares of this Series and any other
preferred stock ranking on a parity as to payment of dividends with this Series,
all dividends declared upon shares of this Series and any other preferred stock
ranking on a parity as to dividends with this Series shall be declared pro rata
so that the amount of dividends declared per share on this Series and such other
preferred stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the shares of this Series and such other
preferred stock bear to each other. If full cumulative dividends on this Series
have not been declared and paid or set apart for payment, the Company shall not
declare or pay or set apart for payment any dividends or make any other
distributions on, or make any payment on account of the purchase, redemption or
retirement of, the Common Stock, $.01 par value, of the Company ("Common
Stock"), or any other stock of the Company ranking junior to this Series as to
dividends or distribution of assets on liquidation, dissolution or winding up of
the Company (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 this Series are declared and paid or
set apart for payment.
1.3 Conversion. The holders of shares of this Series shall have the
right, at their option, to convert all or any part of such shares of this Series
into shares of Common Stock of the Company at any time on and subject to the
following terms and conditions:
(a) The shares of this Series shall be convertible at the
office of any transfer agent for such stock, and at such other place or
places, if any, as the Board of Directors of the Company may designate,
into fully paid and nonassessable shares) calculated as to each
conversion to the nearest 1/100th of a share) of Common Stock of the
Company. The number of shares of Common Stock issuable
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upon conversion of each share of this Series shall be equal to $3.00
divided by the conversion price in effect at the time of conversion,
determined as hereinafter provided. The price at which shares of Common
Stock shall be delivered upon conversion (herein called the "conversion
price") shall be initially $.50 per share of Common Stock and such
conversion price shall be and shall remain in effect until the close of
business on March 1, 1988. After March 1, 1988, the conversion price
shall be $.75 per share of Common Stock. The conversion price shall be
subject to adjustment from time to time in certain instances as
hereinafter provided. If the Company calls for the redemption of any
shares of this Series, such right of conversion shall cease and
terminate, as to the shares designated for redemption, at the close of
business on the redemption date, unless the Company defaults in the
payment of the redemption price. No fractional shares of Common Stock
will be issued. A cash payment will be paid in lieu of any fractional
share in an amount equal to the same fraction of the last sale price on
the Common Stock (determined as provided in Section 1.3(c)(iv) at the
close of business on the business day which next precedes the day of
conversion.
(b) Before any holder of shares of this Series shall be
entitled to convert the same into Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed or assigned to the
Company or in blank, at the office of any transfer agent for such stock
or at such other place or places, if any, as the Board of Directors of
the Company may have designated, and shall give written notice to the
Company at said office or place that he elects to convert the same and
shall state in writing therein the name or names (with addresses) in
which he wishes the certificate or certificates for Common Stock to be
issued. Shares of this Series surrendered for conversion during the
period from the close of business on any record date for the payment of
a dividend on the shares of this Series to the opening of business on
the date for payment of such dividends shall (except in the case of
shares of this Series which have been called for redemption on a
redemption date within such period) be accompanied by payment of an
amount equal to the dividend payable on such dividend payment date on
the shares of this Series being surrendered for conversion. Except as
provided in the preceding sentence, no payment or adjustment shall be
made upon any conversion on account of any dividend accrued on the
shares of this Series surrendered for conversion or on account of any
dividends on the Common Stock issued upon conversion. The Company will,
as soon as practicable thereafter, issue and deliver at said office or
place to such holder of shares of this Series, or to his nominee or
nominees, certificates for the number of full shares of Common Stock to
which
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he shall be entitled as aforesaid, together with cash in lieu of any
fraction of a share. Shares of this Series shall be deemed to have been
converted as of the close of business on the date of surrender of such
shares for conversion as provided above, and the person or persons
entitled to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such
Common Stock as of the close of business on such date.
(c) The conversion price in effect at any time shall be
subject to adjustment as follows:
(i) In case the Company shall (A) declare a dividend
or make a distribution payable in Common Stock on any class of
capital stock of the Company, unless the payment thereof would
increase the number of shares of Common Stock outstanding by
less than one percent (1%), (B) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of
shares, or (C) combine its outstanding shares of Common Stock
into a smaller number of shares, the conversion price in
effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision,
combination or reclassification shall be proportionately
reduced in the case of any increase in the number of shares of
Common Stock outstanding and increased in the case of any
reduction in the number of shares of Common Stock outstanding
so that the holder of any share of this Series surrendered for
conversion after such time shall be entitled to receive the
kind and amount of shares which he would have owned or have
been entitled to receive had such share of this Series been
converted into Common Stock immediately prior to such time and
had such Common Stock received such dividend or other
distribution or participated in such subdivision, combination
or reclassification. Such adjustment shall be effective as of
the record date for such dividend or distribution or the
effective date of such combination, subdivision or
reclassification and shall be made successively whenever any
event listed above shall occur.
(ii) In case the Company shall issue rights or
warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common
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Stock at a price per share less than the Current Market Price
(as defined in paragraph (iv) below) of the Common Stock, on
the date fixed for the determination of stockholders entitled
to receive such rights or warrants, the conversion price at
the opening of business on the day following the date fixed
for such determination shall be reduced by multiplying the
conversion price by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the
number of shares of Common Stock which the aggregate of the
offering price of the total number of shares of Common Stock
so offered for subscription or purchase would purchase at such
Current Market Price of the Common Stock and the denominator
shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination
plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective
immediately after the opening of business on the day following
the date fixed for such determination. For purposes of
determining under this paragraph the number of shares of
Common Stock outstanding at any time, there shall be excluded
all shares of Common Stock held in the treasury of the
Company. If any or all such rights or warrants are not so
issued or expire or terminate before being exercised, the
conversion price then in effect shall be appropriately
readjusted.
(iii) In case the Company shall distribute to all
holders of its Common Stock evidences of its indebtedness or
assets (including securities, but excluding cash dividends or
a distribution referred to in paragraph (i) above or paid out
of earned surplus) or subscription rights or warrants
(excluding those referred to in paragraph (ii) above), the
conversion price shall be adjusted so that it shall equal the
price determined by multiplying the conversion price in effect
immediately prior to the close of business on the date fixed
for the determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the
Current Market Price per share of the Common Stock on the date
fixed for such determination less the then fair market value
(as determined by the Board of
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Directors of the Company, in good faith and in the exercise of
its reasonable business judgment and described in a Board
Resolution filed with any transfer agent for this Series) of
the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock and the
denominator shall be such Current Market Price per share of
the Common Stock. Such adjustment shall become effective
immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders
entitled to receive such distribution.
(iv) For the purpose of any computation under
paragraphs (ii) and (iii) above, the "Current Market Price"
per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of Common
Stock for 15 consecutive business days selected by the Company
commencing no more than 45 business days before such date. The
closing price for each day shall be the last reported sales
price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular
way, in either case on the American Stock Exchange, or, if the
Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange or no
such quotations are available, the average of the closing bid
and asked prices as furnished by any member of the National
Association of Securities Dealers, Inc. selected from time to
time by the Company for that purpose or if no such quotations
are available, the fair market value as determined in good
faith in the exercise of their reasonable business judgment by
the Board of Directors of the Company.
(v) All calculations under this section 1.3(c) shall
be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be.
(vi) No adjustment in the conversion price shall be
required unless such adjustment would require a change of at
least 1% in such price; provided, however, that any
adjustments which by reason of this paragraph (vi) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment.
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(d) Whenever the conversion price is adjusted as herein
provided:
(i) The Company shall promptly file any of the
transfer agents for this Series a certificate of the Treasurer
of the Company setting forth the adjusted conversion price and
showing in reasonable detail the facts upon which such
adjustment is based, including a statement of the
consideration received or to be received by the Company for
any shares of Common Stock issued or deemed to have been
issued; and
(ii) a notice stating that the conversion price has
been adjusted and setting forth the adjusted conversion price
shall forthwith be required, and as soon as practicable after
it is required, such notice shall be mailed by the Company to
the holders of record of this series.
(e)
(i) In case of any consolidation or merger of the
Company with or into any other corporation (other than a
merger which does not result in any reclassification,
conversion, exchange or cancellation of the Common Stock), or
in case of any sale or transfer of all or substantially all of
the assets of the company, or the reclassification of the
Common Stock into another form of capital stock of the
Company, whether in whole or in part, the holder of each share
of this Series shall have the right to receive securities,
cash or property, or any combination thereof, having a value
equal to the greater of (A) $3.00 per share, plus an amount
equal to all dividends accumulated and unpaid on each such
share at the time of such consolidation, merger, sale or
transfer or reclassification or (B) the value of the shares of
stock and other securities, cash and property (including, if
applicable, Common Stock) which such holder would have been
entitled to receive upon such consolidation, merger, sale or
transfer or reclassification if he had held the Common Stock
issuable upon the conversion of such share of this Series
immediately prior to such consolidation, merger, sale or
transfer, or reclassification.
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(ii) In the event that at any time, as a result of
paragraph (i) above, the holder of any share of this Series
shall become entitled to receive any shares of stock and other
securities and property (including, if applicable, Common
Stock), thereafter the amount of such shares of stock and
other securities so receivable upon conversion of any share of
this Series shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Common Stock contained
in paragraphs (i) to (vi), inclusive, of section 1.3 (c)
above, and for the provisions of section 1.3(c) with respect
to the Common Stock shall apply on like terms to any such
shares of stock and other securities and property (including,
if applicable, Common Stock).
(f) In case:
(i) the Company shall authorize the distribution to
all holders of its Common Stock of evidences of its
indebtedness of assets (other than cash dividends or other
cash distributions paid out of earned surplus); or
(ii) the Company shall authorize the granting to the
holders of its Common Stock or rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of
any other rights; or
(iii) of any reclassification of the capital stock of
the Company (other than a subdivision or combination of its
outstanding shares of Common Stock), or of any consolidation
or merger to which the Company is required, or of the sale or
transfer of all or substantially all of the assets of the
Company; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in each case, the Company shall cause to be filed with any of the transfer
agents for this Series, and shall cause to be mailed, first class postage
prepaid, to the holders of record of the outstanding shares of this Series, at
least 20 days prior to the applicable record date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend,
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distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock or record to be entitled
to such dividend, distribution, rights or warrants are to be determined, or (y)
the date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
(g) The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common
Stock, solely for the purpose of effecting the conversion of the shares
of this Series, the full number of shares of Common Stock then issuable
upon the conversion of all outstanding shares of this Series. For the
purpose of this section 1.3(g), the full number of shares of Common
Stock issuable upon the conversion of all outstanding shares of this
Series shall be computed as if at the time of computation of such
number of shares of Common Stock all outstanding shares of this Series
were held by a single holder. The Company shall from time to time, in
accordance with the laws of the State of Delaware, increase the
authorized amount of its Common Stock if at any time the authorized
amount of its Common Stock remaining unissued shall not be sufficient
to permit the conversion of all shares of this Series at the time
outstanding. If any shares of Common Stock required to be reserved for
issuance upon conversions of shares of this Series hereunder require
registration with or approval of any governmental authority under any
Federal or State law before such shares may be issued upon such
conversion, the company will in good faith and as expeditiously as
possible endeavor to cause such shares to be so registered or approved.
(h) The Company will pay any and all taxes that may be payable
in respect of the issue or delivery of shares of Common Stock on
conversion of shares of this Series pursuant hereto. The Company shall
not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue or transfer and delivery
of shares of Common Stock in a name other than that in which the shares
of this Series so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such
issue has paid to the Company the amount of any such tax or has
established to the satisfaction of the Company that such tax has been
paid.
(i) Whenever reference is made in this section 1.3 to the
issue or sale of shares of Common Stock, the term "Common Stock" shall
include only shares of the class designated as Common Stock,
-9-
$.01 par value, of the Company at the date hereof or shares of any
class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of
dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company and
which are not subject to redemption by the Company, provided that if
at any time there shall be more than one such resulting class, the
shares of each such class then so deliverable shall be substantially
in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of
shares of all such classes resulting from all such reclassifications.
1.4 Liquidation Rights. In the event of any liquidation, dissolution,
or winding up of the affairs of the Company, whether voluntary or otherwise,
after payment or provision for payment of the debts and other liabilities of the
Company, the holders of this Series shall be entitled to receive an amount in
cash for each share of this Series equal to $3.00 per share, plus an amount
equal to all dividends accumulated and unpaid on each such share up to the date
fixed for distribution, before any distribution shall be made to the holders of
the Common Stock and of any other capital stock of the Company ranking junior to
this Series upon the liquidation, dissolution or winding up of the Company. If
upon any liquidation, dissolution or winding up of the Company, the assets
distributable among the holders of this Series shall be insufficient to permit
the payment in full to the holders of all the then outstanding shares of this
Series and all holders of preferred stock ranking on a parity with this Series
with respect to the payment upon liquidation, dissolution and winding up of the
Company of all preferential amounts payable to all such holders, then the entire
assets of the Company thus distributable shall be distributed ratably among the
holders of this Series and all such other holders of preferred stock in
proportion to the respective amounts that would be payable per share if such
assets were sufficient to permit payment in full. Subject to the provisions of
section 1.3(e)(i), a consolidation or merger of the Company with or into one or
more corporations or the sale or transfer of all or substantially all of the
assets of the Company shall not be deemed to be a liquidation, dissolution or
winding up of the Company.
1.5 Optional Cash Redemption. The shares of this Series are not
redeemable prior to May 15, 1987, unless the average of the closing bid and
asked prices of the Common Stock as quoted by any member of the National
Association of Securities Dealers, Inc. shall have equaled or exceeded 140% of
the conversion price in effect on the date of notice referred to below for at
least 20 of the 30 consecutive trading days immediately prior to the date notice
of redemption is given. The share of this Series are redeemable for cash, in
whole at any time or from time to time in part at the option of the Company, at
a redemption price of $3.00 per share, plus any accumulated and unpaid dividends
thereon.
-10-
Notice of redemption pursuant to this section 1.5 will be mailed at
least 30 days but not more than 60 days before the redemption date to each
holder of record of shares of this Series to be redeemed at the address shown on
the stock books of the Company (but no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of the proceedings
for such redemption except as to the holder to whom the Company has failed to
mail such notice or except as to the holder whose notice was defective). On and
after the redemption date, dividends shall cease to accumulate on shares of this
Series called for redemption (unless the Company defaults in the payment of the
redemption price).
If less than all the outstanding shares of this Series not previously
called for redemption are to be redeemed pursuant to this section 2.5, shares to
be redeemed shall be selected by the Company from outstanding shares not
previously called for redemption by lot or pro rata (as nearly as may be) as
determined by the Board of Directors of the Company. The Company may not redeem
less than all outstanding shares of this Series pursuant to this section 1.5
unless full cumulative dividends shall have been declared and paid or set apart
for payment upon all outstanding shares of this Series for all past dividend
periods. Shares of this Series redeemed by the Company will be restored to the
status of authorized but unissued shares of preferred stock, without designation
as to series, and may thereafter be issued, but not as shares of this Series.
1.6 Voting Rights. The holders of shares of this Series shall have no
right to vote for any purpose, except as specifically required by the laws of
the State of Delaware and except as follows:
(a) So long as any shares of this Series remain outstanding,
the affirmative vote or consent of the holders of at least 66-2/3% of
the then outstanding shares of this Series, in person or by proxy,
either in writing or at a meeting called for that purpose (voting as a
class with the holders of all other series of preferred stock ranking
on a parity with this Series either as to dividends or distributions or
upon liquidation, dissolution or winding up of the Company and upon
which like voting rights have been conferred and are then exercisable),
shall be necessary to permit, effect or validate the repeal, amendment
or other change of any provision of the Certificate of Incorporation of
the Company in any manner which materially and adversely affects the
rights, preferences, or privileges of this Series or the holders
thereof; provided, however, that any increase in the amount of
authorized preferred stock or the creation and issuance of other series
of preferred stock, whether ranking on a parity with or junior or prior
to this Series with respect to the payment of dividends or the
distribution of assets upon liquidation, dissolution or winding
-11-
up shall not be deemed to materially and adversely affect such rights,
preferences or privileges.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of this Series shall have been
redeemed or sufficient funds shall have been deposited in trust to effect such
redemption.
IN WITNESS WHEREOF, this Certificate has been executed and attested by
the undersigned on October 21, 1986, and shall be effective at 10:00 a.m.
Eastern Daylight Time, on October 21, 1986, or the date on which filed with the
Secretary of State of Delaware, whichever is later.
PARALLEL PETROLEUM CORPORATION
ATTEST:
By: /s/ Thomas R. Cambridge
-----------------------
/s/ Larry C. Oldham Thomas R. Cambridge
- ------------------------------ President
Larry C. Oldham
Secretary
-12-
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
PARALLEL PETROLEUM CORPORATION
Parallel Petroleum Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation")
does hereby certify as follows:
FIRST: Pursuant to the provisions of the Delaware General Corporation
Law, the Board of Directors and the stockholders of the Corporation adopted the
Amendment to the Certificate of Incorporation of the Corporation, which is set
forth in the following resolution in accordance with Section 242 of the Delaware
General Corporation Law, the purpose of which Amendment is to add a new Article
Fourteenth to the Certificate of Incorporation:
"RESOLVED, That Article Fourteenth is hereby added to the Certificate
of Incorporation to read in its entirety as follows:
ARTICLE FOURTEENTH
Section 1
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any
breach of the directors' duty of loyalty to the Corporation or tits
stockholders, (ii) for acts or omissions not in good faith or whish
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this article to authorize corporate
action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of
such repeal or modification.
Section 2
(a) Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved
in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason
of the fact that he or she is or was a director, officer or employee of
the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of
a partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as
the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee
who has ceased to e a director, officer, employee or agent and shall
inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in
paragraph (b) hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated such
indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation. The right to indemnification
conferred in this Section shall be a contract right and shall include
the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if
the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director
or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including without limitation, service to
an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such indemnitee, to
undertaking, by or on behalf of such indemnitee, to repay all amounts
so advanced if it shall ultimately be determined by final
-2-
judicial decision from which there is no further right to appeal that
such indemnitee is not entitled to be indemnified for such expenses
under this Section or otherwise (hereinafter an "undertaking").
(b) Right of Indemnitee to Bring Suit. If a claim under
paragraph (a) of this Section is not paid in full by the Corporation
within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in
whole or in part in any such suit or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms
of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suite brought
by the indemnitee to enforce a right to indemnification hereunder (but
not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) any suit
by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee
has not met the applicable standard of conduct set forth in the
Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors), independent legal counsel or its
stockholders) that the indemnitee has not met such applicable standard
of conduct, shall create a presumption that the indemnitee has not met
the applicable standard of conduct or, in the case of such suit brought
by the indemnitee, be a defense to such suit. In any suit brought by
the indemnitee to enforce a right hereunder, or by the Corporation to
recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled
to be indemnified or to such advancement of expenses under this Section
or otherwise shall be on the Corporation.
(c) Non-Exclusivity of Rights. The rights to indemnification
and to the advancement of expenses conferred in this Section shall not
be exclusive of any other right which any person may have or hereafter
acquire under any statute, this Certificate of Incorporation,
-3-
by-law, agreement, vote of stockholders or disinterested directors or
otherwise.
(d) Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the Delaware
General Corporation Law.
(e) Indemnification of Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the
advancement of expenses, to any agent of the Corporation to the fullest
extent of the Provisions of this Section with respect to the
indemnification and advancement of expenses of directors, officers and
employees of the Corporation.
SECOND: Pursuant to the provisions of the Delaware General Corporation
Law, the Board of Directors and the stockholders of the Corporation adopted the
amendment to the Certificate of Designations, Preferences and Rights of Serial
Preferred Stock - $.30 Cumulative Convertible Preferred Stock filed October 27,
1986 with the Delaware Secretary of State, which is set forth in the following
resolution in accordance with Section 242 of the Delaware General Corporation
Law, the purpose of which Amendment is to reduce the conversion price of the
Corporation's outstanding shares of $.30 Cumulative Convertible Preferred Stock:
RESOLVED, That Section 1.3(a) of the Certificate of Designations,
Preferences and Rights of Serial Preferred Stock - $.30 Cumulative
Convertible Preferred Stock is hereby amended to read in its entirety
as follows:
(a) The shares of this Series shall be convertible at the
office of any transfer agent for such stock, and at such other place or
places, if any, as the Board of Directors of the Company may designate,
into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100th of a share) of Common Stock of the
Company. The number of shares of Common Stock issuable upon conversion
of each share of this Series shall be equal to $3.00 divided by the
conversion price in effect at the time of conversion, determined as
hereinafter provided. The price at which shares of Common Stock shall
be delivered upon conversion (herein called the "conversion price")
shall be $.25 per share of Common Stock and such conversion price shall
be and shall remain in effect until the close of business on August 15,
1988. After August 15, 1988 the conversion price
-4-
shall be $.50 per share of Common Stock. The conversion price shall be
subject to adjustment from time to time in certain instances as
hereinafter provided. If the Company calls for the redemption of any
shares of this Series, such right of conversion shall cease and
terminate, as to the shares designated for redemption, at the close of
business on the redemption date, unless the Company defaults in the
payment of the redemption price. No fractional shares of Common Stock
will be issued. A cash payment will be paid in lieu of any fractional
share in an amount equal to the same fraction of the last sale price on
the Common Stock (determined as provided in Section 1.3(c)(iv) at the
close of business on the business day which next precedes the day of
conversion.
IN WITNESS WHEREOF, Parallel Petroleum Corporation has caused this
Certificate of Amendment to be signed by Thomas R. Cambridge, its President, and
attested by Larry C. Oldham, its Secretary, this 15th day of June, 1988.
Parallel Petroleum Corporation
By:/S/ Thomas R. Cambridge
--------------------------------
Thomas R. Cambridge,
President
ATTESTED:
/S/ Larry C. Oldham
- --------------------------
Larry C. Oldham, Secretary
The undersigned President of Parallel Petroleum Corporation, being duly
sworn, does verify that the foregoing instrument represents the act and deed of
Parallel Petroleum Corporation and that the facts stated in such instrument are
true.
/S/ Thomas R. Cambridge
-----------------------------------
Thomas R. Cambridge, President
-5-
THE STATE OF TEXAS )
)
COUNTY OF MIDLAND )
Before me, the undersigned authority, on this day personally appeared
Thomas R. Cambridge and Larry C. Oldham, President and Secretary, respectively,
of Parallel Petroleum Corporation, a corporation formed under the laws of the
State of Delaware, known to me to be the individuals whose names are subscribed
to the foregoing instrument, and acknowledged and swore to me that they each
executed the same for the purposes and consideration therein expressed and as
the act and deed of said corporation and that the facts stated in the foregoing
instrument are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 15th of June, 1988.
/S/ Jimmie L. Cromwell
--------------------------
Name: Jimmie L. Cromwell
Notary Public in and for the State
Commission Expires: of Texas
1-26-91
- ------------------
-6-
PARALLEL PETROLEUM CORPORATION
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF PREFERRED STOCK -- NON-VOTING CONVERTIBLE
PREFERRED STOCK
Pursuant to Section 151 of the Delaware
General Corporation Law
The undersigned, President and Secretary, respectively, of Parallel
Petroleum Corporation, a Delaware corporation (the "Company"), certify that
pursuant to authority granted to and vested in the Board of Directors of the
Company by the provisions of the Certificate of Incorporation of the Company,
the Board of Directors has duly adopted the following resolutions creating a
series of Preferred Stock of the Company designated as the Non-Voting
Convertible Preferred Stock :
RESOLVED, by the Board of Directors of Parallel Petroleum Corporation,
a Delaware corporation (the "Company"), that pursuant to authority expressly
granted to and vested in the Board of Directors by the provisions of the
Certificate of Incorporation of the Company, the Board of Directors hereby
creates a series of the class of authorized Preferred Stock, $.10 par value
("Preferred Stock"), of the Company, and authorizes the issuance thereof, and
hereby fixes the designations and amount thereof, and the voting powers,
preferences and relative, participation, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof (in addition to the designations, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof (in addition to the
designations, preferences and relative, participating and other special rights,
and the qualifications, limitations or restrictions thereof, set forth in the
Certificate of Incorporation of the Company, which are applicable to the
Preferred Stock) as follows:
1.1 Designation and Amount. The shares of such series shall be
designated Non-Voting Convertible Preferred Stock" (such series being
hereinafter sometimes called "this Series"), and the number of shares
constituting such Series shall initially be 65,248. The number of authorized
shares of this Series may be reduced by further resolution duly adopted by the
Board of Directors of the Company and by the filing of a certificate pursuant to
the provisions of the General Corporation Law of the State of Delaware stating
that such reduction has been so authorized, but the number of authorized shares
of this Series shall not be increased. Shares in this Series have a par value of
$.10 per share.
1.2 Dividends. The holders of shares of this Series shall not be
entitled to receive dividends.
1.3 Conversion. The holders of shares of this Series shall have the
right, at their option, to convert all or any part of such shares of this Series
into shares of Common Stock of the Company at any time on and subject to the
following terms and conditions:
(a) The shares of this Series shall be convertible at the
office of any transfer agent for such stock, and at such other place or
places, if any, as the Board of Directors of the Company may designate,
into fully paid and nonassessable shares ) calculated as to each
conversion to the nearest 1/100th of a share) of Common Stock of the
Company. The number of shares of Common Stock issuable upon conversion
of each share of this Series shall be equal to $3.50 divided by the
conversion price in effect at the time of conversion, determined as
hereinafter provided. The price at which shares of Common Stock shall
be delivered upon conversion (herein called the "conversion price")
shall be initially $.35 per share of Common Stock. The conversion price
shall be subject to adjustment from time to time in certain instances
as hereinafter provided. If the Company calls for the redemption of any
shares of this Series, such right of conversion shall cease and
terminate, as to the shares designated for redemption, at the close of
business on the redemption date, unless the Company defaults in the
payment of the redemption price. No fractional shares of Common Stock
will be issued. A cash payment will be paid in lieu of any fractional
share in an amount equal to the same fraction of the last sale price on
the Common Stock (determined as provided in Section 1.3(c)(iv)) at the
close of business on the business day which next precedes the day of
conversion.
(b) Before any holder of shares of this Series shall be
entitled to convert the same into Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed or assigned to the
Company or in blank, at the office of any transfer agent for such stock
or at such other place or places, if any, as the Board of Directors of
the Company may have designated, and shall give written notice to the
Company at said office or place that he elects to convert the same and
shall state in writing therein the name or names (with addresses) in
which he wishes the certificate or certificates for Common Stock to be
issued. No payment or adjustment shall be made upon any conversion on
account of any dividends on the Common Stock issued upon conversion.
The Company will, as soon as practicable thereafter, issue and deliver
at said office or place to such holder of shares of this Series, or to
his nominee or nominees, certificates for the number of full shares of
Common Stock to which he shall be entitled as aforesaid, together with
cash in lieu of any fraction of a share. Shares of this Series shall be
deemed to have
-2-
<page>
been converted as of the close of business on the date of surrender of
such shares for conversion as provided above, and the person or persons
entitled to receive the Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of
such Common Stock as of the close of business on such date.
(c) The conversion price in effect at any time shall be
subject to adjustment as follows:
(i) In case the Company shall (A) declare a dividend
or make a distribution payable in Common Stock on any class of
capital stock of the Company, unless the payment thereof would
increase the number of shares of Common Stock outstanding by
less than one percent (1%), (B) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of
shares, or (C) combine its outstanding shares of Common Stock
into a smaller number of shares, the conversion price in
effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision,
combination or reclassification shall be proportionately
reduced in the case of any increase in the number of shares of
Common Stock outstanding and increased in the case of any
reduction in the number of shares of Common Stock outstanding
so that the holder of any share of this Series surrendered for
conversion after such time shall be entitled to receive the
kind and amount of shares which he would have owned or have
been entitled to receive had such share of this Series been
converted into Common Stock immediately prior to such time and
had such Common Stock received such dividend or other
distribution or participated in such subdivision, combination
or reclassification. Such adjustment shall be effective as of
the record date for such dividend or distribution or the
effective date of such combination, subdivision or
reclassification and shall be made successively whenever any
event listed above shall occur.
(ii) In case the Company shall issue rights or
warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price
per share less than the Current Market Price (as defined in
paragraph (iv) below) of the Common
-3-
<page>
Stock, on the date fixed for the determination of stockholders
entitled to receive such rights or warrants, the conversion
price at the opening of business on the day following the date
fixed for such determination shall be reduced by multiplying
the conversion price by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination
plus the number of shares of Common Stock which the aggregate
of the offering price of the total number of shares of Common
Stock so offered for subscription or purchase would purchase
at such Current Market Price of the Common Stock and the
denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock
so offered for subscription or purchase, such reduction to
become effective immediately after the opening of business on
the day following the date fixed for such determination. For
purposes of determining under this paragraph the number of
shares of Common Stock outstanding at any time, there shall be
excluded all shares of Common Stock held in the treasury of
the Company. If any or all such rights or warrants are not so
issued or expire or terminate before being exercised, the
conversion price then in effect shall be appropriately
readjusted.
(iii) In case the Company shall distribute to all
holders of its Common Stock evidences of its indebtedness or
assets (including securities, but excluding cash dividends or
a distribution referred to in paragraph (i) above or paid out
of earned surplus) or subscription rights or warrants
(excluding those referred to in paragraph (ii) above), the
conversion price shall be adjusted so that it shall equal the
price determined by multiplying the conversion price in effect
immediately prior to the close of business on the date fixed
for the determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the
Current Market Price per share of the Common Stock on the date
fixed for such determination less the then fair market value
(as determined by the Board of Directors of the Company, in
good faith and in the exercise of its reasonable business
judgment and
-4-
<page>
described in a Board Resolution filed with any transfer agent
for this Series) of the portion of the assets or evidences of
indebtedness so distributed applicable to one share of Common
Stock and the denominator shall be such Current Market Price
per share of the Common Stock. Such adjustment shall become
effective immediately prior to the opening of business on the
day following the date fixed for the determination of
stockholders entitled to receive such distribution.
(iv) For the purpose of any computation under
paragraphs (ii) and (iii) above, the "Current Market Price"
per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of Common
Stock for 15 consecutive business days selected by the Company
commencing no more than 45 business days before such date. The
closing price for each day shall be the last reported sales
price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular
way, in either case on the American Stock Exchange, or, if the
Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange or no
such quotations are available, the average of the closing bid
and asked prices as furnished by any member of the National
Association of Securities Dealers, Inc. selected from time to
time by the Company for that purpose or if no such quotations
are available, the fair market value as determined in good
faith in the exercise of their reasonable business judgment by
the Board of Directors of the Company.
(v) All calculations under this section 1.3(c) shall
be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be.
(vi) No adjustment in the conversion price shall be
required unless such adjustment would require a change of at
least 1% in such price; provided, however, that any
adjustments which by reason of this paragraph (vi) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(d) Whenever the conversion price is adjusted as herein
provided:
-5-
(i) the Company shall promptly file any of the
transfer agents for this Series a certificate of the Treasurer
of the Company setting forth the adjusted conversion price and
showing in reasonable detail the facts upon which such
adjustment is based, including a statement of the
consideration received or to be received by the Company for
any shares of Common Stock issued or deemed to have been
issued; and
(ii) a notice stating that the conversion price has
been adjusted and setting forth the adjusted conversion price
shall forthwith be required, and as soon as practicable after
it is required, such notice shall be mailed by the Company to
the holders of record of this series.
(e)
(i) In case of any consolidation or merger of the
Company with or into any other corporation (other than a
merger which does not result in any reclassification,
conversion, exchange or cancellation of the Common Stock), or
in case of any sale or transfer of all or substantially all of
the assets of the company, or the reclassification of the
Common Stock into another form of capital stock of the
Company, whether in whole or in part, the holder of each share
of this Series shall have the right to receive securities,
cash or property, or any combination thereof, having a value
equal to the greater of (A) $3.50 per share, plus an amount
equal to all dividends accumulated and unpaid on each such
share at the time of such consolidation, merger, sale or
transfer or reclassification or (B) the value of the shares of
stock and other securities, cash and property (including, if
applicable, Common Stock) which such holder would have been
entitled to receive upon such consolidation, merger, sale or
transfer or reclassification if he had held the Common Stock
issuable upon the conversion of such share of this Series
immediately prior to such consolidation, merger, sale or
transfer, or reclassification.
(ii) In the event that at any time, as a result of
paragraph (i) above, the holder of any share of this Series
shall become entitled to receive any shares of stock and
-6-
<page>
other securities and property (including, if applicable,
Common Stock), thereafter the amount of such shares of stock
and other securities so receivable upon conversion of any
share of this Series shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock
contained in paragraphs (i) to (vi), inclusive, of section 1.3
(c) above, and for the provisions of section 1.3(c) with
respect to the Common Stock shall apply on like terms to any
such shares of stock and other securities and property
(including, if applicable, Common Stock).
(f) In case:
(i) the Company shall authorize the distribution to
all holders of its Common Stock of evidences of its
indebtedness of assets (other than cash dividends or other
cash distributions paid out of earned surplus); or
(ii) the Company shall authorize the granting to the
holders of its Common Stock or rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of
any other rights; or
(iii) of any reclassification of the capital stock of
the Company (other than a subdivision or combination of its
outstanding shares of Common Stock), or of any consolidation
or merger to which the Company is required, or of the sale or
transfer of all or substantially all of the assets of the
Company; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in each case, the Company shall cause to be filed with any of the transfer
agents for this Series, and shall cause to be mailed, first class postage
prepaid, to the holders of record of the outstanding shares of this Series, at
least 20 days prior to the applicable record date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock or record to be entitled
to such dividend, distribution, rights or warrants are to be determined, or (y)
the date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation
-7-
<page>
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
(g) The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common
Stock, solely for the purpose of effecting the conversion of the shares
of this Series, the full number of shares of Common Stock then issuable
upon the conversion of all outstanding shares of this Series. For the
purpose of this section 1.3(g), the full number of shares of Common
Stock issuable upon the conversion of all outstanding shares of this
Series shall be computed as if at the time of computation of such
number of shares of Common Stock all outstanding shares of this Series
were held by a single holder. The Company shall from time to time, in
accordance with the laws of the State of Delaware, increase the
authorized amount of its Common Stock if at any time the authorized
amount of its Common Stock remaining unissued shall not be sufficient
to permit the conversion of all shares of this Series at the time
outstanding. If any shares of Common Stock required to be reserved for
issuance upon conversions of shares of this Series hereunder require
registration with or approval of any governmental authority under any
Federal or State law before such shares may be issued upon such
conversion, the company will in good faith and as expeditiously as
possible endeavor to cause such shares to be so registered or approved.
(h) The Company will pay any and all taxes that may be payable
in respect of the issue or delivery of shares of Common Stock on
conversion of shares of this Series pursuant hereto. The Company shall
not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue or transfer and delivery
of shares of Common Stock in a name other than that in which the shares
of this Series so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such
issue has paid to the Company the amount of any such tax or has
established to the satisfaction of the Company that such tax has been
paid.
(i) Whenever reference is made in this section 1.3 to the
issue or sale of shares of Common Stock, the term "Common Stock" shall
include only shares of the class designated as Common Stock, $.01 par
value, of the Company at the date hereof or shares of any class or
classes resulting from any reclassification or reclassifications
-8-
<page>
thereof and which have no preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which are not
subject to redemption by the Company, provided that if at any time
there shall be more than one such resulting class, the shares of each
such class then so deliverable shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.
1.4 Liquidation Rights. In the event of any liquidation, dissolution,
or winding up of the affairs of the Company, whether voluntary or otherwise,
after payment or provision for payment of the debts and other liabilities of the
Company, the holders of this Series shall be entitled to receive an amount in
cash for each share of this Series equal to $3.50 per share, plus an amount
equal to all dividends accumulated and unpaid on each such share up to the date
fixed for distribution, before any distribution shall be made to the holders of
the Common Stock and of any other capital stock of the Company ranking junior to
this Series upon the liquidation, dissolution or winding up of the Company. If
upon any liquidation, dissolution or winding up of the Company, the assets
distributable among the holders of this Series shall be insufficient to permit
the payment in full to the holders of all the then outstanding shares of this
Series and all holders of preferred stock ranking on a parity with this Series
with respect to the payment upon liquidation, dissolution and winding up of the
Company of all preferential amounts payable to all such holders, then the entire
assets of the Company thus distributable shall be distributed ratably among the
holders of this Series and all such other holders of preferred stock in
proportion to the respective amounts that would be payable per share if such
assets were sufficient to permit payment in full. Subject to the provisions of
section 1.3(e)(i), a consolidation or merger of the Company with or into one or
more corporations or the sale or transfer of all or substantially all of the
assets of the Company shall not be deemed to be a liquidation, dissolution or
winding up of the Company.
1.5 Optional Cash Redemption. The shares of this Series are redeemable
for cash, in whole at any time or from time to time in part at the option of the
Company, at a redemption price of $3.50 per share.
Notice of redemption pursuant to this section 1.5 will be mailed at
least 30 days but not more than 60 days before the redemption date to each
holder of record of shares of this Series to be redeemed at the address shown on
the stock books of the Company (but no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of the proceedings
for such redemption except as to the holder to whom the Company has failed to
mail such notice or except as to the holder whose notice was defective). On and
after the redemption date, dividends shall cease to accumulate on shares of this
Series
-9-
<page>
called for redemption (unless the Company defaults in the payment of the
redemption price).
If less than all the outstanding shares of this Series not previously
called for redemption are to be redeemed pursuant to this section 1.5, shares to
be redeemed shall be selected by the Company from outstanding shares not
previously called for redemption by lot or pro rata (as nearly as may be) as
determined by the Board of Directors of the Company. Shares of this Series
redeemed by the Company will be restored to the status of authorized but
unissued shares of preferred stock, without designation as to series, and may
thereafter be issued, but not as shares of this Series.
1.6 Voting Rights. The holders of shares of this Series shall have no
right to vote for any purpose, except as specifically required by the laws of
the State of Delaware and except as follows:
(a) So long as any shares of this Series remain outstanding,
the affirmative vote or consent of the holders of at least 66-2/3% of
the then outstanding shares of this Series, in person or by proxy,
either in writing or at a meeting called for that purpose (voting as a
class with the holders of all other series of preferred stock ranking
on a parity with this Series either as to dividends or distributions or
upon liquidation, dissolution or winding up of the Company and upon
which like voting rights have been conferred and are then exercisable),
shall be necessary to permit, effect or validate the repeal, amendment
or other change of any provision of the Certificate of Incorporation of
the Company in any manner which materially and adversely affects the
rights, preferences, or privileges of this Series or the holders
thereof; provided, however, that any increase in the amount of
authorized preferred stock or the creation and issuance of other series
of preferred stock, whether ranking on a parity with or junior or prior
to this Series with respect to the payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up
shall not be deemed to materially and adversely affect such rights,
preferences or privileges.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of this Series shall have been
redeemed or sufficient funds shall have been deposited in trust to effect such
redemption.
1.7 Parity. The shares of this Series shall be on a parity with the
Company's $.30 Cumulative Convertible Preferred Stock with respect to the
distribution of assets upon liquidation, dissolution or winding up of the
Company.
-10-
IN WITNESS WHEREOF, this Certificate has been executed and attested by
the undersigned on October 10, 1988, and shall be effective on the date filed
with the Secretary of State of Delaware.
PARALLEL PETROLEUM CORPORATION
By /S/ Thomas R. Cambridge
--------------------------------
Thomas R. Cambridge, President
ATTEST:
/S/ Larry C. Oldham
- --------------------------
Larry C. Oldham, Secretary
-11-
PARALLEL PETROLEUM CORPORATION
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIAL PREFERRED STOCK -
$.60 CUMULATIVE CONVERTIBLE
PREFERRED STOCK
Pursuant to Section 151 of the Delaware
General Corporation Law
The undersigned, President and Secretary, respectively, of Parallel
Petroleum Corporation, a Delaware corporation (the "Company"), certify that
pursuant to authority granted to and vested in the Board of Directors of the
Company by the provisions of the Certificate of Incorporation of the Company,
the Board of Directors has duly adopted the following resolutions creating a
series of Serial Preferred Stock of the Company designated as the $.60
Cumulative Convertible Preferred Stock:
RESOLVED, by the Board of Directors of Parallel Petroleum Corporation,
a Delaware corporation (the "Company"), that pursuant to authority expressly
granted to and vested in the Board of Directors by the provisions of the
Certificate of Incorporation of the Company, the Board of Directors hereby
creates a series of the class of authorized Serial Preferred Stock, $.10 par
value ("Preferred Stock"), of the Company, and authorizes the issuance thereof,
and hereby fixes the designations and amount thereof, and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof (in addition to the designations, preferences and relative,
participating and other special rights, and the qualifications, limitations or
restrictions thereof, set forth in the Certificate of Incorporation of the
Company, which are applicable to the Serial Preferred Stock of all series) as
follows:
1.1 Designation and Amount. The shares of such series shall be
designated "$.60 Cumulative Convertible Preferred Stock" (such series being
hereinafter sometimes called "this Series"), and the number of shares
constituting such Series shall initially be 600,000. The number of authorized
shares of this Series may be reduced by further resolution duly adopted by the
Board of Directors of the Company and by the filing of a certificate pursuant to
the provisions of the General Corporation Law of the State of Delaware stating
that such reduction has been so authorized, but the number of authorized shares
of this Series shall not be increased. Shares in this Series have a par value of
$.10 per share.
1.2 Dividends. The holders of shares of this Series shall be entitled
to receive, out of the funds of the Company legally available therefor and as
and when declared by the Board of Directors, cash dividends at the rate of $.60
per share per annum, payable semi-annually on the fifteenth day of the months of
<page>
June and December in each year, commencing June 15, 1998, except that if such
date is a Saturday, Sunday or legal holiday then such dividend shall be payable
on the first immediately preceding day which is not a Saturday, Sunday or legal
holiday. Such dividends shall be cumulative (whether or not in any semi-annual
dividend period there shall be funds of the Company legally available for the
payment of such dividends), commencing on the date of original issue and shall
be payable for any period less than a full semi-annual period on the basis of a
year of 360 days with equal 30 day months. Dividends shall be payable to holders
of record, as they appear on the stock books of the Company on such record dates
as may be declared by the Board of Directors, not more than sixty (60) days nor
less than ten (10) days preceding the payment dates for such dividends.
Dividends in arrears may be declared and paid at any time, without reference to
any regular dividend payment date, to holders of record on such date, not
exceeding sixty (60) days preceding the payment date thereof, as may be fixed by
the Board of Directors of the Company. Except as provided below with regard to
any class of stock ranking on a parity with the Preferred Stock as to payment of
dividends, in no event, so long as this Series shall remain outstanding, shall
any dividend whatsoever be declared or paid upon, nor shall any distribution be
made or ordered in respect of, any class of stock of the Company ranking on a
parity with or junior to this Series with respect to payment of dividends,
unless dividends on this Series since the date of issue thereof to the date of
such distribution shall have been paid or declared and set apart for payment.
When dividends are not paid in full upon the shares of this Series and any other
preferred stock ranking on a parity as to payment of dividends with this Series,
all dividends declared upon shares of this Series and any other preferred stock
ranking on a parity as to dividends with this Series shall be declared pro rata
so that the amount of dividends declared per share on this Series and such other
preferred stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the shares of this Series and such other
preferred stock bear to each other. If full cumulative dividends on this Series
have not been declared and paid or set apart for payment, the Company shall not
declare or pay or set apart for payment any dividends or make any other
distributions on, or make any payment on account of the purchase, redemption or
retirement of, the Common Stock, $.01 par value, of the Company ("Common
Stock"), or any other stock of the Company ranking junior to this Series as to
dividends or distribution of assets on liquidation, dissolution or winding up of
the Company (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 this Series are declared and paid or
set apart for payment.
1.3 Conversion. The holders of shares of this Series shall have the
right, at their option, to convert all or any part of such shares of this Series
into shares of Common Stock of the Company at any time after October 8, 1998 and
subject to the following terms and conditions:
-2-
(a) The shares of this Series shall be convertible at the
office of any transfer agent for such stock, and at such other place or
places, if any, as the Board of Directors of the Company may designate,
into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100th of a share) of Common Stock of the
Company. The number of shares of Common Stock issuable upon conversion
of each share of this Series shall be equal to $10.00 divided by the
conversion price in effect at the time of conversion, determined as
hereinafter provided. The price at which shares of Common Stock shall
be delivered upon conversion (herein called the "conversion price")
shall be initially $6.40 per share of Common Stock. The conversion
price shall be subject to adjustment from time to time in certain
instances as hereinafter provided. If the Company calls for the
redemption of any shares of this Series, such right of conversion shall
cease and terminate, as to the shares designated for redemption, at the
close of business on the redemption date, unless the Company defaults
in the payment of the redemption price. No fractional shares of Common
Stock will be issued. A cash payment will be paid in lieu of any
fractional share in an amount equal to the same fraction of the last
sale price of the Common Stock (determined as provided in Section
1.3(c)(iv)) at the close of business on the business day which next
precedes the day of conversion.
(b) Before any holder of shares of this Series shall be
entitled to convert the same into Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed or assigned to the
Company or in blank, at the office of any transfer agent for such stock
or at such other place or places, if any, as the Board of Directors of
the Company may have designated, and shall give written notice to the
Company at said office or place that he elects to convert the same and
shall state in writing therein the name or names (with addresses) in
which he wishes the certificate or certificates for Common Stock to be
issued. Shares of this Series surrendered for conversion during the
period from the close of business on any record date for the payment of
a dividend on the shares of this Series to the opening of business on
the date for payment of such dividends shall (except in the case of
shares of this Series which have been called for redemption on a
redemption date within such period) be accompanied by payment of an
amount equal to the dividend payable on such dividend payment date on
the shares of this Series being surrendered for conversion. Except as
provided in the preceding sentence, no payment or adjustment shall be
made upon any conversion on account of any dividend accrued on the
shares of this Series surrendered for conversion or on account of any
dividends on the Common Stock issued upon conversion. The Company will,
as soon as practicable thereafter, issue and deliver at said office or
place to such holder of shares of this Series, or to his nominee or
nominees, certificates for the number of full shares of Common Stock to
which he shall be entitled as aforesaid, together with cash in lieu of
any fraction of a share.
-3-
<page>
Shares of this Series shall be deemed to have been converted as of the
close of business on the date of surrender of such shares for
conversion as provided above, and the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such Common Stock
as of the close of business on such date.
(c) The conversion price in effect at any time shall be
subject to adjustment as follows:
(i) In case the Company shall (A) declare a dividend
or make a distribution payable in Common Stock on any class of
capital stock of the Company, unless the payment thereof would
increase the number of shares of Common Stock outstanding by
less than one percent (1%), (B) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of
shares, or (C) combine its outstanding shares of Common Stock
into a smaller number of shares, the conversion price in
effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision,
combination or reclassification shall be proportionately
reduced in the case of any increase in the number of shares of
Common Stock outstanding and increased in the case of any
reduction in the number of shares of Common Stock outstanding
so that the holder of any share of this Series surrendered for
conversion after such time shall be entitled to receive the
kind and amount of shares which he would have owned or have
been entitled to receive had such share of this Series been
converted into Common Stock immediately prior to such time and
had such Common Stock received such dividend or other
distribution or participated in such subdivision, combination
or reclassification. Such adjustment shall be effective as of
the record date for such dividend or distribution or the
effective date of such combination, subdivision or
reclassification and shall be made successively whenever any
event listed above shall occur.
(ii) In case the Company shall issue rights or
warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price
per share less than the Current Market Price (as defined in
paragraph (iv) below) of the Common Stock, on the date fixed
for the determination of stockholders entitled to receive such
rights or warrants, the conversion price at the opening of
business on the day following the date fixed for such
determination shall be
-4-
<page>
reduced by multiplying the conversion price by a fraction of
which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common
Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription
or purchase would purchase at such Current Market Price of the
Common Stock and the denominator shall be the number of shares
of common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of
Common Stock so offered for subscription or purchase, such
reduction to become effective immediately after the opening of
business on the day following the date fixed for such
determination. For purposes of determining under this
paragraph the number of shares of Common Stock outstanding at
any time, there shall be excluded all shares of Common Stock
held in the treasury of the Company. If any or all such rights
or warrants are not so issued or expire or terminate before
being exercised, the conversion price then in effect shall be
appropriately readjusted.
(iii) In case the Company shall distribute to all
holders of its Common Stock evidences of its indebtedness or
assets (including securities, but excluding cash dividends or
a distribution referred to in paragraph (i) above or paid out
of surplus) or subscription rights or warrants (excluding
those referred to in paragraph (ii) above), the conversion
price shall be adjusted so that it shall equal the price
determined by multiplying the conversion price in effect
immediately prior to the close of business on the date fixed
for the determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the
Current Market Price per share of the Common Stock on the date
fixed for such determination less the then fair market value
(as determined by the Board of Directors of the Company, in
good faith and in the exercise of its reasonable business
judgment and described in a Board Resolution filed with any
transfer agent for this Series) of the portion of the assets
or evidences of indebtedness so distributed applicable to one
share of Common Stock and the denominator shall be such
Current Market Price per share of the Common Stock. Such
adjustment shall become effective immediately prior to the
opening of business on the day following the date fixed for
the determination of stockholders entitled to receive such
distribution.
-5-
(iv) For the purpose of any computation under
paragraphs (ii) and (iii) above, the "Current Market Price"
per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of Common
Stock for 15 consecutive business days selected by the Company
commencing no more than 45 business days before such date. The
closing price for each day shall be the last reported sales
price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular
way, in either case on the Nasdaq National Market System or,
if the Common Stock is not listed or admitted to trading on
such Nasdaq National Market System on the principal national
securities exchange on which the Common Stock is listed or
admitted to trading, or if it is not listed or admitted to
trading on any national securities exchange or no such
quotations are available, the average of the closing bid and
asked prices as furnished by any member of the National
Association of Securities Dealers, Inc. selected from time to
time by the Company for that purpose, or if no such quotations
are available, the fair market value as determined in good
faith in the exercise of their reasonable business judgment by
the Board of Directors of the Company.
(v) All calculations under this Section 1.3(c) shall
be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be.
(vi) No adjustment in the conversion price shall be
required unless such adjustment would require a change of at
least 1% in such price; provided, however, that any
adjustments which by reason of this paragraph (vi) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(d) Whenever the conversion price is adjusted as herein
provided:
(i) the Company shall promptly file with any of the
transfer agents for this Series a certificate of the principal
financial officer of the Company setting forth the adjusted
conversion price and showing in reasonable detail the facts
upon which such adjustment is based, including a statement of
the consideration received or to be received by the Company
for any shares of Common Stock issued or deemed to have been
issued; and
-6-
(ii) a notice stating that the conversion price has
been adjusted and setting forth the adjusted conversion price
shall forthwith be required, and as soon as practicable after
it is required, such notice shall be mailed by the Company to
the holders of record of this Series.
(e)
(i) In case of any consolidation or merger of the
Company with or into any other person (other than a merger
which does not result in any reclassification, conversion,
exchange or cancellation of the Common Stock), or in case of
any sale or transfer of all or substantially all of the assets
of the Company, or the reclassification of the Common Stock
into another form of capital stock of the Company, whether in
whole or in part, the holder of each share of this Series
shall have the right to receive the kind and amount of
securities, cash or property, or any combination thereof which
such holder would have been entitled to receive upon such
consolidation, merger, sale or transfer or reclassification if
he had held the Common Stock issuable upon the conversion of
such share of this Series immediately prior to such
consolidation, merger, sale or transfer, or reclassification.
(ii) In the event that at any time, as a result of
paragraph (i) above, the holder of any share of this Series
shall become entitled to receive any shares of stock and other
securities and property (including, if applicable, Common
Stock), thereafter the amount of such shares of stock and
other securities so receivable upon conversion of any share of
this Series shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Common Stock contained
in paragraphs (i) to (vi), inclusive, of section 1.3(c) above,
and the provisions of section 1.3(c) with respect to the
Common Stock shall apply on like terms to any such shares of
stock and other securities and property (including, if
applicable, Common Stock).
(f) In case:
(i) the Company shall authorize the distribution to
all holders of its Common Stock of evidences of its
indebtedness or assets (other than cash dividends or other
cash distributions paid out of surplus); or
-7-
(ii) the Company shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of
any other rights; or
(iii) of any reclassification of the capital stock of
the Company (other than a subdivision or combination of its
outstanding shares of Common Stock), or of any consolidation
or merger, or of the sale or transfer of all or substantially
all of the assets of the Company; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in each case, the Company shall cause to be filed with any of the
transfer agents for this Series, and shall cause to be mailed, first
class postage prepaid, to the holders of record of the outstanding
shares of this Series, at least 20 days prior to the applicable record
date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined, or (y)
the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their Common Stock
for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
(g) The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common
Stock, solely for the purpose of effecting the conversion of the shares
of this Series, the full number of shares of Common Stock then issuable
upon the conversion of all outstanding shares of this Series. For the
purpose of this section 1.3(g), the full number of shares of Common
Stock issuable upon the conversion of all outstanding shares of this
Series shall be computed as if at the time of computation of such
number of shares of Common Stock all outstanding shares of this Series
were held by a single holder. The Company shall from time to time, in
accordance with the laws of the State of Delaware, increase the
authorized amount of its Common Stock if at any time the authorized
amount of its Common Stock remaining unissued shall not be sufficient
to permit the conversion of all shares of this Series at the time
outstanding.
-8-
(h) The Company will pay any and all taxes that may be payable
in respect of the issue or delivery of shares of Common Stock on
conversion of shares of this Series pursuant hereto. The Company shall
not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue or transfer and delivery
of shares of Common Stock in a name other than that in which the shares
of this Series so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such
issue has paid to the Company the amount of any such tax or has
established to the satisfaction of the Company that such tax has been
paid.
(i) Whenever reference is made in this section 1.3 to the
issue or sale of shares of Common Stock, the term "Common Stock" shall
include only shares of the class designated as Common Stock, $.01 par
value, of the Company at the date hereof or shares of any class or
classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which are not
subject to redemption by the Company, provided that if at any time
there shall be more than one such resulting class, the shares of each
such class then so deliverable shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.
1.4 Liquidation Rights. In the event of any liquidation, dissolution,
or winding up of the affairs of the Company, whether voluntary or otherwise,
after payment or provision for payment of the debts and other liabilities of the
Company, the holders of this Series shall be entitled to receive an amount in
cash for each share of this Series equal to $10.00 per share, plus an amount
equal to all dividends accumulated and unpaid on each such share up to the date
fixed for distribution, before any distributions shall be made to the holders of
the Common Stock and of any other capital stock of the Company ranking junior to
this Series upon the liquidation, dissolution or winding up of the Company. If
upon any liquidation, dissolution or winding up of the Company, the assets
distributable among the holders of this Series shall be insufficient to permit
the payment in full to the holders of all the then outstanding shares of this
Series and all holders of preferred stock ranking on a parity with this Series
with respect to the payment upon liquidation, dissolution and winding up of the
Company of all preferential amounts payable to all such holders, then the entire
assets of the Company thus distributable shall be distributed ratably among the
holders of this Series and all such other holders of Preferred Stock in
proportion to the respective amounts that would be payable per share if such
assets were sufficient to permit payment in full. Subject to the provisions of
section 1.3(e)(i), a consolidation or merger of the
-9-
<page>
Company with or into one or more persons or the sale or transfer of all or
substantially all of the assets of the Company shall not be deemed to be a
liquidation, dissolution or winding up of the Company.
1.5 Optional Cash Redemption. The shares of this Series are not
redeemable prior to April 1, 1999. Thereafter, the shares of this Series are
redeemable for cash, in whole at any time or from time to time in part at the
option of the Company, at a redemption price of $10.00 per share, plus any
accumulated and unpaid dividends thereon.
Notice of redemption pursuant to this Section 1.5 will be mailed at
least 30 days but not more than 60 days before the redemption date to each
holder of record of shares of this Series to be redeemed at the address shown on
the stock books of the Company (but no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of the proceedings
for such redemption except as to the holder to whom the Company has failed to
mail such notice or except as to the holder whose notice was defective). On and
after the redemption date, dividends shall cease to accumulate on shares of this
Series called for redemption (unless the Company defaults in the payment of the
redemption price).
If less than all the outstanding shares of this Series not previously
called for redemption are to be redeemed pursuant to this Section 1.5, shares to
be redeemed shall be selected by the Company from outstanding shares not
previously called for redemption by lot or pro rata (as nearly as may be) as
determined by the Board of Directors of the Company. The Company may not redeem
less than all outstanding shares of this Series pursuant to this Section 1.5
unless full cumulative dividends shall have been declared and paid or set apart
for payment upon all outstanding shares of this Series for all past dividend
periods. Shares of this Series redeemed by the Company will be restored to the
status of authorized but unissued shares of preferred stock, without designation
as to series, and may thereafter be issued, but not as shares of this Series.
1.6 Voting Rights. The holders of shares of this Series shall have no
right to vote for any purpose, except as specifically required by the laws of
the State of Delaware and except as follows:
So long as any shares of this Series remain outstanding, the
affirmative vote or consent of the holders of a majority of the then
outstanding shares of this Series, in person or by proxy, either in
writing or at a meeting called for that purpose (voting as a class with
the holders of all other series of preferred stock ranking on a parity
with this Series either as to dividends or distributions or upon
liquidation, dissolution or winding up of the Company and upon which
like voting rights have been conferred and are then
-10-
<page>
exercisable), shall be necessary to permit, effect or validate the
repeal, amendment or other change of any provision of the Certificate
of Incorporation of the Company in any manner which materially and
adversely affects the rights, preferences, or privileges of this Series
or the holders thereof; provided, however, the creation and issuance of
other series of preferred stock, whether ranking on a parity with or
junior or prior to this Series with respect to voting, the payment of
dividends or the distribution of assets upon liquidation, dissolution
or winding up shall not be deemed to materially and adversely affect
such rights, preferences or privileges. In connection with any right to
vote, each holder of outstanding shares of this Series shall have one
vote for each share held.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of this Series shall have been
redeemed or sufficient funds shall have been deposited in trust to effect such
redemption.
IN WITNESS WHEREOF, this Certificate has been executed and attested by
the undersigned on April 7, 1998, and shall be effective at 10:00 a.m. Eastern
Daylight Time, on April 8, 1998, or the date on which filed with the Secretary
of State of the State of Delaware, whichever is later.
PARALLEL PETROLEUM CORPORATION
By: /S/ Larry C. Oldham
------------------------------------
Larry C. Oldham, President
ATTEST:
/S/ Thomas W. Ortloff
- ----------------------------
Thomas W. Ortloff, Secretary
-11-
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
PARALLEL PETROLEUM CORPORATION
Parallel Petroleum Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify as follows:
Pursuant to the provisions of the Delaware General Corporation Law, the
Board of Directors and the stockholders of the Corporation adopted an amendment
to the Certificate of Incorporation of the Corporation, which is set forth in
the following resolution in accordance with Section 242 of the Delaware General
Corporation Law, the purpose of which amendment is to decrease the number of
authorized shares of Common Stock and Preferred Stock:
"RESOLVED, That the first paragraph of Article Fourth of the Company's
Certificate of Incorporation be amended as follows:
FOURTH: The total number of shares of all classes that the
Corporation shall have authority to issue is 70,000,000, of
which 10,000,000 shall be Preferred Shares, par value $.10 per
share, and 60,000,000 shall be Common Shares, $.01 par value
per share.
Except as specifically amended hereby, all other provisions of Article
Fourth shall remain in full force and effect.
IN WITNESS WHEREOF, Parallel Petroleum Corporation has caused this
Certificate of Amendment to be signed by Larry C. Oldham, its President, and
attested by Rebecca A. Burrell, its Assistant Secretary, this 15th day of June,
1998.
PARALLEL PETROLEUM CORPORATION
By:/S/ Larry C. Oldham
-------------------------------------
Larry C. Oldham, President
ATTESTED:
/S/ Rebecca A. Burrell
- ---------------------------------------
Rebecca A. Burrell, Assistant Secretary
The undersigned President of Parallel Petroleum Corporation, being duly
sworn, does verify that the foregoing instrument represents the act and deed of
Parallel Petroleum Corporation and that the facts stated in such instrument are
true.
/S/ Larry C. Oldham
----------------------------------
Larry C. Oldham, President
STATE OF TEXAS )
COUNTY OF MIDLAND )
Before me, the undersigned authority, on this day personally appeared
Larry C. Oldham and Rebecca A. Burrell, President and Assistant Secretary,
respectively, of Parallel Petroleum Corporation, a corporation formed under the
laws of the State of Delaware, known to me to be the individuals whose names are
subscribed to the foregoing instrument, and acknowledged and swore to me that
they each executed the same for the purposes and consideration therein expressed
and as the act and deed of said corporation and that the facts stated in the
foregoing instrument are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 15th day of June, 1998.
/S/ Diane DePrang Hurst
------------------------
Notary Public in and for
the State of Texas
-2-
PARALLEL PETROLEUM CORPORATION
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIAL PREFERRED STOCK -
6% CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151 of the Delaware
General Corporation Law
Pursuant to the provisions of Section 151 of the General Corporation
Law of the State of Delaware and Paragraph Fourth of the Certificate of
Incorporation of Parallel Petroleum Corporation (the "Company"), the undersigned
Company submits the following statement for the purpose of establishing and
designating a series of shares and fixing and determining the relative rights
and preferences thereof:
1. The name of the corporation is Parallel Petroleum Corporation.
2. The following resolutions were duly adopted by the Board of
Directors of the Company on October 13, 1998:
WHEREAS, the Company is authorized by its Certificate of Incorporation,
as amended, to issue 10,000,000 shares of Preferred Stock, $.10 par value; and
WHEREAS, the Certificate of Incorporation does not otherwise state or
fix the designations, preferences, voting rights and relative, participating,
optional or other special rights, qualifications, limitations and restrictions
of the preferred stock, $.10 par value, of the Company, but instead authorizes
the issuance thereof in series from time to time with such designations,
preferences, voting rights, rights of conversion into Common Stock and relative,
participating, optional or other rights, qualifications, limitations and
restrictions thereof as shall be stated and expressed in the resolution or
resolutions providing for the creation and issuance of such series adopted by
the Board of Directors of the Company; and
WHEREAS, the Board of Directors deems it advisable to create and
establish and authorize the issuance of a new series of the Company's preferred
stock, $.10 par value;
NOW, THEREFORE, BE IT RESOLVED, by the Board of Directors of the
Company, that pursuant to authority expressly granted to and vested in the Board
of Directors by the provisions of the Certificate of Incorporation of the
Company, the Board of Directors hereby creates a series of the class of
authorized Serial Preferred Stock, $.10 par value ("Preferred Stock"), of the
Company, and authorizes the issuance thereof, and hereby fixes the designations
and amount
<page>
thereof, and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof (in addition to the
designations, preferences and relative, participating and other special rights,
and the qualifications, limitations or restrictions thereof, set forth in the
Certificate of Incorporation of the Company, which are applicable to the Serial
Preferred Stock of all series) as follows:
1.1 Designation and Amount. The shares of such series shall be
designated "6% Convertible Preferred Stock" (such series being hereinafter
sometimes called "this Series"), and the number of shares constituting such
Series shall initially be 1,200,000. The Board of Directors of the Company
reserves the right by subsequent amendment of this resolution from time to time
to decrease the number of shares which constitute this Series (but not below the
number of shares thereof then outstanding) and, subject to anything to the
contrary set forth in the Certificate of Incorporation of the Company applicable
to the preferred stock, to subdivide the number of shares, the stated value per
share and the liquidation value per share of this Series and in other respects
to amend, within the limitations provided by law, this resolution and the
Certificate of Incorporation of the Company.
1.2 Dividends. The holders of shares of this Series shall be entitled
to receive, out of the funds of the Company legally available therefor and as
and when declared by the Board of Directors, cash dividends at the rate of $.60
per share per annum, payable semi-annually on the fifteenth day of the months of
June and December in each year, commencing December 15, 1998, except that if
such date is a Saturday, Sunday or legal holiday then such dividend shall be
payable on the first immediately preceding day which is not a Saturday, Sunday
or legal holiday. Such dividends shall be cumulative (whether or not in any
semi-annual dividend period there shall be funds of the Company legally
available for the payment of such dividends), commencing on the date of original
issue and shall be payable for any period less than a full semi-annual period on
the basis of a year of 360 days with equal 30 day months. Dividends shall be
payable to holders of record, as they appear on the stock books of the Company
on such record dates as may be declared by the Board of Directors, not more than
sixty (60) days nor less than ten (10) days preceding the payment dates for such
dividends. Dividends in arrears may be declared and paid at any time, without
reference to any regular dividend payment date, to holders of record on such
date, not exceeding sixty (60) days preceding the payment date thereof, as may
be fixed by the Board of Directors of the Company. Except as provided below with
regard to any class of stock ranking on a parity with the Preferred Stock as to
payment of dividends, in no event, so long as this Series shall remain
outstanding, shall any dividend whatsoever be declared or paid upon, nor shall
any distribution be made or ordered in respect of, any class of stock of the
Company ranking on a parity with or junior to this Series with respect to
payment of dividends, unless dividends on this Series since the date of issue
thereof to the date of such
-2-
<page>
distribution shall have been paid or declared and set apart for payment. When
dividends are not paid in full upon the shares of this Series and any other
preferred stock ranking on a parity as to payment of dividends with this Series,
all dividends declared upon shares of this Series and any other preferred stock
ranking on a parity as to dividends with this Series shall be declared pro rata
so that the amount of dividends declared per share on this Series and such other
preferred stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the shares of this Series and such other
preferred stock bear to each other. If full cumulative dividends on this Series
have not been declared and paid or set apart for payment, the Company shall not
declare or pay or set apart for payment any dividends or make any other
distributions on, or make any payment on account of the purchase, redemption or
retirement of, the Common Stock, $.01 par value, of the Company ("Common
Stock"), or any other stock of the Company ranking junior to this Series as to
dividends or distribution of assets on liquidation, dissolution or winding up of
the Company (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 this Series are declared and paid or
set apart for payment.
1.3 Conversion. The holders of shares of this Series shall have the
right, at their option, to convert all or any part of such shares of this Series
into shares of Common Stock of the Company at any time after April 20, 1999 and
subject to the following terms and conditions:
(a) The shares of this Series shall be convertible at the
office of any transfer agent for such stock, and at such other place
or places, if any, as the Board of Directors of the Company may
designate, into fully paid and nonassessable shares (calculated as to
each conversion to the nearest 1/100th of a share) of Common Stock of
the Company. The number of shares of Common Stock issuable upon
conversion of each share of this Series shall be equal to $10.00
divided by the conversion price in effect at the time of conversion,
determined as hereinafter provided. The price at which shares of
Common Stock shall be delivered upon conversion (herein called the
"conversion price") shall be initially $3.50 per share of Common
Stock. The conversion price shall be subject to adjustment from time
to time in certain instances as hereinafter provided. If the Company
calls for the redemption of any shares of this Series, such right of
conversion shall cease and terminate, as to the shares designated for
redemption, at the close of business on the redemption date, unless
the Company defaults in the payment of the redemption price. No
fractional shares of Common Stock will be issued. A cash payment will
be paid in lieu of any fractional share in an amount equal to the same
fraction of the last sale price of the Common Stock (determined as
provided in Section 1.3(c)(iv)) at the close of business on the
business day which next precedes the day of conversion.
-3-
(b) Before any holder of shares of this Series shall be
entitled to convert the same into Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed or assigned to the
Company or in blank, at the office of any transfer agent for such
stock or at such other place or places, if any, as the Board of
Directors of the Company may have designated, and shall give written
notice to the Company at said office or place that he elects to
convert the same and shall state in writing therein the name or names
(with addresses) in which he wishes the certificate or certificates
for Common Stock to be issued. Shares of this Series surrendered for
conversion during the period from the close of business on any record
date for the payment of a dividend on the shares of this Series to the
opening of business on the date for payment of such dividends shall
(except in the case of shares of this Series which have been called
for redemption on a redemption date within such period) be accompanied
by payment of an amount equal to the dividend payable on such dividend
payment date on the shares of this Series being surrendered for
conversion. Except as provided in the preceding sentence, no payment
or adjustment shall be made upon any conversion on account of any
dividend accrued on the shares of this Series surrendered for
conversion or on account of any dividends on the Common Stock issued
upon conversion. The Company will, as soon as practicable thereafter,
issue and deliver at said office or place to such holder of shares of
this Series, or to his nominee or nominees, certificates for the
number of full shares of Common Stock to which he shall be entitled as
aforesaid, together with cash in lieu of any fraction of a share.
Shares of this Series shall be deemed to have been converted as of the
close of business on the date of surrender of such shares for
conversion as provided above, and the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
Common Stock as of the close of business on such date.
(c) The conversion price in effect at any time shall be
subject to adjustment as follows:
(i) In case the Company shall (A) declare a dividend
or make a distribution payable in Common Stock on any class of
capital stock of the Company, unless the payment thereof would
increase the number of shares of Common Stock outstanding by
less than one percent (1%), (B) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of
shares, or (C) combine its outstanding shares of Common Stock
into a smaller number of shares, the conversion price in
effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision,
combination or reclassification shall be
-4-
<page>
proportionately reduced in the case of any increase in the
number of shares of Common Stock outstanding and increased in
the case of any reduction in the number of shares of Common
Stock outstanding so that the holder of any share of this
Series surrendered for conversion after such time shall be
entitled to receive the kind and amount of shares which he
would have owned or have been entitled to receive had such
share of this Series been converted into Common Stock
immediately prior to such time and had such Common Stock
received such dividend or other distribution or participated
in such subdivision, combination or reclassification. Such
adjustment shall be effective as of the record date for such
dividend or distribution or the effective date of such
combination, subdivision or reclassification and shall be made
successively whenever any event listed above shall occur.
(ii) In case the Company shall issue rights or
warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price
per share less than the Current Market Price (as defined in
paragraph (iv) below) of the Common Stock, on the date fixed
for the determination of stockholders entitled to receive such
rights or warrants, the conversion price at the opening of
business on the day following the date fixed for such
determination shall be reduced by multiplying the conversion
price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business
on the date fixed for such determination plus the number of
shares of Common Stock which the aggregate of the offering
price of the total number of shares of Common Stock so offered
for subscription or purchase would purchase at such Current
Market Price of the Common Stock and the denominator shall be
the number of shares of common Stock outstanding at the close
of business on the date fixed for such determination plus the
number of shares of Common Stock so offered for subscription
or purchase, such reduction to become effective immediately
after the opening of business on the day following the date
fixed for such determination. For purposes of determining
under this paragraph the number of shares of Common Stock
outstanding at any time, there shall be excluded all shares of
Common Stock held in the treasury of the Company. If any or
all such rights or warrants are not so issued or expire or
terminate before being exercised, the conversion price then in
effect shall be appropriately readjusted.
-5-
(iii) In case the Company shall distribute to all
holders of its Common Stock evidences of its indebtedness or
assets (including securities, but excluding cash dividends or
a distribution referred to in paragraph (i) above or paid out
of surplus) or subscription rights or warrants (excluding
those referred to in paragraph (ii) above), the conversion
price shall be adjusted so that it shall equal the price
determined by multiplying the conversion price in effect
immediately prior to the close of business on the date fixed
for the determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the
Current Market Price per share of the Common Stock on the date
fixed for such determination less the then fair market value
(as determined by the Board of Directors of the Company, in
good faith and in the exercise of its reasonable business
judgment and described in a Board Resolution filed with any
transfer agent for this Series) of the portion of the assets
or evidences of indebtedness so distributed applicable to one
share of Common Stock and the denominator shall be such
Current Market Price per share of the Common Stock. Such
adjustment shall become effective immediately prior to the
opening of business on the day following the date fixed for
the determination of stockholders entitled to receive such
distribution.
(iv) For the purpose of any computation under
paragraphs (ii) and (iii) above, the "Current Market Price"
per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of Common
Stock for 15 consecutive business days selected by the Company
commencing no more than 45 business days before such date. The
closing price for each day shall be the last reported sales
price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular
way, in either case on the Nasdaq National Market System or,
if the Common Stock is not listed or admitted to trading on
such Nasdaq National Market System on the principal national
securities exchange on which the Common Stock is listed or
admitted to trading, or if it is not listed or admitted to
trading on any national securities exchange or no such
quotations are available, the average of the closing bid and
asked prices as furnished by any member of the National
Association of Securities Dealers, Inc. selected from time to
time by the Company for that purpose, or if no such quotations
are available, the fair market value as determined in good
faith in
-6-
<page>
the exercise of their reasonable business judgment by the
Board of Directors of the Company.
(v) All calculations under this Section 1.3(c) shall
be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be.
(vi) No adjustment in the conversion price shall be
required unless such adjustment would require a change of at
least 1% in such price; provided, however, that any
adjustments which by reason of this paragraph (vi) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(d) Whenever the conversion price is adjusted as herein
provided:
(i) the Company shall promptly file with any of the
transfer agents for this Series a certificate of the principal
financial officer of the Company setting forth the adjusted
conversion price and showing in reasonable detail the facts
upon which such adjustment is based, including a statement of
the consideration received or to be received by the Company
for any shares of Common Stock issued or deemed to have been
issued; and
(ii) a notice stating that the conversion price has
been adjusted and setting forth the adjusted conversion price
shall forthwith be required, and as soon as practicable after
it is required, such notice shall be mailed by the Company to
the holders of record of this Series.
(e)
(i) In case of any consolidation or merger of the
Company with or into any other person (other than a merger
which does not result in any reclassification, conversion,
exchange or cancellation of the Common Stock), or in case of
any sale or transfer of all or substantially all of the assets
of the Company, or the reclassification of the Common Stock
into another form of capital stock of the Company, whether in
whole or in part, the holder of each share of this Series
shall have the right to receive the kind and amount of
securities, cash or property, or any combination thereof which
such holder would have been entitled to receive upon such
consolidation, merger,
-7-
sale or transfer or reclassification if he had held the Common Stock issuable
upon the conversion of such share of this Series immediately prior to such
consolidation, merger, sale or transfer, or reclassification.
(ii) In the event that at any time, as a result of
paragraph (i) above, the holder of any share of this Series
shall become entitled to receive any shares of stock and other
securities and property (including, if applicable, Common
Stock), thereafter the amount of such shares of stock and
other securities so receivable upon conversion of any share of
this Series shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Common Stock contained
in paragraphs (i) to (vi), inclusive, of section 1.3(c) above,
and the provisions of section 1.3(c) with respect to the
Common Stock shall apply on like terms to any such shares of
stock and other securities and property (including, if
applicable, Common Stock).
(f) In case:
(i) the Company shall authorize the distribution to
all holders of its Common Stock of evidences of its
indebtedness or assets (other than cash dividends or other
cash distributions paid out of surplus); or
(ii) the Company shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of
any other rights; or
(iii) of any reclassification of the capital stock of
the Company (other than a subdivision or combination of its
outstanding shares of Common Stock), or of any consolidation
or merger, or of the sale or transfer of all or substantially
all of the assets of the Company; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in each case, the Company shall cause to be filed with any of the
transfer agents for this Series, and shall cause to be mailed, first
class postage prepaid, to the holders of record of the outstanding
shares of this Series, at least 20 days prior to the applicable record
date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for
-8-
<page>
the purpose of such dividend, distribution, rights or warrants, or, if
a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution, rights
or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date
as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up.
(g) The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common
Stock, solely for the purpose of effecting the conversion of the shares
of this Series, the full number of shares of Common Stock then issuable
upon the conversion of all outstanding shares of this Series. For the
purpose of this section 1.3(g), the full number of shares of Common
Stock issuable upon the conversion of all outstanding shares of this
Series shall be computed as if at the time of computation of such
number of shares of Common Stock all outstanding shares of this Series
were held by a single holder. The Company shall use all reasonable
efforts from time to time, in accordance with the laws of the State of
Delaware, to cause its stockholders to increase the authorized amount
of its Common Stock if at any time the authorized amount of its Common
Stock remaining unissued shall not be sufficient to permit the
conversion of all shares of this Series at the time outstanding.
(h) The Company will pay any and all taxes that may be payable
in respect of the issue or delivery of shares of Common Stock on
conversion of shares of this Series pursuant hereto. The Company shall
not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue or transfer and delivery
of shares of Common Stock in a name other than that in which the shares
of this Series so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such
issue has paid to the Company the amount of any such tax or has
established to the satisfaction of the Company that such tax has been
paid.
(i) Whenever reference is made in this section 1.3 to the
issue or sale of shares of Common Stock, the term "Common Stock" shall
include only shares of the class designated as Common Stock, $.01 par
value, of the Company at the date hereof or shares of any class or
classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which are not
subject to redemption by the Company,
-9-
<page>
provided that if at any time there shall be more than one such
resulting class, the shares of each such class then so deliverable
shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to
the total number of shares of all such classes resulting from all such
reclassifications.
(j) Upon any conversion of shares of this Series, the shares
so converted shall have the status of authorized and unissued shares of
preferred stock, unclassified as to series, and the number of shares of
preferred stock which the Company shall have authority to issue shall
not be decreased by the conversion of shares of this Series.
1.4 Liquidation Rights. In the event of any liquidation, dissolution,
or winding up of the affairs of the Company, whether voluntary or otherwise,
after payment or provision for payment of the debts and other liabilities of the
Company, the holders of this Series shall be entitled to receive an amount in
cash for each share of this Series equal to $10.00 per share, plus an amount
equal to all dividends accumulated and unpaid on each such share up to the date
fixed for distribution, before any distributions shall be made to the holders of
the Common Stock and of any other capital stock of the Company ranking junior to
this Series upon the liquidation, dissolution or winding up of the Company. If
upon any liquidation, dissolution or winding up of the Company, the assets
distributable among the holders of this Series shall be insufficient to permit
the payment in full to the holders of all the then outstanding shares of this
Series and all holders of preferred stock ranking on a parity with this Series
with respect to the payment upon liquidation, dissolution and winding up of the
Company of all preferential amounts payable to all such holders, then the entire
assets of the Company thus distributable shall be distributed ratably among the
holders of this Series and all such other holders of Preferred Stock in
proportion to the respective amounts that would be payable per share if such
assets were sufficient to permit payment in full. Subject to the provisions of
section 1.3(e)(i), a consolidation or merger of the Company with or into one or
more persons or the sale or transfer of all or substantially all of the assets
of the Company shall not be deemed to be a liquidation, dissolution or winding
up of the Company.
1.5 Optional Cash Redemption. The shares of this Series are not
redeemable prior to October 20, 1999. Thereafter, the shares of this Series are
redeemable for cash, in whole at any time or from time to time in part at the
option of the Company, at a redemption price of $10.00 per share, plus any
accumulated and unpaid dividends thereon.
Notice of redemption pursuant to this Section 1.5 will be mailed at
least 30 days but not more than 60 days before the redemption date to each
holder of record of shares of this Series to be redeemed at the address shown on
the stock books of the Company (but no failure to mail such notice or any defect
therein or
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<page>
in the mailing thereof shall affect the validity of the proceedings for such
redemption except as to the holder to whom the Company has failed to mail such
notice or except as to the holder whose notice was defective). On and after the
redemption date, dividends shall cease to accumulate on shares of this Series
called for redemption (unless the Company defaults in the payment of the
redemption price).
If less than all the outstanding shares of this Series not previously
called for redemption are to be redeemed pursuant to this Section 1.5, shares to
be redeemed shall be selected by the Company from outstanding shares not
previously called for redemption by lot or pro rata (as nearly as may be) as
determined by the Board of Directors of the Company. The Company may not redeem
less than all outstanding shares of this Series pursuant to this Section 1.5
unless full cumulative dividends shall have been declared and paid or set apart
for payment upon all outstanding shares of this Series for all past dividend
periods. Shares of this Series redeemed by the Company shall, after such
redemption, have the status of authorized but unissued shares of preferred
stock, without designation as to series, and may thereafter be issued.
1.6 Voting Rights. The holders of shares of this Series shall have no
right to vote for any purpose, except as specifically required by the laws of
the State of Delaware and except as follows:
So long as any shares of this Series remain outstanding, the
affirmative vote or consent of the holders of a majority of the then
outstanding shares of this Series, in person or by proxy, either in
writing or at a meeting called for that purpose (voting as a class with
the holders of all other series of preferred stock ranking on a parity
with this Series either as to dividends or distributions or upon
liquidation, dissolution or winding up of the Company and upon which
like voting rights have been conferred and are then exercisable), shall
be necessary to permit, effect or validate the repeal, amendment or
other change of any provision of the Certificate of Incorporation of
the Company in any manner which materially and adversely affects the
rights, preferences, or privileges of this Series or the holders
thereof; provided, however, that any increase or decrease (but not
below the number of shares of this Series then outstanding) in the
amount of authorized preferred stock or the creation and issuance of
other series of preferred stock, whether ranking on a parity with or
junior or prior to this Series with respect to voting, the payment of
dividends or the distribution of assets upon liquidation, dissolution
or winding up shall not be deemed to materially and adversely affect
such rights, preferences or privileges. In connection with any right to
vote, each holder of outstanding shares of this Series shall have one
vote for each share held.
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The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of this Series shall have been
redeemed or sufficient funds shall have been deposited in trust to effect such
redemption.
IN WITNESS WHEREOF, this Certificate has been executed and attested by
the undersigned on October 19, 1998, and shall be effective at 10:00 a.m.
Eastern Daylight Time on the date on which filed with the Secretary of State of
the State of Delaware.
PARALLEL PETROLEUM CORPORATION
By: /s/ Larry C. Oldham
-------------------------------
Larry C. Oldham, President
ATTEST:
/s/ Thomas W. Ortloff
- ----------------------------
Thomas W. Ortloff, Secretary
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PARALLEL PETROLEUM CORPORATION
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
Pursuant to the provisions of Section 243 of the Delaware General
Corporation Law, the undersigned, being the duly elected and acting President of
Parallel Petroleum Corporation, a Delaware corporation, hereby certifies as
follows:
1. The name of the corporation is Parallel Petroleum Corporation (the
"Corporation").
2. A resolution was duly adopted by the Board of Directors of the
Corporation on October 20, 1998 retiring 600,000 shares of the Corporation's
$.60 Cumulative Convertible Preferred Stock (the "Shares").
3. The Shares constitute all of the authorized shares of the series to
which they belong.
4. The Certificate of Designations, Preferences and Rights of Serial
Preferred Stock (the "Certificate of Designations") creating the Shares
prohibits the reissuance of such shares as a part of the series created by the
Certificate of Designations. The Shares shall be restored to the status of
authorized but unissued shares of preferred stock, $.10 par value per share,
without designation as to series.
IN WITNESS WHEREOF, this Certificate has been executed by the
undersigned on October 30, 1998, and shall be effective at 10:00 a.m. Eastern
Daylight Time on the date filed with the Secretary of State of the State of
Delaware.
PARALLEL PETROLEUM CORPORATION
By: /s/ Larry C. Oldham
-----------------------------
Larry C. Oldham, President
CERTIFICATE OF
DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES A PREFERRED STOCK
of
PARALLEL PETROLEUM CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware, the undersigned authorized officer of Parallel Petroleum Corporation
(the "Corporation"), on behalf of the Corporation, DOES HEREBY CERTIFY
That pursuant to the authority conferred upon the Board of Directors
(the "Board") by the Certificate of Incorporation of the Corporation, as
amended, and the General Corporation Law of the State of Delaware, the Board of
Directors on October 5, 2000, adopted the following resolutions creating a
series of fifty thousand shares of Preferred Stock, par value $0.10 per share,
designated as Series A Preferred Stock;
RESOLVED, that, pursuant to the authority vested in the Board in
accordance with the provisions of its Certificate of Incorporation, as amended,
the Board and the General Corporation Law of the State of Delaware, does hereby
create, authorize and provide for the issuance upon the exercise of the
Corporation's Preferred Stock Purchase Rights, of a series of Preferred Stock of
the Corporation, and does hereby fix and state that the designations, amounts,
powers, preferences and relative and other special rights and the
qualifications, limitations or restrictions thereof are as follows:
Series A Preferred Stock
Section 1. Designation and Amount. The shares of such series shall be
designated as Series A Preferred Stock and the number of shares constituting
such series shall be 50,000, which number may be increased or decreased (but not
below the number of shares thereof then outstanding) from time to time by action
of the Board of Directors.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for that purpose,
quarterly dividends payable in cash on the 1 st day of July, October, January
and April, in each year commencing January 1, 2001 (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share
<page>
(rounded to the nearest cent) equal to the greater of (a) $0.01 or (b) subject
to the provision for adjustment hereinafter set forth, one thousand (1,000)
times the aggregate per share amount of all cash dividends, and one thousand
(1,000) times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of the
common stock of the Corporation, par value $0.01 per share ("the Common Stock"),
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock, since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. In the event the Corporation shall at any
time after October 5, 2000 (the "Rights Declaration Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $0.01 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at
-2-
<page>
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than sixty
(60) days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to one
thousand (1,000) votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation. Except as otherwise provided herein or by law,
the holders of the shares of Series A Preferred Stock shall not be entitled to
vote as a separate class on any matters submitted to a vote of the stockholders.
(C) (i) If at any time dividends on any Series A Preferred Stock shall
be in arrears in an amount equal to six (6) quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all shares of Series A Preferred Stock then
outstanding shall have been declared and paid or set apart for payment. During
each default period, all holders of Series A Preferred Stock, voting as a class,
shall have the right to elect two (2) Directors to the Board of Directors of the
Corporation.
(ii) During any default period, such voting right of the
holders of Series A Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders of the Corporation, and thereafter at annual
meetings of stockholders of the Corporation,
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<page>
provided that such voting right shall not be exercised unless the holders of
one-third (1/3) in number of shares of Series A Preferred Stock outstanding
shall be present in person or by proxy. The absence of a quorum of the holders
of Common Stock shall not affect the exercise by the holders of Series A
Preferred Stock of such voting right. At any meeting at which the holders of
Series A Preferred Stock shall exercise such voting right initially during an
existing default period, they shall have the right, voting as a class, to elect
Directors to fill such vacancies, if any, in the Board of Directors as may then
exist up to two (2) Directors or, if such right is exercised at an annual
meeting, to elect two (2) Directors. If the number which may be so elected at
any special meeting does not amount to the required number, the holders of the
Series A Preferred Stock shall have the right to make such increase in the
number of Directors constituting the whole Board of Directors as shall be
necessary to permit the election by them of the required number. After the
holders of the Series A Preferred Stock shall have exercised their right to
elect Directors in any default period and during the continuance of such period,
the number of Directors constituting the whole Board of Directors shall not be
increased or decreased except by vote of the holders of Series A Preferred Stock
as herein provided or pursuant to the rights of any equity securities ranking
senior to or pari passu with the Series A Preferred Stock.
(iii) Unless the holders of Series A Preferred Stock shall,
during an existing default period, have previously exercised their right to
elect Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Series A Preferred Stock outstanding may request, the
calling of a special meeting of the holders of Series A Preferred Stock, which
meeting shall thereupon be called by the President, a Vice President or the
Secretary of the Corporation. Notice of such meeting and of any annual meeting
at which holders of Series A Preferred Stock are entitled to vote pursuant to
this subparagraph (C)(iii) shall be given to each holder of record of Series A
Preferred Stock by mailing a copy of such notice to him at his last address as
the same appears on the books of the Corporation. Such meeting shall be called
for a time not earlier than twenty (20) days and not later than sixty (60) days
after such order or request or in default of the calling of such meeting within
sixty (60) days after such order or request, such meeting may be called on
similar notice by any stockholder or stockholders owning in the aggregate not
less than ten percent (10%) of the Total number of shares of Series A Preferred
Stock outstanding. Notwithstanding the provisions of this subparagraph (C)(iii),
no such special meeting shall be called during the period within sixty (60) days
immediately preceding the date fixed for the next annual meeting of the
stockholders of the Corporation.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of the Series
A Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of the Series A Preferred Stock shall continue in office
until their successors shall have been elected by such holders
-4-
<page>
or until the expiration of the default period, and (y) any vacancy in the Board
of Directors may (except as provided in subparagraph (C)(ii) of this Section 3)
be filled by vote of a majority of the remaining Directors theretofore elected
by the holders of the class of stock which elected the Director whose office
shall have become vacant. References in this paragraph (C) to Directors elected
by the holders of a particular class of stock shall include Directors elected by
such Directors to fill vacancies as provided in clause (y) of the foregoing
sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of the Series A Preferred Stock as a class to elect
Directors shall cease, (y) the term of any Directors elected by the holders of
Series A Preferred Stock as a class shall terminate and (z) the number of
Directors constituting the whole Board of Directors shall be such number as may
be provided for in the Corporation's Certificate of Incorporation or bylaws
irrespective of any increase made pursuant to the provisions of subparagraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the Corporation's Certificate of
Incorporation or bylaws). Any vacancies in the Board of Directors effected by
the provisions of clauses (y) and (z) in the preceding sentence may be filled as
provided in the Corporation's Amended and Restated Certificate of Incorporation.
(D) Except as set forth herein, holders of Series A Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to, the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
junior stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
-5-
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received
$250 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) one thousand (1,000) (as appropriately adjusted
as setforth in paragraph (C) of this Section to reflect such events as stock
splits, stock
-6-
<page>
dividends and recapitalizations with respect to the Common Stock) (such number
in clause (ii) immediately above being referred to as the "Adjustment Number").
Following the payment of the full amount of the Series A Liquidation Preference
and the Common Adjustment in respect of all outstanding shares of Series A
Preferred Stock and Common Stock, respectively, holders of Series A Preferred
Stock and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to one (1) with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event, however,
that there are not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger,_etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock,
securities, cash or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to one thousand (1,000) times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common
-7-
<page>
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 8. Redemption. The outstanding shares of Series A Preferred
Stock may be redeemed at the option of the Board of Directors as a whole, but
not in part, at any time, or from time to time, at a cash price per share equal
to one hundred five percent (105%) of (i) the product of the Adjustment Number
times the Average Market Value (as such term is hereinafter defined) of the
Common Stock, plus (ii) all dividends which on the redemption date have accrued
on the shares to be redeemed and have not been paid, or declared and a sum
sufficient for the payment thereof set apart, without interest. The "Average
Market Value" is the average of the closing sale prices of the Common Stock
during the thirty (30) day period immediately preceding the date before the
redemption date on the Composite Tape for New York Stock Exchange Listed Stocks,
or, if such stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Securities Exchange Act
of 1934, as amended, on which such stock is listed, or, if such stock is not
listed on any such exchange, the average of the closing sale prices with respect
to a share of Common Stock during such thirty (30) day period, as quoted on the
National Association of Securities Dealers, Inc. Automated Quotations System or
any system then in use, or if no such quotations are available, the fair market
value of the Common Stock as determined by the Board of Directors in good faith.
Section 9. Ranking. The Series A Preferred Stock shall rank junior to
all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
Section 10. Amendment. Except as otherwise provided in the
Certificate of Incorporation, as amended, or by law, the Certificate of
Incorporation of the Corporation, as amended, shall not be further amended in
any manner which would materially alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares of Series A Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. At the Corporation's sole discretion,
Series A Preferred Stock may be issued in fractions of a share which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Preferred Stock.
-8-
IN WITNESS WHEREOF, I have executed this Certificate as of October 5,
2000.
PARALLEL PETROLEUM CORPORATION
By: /s/ Larry C. Oldham
----------------------------
Larry C. Oldham
President
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