STATEMENT OF RESOLUTION
ESTABLISHING SERIES OF SHARES
TO THE SECRETARY OF STATE
OF THE STATE OF TEXAS:
Pursuant to the provisions of Article 2.13 ofthe Texas
Business Corporation Act, the undersigned corporationsubmits the
following statement for the purpose of establishing and
designating a series of shares and fixing anddetermining the
relative rights and preferences thereof:
1. The name of the corporation is Electric & Gas
Technology, Inc.
2. The following resolution, establishing and designating
a series of shares and fixing and determining the relative rights
and preferences thereof, was duly adopted by the board of
directors of the corporation on December 15, 1995:
ELECTRIC & GAS TECHNOLOGY, INC.
(A Texas Corporation)
RESOLUTION DESIGNATING AND
SPECIFYING PREFERENCES AND
RIGHTS OF SERIES A, 7% CONVERTIBLE PREFERRED STOCK
RESOLVED, That the following designation and statement of
preferences, rights and other provisions of and applying to the
"Series A, 7% Convertible Preferred Stock" of the Company is
hereby adopted:
1. Statement of Series Designation and Issuance.
The Company has authorized 5,000,000 shares of preferred
stock, par value $10.00 per share (the "Authorized Preferred")
and none of such Authorized Preferred has been issued or is
outstanding. The Company hereby designates 90,000 shares of such
Authorized Preferred as the "Series A, 7% Convertible Preferred
Stock" of the Company and authorizes issuance of the Series A, 7%
Convertible Preferred Stock, upon and having the terms,
preferences, rights and other provisions provided for under the
Texas Business Corporation Act, as in effect from time to time,
the Articles of Incorporation of the Company, as now amended and
as in effect from time to time, and this Resolution.
2. Issuance.
1
The Series A, 7% Convertible Preferred Stock shall be issued
to and initially registered in the name of Allied Products
Corporation as contemplated by that certain Note Purchase
Agreement of even date herewith between the Company and Allied
Products Corporation.
3. Terms, Provisions and Rights of Series A, 7%
Convertible Preferred Stock.
1. Par Value. The par value of each share of the
Series A, 7% Convertible Preferred Stock is $10.00.
2. Dividends.
(a) The holders of Series A, 7% Convertible Preferred
Stock, in preference to the holders of Common Stock and of
any other stock ranking as to dividends junior to the Series
A, 7% Convertible Preferred Stock, shall be entitled to
receive cumulative dividends in cash at a dividend rate of
$.70 (70 ) per share per annum and no more, such dividends
to be payable quarterly on the last day of March, June,
September and December in each year commencing March 31,
1996 (each such date being hereinafter called a "dividend
date" and each of the quarterly periods ending on a dividend
date being hereinafter called a "dividend period" and the
first dividend period being from the date of issuance of the
Series A, 7% Convertible Preferred Stock until March 31,
1996), and such dividends shall accrue from and after the
date on which such shares of Series A, 7% Convertible
Preferred Stock shall first be issued.
(b) Such dividends shall be cumulative from the date
on which such shares of Series A, 7% Convertible Preferred
Stock shall be first issued (whether or not in any dividend
period or periods there shall be surplus of the Corporation
legally available for the payment of such dividends) so
that, if dividends in respect of any dividend period shall
not have been paid upon, or declared and a sum sufficient
for payment thereof not set apart for the dividends on, the
Series A, 7% Convertible Preferred Stock, the amount of the
deficiency in such dividends shall be fully paid (or
declared and a sum sufficient for payment thereof set apart
and placed in an insured interest bearing account of a
national or state bank) before any dividend shall be
declared or paid, or any sum be set apart for or applied to
the purchase or redemption of, any shares of Common Stock or
any class of stock ranking as to dividends junior to the
Series A, 7% Convertible Preferred Stock.
(c) If, on any dividend date, the surplus of the
Corporation legally available for the payment of dividends
is not sufficient to enable payment of the full accrued
2
dividends on all shares of Series A, 7% Convertible
Preferred Stock then outstanding at the rate fixed as
aforesaid, then, in such event, there shall be paid on such
dividend date, to the full extent of the surplus of the
Corporation legally available for dividends, to the holders
of Series A, 7% Convertible Preferred Stock, dividends in
amounts proportionate to the full accrued dividends to which
they are respectively entitled. No dividends shall be paid
upon or declared or set apart for any share of Preferred
Stock other than the Series A, 7% Convertible Preferred
Stock for any dividend period unless at the same time a like
proportionate dividend for the same dividend period at the
respective rates fixed as aforesaid shall be paid upon or
declared and a sum sufficient for the payment thereof set
apart for all shares of Series A, 7% Convertible Preferred
Stock then issued and outstanding.
3. Redemption. The shares of the Series A, 7%
Convertible Preferred Stock shall be subject to redemption
as follows:
(a) Redemption Incident to Underwriting and Other
Provisions.
(i) Subject to the other provisions of this subsection
3(a), all shares of Series A, 7% Convertible Preferred Stock
issued and outstanding shall be redeemed incident to and as
a condition to any "underwriting" (defined below) that
occurs at any time during the approximately two (2) year
period expiring on December 31, 1997, and redemption shall
be effected at (A) the redemption price of $10.00 per share,
plus (B) in each case a sum equal to all dividends (whether
or not earned or declared) on such shares accrued and unpaid
thereon to and including the date of redemption, provided
that the holders of Series A, 7% Convertible Preferred Stock
may elect to have the redemption price be determined on the
basis of the value of such stock as if conversion rights had
been exercised.
(ii) Less than all the outstanding shares of Series A,
7% Convertible Preferred Stock may be redeemed incident to
an "underwriting" only upon consent of the holders of 2/3 or
more of the outstanding Series A, 7% Convertible Preferred
Stock, and the shares to be redeemed shall be determined pro
rata, with all fractions being rounded to the next highest
full share.
(iii) At such time or times prior to the date
fixed for redemption, as the Board of Directors shall
determine for purposes of redemption pursuant to this
subsection 3(a), written notice of any redemption of shares
of Series A, 7% Convertible Preferred Stock, specifying the
3
date fixed for redemption, the redemption price and the
place of redemption, shall be mailed to each holder of
record of the shares of Series A, 7% Convertible Preferred
Stock to be redeemed in a postage prepaid envelope at his
address of record, not more than fifty (50) nor less than
twenty (20) days prior to the date fixed for redemption,
calling upon such holder to surrender to the Corporation on
or after such date at the principal office of the
Corporation designated in such notice, his certificate or
certificates representing the number of shares specified in
such notice of redemption. On or after the date fixed in
such notice of redemption, each holder of shares of Series
A, 7% Convertible Preferred Stock to be redeemed shall
present and surrender his certificate or certificates for
such shares to the Corporation at the place designated in
such notice and thereupon the redemption price of such
shares shall be paid to or on the order of the person whose
name appears on the records of the Corporation as the holder
of the shares designated for redemption. If less than all
the shares owned by a holder of Series A, 7% Convertible
Preferred Stock are then to be redeemed in compliance with
this subsection (3)(a), the notice shall also specify the
number of shares thereof which are to be redeemed and the
number of the certificates representing such shares, and a
new certificate shall be issued to such holder representing
the unredeemed shares without cost to such holder.
(iv) Unless default be made in the payment in full of
the redemption price plus any accrued and unpaid dividends,
dividends on the shares of Series A, 7% Convertible
Preferred Stock called for redemption shall cease to accrue
on the redemption date, and all rights of the holders of
such shares as shareholders of the Corporation by reason of
the ownership of such shares shall cease on the redemption
date, except the right to receive the amount payable upon
redemption of such shares, on presentation and surrender of
the respective certificates representing such shares.
(v) Series A, 7% Convertible Preferred Stock redeemed
in accordance with this subsection 3(a) shall be cancelled
and not reissued and the number of shares of Series A, 7%
Convertible Preferred Stock which the Corporation shall have
authority to issue shall be decreased by the number of
shares so redeemed.
(vi) Notwithstanding the foregoing provisions of this
subsection 3(a) if any dividends on the Series A, 7%
Convertible Preferred Stock are accrued and unpaid, no
shares of the Series A, 7% Convertible Preferred Stock shall
be redeemed unless all outstanding shares of the Series A,
7% Convertible Preferred Stock are simultaneously redeemed,
4
and the Corporation shall not purchase or otherwise acquire
any shares of the Series A, 7% Convertible Preferred Stock.
(vii) An "underwriting" is the issuance and/or
sale of stock, notes or other "securities" of the
Corporation to the public or through a private placement
effected by or through an investment banker, broker, broker-
dealer, securities exchange or "NASDAQ" occurring on or
before December 31, 1997.
(b) Mandatory Redemption. If and so long as shares of
Series A, 7% Convertible Preferred Stock are outstanding, if
the Corporation shall directly or indirectly sell, lease,
abandon, or otherwise dispose of all or substantially all of
its property or assets, or consolidate with or merge into
any other person, partnership or corporation (other than a
wholly owned subsidiary of the Corporation), then the
Corporation shall, prior to or simultaneously with such
sale, lease, abandonment, or other disposition or such
consolidation or merger, redeem, out of funds legally
available for such purpose, all the shares of Series A, 7%
Convertible Preferred Stock then outstanding at a redemption
price of $10.00 per share plus an amount equal to all
dividends (whether or not earned or declared) on such shares
accrued and unpaid thereon to and including the mandatory
redemption date, such payment to be made on such mandatory
redemption date in accordance with paragraph (a) of this
Section 3 including, without limitation, subparagraph (iii)
of said paragraph (a).
4. Rights on Liquidation, Dissolution or Winding Up.
(a) Upon the involuntary liquidation, distribution or
sale of assets, or involuntary dissolution or winding up of
the Corporation or upon the voluntary liquidation,
distribution or sale of assets, or voluntary dissolution or
winding up of the Corporation, the holders of the shares of
Series A, 7% Convertible Preferred Stock, out of the assets
of the Corporation available for distribution to its
shareholders, a sum in cash equal to $10.00 plus an amount
equal to all dividends on such shares accrued and unpaid
thereon to the date of final distribution, before any
payment or distribution shall be made on the Common Stock or
on any other class of stock ranking as to dividends or upon
liquidation junior to the Series A, 7% Convertible Preferred
Stock.
(b) If upon any such liquidation, distribution or sale
of assets, dissolution or winding up of the Corporation,
whether voluntary or involuntary, its assets available for
distribution to its shareholders shall be insufficient to
permit the payment in full of the respective amounts to
5
which the holders of all outstanding Series A, 7%
Convertible Preferred Stock, are entitled as provided in
paragraph (a) of this Section 4, the entire remaining assets
of the Corporation available for distribution to its
shareholders shall be distributed among the holders of
Series A, 7% Convertible Preferred Stock in amounts
proportionate to the full preferential amounts to which they
would be respectively entitled if all amounts payable on or
with respect to such shares were paid in full.
(c) In the event of any liquidation, distribution or
sale of assets, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payment
shall have been made to the holders of shares of Series A,
7% Convertible Preferred Stock and any other class or
classes of stock ranking upon liquidation on parity with the
Series A, 7% Convertible Preferred Stock, the holders of
shares of any class or classes of stock ranking upon
liquidation junior to the Series A, 7% Convertible Preferred
Stock shall be entitled, to the exclusion of the holders of
shares of Series A, 7% Convertible Preferred Stock, to
share, according to their respective rights and preferences,
in all remaining assets of the Corporation available for
distribution to its shareholders.
5. Voting.
(a) Subject to the provisions of any applicable law or
of the By-laws of the Corporation as from time to time
amended, with respect to the closing of the transfer books
or the fixing of a record date for the determination of
shareholders entitled to vote, at each meeting of
shareholders each holder of record of shares of Series A, 7%
Convertible Preferred Stock shall be entitled to one vote
per share on each matter on which the holders of record of
shares of Common Stock shall be entitled to vote, voting
together, and not by classes, with the holders of record of
shares of Common Stock, and each such record holder of
shares of Series A, 7% Convertible Preferred Stock shall be
entitled to the same notice of any such meeting of
shareholders as isfurnished to such holders of Common Stock.
(b) In case any one or more of the following events
shall have occurred and be continuing, that is to say: a
breach, default or other failure of the Corporation to
perform under, comply with or observe its agreements,
covenants, representations, or any term of the Note Purchase
Agreement of even date with Allied Products Corporation; a
failure or default by the Corporation in paying or declaring
two (2) or more required dividends or distributions on the
Series A, 7% Convertible Preferred Stock (whether or not
consecutive);
6
then, and in such event the number of directors constituting
the Board of Directors of the Corporation shall be increased
by one (1) member of the Board of Directors, and the holders
of Series A, 7% Convertible Preferred Stock shall have, in
addition to any other voting rights, the special right, to
the exclusion of all other classes (whether preferred,
common or otherwise) of stock of the Corporation, voting
together as a class to elect persons to fill such newly
created directorship (and to fill any vacancies in the
membership of the Board of Directors arising when the
position of any director so elected by the Series A, 7%
Convertible Preferred Stock becomes vacant until such time
as the special right of the holders of Series A, 7%
Convertible Preferred Stock to vote separately as a class
for the election of directors pursuant to this paragraph (b)
of Section 5 shall terminate as set forth below). Whenever
such special right of holders of shares of Series A, 7%
Convertible Preferred Stock shall have vested, it may be
exercised initially either at a special meeting of such
holders called as provided below, or at any annual meeting
of shareholders and thereafter at annual meetings of
shareholders. The special right of holders of shares of
Series A, 7% Convertible Preferred Stock, to elect members
of the Board of Directors as aforesaid shall continue until
such time as the event or events giving rise to such special
right of the holders of shares of Series A, 7% Convertible
Preferred Stock so to vote for the election of directors
shall have been cured or shall cease to exist or shall have
been waived by the holders of at least sixty-six and two-
thirds percent (66-2/3%) of all the shares of Series A, 7%
Convertible Preferred Stock outstanding, in writing or by a
vote at a meeting of such shareholders for that purposes, at
which time such special rights shall terminate, subject to
revesting in the event of the occurrence of any of the
foregoing events giving rise to such special right.
6. Restrictions on Issuance of Other Securities.
At any time that shares of Series 1995 Cumulative
Preferred Stock are issued and outstanding, the Corporation
shall not issue any preferred or other stock that is senior
to the Series 1995 Convertible Preferred Stock with respect
to dividends or distributions, redemption or rights incident
to redemption, or other similar rights of the Series 1995
Convertible Preferred Stock, or any security or obligation
that is convertible into or exchangeable or exercisable for
such senior stock. The Corporation may issue up to, but not
more than, 90,000 shares of preferred or other stock that is
on a parity with the Series 1995 Convertible Preferred Stock
with respect to dividends or distributions, redemption or
rights incident to redemption, or other similar rights of
the Series 1995 Convertible Preferred Stock, or any security
7
or obligation that is convertible into or exchangeable or
exercisable for such senior stock.
7. Covenant to Maintain Registration; Conversions.
(a) At all times that any of the Series A, 7%
Convertible Preferred Stock is outstanding, the Corporation
shall be in compliance with, and maintain registration of
its common stock (in amounts sufficient to permit conversion
of the Series A, 7% Convertible Preferred Stock into
properly registered, publicly traded stock) under, all
applicable federal and state securities laws, rules and
regulations. In this regard, the Corporation will timely
and properly file all registration and reporting papers
required or advisable under such laws, rules and
regulations.
(b) At any time and from time to time, the holder(s)
of Series A, 7% Convertible Preferred Stock shall have the
option to convert shares of Series A, 7% Convertible
Preferred Stock into common stock of the Corporation, at the
ratio of two (2) shares of common stock for each one (1)
share of Series A, 7% Convertible Preferred Stock. The
Corporation shall at all times have authorized and maintain
the availability for issuance of sufficient common stock to
effect such conversion. At all times when any of the Series
A, 7% Convertible Preferred Stock is issued and outstanding,
the Corporation shall not: take, authorize, or agree to
take or authorize any action that would limit, impair or
restrict the ability of the Corporation to comply with and
observe or perform its obligations, covenants and duties
with respect to the Series A, 7% Convertible Preferred
Stock, or that would dilute the proportionate interest, on
the date of its issuance, of the holders of the Series A, 7%
Convertible Preferred Stock in, or to be acquired upon
conversion of such Series A, 7% Preferred Stock into, common
stock.
(c) Shares of Series A, 7% Convertible Preferred Stock
of the Corporation that are redeemed or that are converted
into common stock of the Corporation shall be tendered to
the Secretary of the Corporation or the Corporation's
transfer agent accompanied by a copy of the notice of
redemption or by a notice of election to convert from the
registered owner of such shares of Series A, 7% Convertible
Preferred Stock, as the case may be, and the Secretary of
the Corporation or the Corporation's transfer agent and the
Corporation shall forthwith take all acts necessary and
appropriate to pay the redemption price for, or issue and
cause to be issued the requisite shares of common stock upon
conversion, as the case may be. If called for redemption,
shares of the Series A, 7% Convertible Preferred Stock of
8
the Corporation may be converted (at the election of the
registered owner thereof) at any time up to and including
(but not after) the date of redemption.
Dated: December 15, 1995.
Electric & Gas Technology, Inc.
By /s/ S. Mort Zimmerman
S. Mort Zimmerman
Chairman of the Board &
President
And /s/ Marie Pazol
Marie Pazol
Secretary
9
THE STATE OF TEXAS
COUNTY OF DALLAS
I, Joe B. Abbey , a notary public, do hereby certify
that on this 15 day of December , 19 95 , personally
appeared before me S. Mort Zimmerman and Marie
Pazol , who, being by me first duly sworn, declared that
[he/she] is the President and Secretary of Electric & Gas
Technology, Inc. , that [he/she] signed the foregoing document
as President and secretary of the corporation and that the
statements therein contained are true.
(SEAL)
/s/ Joe B Abbey
Notary Public in and for
the State of Texas
Joe B Abbey
Printed Name of Notary
My Commission Expires: August 23,
1997
10