EXHIBIT 4.1
TRAVIS BOATS & MOTORS, INC.
STATEMENT OF DESIGNATIONS
OF
6% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 2.13 of the Texas Business Corporation Act, Travis
Boats & Motors, Inc., a Texas corporation (the "Corporation"), hereby certifies
that the following resolutions were duly adopted by its Board of Directors (the
"Board") on March 8, 2002 to set forth the powers, designations, preferences and
relative, participating, optional or other rights of its 6% Series A Cumulative
Convertible Preferred Stock;
RESOLVED, that pursuant to the authority granted to the Board in the
Restated Articles of Incorporation of the Corporation (the "Articles of
Incorporation"), there is hereby created, and the Corporation is hereby
authorized to issue, a series of Preferred Stock (as defined in the Articles of
Incorporation) having the following powers, designations, preferences and
rights:
Certain defined terms used herein are set forth in Section 9 hereof.
1. Designation. The series of Preferred Stock shall be designated "6%
Series A Cumulative Convertible Preferred Stock" (the "Series A Preferred") and
shall consist of One Hundred Fifty Thousand (150,000) shares.
2. Rank. All shares of Series A Preferred shall rank senior, both as to
payment of dividends and as to distributions of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
to (a) all of the Corporation's Common Stock, par value $.01 per share ("Common
Stock"), and (b) all of the Corporation's capital stock that by its terms ranks
junior to the Series A Preferred either as to the payment of dividends or as to
distributions of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (the capital stock referred to in
clauses (a) and (b) above being herein referred to as "Junior Securities").
3. Dividends.
(a) Dividends on Series A Preferred. The Corporation shall pay
to the holders of shares of the Series A Preferred (regardless of whether
purchased for cash, issued as dividends or otherwise issued), out of the assets
of the Corporation legally available therefor, dividends at the times, in the
amounts and with such priorities as follows:
(i) Dividend Rate. Dividends on shares of Series A Preferred
will be payable quarterly on the last day of each calendar quarter in arrears at
a rate per annum equal to 6%, as may be adjusted as set forth below, of the
Liquidation Value thereof on the Dividend Payment Date. Dividend payments under
this clause 3(a) shall be made, at the option of the Corporation, in cash or in
additional shares of Series A Preferred; provided that if additional shares of
Series A Preferred are to be issued, the Corporation shall issue that number of
shares equal to the amount of such dividends divided by $100, rounded up to the
nearest whole share. All shares of Series A Preferred issued as a dividend will
upon and by virtue of their issuance be duly authorized, validly issued, fully
paid and nonassessable. In the event that Consents, as such term is defined in
that certain Preferred Stock and Warrant Purchase Agreement by and between TMRC,
L.L.P. ("Tracker") and the Corporation, dated on or about March 13, 2002 (the
"Purchase Agreement"), other than the shareholder approval contemplated by
Section 5.6 of the Purchase Agreement, are not obtained within one hundred and
eighty (180) days after Tracker reasonably determines and notifies the
Corporation in writing that such Consents are required in connection with the
consummation of the transactions contemplated under the Purchase Agreement, the
dividend rate on shares of Series A Preferred will be increased by 1% (or
fraction thereof) for each 30 day period (or fraction thereof) until such
Consents are, to the reasonable satisfaction of Tracker, obtained.
Notwithstanding the foregoing, in no event will the dividend rate exceed 12% per
annum.
(ii) Payment Dates. Dividends on the Series A Preferred shall
be declared out of legally available funds therefor and paid quarterly in the
manner specified in Section 3(a)(i), on the last day of March, June, September
and December in each year (each, a "Dividend Payment Date"). The first Dividend
Payment Date shall be the last day of March, 2002. If any Dividend Payment Date
shall be on a day other than a Business Day, then the Dividend Payment Date
shall be on the next succeeding Business Day. An amount equal to the full
cumulative dividends shall also be payable, in satisfaction of such dividend
obligation, upon liquidation as provided under Section 4 hereof, upon conversion
as provided under Section 6 hereof and upon redemption as provided under Section
7 hereof. The record date for the determination of holders of shares of Series A
Preferred entitled to receive payment of the dividends payable pursuant to this
Section 3 shall be the date which is twenty (20) Business Days prior to the
Dividend Payment Date.
(iii) Accrual of Dividends.
(A) To the extent the Board is prohibited by law from
declaring and paying dividends in accordance with this Section 3(a), dividends
shall accrue on a daily basis, calculated on the basis of a 360 day year
consisting of twelve months of thirty days each in a year, whether or not there
shall be (at the time such dividends became or become payable or any other time)
profits, surpluses or other funds of the Corporation legally available for the
payment of dividends. Dividends shall not compound except as set forth below in
clause (B).
(B) All dividends which have accrued on any share of Series A
Preferred then outstanding during the period from (but excluding) the preceding
Dividend Payment Date (or from and including the Issue Date in the case of the
initial Dividend Payment Date) to and including such Dividend Payment Date shall
be added on such Dividend Payment Date to the Liquidation Value of such share of
Series A Preferred (so that, without limitation, dividends shall thereafter
accrue in respect of the amount of such accrued but unpaid dividends) and shall
remain a part thereof until (but only until) such dividends are paid. The
"Liquidation Value" of any share of Series A Preferred as of a particular date
shall be equal to the sum of $100 plus an amount equal to any accrued and unpaid
dividends on such share of Series A Preferred that have been added to the
Liquidation Value of such share of Series A Preferred Stock on any prior
Dividend Payment Date pursuant to this Section 3(a)(iii)(B) and have not
theretofore been paid. Dividends shall not otherwise accrue or cumulate on
previously accrued dividends on Series A Preferred.
(iv) Amounts Payable. The amount of dividends payable on
Series A Preferred on each Dividend Payment Date shall be the full cumulative
dividends which are accrued but unpaid through and including such Dividend
Payment Date. Dividends which are not paid as provided in clause (iii) above
shall accrue as provided in clause (iii) above until paid and shall be payable
as soon as payment can lawfully be made (or upon liquidation, conversion or
redemption as provided herein).
(b) Dividends on Common Stock. In the event that the
Corporation shall at any time or from time to time declare, order, pay or make a
dividend or other distribution (whether in cash, securities, rights to purchase
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securities or other property) on its Common Stock, the holders of the Series A
Preferred shall receive from the Corporation, with respect to each share of
Series A Preferred held, a dividend or distribution that is the same dividend or
distribution that would be received by a holder of the number of shares of
Common Stock into which such share of Series A Preferred is then convertible
pursuant to the provisions of Section 6 hereof on the record date for such
dividend or distribution with respect to Common Stock. Any such dividend or
distribution shall be declared, ordered, paid or made on the Series A Preferred
at the same time such dividend or distribution is declared, ordered, paid or
made on the Common Stock.
(c) Limitation on Dividends, Repurchases and Redemptions. So
long as at least 10,000 shares of Series A Preferred shall be outstanding, the
Corporation shall not declare or pay or set apart for payment any dividends or
make any other distributions on any Junior Securities, whether in cash,
securities, rights to purchase securities or other property (other than
dividends or distributions payable in shares of the class or series upon which
such dividends or distributions are declared or paid), nor shall the Corporation
or any of its Subsidiaries purchase, redeem or otherwise acquire for any
consideration or make payment on account of the purchase, redemption or other
retirement of any Parity Securities or Junior Securities, nor shall any monies
be paid or made available for a sinking fund for the purchase or redemption of
any Parity Securities or Junior Securities, unless with respect to all of the
foregoing all dividends or other distributions to which the holders of Series A
Preferred shall have been entitled, pursuant to Sections 3(a) and 3(b) hereof,
shall have been either (i) paid, or (ii) declared with a sum of money set apart
for the full payment thereof.
4. Preference on Liquidation.
(a) Liquidation Preference for Series A Preferred. In the
event that the Corporation shall liquidate, dissolve or wind up, whether
voluntarily or involuntarily, the holders of shares of Series A Preferred shall,
to the extent not electing to convert pursuant to Section 6, receive an amount
per share in cash equal to the sum of (i) the Liquidation Value, plus (ii) all
accrued but unpaid dividends thereon through the date of distribution, if any,
to the extent not already added to the Liquidation Value pursuant to Section
3(a)(iii)(B) (the "Series A Liquidation Preference"). The Series A Liquidation
Preference shall be paid prior to any distribution to the holders of shares of
Common Stock or other Junior Securities (and no monies shall be set apart for
payments on any of such securities unless the Series A Liquidation Preference is
so paid). If upon the occurrence of such event the assets and funds thus
distributed among the holders of the Series A Preferred are insufficient to
permit the payment to such holders of the Series A Liquidation Preference, then
the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of Series A
Preferred in proportion to the respective number of shares held. After payment
has been made to the holders of the Series A Preferred of the full Series A
Liquidation Preference, all remaining assets and funds of the Corporation shall
be distributed pro rata among all holders of Junior Securities and the Series A
Preferred on the basis of their respective holdings, assuming all Series A
Preferred had been converted into Common Stock in accordance with the conversion
rights then in effect pursuant to Section 6.
(b) Notice of Liquidation. Written notice of any liquidation,
dissolution or winding up of the Corporation, stating the payment date or dates
when and the place or places where amounts distributable in such circumstances
shall be payable, and the expected distribution to holders of each class of the
Company's capital stock, shall be given by first class mail, postage prepaid,
not less than twenty (20) days prior to any payment date specified therein, to
the holders of record of the Series A Preferred at their respective addresses as
shall appear on the records of the Corporation.
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5. Voting.
(a) Vote with Common; Notice. Except as provided under Texas
law and in this Section 5, the Series A Preferred shall vote together with the
Common Stock as a single class on all actions to be voted on by the shareholders
of the Corporation, including, without limitation, the election of directors
other than the directors elected in accordance with Section 5(b). Each share of
Series A Preferred shall entitle the holder thereof to such number of votes per
share on each such action as shall equal the number of shares of Common Stock
(excluding fractions of a share) into which each share of Series A Preferred is
convertible on the record date for such shareholder vote. The holders of Series
A Preferred shall be entitled to notice of any shareholder's meeting on the same
terms as if they were holders of Common Stock.
(b) Election of Series A Preferred Directors. Notwithstanding
any other provision in the Articles of Incorporation:
(i) Subject to Section 5(b)(ii) below, after the ninetieth
(90th) day following the Issue Date and if at any given time at least 10,000
shares of Series A Preferred are outstanding, the Board shall consist of seven
(7) directors and the Series A Preferred shall vote as a single class to elect
one (1) such director.
(ii) After the Second Tranche (as such term is defined in the
Purchase Agreement) has been consummated:
(C) if at least 10,000 shares and less than
25,000 shares of Series A Preferred remain outstanding, the
Board shall continue to consist of seven (7) directors and the
Series A Preferred shall vote as a single class to elect one
(1) such director;
(B) if at least 25,000 shares (and, after
the first anniversary date of the Issue Date, less than 60,000
shares) of Series A Preferred remain outstanding, the Board
shall continue to consist of seven (7) directors and the
Series A Preferred shall vote as a single class to elect two
(2) such directors; and
(C) after the first anniversary date of the
Issue Date, if at least 60,000 shares of Series A Preferred
remain outstanding, the Board shall continue to consist of
seven (7) directors and the Series A Preferred shall vote as a
single class to elect three (3) such directors.
(iii) In addition to the rights set forth in this Section
5(b), after the Second Tranche has been consummated, so long as at least 10,000
shares of Series A Preferred remain outstanding, each standing committee or
newly formed committee of the Board shall not be larger than a five-member
committee and shall have as members a proportionate number of directors elected
in accordance with this Section 5 equal to the proportion that the directors
elected in accordance with this Section 5 bears to the full Board; provided,
however, that in no case shall there be less than one director elected in
accordance with this Section 5 on each such committee.
(c) Class Voting. So long as the Second Tranche is consummated
and Tracker, collectively with its Affiliates, holds at least 32,000 shares of
Series A Preferred, Corporation shall not, without the affirmative vote or
consent of the holders of at least a majority of all outstanding shares of the
Series A Preferred, voting or consenting separately as a class without regard to
series:
(i) create any new class of equity or equity-related
securities of the Corporation;
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(ii) issue shares of any class of equity or equity-related
securities that by their terms rank senior to, or pari passu with, the Series A
Preferred as to dividends or upon liquidation or increase the authorized number
of shares of any such class, or have a conversion or purchase price less than
the Conversion Price or other terms and conditions that, individually or in the
aggregate, are more favorable than the terms and conditions of the Series A
Preferred;
(iii) redeem, repurchase or pay dividends on any securities of
the Corporation, other than payment of dividends on the Series A Preferred;
(iv) alter or change the number of directors that comprise the
Board or any of the provisions of the Corporation's Articles of Incorporation
(including, without limitation, any of the terms and conditions set forth in
this Statement of Designations) or Bylaws so as to adversely affect the relative
rights and preferences of any outstanding share of Series A Preferred of the
Corporation;
(v) consummate or enter into an agreement with respect to any
voluntary sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of the Corporation, or the consolidation, merger or other business
combination of the Corporation with or into one or more entities (each, a "Sale
Transaction"); provided, however, that, at any time prior to the third
anniversary of the Issue Date, if (a) a bona fide proposal with respect to a
Sale Transaction has been received by the Corporation, and (b) such proposal is
at a price per share of Common Stock at least four (4) times the Conversion
Price as of the Issue Date, then holders of Series A Preferred shall only be
entitled to vote on such Sale Transaction in accordance with Section 5(a) and
not as a separate class in accordance with this Section 5(c); or
(vi) consummate any of the transactions set forth in Section
4(a).
(d) Notwithstanding anything to the contrary in Section 5(c),
the Corporation may issue Junior Securities without the affirmative vote or
consent of the holders of the Series A Preferred in the following instances:
(i) issuances pursuant to stock options or other equity
incentive plans that were in existence prior to the Issue Date for employees,
officers and/or directors of the Corporation;
(ii) issuances to financial institutions or equipment leasing
organizations in connection with bona fide financial or leasing transactions
entered into in the ordinary course of business pursuant to which the
Corporation is a party ;
(iii) issuances to customers or suppliers of the Corporation
in connection with bona fide commercial agreements entered into in the ordinary
course of business pursuant to which the Corporation is a party; and
(iv) issuances to professional services firms of the
Corporation in connection with bona fide relationships entered into in the
ordinary course of business pursuant to which the Corporation is a party;
provided, however, that (A) the aggregate issuances pursuant
to this Section 5(d) shall not exceed 10% of the issued and outstanding common
stock of the Corporation as of the Issue Date; and (B) this Section 5(d) shall
not apply with respect to any transaction having a primary purpose related to
the raising of capital.
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6. Conversion. The holders of shares of Series A Preferred shall have
the right to convert all or a portion of such shares into fully paid and
nonassessable shares of Common Stock as follows:
(a) Right to Convert. Subject to and upon compliance with the
provisions of this Section 6, the shares of Series A Preferred shall be
converted into the number of fully paid and nonassessable shares of Common Stock
(calculated as to each conversion rounded down to the nearest 1/100th of a
share) obtained by dividing the aggregate Liquidation Value of the shares to be
converted, plus all accrued but unpaid dividends thereon through the date of
conversion (unless the holder of shares of Series A Preferred being so converted
shall have elected to receive any such dividends in respect of the shares being
converted subsequent to conversion), by the then Conversion Price and by
surrender of such shares, such surrender to be made in the manner provided in
paragraph (b) of this Section 6. The Common Stock issuable upon conversion of
the shares of Series A Preferred, when such Common Stock shall be issued in
accordance with the terms hereof, is hereby declared to be and shall be duly
authorized, validly issued, fully paid and nonassessable Common Stock. The
shares of Series A Preferred shall be converted:
(i) at any time and from time to time, in part or in whole, at
the election of a holder of Series A Preferred by written notice to the
Corporation that such holder elects to convert some or all of such holder's
Series A Preferred and stating therein the number of shares of Series A
Preferred being converted; or
(ii) within thirty (30) days of receipt of a redemption notice
from the Corporation in accordance with Section 7 hereof, in part or in whole,
at the election of a holder of Series A Preferred, by written notice to the
Corporation that such holder elects to convert some or all of such holder's
Series A Preferred and stating therein the number of shares of Series A
Preferred being converted.
(b) Mechanics of Conversion. Certificates for each share of
Series A Preferred being converted under Section 6(a) shall be surrendered, duly
endorsed, at the principal office of the Corporation or of any transfer agent
for the Series A Preferred, accompanied by written notice whether all accrued
and unpaid dividends in respect of such shares shall be included in the
calculation set forth in Section 6(a) hereof, and setting forth the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued if such name or names shall be different than that of
such holder. Thereupon, the Corporation shall issue and deliver at such office
on the second succeeding Business Day (unless such conversion is in connection
with an underwritten public offering of Common Stock, in which event
concurrently with such conversion) to such holder or on such holder's written
order, (i) a certificate or certificates for the number of validly issued, fully
paid and nonassessable full shares of Common Stock to which such holder is
entitled and (ii) if less than the full number of shares of Series A Preferred
evidenced by the surrendered certificate or certificates are being converted, a
new certificate or certificates, of like tenor, for the number of shares
evidenced by such surrendered certificate or certificates less the number of
shares converted. Each conversion under 6(a)(i) shall be deemed to have been
effected immediately prior to the close of business on the date of such
surrender of the shares to be converted (except that if such conversion is in
connection with an underwritten public offering of Common Stock, then such
conversion shall be deemed to have been effected upon such surrender) so that
the rights of the holder thereof as to the shares of Series A Preferred being
converted shall cease at such time except for the right to receive shares of
Common Stock and if the holder of the shares of Series A Preferred being so
converted shall have elected to receive dividends subsequent to such conversion,
all accrued and unpaid dividends in accordance herewith, and the person entitled
to receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common Stock at
such time. Each conversion under 6(a)(ii) shall be deemed to have been effected
on the close of business on the date indicated in the written notice required
thereby.
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(c) Conditional Conversion. Notwithstanding any other
provision hereof, if conversion of any shares of Series A Preferred is to be
made in connection with a public offering of Common Stock or any transaction
described in Section 6(d)(vi) hereof, the conversion of any shares of Series A
Preferred may, at the election of the holder thereof, be conditioned upon the
consummation of the public offering or such transaction, in which case such
conversion shall not be deemed to be effective until the consummation of such
public offering or transaction or, if the shares of Common Stock to be received
are sold as part of such public offering such conversion at the election of the
holder of the Series A Preferred being converted may be deemed to be
simultaneous with the consummation of such public offering.
(d) Adjustment of the Conversion Price. The Conversion Price
shall be adjusted from time to time as follows:
(i) Adjustment for Stock Dividends, Splits and Combinations.
If the Corporation at any time or from time to time after the Issue Date, pays a
stock dividend in shares of Common Stock, effects a subdivision of the
outstanding Common Stock, combines the outstanding shares of Common Stock, or
issues by reclassification of shares of its Common Stock any shares of capital
stock of the Corporation, then, in each such case, the Conversion Price in
effect immediately prior to such event shall be adjusted so that each holder of
shares of Series A Preferred shall have the right to convert its shares of
Series A Preferred into the number of shares of Common Stock which it would have
owned after the event had such shares of Series A Preferred been converted
immediately before the happening of such event; provided, however, that no
adjustment shall be made hereunder to the extent the Corporation issues to the
holders of Series A Preferred the shares or other instruments delivered to the
holders of Common Stock in connection with such event. Any adjustment under this
Section 6(d)(i) shall become effective retroactively immediately after the
record date in the case of a dividend and shall become effective immediately
after the effective date in the case of an issuance, subdivision, combination or
reclassification.
(ii) Issuance of Additional Shares of Stock. If at any time
the Corporation shall (except as hereinafter provided) issue or sell any
Additional Shares of Stock in exchange for consideration in an amount per
Additional Share of Stock less than the Conversion Price in effect immediately
prior to such issuance or sale of Additional Shares of Stock, then the
Conversion Price in effect immediately prior to such issuance or sale of such
Additional Shares of Stock (the "Adjustment Event") shall be adjusted to equal
the price determined by multiplying such Conversion Price by a fraction, of
which: (A) the numerator shall be (1) the number of shares of Common Stock
outstanding immediately prior to such Adjustment Event plus (2) the number of
shares of Common Stock which the aggregate amount of consideration, if any,
received by the Corporation for the total number of Additional Shares of Stock
would purchase at the Conversion Price per share of the Common Stock in effect
immediately prior to such Adjustment Event, and (B) the denominator shall be the
number of shares of Common Stock outstanding immediately after such Adjustment
Event; provided, however, that such adjustment shall be made only if the
Conversion Price determined from such adjustment shall be less than the
Conversion Price in effect immediately prior to the issuance of such Additional
Shares of Stock. The provisions of this Section 6(d)(ii) shall not apply to any
issuance of Additional Shares of Common Stock for which an adjustment is
provided under Section 6(d)(i) or 6(d)(iii) or which are dividends or
distributions received by the holders of the Series A Preferred pursuant to
Section 3(b) hereof.
(iii) (A) Issuance of Warrants or Other Rights. If at any time
the Corporation shall in any manner (whether directly or by assumption in a
merger in which the Corporation is the surviving corporation) issue or sell any
warrants or other rights to subscribe for or purchase any Additional Shares of
Stock or any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the per share consideration
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received for such warrants or other rights shall be less than the Conversion
Price in effect immediately prior to the time of such issue or sale, then the
Conversion Price shall be adjusted as provided in Section 6(d)(ii), except that
"Adjustment Event" shall mean such issuance or sale and the denominator shall
include the Additional Shares of Stock that would be issued upon exercise of
such warrants and rights and conversion of any such Convertible Securities. No
further adjustments of the Conversion Price shall be made upon the actual issue
or sale of such Additional Shares of Stock or of such Convertible Securities
upon exercise of such warrants or other rights or upon the actual issue of
Common Stock upon the conversion or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. If at any time the
Corporation shall in any manner (whether directly or by assumption in a merger
in which the Corporation is the surviving corporation) issue or sell, any
Convertible Securities, whether or not the rights to convert thereunder are
immediately exercisable, and the portion of the consideration received for such
Convertible Securities allocable to one share of Common Stock on an as-converted
basis shall be less than the Conversion Price in effect immediately prior to the
time of such issue or sale, then the Conversion Price shall be adjusted as
provided in Section 6(d)(ii), except that "Adjustment Event" shall mean such
issuance or sale and the denominator shall include the Additional Shares of
Stock that would be issued upon conversion of such Convertible Securities. No
adjustment of the Conversion Price shall be made under this Section 6(d)(iii)(B)
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 6(d)(iii)(A). No further
adjustments of the Conversion Price shall be made upon the actual issue of
Common Stock upon conversion of such Convertible Securities and, if any issue or
sale of such Convertible Securities is made upon exercise of any warrant or
other right to subscribe for or to purchase any such Convertible Securities for
which adjustments of the Conversion Price have been or are to be made pursuant
to other provisions of this Section 6(d), no further adjustments of the
Conversion Price shall be made by reason of such issue or sale.
(iv) Superseding Adjustments. If, at any time after any
adjustment of the Conversion Price at which the Series A Preferred is
convertible shall have been made pursuant to Section 6(d)(iii) as a result of
any issuance of warrants, rights or Convertible Securities, (A) such warrants or
rights, or the right of conversion or exchange in such other Convertible
Securities, shall expire, and all or a portion of such warrants or rights, or
the right of conversion or exchange with respect to all or a portion of such
other Convertible Securities, as the case may be, shall not have been exercised,
or (B) the consideration per share for which shares of Common Stock are issuable
pursuant to such warrants or rights, or the terms of such other Convertible
Securities, shall be increased solely by virtue of provisions therein contained
for an automatic increase in such consideration per share upon the occurrence of
a specified date or event, then such previous adjustment pursuant to Section
6(d)(iii) shall be rescinded and annulled and the Additional Shares of Stock
which were deemed to have been issued by virtue of the computation made in
connection with the adjustment so rescinded and annulled shall no longer be
deemed to have been issued by virtue of such computation. Immediately
thereafter, a recomputation shall be made of the effect of such rights or
options or other Convertible Securities on the basis of (y) treating the number
of Additional Shares of Stock or other property, if any, theretofore actually
issued or issuable pursuant to the previous exercise of any such warrants or
rights or any such right of conversion or exchange, as having been issued on the
date or dates of any such exercise and for the consideration actually received
and receivable therefor, and (z) treating any such warrants or rights or any
such other Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase of the
consideration per share for which shares of stock or other property are issuable
under such warrants or rights or other Convertible Securities; whereupon a new
adjustment of the Conversion Price at which the Series A Preferred is
convertible shall be made, which new adjustment shall supersede the previous
adjustment so rescinded and annulled.
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(v) Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to making adjustments to
the shares of Common Stock into which the Series A Preferred is convertible and
the Conversion Price at which the Series A Preferred is convertible provided for
in this Section 6(d):
(A) Computation of Consideration. As to the cash consideration
paid by the Company, and subject to the fourth sentence of this Section 6(v)(a),
to the extent that any Additional Shares of Stock or any Convertible Securities
or any warrants or other rights to subscribe for or purchase any Additional
Shares of Stock or any Convertible Securities shall be issued for cash
consideration, the consideration received by the Corporation therefor shall be
the amount of the cash received by the Corporation therefor, or, if such
Additional Shares of Stock or Convertible Securities are offered by the
Corporation for subscription, the subscription price, or, if such Additional
Shares of Stock or Convertible Securities are sold to underwriters or dealers
for public offering without a subscription offering, the initial public offering
price (in any such case subtracting any amounts paid or receivable for accrued
interest or accrued dividends). To the extent that such issuance shall be for a
consideration other than cash, then except as herein otherwise expressly
provided, the amount of such consideration shall be deemed to be the fair value
of such consideration at the time of such issuance as determined in good faith
by the Board. In case any Additional Shares of Stock or any Convertible
Securities or any warrants or other rights to subscribe for or purchase such
Additional Shares of Stock or Convertible Securities shall be issued in
connection with any merger in which the Corporation issues any securities, the
amount of consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Corporation, of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such Additional Shares of
Stock, Convertible Securities, warrants or other rights, as the case may be. The
consideration for warrants or other rights to subscribe for or purchase any
Additional Shares of Stock or any Convertible Securities shall be the
consideration received by the Corporation for issuing such warrants or other
rights plus the additional consideration payable (or deemed paid) to the
Corporation upon exercise of such warrants or other rights plus, in the case of
Convertible Securities, the additional consideration, if any, payable (or deemed
paid) to the Corporation upon the exercise of the right of conversion or
exchange of such Convertible Securities. The consideration for any Convertible
Securities shall be the consideration received by the Corporation for issuing
warrants or other rights to subscribe for or purchase such Convertible
Securities, plus the consideration paid or payable to the Corporation in respect
of the subscription for or purchase of such Convertible Securities, plus the
additional consideration, if any, payable (or deemed paid) to the Corporation
upon the exercise of the right of conversion or exchange of such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Stock or Convertible Securities in payment or satisfaction of any dividends or
interest upon any class of stock other than Common Stock or Convertible
Securities, the Corporation shall be deemed to have received for such Additional
Shares of Stock or Convertible Securities a consideration equal to the amount of
such dividend so paid or satisfied.
(B) When Adjustments to Be Made. The adjustments required by
this Section 6(d) shall be made whenever and as often as any event requiring an
adjustment shall occur, except that any adjustment of the Conversion Price that
would otherwise be required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as provided for in
Section 6(d)(i)) if such adjustment either by itself or with other adjustments
not previously made amount to a change in the Conversion Price of less than
$.05. Any adjustment representing a change of less than such minimum amount
(except as aforesaid) that is postponed shall be carried forward and made as
soon as such adjustment, together with other adjustments required by this
Section 6(d) and not previously made, would result in a minimum adjustment. For
the purpose of any adjustment, any event shall be deemed to have occurred at the
close of business on the date of its occurrence.
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(C) Fractional Interests. In computing adjustments under this
Section 6(d), fractional interests in the Common Stock shall be taken into
account to the nearest 1/100th of a share.
(vi) Reorganization, Reclassification, Merger or
Consolidation. If the Corporation shall at any time reorganize or reclassify the
outstanding shares of Common Stock (other than a change in par value, or from no
par value to par value, or from par value to no par value, or as a result of a
subdivision or combination) or consolidate with or merge into another
corporation, the Series A Preferred shall automatically become convertible into
the same kind and number of shares of stock and other securities, cash or other
property (and upon the same terms and with the same rights) as would have been
receivable by a holder of the number of shares of Common Stock into which such
shares of Series A Preferred could have been converted immediately prior to such
reorganization, reclassification, consolidation or merger (the "Post Merger
Securities"). The Conversion Price upon such conversion shall be the Conversion
Price that would otherwise be in effect pursuant to the terms hereof, but shall
be adjusted proportionately to reflect the relationship between the number of
Post Merger Securities obtainable upon the conversion of a share of Series A
Preferred and the number of shares of Common Stock into which a share of Series
A Preferred Stock could have been converted immediately prior to such
transaction. Notwithstanding anything herein to the contrary, the Corporation
will not effect any such reorganization, reclassification, merger or
consolidation unless prior to the consummation thereof, the corporation which
may be required to deliver any stock, securities or other assets upon the
conversion of the Series A Preferred shall agree by an instrument in writing to
deliver such stock, cash, securities or other assets to the holders of the
Series A Preferred. A sale, transfer or lease of all or substantially all of the
assets of the Corporation to another person shall be deemed a reorganization,
reclassification, consolidation or merger for the foregoing purposes.
(vii) Adjustment Upon Conversion of Brunswick Note. In the
event that (i) the Corporation receives a conversion notice from the holder of
the Brunswick Note (other than Tracker) (the "Brunswick Conversion Notice")
prior to binding effectiveness of the Corporation's notice to prepay the
Brunswick Note in accordance with the terms of the Brunswick Note, or (ii)
Brunswick converts the Brunswick Note notwithstanding the delivery of any
prepayment notice by the Corporation (and such conversion was able to occur for
any reason other than solely as a result of a breach by Tracker of its
obligation with respect to its exercise of the Warrant and to deposit into
escrow the entire exercise price therefor as contemplated by the parties hereto
in that certain escrow agreement described in Section 2.2 of the Purchase
Agreement), the Conversion Price shall be reduced to a price per share so as to
result in the Series A Preferred then outstanding and issuable upon the exercise
of the Warrant being convertible into that number of shares of Common Stock such
that the percentage interest of Common Stock (determined on an as-if converted
and exercised basis) held by Tracker before receipt by the Corporation of the
Brunswick Conversion Notice shall be equal to the percentage interest of Common
Stock (determined on an as-if converted and exercised basis) held by Tracker
after conversion of the Brunswick Note.
(viii) Exceptions to Adjustment of Conversion Price. Anything
herein to the contrary notwithstanding, the Corporation shall not make any
adjustment of the Conversion Price in the case of issuance of Additional
Preferred Shares as dividends on shares of Series A Preferred.
(ix) Officer's Certificate. Upon each adjustment of the
Conversion Price, and in the event of any change in the rights of a holder of
Series A Preferred by reason of other events herein set forth, then and in each
such case, the Corporation will promptly provide a certificate of a duly
authorized officer of the Corporation, stating the adjusted Conversion Price, or
specifying the other shares of the Common Stock, securities or assets and the
amount thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
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(x) Corporation to Prevent Dilution. In case at any time or
from time to time conditions arise by reason of action taken by the Corporation,
which in the good faith opinion of its Board are not adequately covered by the
provisions of this Section 6(d), and which might materially and adversely affect
the exercise rights of the holders of the Series A Preferred, the Board shall
appoint a firm of independent certified public accountants, which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
standards established in the other provisions of this Section 6(d), necessary
with respect to the Conversion Price, so as to preserve, without dilution (other
than as specifically contemplated by the Articles of Incorporation), the
exercise rights of the holders of the Series A Preferred. Upon receipt of such
opinion, the Board shall forthwith make the adjustments described therein.
(e) No Impairment. The Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation (it being understood that the Corporation will not be prohibited
from taking actions that are permitted by the terms hereunder), but will at all
times in good faith assist in the carrying out of all the provisions of Section
6 hereof and in the taking of all such action as may be necessary or appropriate
in order to protect the conversion rights of the holders of the Series A
Preferred against impairment.
(f) No Fractional Shares Adjustments. No fractional shares
shall be issued upon conversion of the Series A Preferred. The number of full
shares of Common Stock issuable upon conversion of all shares of Series A
Preferred converted by the same shareholder at the same time shall be computed
on the basis of the aggregate amount of the shares to be converted. Instead of
any fractional shares of Common Stock which would otherwise be issuable upon
conversion of any shares of Series A Preferred, the Corporation will pay a cash
adjustment in respect of such fractional interest in an amount equal to the same
fraction of the Market Price per share of Common Stock on the day of conversion.
(g) Shares to be Reserved. The Corporation shall at all times
reserve and keep available, out of its authorized and unissued stock, solely for
the purpose of effecting the conversion of the Series A Preferred, such number
of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Series A Preferred from time to time outstanding. The
Corporation shall from time to time, in accordance with the laws of the State of
Texas, use its best efforts to obtain shareholder approval to increase, and
thereafter, to increase the authorized number of shares of Common Stock if at
any time the number of shares of authorized but unissued Common Stock shall be
insufficient to permit the conversion in full of the Series A Preferred.
(h) Taxes and Charges. The Corporation will pay any and all
issue or other taxes that may be payable in respect of any issuance or delivery
of shares of Common Stock on conversion of the Series A Preferred. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance or delivery of Common Stock
in a name other than that of the registered holder of the Series A Preferred,
and no such issuance or delivery shall be made unless and until the Person
requesting such issuance has paid to the Corporation the amount of such tax or
has established, to the satisfaction of the Corporation, that such tax has been
paid.
(i) Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any shares of Series A Preferred or
of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series A Preferred in any manner which interferes with the timely
conversion of such shares of Series A Preferred.
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7. Redemption.
(a) Subject to the right of the holders of the Series A
Preferred to exercise their conversion rights pursuant to section 6(a)(ii), all
of the shares of the Series A Preferred shall be redeemable at the option of the
Corporation, at any time or from time to time after the third anniversary of the
Issue Date, in whole but not in part, at a price equal to the sum of the
Liquidation Value and all accrued but unpaid dividends thereon through the date
of redemption, which such dividends shall be determined on a pro rata basis for
the number of days in the period through the date of redemption, multiplied by
the applicable Redemption Percentage (the "Redemption Price"). The redemption
shall not occur or be effective until the date of redemption set forth in the
notice of redemption delivered to holders of the Series A Preferred in
accordance with Section 7(b) hereof and may be superseded by the timely exercise
of the conversion right set forth in Section 6(a)(ii).
(b) The Corporation may exercise its redemption right set
forth in Section 7(a) by providing written notice of the Corporation's intention
to redeem all of the shares of the Series A Preferred to each holder of Series A
Preferred, at such holder's address of record, not less than thirty one (31)
days nor more than sixty (60) days prior to the date of redemption, with such
notice to specify the time and place of redemption.
(c) Unless the Corporation defaults in the payment in full of
the applicable Redemption Price, dividends on the shares called for redemption
shall cease to accrue on the date of redemption, and all rights of the holders
of such shares shall cease on the date of redemption, except the right to
receive the amount payable upon redemption of the shares on presentation and
surrender of the respective certificates representing the shares, and the shares
shall not after the date of redemption be deemed to be outstanding.
(d) Upon redemption, the shares of the Series A Preferred that
shall at any time have been redeemed or which shall have been converted pursuant
to Section (e), shall have the status of authorized but unissued shares of
preferred stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors.
8. Issuance of Additional Series A Preferred. To the extent the
Corporation issues shares of Series A Preferred in more than one issuance, all
shares of Series A Preferred issued after the Issue Date shall have all the
powers, designations, preferences and relative, participating, optional or other
rights of the Series A Preferred, as adjusted after the Issue Date.
9. Definitions. As used herein, the following terms shall have the
respective meanings set forth below:
"Additional Preferred Shares" means additional shares of Series A
Preferred paid as a dividend on shares of Series A Preferred in accordance with
Section 3(a)(i).
"Additional Shares of Stock" means all shares of Common Stock issued by
the Corporation after the Issue Date, other than (a) on any conversion of shares
of Series A Preferred, (b) pursuant to stock options or other equity incentive
plans for employees, officers and/or directors of the Corporation that (i) are
either approved by the directors appointed by the holders of the Series A
Preferred, or (ii) were in existence prior to the Issue Date, or (c) pursuant to
the terms of any other securities outstanding on the Issue Date.
"Adjustment Event" shall have the meaning set forth in Section
6(d)(ii).
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"Articles of Incorporation" shall have the meaning set forth in the
second paragraph of this Statement of Designations.
"Board" shall have the meaning set forth in the first paragraph of this
Statement of Designations.
"Brunswick" means Brunswick Corporation, a Delaware corporation.
"Brunswick Conversion Notice" shall have the meaning set forth in
Section 6(d)(vii).
"Brunswick Note" means the Convertible Subordinated Promissory Note
dated December 14, 2001 with an initial face value of $3,000,000 initially
issued to Brunswick.
"Business Day" means any day that is not a Saturday, a Sunday or any
day on which banks in the State of Missouri or Texas are authorized or obligated
to close.
"Bylaws" means the Second Amended and Restated Bylaws of the Company.
"Common Stock" means the Corporation's Common Stock, par value $.01 per
share, and shall also include any capital stock or other securities of the
Corporation into which Common Stock is changed, including by way of a
reclassification, combination or subdivision.
"Conversion Price" means the Conversion Price per share of Common Stock
into which the Series A Preferred is convertible, as such Conversion Price may
be adjusted pursuant to Section 6 hereof. The initial Conversion Price will be
$2.4594.
"Convertible Securities" means evidences of indebtedness, shares of
preferred stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Stock, either immediately or upon the occurrence of a
specified date or a specified event (including, without limitation, the
Affiliate Notes), other than the Series A Preferred Stock and the Warrant.
"Corporation" means Travis Boats & Motors, Inc., a Texas corporation.
"Dividend Payment Date" shall have the meaning set forth in Section
3(a)(ii).
"Issue Date" means the date of the first issuance of any shares of the
Series A Preferred by the Corporation.
"Junior Securities" shall have the meaning set forth in Section 2.
"Liquidation Value" shall have the meaning set forth in Section
3(a)(iii)(B).
"Market Price" means, as to any security on the date of determination
thereof, the average of the closing prices of such security's sales on all
principal United States securities exchanges on which such security may at the
time be listed, or, if there shall have been no sales on any such exchange on
any day, the last trading price of such security on such day, or if there is no
such price, the average of the bid and asked prices at the end of such day, on
the Nasdaq National Market, in each such case averaged for a period of twenty
(20) consecutive Business Days prior to the day when the Market Price is being
determined; provided, that if such security is listed on any United States
securities exchange the term "Business Days" as used in this sentence means
business days on which such exchange is open for trading. Notwithstanding the
foregoing, with respect to the issuance of any security by the Corporation in an
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underwritten public offering, the Market Price shall be the per share purchase
price paid by the public investors. If at any time such security is not listed
on any exchange or the Nasdaq National Market, the Market Price shall be deemed
to be the fair value thereof determined by an investment banking firm of
nationally recognized standing selected by the Board, as of the most recent
practicable date when the determination is to be made, taking into account the
value of the Corporation as a going concern, and without taking into account any
lack of liquidity of such security or any discount for a minority interest.
"Parity Securities" means any securities of the Corporation which by
their terms rank pari passu either as to the payment of dividends or as to
distributions of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary.
"Person" or "person" shall mean an individual, partnership,
corporation, trust, unincorporated organization, joint venture, government or
agency, political subdivision thereof, or any other entity of any kind.
"Post Merger Securities" shall have the meaning set forth in Section
6(d)(vi).
"Purchase Agreement" shall have the meaning set forth in Section
3(a)(i).
"Redemption Percentage" shall mean a percentage equal to 104% during
the period commencing on the third anniversary date of the Issue Date and ending
on the day before the fourth anniversary date of the Issue Date, 103% during the
period commencing on the fourth anniversary date of the Issue Date and ending on
the day before the fifth anniversary date of the Issue Date, 102% during the
period commencing on the fifth anniversary date of the Issue Date and ending on
the day before the sixth anniversary date of the Issue Date, 101% during the
period commencing on the sixth anniversary date of the Issue Date and ending on
the day before the seventh anniversary date of the Issue Date, and 100%
beginning on the seventh anniversary date of the Issue Date and thereafter.
"Redemption Price" shall have the meaning set forth in Section 7(a).
"Sale Transaction" shall have the meaning set forth in Section 5(c)(v).
"Series A Liquidation Preference" shall have the meaning set forth in
Section 4(a).
"Series A Preferred" shall have the meaning set forth in Section 1.
"Tracker" shall have the meaning set forth in Section 3(a)(i).
"Warrant" shall mean the warrant to purchase shares of Series A
Preferred issuable to the initial holder of Series A Preferred as of the Second
Closing.
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IN WITNESS WHEREOF, Travis Boats & Motors, Inc. has caused this
Statement of Designation to be signed on its behalf by Mark T. Walton, its
President, and Michael B. Perrine, its Secretary, this _____ day of
__________________, 2002.
TRAVIS BOATS & MOTORS, INC.
By:
--------------------------------------------
Mark T. Walton, President
ATTEST
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Michael B. Perrine, Secretary
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