Exhibit 4.3
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TRAVIS BOATS & MOTORS, INC.
AMENDED AND RESTATED
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 April 4, 2002 to amend and restate 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).
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(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
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; provided that, solely for purposes of this
Section 5(a), the Conversion Price shall be deemed to be $2.55, subject
solely to the adjustment provisions set forth in this Section 5(a) (the
"Voting Conversion Price"). 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. 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 Voting Conversion Price in
effect immediately prior to such event shall be adjusted so that each
holder of shares of Series A Preferred shall have that number of votes
equal to the number of shares of Common Stock which it would have owned
after the event had such shares of Series A Preferred been converted at the
Voting Conversion Price 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 5(a) 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.
(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.
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(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;
(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;
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(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.
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
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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.
(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
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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 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
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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.
(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
9
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.
(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
10
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.
(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.
11
(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.
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 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
12
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).
"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
13
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
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.
14
"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).
"Voting Conversion Price" shall have the meaning set forth in Section 5(a).
"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.
15
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, this
_____ day of __________________, 2002.
TRAVIS BOATS & MOTORS, INC.
By:
--------------------------------------------
Mark T. Walton, President
16