Exhibit 3.1
CERTIFICATE OF DESIGNATION
of
SERIES B PREFERRED STOCK
of
3TEC ENERGY CORPORATION
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Pursuant to Section 151
of the General Corporation Law of Delaware
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3TEC ENERGY CORPORATION, a corporation existing under the laws of the
State of Delaware (the "Corporation"), DOES HEREBY CERTIFY that, pursuant to the
authority conferred on the Board of Directors of the Corporation by the
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and in accordance with Section 151 of the General Corporation
Law of the State of Delaware ("DGCL"), the Board of Directors of the Corporation
on October 1, 1999 duly adopted the following resolution establishing and
creating a series of its Preferred Stock, par value $.02 per share, designated
"Series B Preferred Stock".
RESOLVED, that pursuant to authority vested in the Board of
Directors of the Corporation (the "Board of Directors") in accordance
with the provisions of its Certificate of Incorporation (the "Certificate
of Incorporation"), a series of Preferred Stock, par value $.02 per
share, of the Corporation is hereby created, and the designation and
number of shares thereof and the preferences, limitations and relative
rights thereof are as follows:
1. DESIGNATION, NUMBER OF SHARES AND STATED VALUE OF SERIES B
PREFERRED STOCK. There is hereby authorized and established a series of
Preferred Stock that shall be designated as "Series B Preferred Stock", and the
number of shares constituting such series shall be 266,667. Such number may be
increased or decreased, but not to a number less than the number of shares of
Series B Preferred Stock then issued and outstanding, by resolution adopted by
the full Board of Directors. The "stated value" of the Series B Preferred Stock
shall be $7.50 per share.
2. CERTAIN DEFINITIONS.
"COMMON STOCK" means, collectively, the Corporation's Common Stock, par
value $.02 per share, and any capital stock of any class of the Corporation
hereafter authorized
which is not limited to a fixed sum or percentage of par or stated value in
respect to the rights of the holders thereof to participate in dividends or
in the dissolution of assets upon any liquidation, dissolution or winding up
of the Corporation.
"JUNIOR SECURITIES" means any of the Corporation's equity securities
other than the Series B Shares.
"LIQUIDATION VALUE" of any Series B Share as of any particular date will
be equal to the sum of $7.50 plus, in the event of any liquidation, dissolution
or winding up of the Corporation, any declared but unpaid dividends on such
Series B Share shall be added to the Liquidation Value of such Share on the
payment date in any liquidation, dissolution or winding up accrued to the close
of business on such payment date.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"SERIES B SHARE" means a share of the Series B Preferred Stock.
3. DIVIDENDS; CAPITAL.
A. GENERAL. When and as declared by the Corporation's Board
of Directors and only to the extent permitted under the
DGCL, the Corporation may, but is not required to, pay
dividends to the holders of its Series B Preferred Stock;
however, the Corporation shall not be restricted from
declaring and paying dividends to the holders of any Junior
Securities out of funds lawfully available for payment of
such dividends.
B. CAPITAL. Upon issuance of any Series B Preferred Stock,
the entire consideration received therefor shall be
allocated to the "capital" of the Corporation, and the
Corporation shall take no action to reduce its capital in
respect of the Series B Preferred Stock below the
Liquidation Value of all outstanding Series B Preferred
Stock.
4. LIQUIDATION. Upon any liquidation, dissolution or winding up of
the Corporation, subject to the conversion rights set forth in Paragraph 5.
hereof, the holders of Series B Shares will be entitled to be paid, before any
distribution or payment is made upon any Junior Securities, an amount in cash
equal to the Liquidation Value (including the amount of declared but unpaid
dividends, if any) of all Series B Shares outstanding. If, upon any such
liquidation, dissolution or winding up of the Corporation, the Corporation's
assets to be distributed among the holders of the Series B Shares are
insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid, then the entire assets to be distributed in
respect of such Series B Shares will be distributed ratably among such holders
based upon the Liquidation Value of the Series B Shares held by each such
holder. The Corporation will mail written notice of such liquidation,
dissolution or winding up not less than 60 days prior to the payment date stated
therein, to each record holder of Series B Shares. Neither the consolidation or
merger of the
Corporation into or with any other corporation or corporations, the sale or
transfer by the Corporation of all or any part of its assets nor the
reduction of the capital stock of the Corporation will be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning
of this Paragraph 4.
5. CONVERSION.
A. CONVERSION BY HOLDER.
(1) Until December 31, 2002 (the "Conversion Period"),
any holder of Series B Shares may convert all or any
portion of the Series B Shares held by such holder
into shares of Common Stock (i) at a ratio of one
share of Common Stock for each Series B Share or
(ii) pursuant to the Alternative Conversion Method
based on Cumulative Value, as described and defined
in and in accordance with Section 2.9 of that
certain Agreement and Plan of Merger dated June 20,
1997 among Middle Bay Oil Company, Inc., Shore
Acquisition Company, Shore Oil Company and its
shareholders, which Section 2.9 is incorporated
herein.
(2) Upon the expiration of the Conversion Period, unless
the Corporation has given prior notice of intent to
redeem the Series B Shares pursuant to Paragraph 7.,
all outstanding Series B Shares shall be
automatically converted pursuant to
Paragraph 5.A(1)(i) or 5.A(2)(ii), whichever
provides for a greater conversion ratio.
(3) Any conversion will be deemed effected (i) at the
close of business on the date which the certificate
or certificates representing the Series B Shares to
be converted have been delivered by the holder to
the Corporation at its principal office, together
with a request for conversion of such Series B
Shares, or (ii) upon the last day of the Conversion
Period if the Series B Shares are converted pursuant
to Paragraph 5.A(2)(ii).
(4) In no event shall the aggregate total number of
Shares of Common Stock into which the Series B
Shares are converted exceed
1,333,333 Shares (except as that number may be
adjusted pursuant to Paragraph 6).
B. CONVERSION PROCEDURES.
(1) At such time as a conversion has been effected, the
rights of the holder of such Series B Shares as such
holder will cease and the Person or Persons in whose
name or names any certificate or certificates for
shares of Common Stock are to be issued upon such
conversion will be deemed to have become the holder
or holders of record of the shares of Common Stock
represented thereby.
(2) As soon as possible after a conversion has been
effected, the Corporation will deliver to the holder
of Series B Shares being converted:
a. A certificate or certificates representing
the number of shares of Common Stock issuable
by reason of such conversion in such name or
names and such denomination or denominations
as the converting holder has specified; and
b. A certificate representing any Series B
Shares which were represented by the
certificate or certificates delivered to the
Corporation in connection with such
conversion but which were not converted.
(3) The issuance of certificates for shares of Common
Stock upon conversion of Series B Shares will be
made without charge to the holders of such Series B
Shares for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection
with such conversion and the related issuance of
shares of Common Stock. Upon conversion of each
Series B Share, the Corporation will take all such
actions as are necessary in order to insure that the
Common Stock issuable with respect to such
conversion will be validly issued, fully paid and
nonassessable.
(4) The Corporation will not close its books against the
transfer of Series B Shares or of Common Stock
issued or issuable upon conversion of Series B
Shares in any manner which interferes with the
timely conversion of Series B Shares.
6. ANTI-DILUTION PROVISIONS. In the event that the Common Stock
hereafter is changed into or exchanged for a different number or kind of shares
or other securities of the Corporation or of another corporation by reason of
merger, consolidation, other reorganization, recapitalization, reclassification,
combination of shares, stock split-up or stock dividend:
A. The aggregate number and kind of shares subject to the
conversion rights granted hereunder shall be adjusted
appropriately;
B. Conversion rights granted hereunder, both as to the number
of subject Series B Shares and the Cumulative Value, shall
be adjusted appropriately;
C. Where dissolution or liquidation of the Corporation or any
merger or combination in which the Corporation is not a
surviving corporation is involved, each outstanding
conversion right granted hereunder shall terminate, but the
holder shall have the right, immediately prior to such
dissolution, liquidation, merger or combination, to
exercise his conversion right, in whole or in part, to the
extent that it shall not have been exercised; and
D. Such new or additional or different shares or securities
which are distributed to holder, in his capacity as the
owner of Common Stock issued pursuant to the conversion
rights granted hereunder, shall be subject to all of the
conditions and restrictions applicable to the Common Stock
issuable hereunder.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined solely by the Corporation, and any such
adjustment may provide for the elimination of fractional share interests.
7. OPTIONAL REDEMPTION.
A. Subject to prior exercise of conversion rights by the
holder during the Conversion Period, the Series B Preferred
Stock may be redeemed, in whole or in part, upon notice
given as provided in Paragraph 7.B. (but subject to the
terms and conditions hereinafter set forth), at the option
of the Corporation, at any time and from time to time after
December 31, 2002, at a redemption price of $7.50 per
Share, together with any dividends declared and unpaid
thereon to the date of redemption (the "Redemption Price"),
so long as funds are legally available for such redemption.
B. If pursuant to Paragraph 7.A. the Corporation shall redeem
any shares of Series B Preferred Stock, the Corporation
shall give written notice of such redemption to each holder
of record of Series B Shares to be redeemed not less than
thirty (30) nor more than ninety (90) days prior to the
date fixed for redemption, by certified mail enclosed in a
postage-paid envelope addressed to such holder at such
holder's address as the
same shall appear on the books of the Corporation. Such
notice shall (i) state that the Corporation has elected
to redeem such Series B Shares, (ii) state the date
fixed for redemption, (iii) state the Redemption Price
and (iv) call upon such holder to surrender to the
Corporation on or after said date at its principal place
of business designated in such notice a certificate or
certificates representing the number of Series B Shares
to be redeemed in accordance with such notice. On or
after the date fixed in such notice for redemption, each
holder of shares of Series B Preferred Stock to be so
redeemed shall present and surrender the certificate or
certificates for such Series B Shares to the Corporation
at the place designated in said notice, and thereupon
the Redemption Price of such Series B Shares shall be
paid to, or to the order of, the Person whose name
appears on such certificate or certificates as the owner
thereof. From and after the date fixed in any such
notice as the date for redemption, unless default shall
be made by the Corporation in providing for the payment
of the Redemption Price pursuant to such notice, all
rights of the holders of the Series B Shares so redeemed,
except the right to receive the Redemption Price (but
without interest thereon), shall cease and terminate.
If less than all of the outstanding Series B Shares are
to be redeemed, the Series B Shares to be redeemed shall
be allocated among the holders thereof in proportion to
the respective number of Series B Shares held by them.
C. Any Series B Shares redeemed by the Corporation shall be
retired.
8. COVENANTS OF CORPORATION. So long as any of the Series B Shares
are outstanding, the Corporation shall do all of the following (the
"Covenants"):
A. Maintain its corporate existence in good standing;
B. Maintain the general character of its business and conduct
its business in its ordinary and usual manner;
C. Maintain proper business and accounting records;
D. Comply with and perform all material obligations and duties
imposed upon it by federal, state and local laws and all
rules, regulations and orders imposed by federal, state or
local governmental authorities, except as may be contested
by them in good faith by appropriate proceedings;
E. Deliver to the holders of the Series B Preferred Shares,
within the times required for the filing of SEC Forms 10-K
and 10-Q, true and correct copies of the annual and
quarterly financial statements of the Corporation, which
statements shall be prepared in compliance with the Rules
and Regulations of the Securities and Exchange Commission;
F. Comply with all financial covenants in all loan agreements
or credit
facilities to which the Corporation is a party; and
G. Timely make all filings and submit all reports required by
the Rules and Regulations of the Securities and Exchange
Commission.
9. VOTING RIGHTS. The holders of the Series B Preferred Stock shall
have no voting rights, other than those rights afforded to them by law.
10. NOTICES. Except as otherwise expressly provided, all notices
referred to herein will be in writing and will be deemed to have been given
either when delivered personally or three business days after having been mailed
by registered or certified mail, return receipt requested, postage prepaid (i)
to the Corporation, at its principal executive offices, and (ii) to any
stockholder, at such holder's address as it appears in the stock records of the
Corporation (unless otherwise indicated by any such holder).
11. REMEDIES. The remedies afforded the holders of Series B Shares in
this Certificate of Designation are cumulative and not sole or exclusive.
12. CONFLICT WITH OTHER PROVISIONS. In the event of any conflict
between the provisions of this Certificate of Designation and any other
provisions of the Certificate of Incorporation, then the provisions of this
Certificate of Designation shall govern and control.
RESOLVED FURTHER, that the appropriate officers of the Corporation
be, and they are hereby, authorized and directed from time to time to
execute such certificates, instruments or other documents and do all such
things as may be necessary or advisable in their discretion in order to
carry out the terms hereof, including the filing with the Secretary of
State for the State of Delaware of a copy of the foregoing resolution
executed by an officer of the Corporation.
Dated November 24, 1999.
3TEC ENERGY CORPORATION
By: /s/ Floyd C. Wilson
Name: Floyd C. Wilson
Title: President