EXHIBIT 3.1
THE MERIDIAN RESOURCE CORPORATION
STATEMENT OF DESIGNATION OF
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
PURSUANT TO ARTICLE 2.13
OF THE
TEXAS BUSINESS CORPORATION ACT
THE MERIDIAN RESOURCE CORPORATION, a corporation organized and existing
under the laws of the State of Texas (the "Company"), does hereby certify that,
pursuant to the authority conferred on the Board of Directors of the Company by
the Third Amended and Restated Articles of Incorporation of the Company and in
accordance with Article 2.13 of the Texas Business Corporation Act (the "TBCA"),
the Board of Directors of the Company adopted the following resolution on March
28, 2002, establishing a series of 1,500,000 shares of preferred stock, $1.00
par value, of the Company designated as "Series C Redeemable Convertible
Preferred Stock":
RESOLVED, that pursuant to the authority conferred on the Board of
Directors of this Company by the Articles of Incorporation, a series of
preferred stock, $1.00 par value, of the Company be and hereby is
established and created, and that the designation and number of shares
thereof and the voting and other powers, preferences and relative,
participating, optional or other rights of the shares of such series
and the qualifications, limitations and restrictions thereof are as
follows:
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
1. Designation and Amount. There shall be a series of preferred stock, $1.00 par
value, designated as "Series C Redeemable Convertible Preferred Stock", and the
number of shares constituting such series shall be 1,500,000. Such series is
referred to herein as the "Convertible Preferred Stock". Such shares may be
issued in part on the date hereof and in part on any later date.
2. Stated Capital. The amount to be represented in stated capital at all times
for each share of Convertible Preferred Stock shall be $100 (the "Stated
Value").
3. Rank. All shares of Convertible Preferred Stock shall rank prior to all of
the Company's common stock, par value $.01 per share (the "Common Stock"), now
or hereafter issued, both as to payment of dividends and as to distributions of
assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary.
4. Dividends. Subject to the provisions of Section 3 above, the holders of any
shares of Convertible Preferred Stock shall be entitled to receive, when, as and
if declared, and upon declaration by the Board of Directors out of funds at the
time legally available therefor, dividends on each such share at the rate of
8.5% of the Stated Value per annum per share, and no more, which shall be fully
cumulative, shall accrue in all events, whether or not declared, without
interest from the date of first issuance of such share of Convertible Preferred
Stock and shall be payable in cash, semi-annually in arrears on January 2 and
July 1 of each year commencing the first such date after issuance of such share
Convertible Preferred Stock (except that if any such date is a Saturday, Sunday
or legal holiday, then such dividend shall be payable on the next day that is
not a Saturday, Sunday or legal holiday) to holders of record as they appear on
the stock books of the Company on such dates. For purposes hereof, the term
"legal holiday" shall mean any day on which banking institutions are authorized
to close in Houston,
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Texas. Subject to the next paragraph of this Section 4, if dividends on the
Convertible Preferred Stock have not been paid in cash pursuant to the
provisions of this Section 4 within 30 days after a dividend payment date, the
Company, in lieu of its obligation to pay cash dividends pursuant to the
provisions of this Section 4, shall pay, within ten days after the end of such
30 day period, any such dividends in the form of additional shares of
Convertible Preferred Stock valued at the Stated Value. The amount of dividends
payable per share of Convertible Preferred Stock for each semi-annual dividend
period shall be computed by dividing the annual dividend amount by two. The
amount of dividends payable for the initial dividend period and any period
shorter than a full semi-annual dividend period shall be computed on the basis
of a 360-day year of twelve 30-day months. Dividends also shall accrue and
compound on any dividend arrearages.
Subject to the provisions of Section 3, no dividends or other
distributions, other than dividends payable solely in shares of Common Stock or
other capital stock of the Company ranking junior as to payment of dividends and
as to liquidation rights to the Convertible Preferred Stock (or rights to
purchase Common Stock or any other such capital stock), shall be declared, paid
or set apart for payment on, and no purchase, redemption or other acquisition
shall be made by the Company of, any shares of Common Stock or other capital
stock of the Company ranking junior as to payment of dividends to the
Convertible Preferred Stock (the "Junior Dividend Stock") unless and until all
accrued and unpaid dividends on the Convertible Preferred Stock then due shall
have been paid or declared and set apart for payment.
Subject to the provisions of Section 3, if at any time any dividend on
any capital stock of the Company ranking senior as to dividends to the
Convertible Preferred Stock (the "Senior Dividend Stock") shall be in default or
in arrears, in whole or in part, then (except to the extent allowed by the terms
of such Senior Dividend Stock) no dividend shall be paid or declared and set
apart for payment on the Convertible Preferred Stock unless and until all
accrued and unpaid dividends with respect to the Senior Dividend Stock then due
shall have been paid or declared and set apart for payment. No full dividends
shall be paid or declared and set apart for payment on any class or series of
the Company's capital stock ranking, as to payment of dividends, on a parity
with the Convertible Preferred Stock, if any (the "Parity Dividend Stock"), for
any period unless full cumulative dividends have been, or contemporaneously are,
paid or declared and set apart for such payment on the Convertible Preferred
Stock for all dividend payment periods terminating on or prior to the date of
payment of such full cumulative dividends. No full dividends shall be paid or
declared and set apart for payment on the Convertible Preferred Stock for any
period unless full cumulative dividends have been, or contemporaneously are,
paid or declared and set apart for payment on the Parity Dividend Stock for all
dividend periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full upon the Convertible
Preferred Stock and the Parity Dividend Stock, all dividends paid or declared
and set aside for payment upon shares of the Convertible Preferred Stock and the
Parity Dividend Stock shall be paid or declared and set aside for payment pro
rata so that the amount of dividends paid or declared and set aside for payment
per share on the Convertible Preferred Stock and the Parity Dividend Stock shall
in all cases bear to each other the same ratio that accrued and unpaid dividends
per share on the shares of the Convertible Preferred Stock and the Parity
Dividend Stock bear to each other.
Any reference to "distribution" contained in this Section 4 shall not
be deemed to include any distribution made in connection with any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary.
5. Liquidation Preference. Subject to the provisions of Section 3, in the event
of a liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the holders of Convertible Preferred Stock shall be entitled to
receive out of the assets of the Company available for
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distribution, whether such assets are stated capital or surplus of any nature,
an amount equal to the dividends accrued and unpaid thereon to the date of final
distribution to such holders, whether or not declared, without interest, and a
sum equal to $100 per share, and no more, before any payment shall be made or
any assets distributed to the holders of Common Stock or any other class or
series of the Company's capital stock ranking junior as to liquidation rights to
the Convertible Preferred Stock (the "Junior Liquidation Stock"); provided,
however, that such rights shall accrue to the holders of Convertible Preferred
Stock only if the Company's payments with respect to the liquidation preferences
of the holders of capital stock of the Company ranking senior as to liquidation
rights to the Convertible Preferred Stock (the "Senior Liquidation Stock") are
fully met. The entire assets of the Company available for distribution after the
liquidation preferences of the Senior Liquidation Stock are fully met shall be
distributed ratably among the holders of the Convertible Preferred Stock and any
other class or series of the Company's capital stock that may hereafter be
created having parity as to liquidation rights with the Convertible Preferred
Stock in proportion to the respective preferential amounts to which each is
entitled (but only to the extent of such preferential amounts). Neither a
consolidation or merger of the Company with another company nor a sale or
transfer of all or part of the Company's assets for cash, securities or other
property will be considered a liquidation, dissolution or winding up of the
Company.
6. Redemption at Option of the Company. Subject to the provisions of Section 3,
the Company, at its option at any time following the third anniversary of the
date of initial issuance, may redeem all shares of Convertible Preferred Stock,
in whole or in part, from time to time at the redemption price of $100 per
share, plus an amount in cash equal to any and all accumulated dividends that
are accrued and unpaid thereon to and including the date fixed for the
redemption. The redemption price per share as determined in this paragraph of
this Section 6 shall be hereinafter referred to as the "Redemption Price". In
the case of redemption of less than all of the outstanding shares of Convertible
Preferred Stock pursuant to this Section 6, the shares to be so redeemed shall
be selected pro rata or by lot or in such other manner as the Board of Directors
may determine, as may be prescribed by resolution of the Board of Directors of
the Company, provided that only whole shares shall be selected for redemption.
Not more than 60 nor less than 10 days before the redemption date,
notice by first class mail, postage prepaid, shall be given to the holders of
record of the Convertible Preferred Stock to be redeemed, addressed to such
holders at their last addresses as shown on the books of the Company. Each such
notice of redemption shall specify the date fixed for redemption, the Redemption
Price, the place or places of payment, that payment will be made upon
presentation and surrender of the shares of Convertible Preferred Stock, that on
and after the redemption date dividends will cease to accumulate on such shares,
the then-effective Conversion Price pursuant to Section 7 and that the right of
holders to convert shall terminate at the close of business on the fifth
business day prior to the redemption date.
Any notice that is mailed as herein provided shall be conclusively
presumed to have been duly given, whether or not the holder of the Convertible
Preferred Stock receives such notice; and failure properly to give such notice
by mail, or any defect in such notice, to the holders of any shares designated
for redemption shall not affect the validity of the proceedings for the
redemption of any other shares of Convertible Preferred Stock. On or after the
date fixed for redemption as stated in such notice, each holder of the shares
called for redemption shall surrender the certificate evidencing such shares to
the Company at the place designated in such notice and shall thereupon be
entitled to receive payment of the Redemption Price. If, on the date fixed for
redemption, funds necessary for the redemption shall be available therefor and
shall have been irrevocably deposited or set aside in the manner described in
Section 9(i), then, notwithstanding that the certificates evidencing any shares
properly called for redemption shall not have been surrendered, the dividends
with respect to the shares so called shall cease to accrue after the date fixed
for redemption, the shares shall no longer be deemed outstanding, the holders
thereof shall cease to be stockholders, and all rights whatsoever with respect
to the shares so
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called for redemption (except the right of the holders to receive the Redemption
Price without interest upon surrender of their certificates therefor) shall
terminate.
The shares of Convertible Preferred Stock shall not be subject to the
operation of any purchase, retirement or sinking fund.
7. Conversion Privilege; Mandatory Conversion.
(a) Right of Conversion at Option of Holder. Each share of Convertible
Preferred Stock shall be convertible at the option of the holder thereof, at any
time prior to the close of business on the fifth business day prior to date
fixed for redemption of such share as herein provided, into the number of fully
paid and nonassessable shares of Common Stock equal to $100 divided by the
Conversion Price (as defined in Section 7(d)) in effect from time to time.
For the purpose of this Section 7, the term "Common Stock" shall mean
the class designated as Common Stock, par value $.01 per share, of the Company,
subject to adjustment as hereinafter provided.
(b) Mandatory Conversion.
(i) If the closing sale price per share of Common Stock, as reported on
the New York Stock Exchange, is greater than 150% of the then current Conversion
Price for 30 out of 40 consecutive trading days immediately prior to the date of
delivery of a Mandatory Conversion Notice (as defined herein), and provided that
the Company is not as of the date of delivery of the Mandatory Conversion Notice
or as of the Effective Time of the Mandatory Conversion (as defined herein) in
material violation of any of its obligations under its senior credit facility or
this Statement of Designation, then the Company shall have the right to require
the conversion (the "Initial Mandatory Conversion") of up to one-third of the
then outstanding shares of Convertible Preferred Stock, which right shall be
exercisable by delivery of a Mandatory Conversion Notice (as defined herein) in
accordance with the procedures set forth in Section 7(b)(iv).
(ii) If, no earlier than 12 months following the Effective Time of the
Initial Mandatory Conversion, the closing sale price per share of Common Stock,
as reported on the New York Stock Exchange, is again greater than 150% of the
then current Conversion Price for 30 out of 40 consecutive trading days
immediately prior to the date of delivery of a Mandatory Conversion Notice (as
defined herein), and subject to the same restrictions as provided in
subparagraph (i) above, then the Company shall have the right to require the
conversion (the "Second Mandatory Conversion") of up to one-half of the then
outstanding shares of Convertible Preferred Stock, which right shall be
exercisable by delivery of a Mandatory Conversion Notice (as defined herein) in
accordance with the procedures set forth in Section 7(b)(iv).
(iii) If, no earlier than 12 months following the Effective Time of the
Second Mandatory Conversion, the closing sale price per share of Common Stock,
as reported on the New York Stock Exchange, is again greater than 150% of the
then current Conversion Price for 30 out of 40 consecutive trading days
immediately prior to the date of delivery of a Mandatory Conversion Notice (as
defined herein), and subject to the same restrictions as provided in
subparagraph (i) above, then the Company shall have the right to require the
conversion (the "Final Mandatory Conversion") of any or all remaining
outstanding shares of Convertible Preferred Stock, which right shall be
exercisable by delivery of a Mandatory Conversion Notice (as defined herein) in
accordance with the procedures set forth in Section 7(b)(iv).
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(iv) In the case of Initial Mandatory Conversion and Second Mandatory
Conversion of less than all of the outstanding shares of Convertible Preferred
Stock pursuant to this Section 7(b), the shares to be so converted shall be
selected pro rata or by lot or in such other manner as the Board of Directors
may determine, as may be prescribed by resolution of the Board of Directors of
the Company, provided that only whole shares shall be selected for conversion.
Notwithstanding the foregoing, the Company shall not redeem any of the shares of
Convertible Preferred Stock at any time outstanding until all dividends accrued
and in arrears on all shares of the Convertible Preferred Stock then outstanding
shall have been paid for all past dividend periods. The Company shall effect a
mandatory conversion under this Section 7(b) by delivering an irrevocable
written notice thereof (the "Mandatory Conversion Notice") no less than five nor
more than ten business days prior to the time on which any such mandatory
conversion is to become effective (the "Effective Time of Mandatory Conversion")
to each holder of shares of Convertible Preferred Stock subject to a mandatory
conversion in the manner provided in Section 13 hereof.
(c) Conversion Procedures. Any holder of shares of Convertible Preferred
Stock desiring to convert such shares into Common Stock, and any holders of
shares of Convertible Preferred Stock subject to mandatory conversion as
provided herein, shall surrender the certificate or certificates for such shares
of Convertible Preferred Stock at the office of the transfer agent for the
Convertible Preferred Stock, which certificate or certificates, if the Company
shall so require, shall be duly endorsed to the Company or in blank, or
accompanied by proper instruments of transfer to the Company or in blank,
accompanied by irrevocable written notice to the Company that the holder elects
so to convert such shares of Convertible Preferred Stock and specifying the name
or names (with address) in which a certificate or certificates for Common Stock
are to be issued.
Upon the conversion of any shares of Convertible Preferred Stock, the
Company shall, subject to the provisions of Sections 3 and 4, pay the holder
surrendering such shares cash in an amount equal to any accrued but unpaid
dividends to the date of conversion on such shares of Convertible Preferred
Stock. In the event the Company does not pay such accrued and unpaid dividends,
the obligation to pay such dividends shall remain outstanding and dividends
shall continue to accrue (at the dividend rate set forth in Section 4) on such
outstanding obligation.
The Company will, as soon as practicable (but in no event later than
ten business days) after such deposit of certificates for Convertible Preferred
Stock accompanied by the written notice and compliance with any other conditions
herein contained, deliver at such office of such transfer agent to the person
for whose account such shares of Convertible Preferred Stock were so
surrendered, or to his nominee or nominees, certificates for the number of full
shares of Common Stock to which he shall be entitled as aforesaid, together with
a cash adjustment of any fraction of a share as hereinafter provided. Subject to
the following provisions of this paragraph, such conversion shall be deemed to
have been made as of the date of such surrender of the shares of Convertible
Preferred Stock to be converted, and the person or persons entitled to receive
the Common Stock deliverable upon conversion of such Convertible Preferred Stock
shall be treated for all purposes as the record holder or holders of such Common
Stock on such date; provided, however, that the Company shall not be required to
convert any shares of Convertible Preferred Stock while the stock transfer books
of the Company are closed for any purpose, but the surrender of Convertible
Preferred Stock for conversion during any period while such books are so closed
shall become effective for conversion immediately upon the reopening of such
books as if the surrender had been made on the date of such reopening, and the
conversion shall be at the Conversion Price in effect on such date.
(d) Conversion Price. The conversion price for determining the number of
shares of Common Stock deliverable upon conversion (the "Conversion Price")
shall initially be $5.00 per share of Common Stock. The Conversion Price shall
be subject to adjustment from time to time as follows:
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(i) In case the Company shall (A) pay a dividend to all holders of its
Common Stock or make a distribution on the Common Stock to all holders of the
Common Stock, which is paid or made (I) in other shares of stock of the Company
or (II) in rights to purchase stock or other securities if such rights are not
separable from the Common Stock except upon the occurrence of a contingency, (B)
subdivide its outstanding shares of Common Stock into a greater number of shares
or (C) combine its outstanding shares of Common Stock into a smaller number of
shares, then in each such case the Conversion Price in effect immediately prior
thereto and the securities issuable shall be adjusted retroactively as provided
below so that the holder of any shares of Convertible Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock and other shares and rights to purchase stock or other securities
that such holder would have owned or have been entitled to receive after the
happening of any of the events described above had such shares of Convertible
Preferred Stock been converted immediately prior to the happening of such event.
In the event of the redemption of any shares or rights referred to in clause
(A), such holder shall have the right to receive, in lieu of any such shares or
rights, any cash, property or securities paid in respect of such redemption;
provided, however, that if the value of such cash, property or securities is
less than $.10 per share of Common Stock, such holder shall not be entitled to
such cash, property or securities. An adjustment made pursuant to this
subparagraph (i) shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision or combination.
(ii) In case the Company shall issue rights or warrants to all holders
of the Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the current market price per share
(determined as provided below) of the Common Stock on the date fixed for the
determination of shareholders entitled to receive such rights or warrants, then
the Conversion Price in effect at the opening of business on the day following
the date fixed for such determination shall be reduced by multiplying such
conversion price by a fraction of which the denominator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock so offered for
subscription or purchase and the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock that the aggregate of
the offering price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current market price, such
reduction to become effective immediately after the opening of business on the
day following the date fixed for such determination; provided, however, in the
event that all the shares of Common Stock offered for subscription or purchase
are not delivered upon the exercise of such rights or warrants, upon the
expiration of such rights or warrants the conversion price shall be readjusted
to the conversion price that would have been in effect had the denominator and
the numerator of the foregoing fraction and the resulting adjustment been made
based upon the number of shares of Common Stock actually delivered upon the
exercise of such rights or warrants rather than upon the number of shares of
Common Stock offered for subscription or purchase. For the purposes of this
subparagraph (ii), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company.
(iii) For the purpose of any computation under subparagraphs (ii) and
(iii) or Section 6, the current market price per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices for the 30
consecutive trading days commencing with the 45th trading day before the day in
question. The closing price for each day shall be the reported last sales price
regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on the New York Stock Exchange or, if the Common Stock is not listed or admitted
to trading on such Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading (based on the aggregate
dollar value of all securities listed or admitted to trading) or, if not listed
or admitted to trading on any national securities exchange, on the
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NASDAQ National Market System or, if the Common Stock is not listed or admitted
to trading on any national securities exchange or quoted on the NASDAQ National
Market System, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for that purpose, or, if such prices
are not available, the fair market value set by, or in a manner established by,
the Board of Directors of the Company in good faith. "Trading day" shall mean a
day on which the national securities exchange or the NASDAQ National Market
System used to determine the closing price is open for the transaction of
business or the reporting of trades or, if the closing price is not so
determined, a day on which the New York Stock Exchange is open for the
transaction of business.
(iv) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that the Company may make any such adjustment at its
election; and provided, further, that any adjustments that by reason of this
subparagraph (vi) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section 7
shall be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
(v) Whenever the Conversion Price is adjusted as provided in any
provision of this Section 7:
(1) the Company shall compute the adjusted conversion price in
accordance with this Section 7 and shall prepare a certificate signed by the
principal financial officer of the Company setting forth the adjusted Conversion
Price and showing in reasonable detail the facts upon that such adjustment is
based, and such certificate shall forthwith be filed with the transfer agent of
the Convertible Preferred Stock; and
(2) a notice stating that the Conversion Price has been adjusted
and setting forth the adjusted conversion price shall forthwith be required, and
as soon as practicable after it is required, such notice shall be mailed by the
Company to all record holders of Convertible Preferred Stock at their last
addresses as they shall appear in the stock transfer books of the Company.
(vi) If at any time, as a result of any adjustment made pursuant to
this Section 7, the holder of any shares of Convertible Preferred Stock
thereafter surrendered for conversion shall become entitled to receive any
shares of the Company other than shares of Common Stock or to receive any other
securities, the number of such other shares or securities so receivable upon
conversion of any share of Convertible Preferred Stock shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions contained in this Section 7 with respect to the
Common Stock.
(e) No Fractional Shares. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon conversion of Convertible
Preferred Stock. If more than one certificate representing shares of Convertible
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Convertible Preferred
Stock so surrendered. Instead of any fractional share of Common Stock that would
otherwise be issuable upon conversion of any shares of Convertible Preferred
Stock, the Company will pay a cash adjustment in respect of such fractional
interest in an amount equal to the same fraction of the closing price per share
of Common Stock (determined in accordance with subparagraph (d)(v)) at the close
of business on the day of conversion.
(f) Reclassification, Consolidation, Merger or Sale of Assets. In case
of any reclassification of the Common Stock, any consolidation of the Company
with, or merger of the Company
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into, any other person, any merger of another person into the Company (other
than a merger that does not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of Common Stock of the Company), any sale
or transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which share exchange the Common Stock is
converted into other securities, cash or other property, then lawful provision
shall be made as part of the terms of such transaction whereby the ranking of
the Convertible Preferred Stock shall be preserved as to payment of dividends
and distributions upon liquidation, dissolution or winding up and whereby the
holder of each share of Convertible Preferred Stock then outstanding shall have
the right thereafter, during the period such share shall be convertible
hereunder, to convert such share only into the kind and amount of securities,
cash and other property receivable upon such reclassification, consolidation,
merger, sale, transfer or share exchange by a holder of the number of shares of
Common Stock of the Company into which such share of Convertible Preferred Stock
might have been converted immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange assuming such holder of
Common Stock of the Company (i) is not a person with which the Company
consolidated or into which the Company merged or that merged into the Company,
to which such sale or transfer was made or a party to such share exchange, as
the case may be ("constituent person"), or an affiliate of a constituent person
and (ii) failed to exercise his rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, sale, transfer or share exchange
(provided that if the kind or amount of securities, cash and other property
receivable upon such reclassification, consolidation, merger, sale, transfer or
share exchange is not the same for each share of Common Stock of the Company
held immediately prior to such consolidation, merger, sale or transfer by other
than a constituent person or an affiliate thereof and in respect of which such
rights of election shall not have been exercised ("non-electing share"), then
the kind and amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, sale, transfer or share exchange by
each non-electing share shall be deemed to be the kind and amount so receivable
per share by a plurality of the non-electing shares). The Company, the person
formed by such consolidation or resulting from such merger or that acquires such
assets or that acquires the Company's shares, as the case may be, shall make
provisions in its certificate or articles of incorporation or other constituent
document to establish such right. Such certificate or articles of incorporation
or other constituent document shall provide for adjustments that, for events
subsequent to the effective date of such certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 7. The above
provisions shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(g) Reservation of Shares; Transfer Taxes; Etc. The Company 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 Convertible Preferred
Stock, such number of shares of its Common Stock free of preemptive rights as
shall from time to time be sufficient to effect the conversion of all shares of
Convertible Preferred Stock from time to time outstanding. The Company shall
from time to time, in accordance with the laws of the State of Texas, increase
the authorized number of shares of Common Stock if at any time the number of
shares of Common Stock not outstanding shall not be sufficient to permit the
conversion of all the then-outstanding shares of Convertible Preferred Stock.
If any shares of Common Stock required to be reserved for purposes of
conversion of the Convertible Preferred Stock hereunder require registration
with or approval of any governmental authority under any Federal or State law
before such shares may be issued upon conversion, the Company will in good faith
and as expeditiously as possible endeavor to cause such shares to be duly
registered or approved, as the case may be. If the Common Stock is listed on the
New York Stock Exchange or any other national securities exchange, the Company
will, if permitted by the rules of such exchange, as soon as practicable
following issuance of the Convertible Preferred Stock, list and keep listed on
such
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exchange, upon official notice of issuance, all shares of Common Stock issuable
upon conversion of the Convertible Preferred Stock.
The Company will pay any and all issue or other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of the Convertible Preferred Stock. The Company shall not, however,
be required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of Common Stock (or other securities or
assets) in a name other than that in which the shares of Convertible Preferred
Stock so converted were registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the Company the
amount of such tax or has established, to the satisfaction of the Company, that
such tax has been paid.
Before taking any action that would cause an adjustment reducing the
Conversion Price to less than the then par value of the Common Stock, the
Company will take any corporate action that may, in the opinion of its counsel,
be necessary in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock at the conversion price as so adjusted.
(h) Prior Notice of Certain Events. In case:
(i) the Company shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in shares
of Common Stock or (B) regular cash dividends or (2) declare or authorize a
redemption or repurchase of in excess of 20% of the then-outstanding shares of
Common Stock; or
(ii) the Company shall authorize the granting to the holders of Common
Stock of rights or warrants to subscribe for or purchase any shares of stock of
any class or of any other rights or warrants (other than any rights specified in
paragraph (d)(i)(1)(B) of this Section 7); or
(iii) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding Common Stock, or a change in par value, or
from par value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company shall be required, or of the sale or transfer
of all or substantially all of the assets of the Company or of any compulsory
share exchange whereby the Common Stock is converted into other securities, cash
or other property; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the holders of record of the
Convertible Preferred Stock, at their last address as they shall appear upon the
stock transfer books of the Company, at least 15 days prior to the applicable
record date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, redemption
or granting of rights or warrants or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, redemption, rights or warrants are to be determined, or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the corporate action required
to be specified in such notice).
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(i) Other Changes in Conversion Price. The Company may make reductions
in the Conversion Price, in addition to those required or allowed by this
Section 7, as shall be determined by it, as evidenced by a resolution of the
Board of Directors, to be advisable in order to avoid or diminish any income tax
to holders of Common Stock resulting from any dividend or distribution of stock
or issuance of rights or warrants to purchase or subscribe for stock or from any
event treated as such for income tax purposes. Whenever the Conversion Price is
so reduced, the Company shall mail to holders of record of the Convertible
Preferred Stock a notice of the reduction at least 10 days before the date the
reduced conversion price takes effect, and such notice shall state the reduced
conversion price and the period it will be in effect.
8. Mandatory Redemption. The Convertible Preferred Stock shall be subject to
mandatory redemption on March 31, 2009 (the "Mandatory Redemption Date"). On the
Mandatory Redemption Date, the Company shall, subject to the provisions of
Section 3, pay each record holder of Convertible Preferred Stock on the
Mandatory Redemption Date the entire Stated Value of the shares of Convertible
Preferred Stock held of record by them, plus accrued and unpaid dividends to the
Mandatory Redemption Date. The Convertible Preferred Stock shall cease to be
outstanding on the Mandatory Redemption Date and dividends shall cease to accrue
on the Mandatory Redemption Date and no conversion rights or other rights
(except to receive the payment described in the previous sentence) shall exist
after the Mandatory Redemption Date; provided, however, in the event the Company
fails to redeem the Convertible Preferred Stock on the Maturity Date, whether
due to restrictions under the Company's credit facilities or otherwise, the
Convertible Preferred Stock not so redeemed, and any accrued and unpaid
dividends relating thereto, shall continue to be outstanding and shall continue
to accrue dividends in accordance with the provisions hereof.
9. Outstanding Shares. Except as set forth in the next sentence, for purposes of
this Statement of Designation, all shares of Convertible Preferred Stock shall
be deemed outstanding except (i) from the date fixed for redemption pursuant to
Section 6 hereof, all shares of Convertible Preferred Stock that have been so
called for redemption under Section 6 if funds necessary for the redemption of
such shares are available and have been deposited in trust with a bank having a
combined capital and surplus in excess of $50,000,000, as trustee, for the
benefit of the holders of such shares to be redeemed for payment of the relevant
redemption price; (ii) from the date of surrender of certificates representing
shares of Convertible Preferred Stock, all shares of Convertible Preferred Stock
converted into Common Stock; (iii) from the date of registration of transfer,
all shares of Convertible Preferred Stock held of record by the Company or any
subsidiary of the Company; and (iv) upon payment of the Stated Value and accrued
and unpaid dividends pursuant to Section 8. For purposes of voting or consenting
with respect to any action shares called for redemption pursuant to Section 6
shall not be treated as outstanding from and after the date of any such deposit
of the funds for redemption.
10. Status of Acquired Shares. Shares of Convertible Preferred Stock redeemed by
the Company, received upon conversion pursuant to Section 7 or otherwise
acquired by the Company will be restored to the status of authorized but
unissued shares of Preferred Stock, without designation as to class, and may
thereafter be issued.
11. Preemptive Rights. The Convertible Preferred Stock is not entitled to any
preemptive or subscription rights in respect of any securities of the Company.
12. Severability of Provisions. Whenever possible, each provision hereof shall
be interpreted in a manner as to be effective and valid under applicable law,
but if any provision hereof is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or otherwise adversely affecting
the remaining provisions hereof. If a court of competent jurisdiction should
determine that a provision hereof
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would be valid or enforceable if a period of time were extended or shortened or
a particular percentage were increased or decreased, then such court may make
such change as shall be necessary to render the provision in question effective
and valid under applicable law.
13. Notices. If at the time of the giving of any notice provided for in Section
6 there shall be fewer than ten holders of record of the Convertible Preferred
Stock, then such notice shall be given by registered first class mail, postage
prepaid, return receipt requested. Any notice shall be given in such manner to
the initial holder of the Convertible Preferred Stock so long as it remains a
holder of record of any Convertible Preferred Stock.
14. Voting Rights.
(a) Except as provided in this Section 14, no holder of Convertible
Preferred Stock shall be entitled to any voting rights at any annual or special
meeting of shareholders of the Company or otherwise.
(b) So long as shares of Convertible Preferred Stock remain outstanding
the affirmative vote or consent of the holders of a majority of the shares of
Convertible Preferred Stock outstanding at the time, voting as a single class,
given in person or by proxy, either in writing or at a meeting, shall be
necessary to permit or effect any amendment to the Company's Third Amended and
Restated Articles of Incorporation if the amendment would accomplish any of the
following:
(i) the amendment, restatement, modification, alteration or repeal of
any of the provisions of this Statement of Designation;
(ii) increase or decrease the aggregate number of authorized shares of
Convertible Preferred Stock;
(iii) effect an exchange, or create a right of exchange, of all or any
part of the shares of another class into the shares of Convertible Preferred
Stock;
(iv) create a new class or series of shares having rights and
preferences equal, prior, or superior to the Convertible Preferred Stock, or
increase the rights and preferences of any class or series having rights and
preferences equal, prior, or superior to the Convertible Preferred Stock, or
increase the rights and preferences of any class or series having rights or
preferences later or inferior to the Convertible Preferred Stock in such a
manner as to become equal, prior, or superior to the Convertible Preferred
Stock; or
(v) cancel or otherwise affect dividends on the shares of Convertible
Preferred Stock that had accrued but had not been declared.
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IN WITNESS WHEREOF, The Meridian Resource Company has caused
this statement to be signed by the undersigned officer this 28th day of March,
2002.
THE MERIDIAN RESOURCE CORPORATION
By: /s/ Michael Mayell, President
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