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EXHIBIT 4
[FORM OF]
STATEMENT OF RESOLUTION ESTABLISHING
SERIES OF SHARES
designated
SERIES A 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
and
SERIES B 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
of
MESA INC.
To the Secretary of State
of the State of Texas:
Pursuant to the provisions of Article 2.13D of the Texas Business
Corporation Act (the "TBCA"), and pursuant to Article IV of its Amended and
Restated Articles of Incorporation, the undersigned, MESA Inc., a corporation
organized and existing under the TBCA (the "corporation"), hereby submits the
following statement for the purpose of establishing and designating series of
its Preferred Stock, par value $.01, designated "Series A Cumulative
Convertible Preferred Stock" and "Series B Cumulative Convertible Preferred
Stock" and fixing and determining the relative rights and preferences thereof:
I. The name of the corporation is MESA Inc.
II. The following resolution establishing and designating series of
shares and fixing and determining the relative rights and preferences thereof,
was duly adopted by all necessary action on the part of the corporation,
consisting of due adoption by the Board of Directors of the corporation at a
meeting held on _______________________, 1996.
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation ("Board of Directors") in accordance with
provisions of its Amended and Restated Articles of Incorporation (the
"Articles of Incorporation"), two series of Preferred Stock, par value
$.01 per share, of the corporation are hereby created, and that the
designation and number of shares thereof and the preferences, limitations
and relative rights thereof are as follows:
SECTION 1. DESIGNATION, NUMBER OF SHARES AND STATED VALUE OF SERIES A
PREFERRED STOCK. There is hereby authorized and established a series of
Preferred Stock that shall be designated as "Series A 8% Cumulative Convertible
Preferred Stock" (hereinafter referred to as "Series A Preferred"), and the
number of shares constituting such series shall be _______________, plus, at
any time, such number of shares of Series B Preferred as have been or are at
such time being converted to shares of Series A Preferred pursuant to Section
16 hereof. Such number of shares may be increased, but not decreased,
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by resolution adopted by the majority of the full Board of Directors. The
"Stated Value" per share of the Series A Preferred shall be equal to $[2.26]1.
SECTION 2. 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 8% Cumulative Convertible
Preferred Stock" (hereinafter referred to as "Series B Preferred"), and the
number of shares constituting such series shall be _____________________. Such
number of shares may be increased, but not decreased, by resolution adopted by
the majority of the full Board of Directors. The "Stated Value" per share of
the Series B Preferred shall be equal to $[2.26](1).
SECTION 3. DEFINITIONS. In addition to the definitions set forth
elsewhere herein, the following terms shall have the meanings indicated:
"Affiliate" means (i) with respect to any Person, any other Person that
directly or indirectly controls or manages, is controlled or managed by, or is
under common control or management with such Person, whether through the
ownership of equity interests, by contract or otherwise, and (ii) with respect
to any individual, in addition to any Persons specified in clause (i), the
spouse, any parent or any child of such individual and any trust for the
benefit of such individual, spouse, parent or child.
"Average Gas Equivalent Price" shall mean for any Rolling 4 Quarter
Period, the average price received by the corporation during such period from
sales of oil and gas production, expressed on a natural gas equivalent basis
per thousand cubic feet ("Mcf") using a factor of 6 Mcf of natural gas per 1
barrel of liquids, to be calculated as follows:
(i) the aggregate revenues of the corporation and its consolidated
subsidiaries during such Rolling 4 Quarter Period from sales of natural
gas, natural gas liquids and oil and condensate produced (other than that
used for fuel and shrinkage) and sold by the corporation and its
consolidated subsidiaries, as reported in the corporation's consolidated
financial statements, divided by,
(ii) the sum of (A) the total volume, on an Mcf basis, of natural
gas produced (other than that used for fuel and shrinkage) and sold by
the corporation and its consolidated subsidiaries during such Rolling 4
Quarter Period, plus (B) the product of 6 times the total number of
barrels of natural gas liquids, oil and condensate, produced (other than
that used for fuel and shrinkage) and sold by the corporation and its
consolidated subsidiaries during such Rolling 4 Quarter Period, as
derived from the corporation's consolidated financial statements.
"Business Day" shall mean any day other than a Saturday, Sunday or a day
on which banking institutions in Dallas, Texas are authorized or obligated by
law or executive order to close.
"Closing Price" with respect to a particular security on any Trading Day
shall mean the last reported sales price, regular way, for such security on
such Trading Day, or, in case no sale takes place on such day, the average of
the closing bid and ask prices, regular way on such Trading Day, in either case
as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if not listed or admitted to trading
____________________
(1) Subject to appropriate adjustment for any reverse stock split
effectuated before issuance of the Series A and B Preferred Stock.
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on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which such security is listed or admitted to
trading or, if such security is not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the Nasdaq Stock Market or such other system then in use, or, if on
any such date such security is not quoted by any such organization, the average
of the closing bid and ask prices on such Trading Day as furnished by a
professional market maker making a market in such security selected by the
Board of Directors of the corporation. If on any such date no market maker is
making a market in such security, the fair value of such shares on such date as
determined in good faith by the Board of Directors shall be used.
"Common Stock" shall mean the common stock, par value $0.01 per share, of
the corporation.
"Consolidated EBITDA" for any period, shall mean the consolidated net
income or loss of the corporation for such period determined in accordance with
GAAP, but excluding gains and losses not arising from operations (including,
without limitation, interest income, gains and losses from investments, gains
and losses from dispositions of oil and gas properties or other assets,
collections and settlements of claims and litigation, adjustments of
contingency reserves and other extraordinary and/or non-recurring gains and
losses), plus, to the extent the following have been deducted in determining
such net income or loss, interest expense, income taxes, depreciation,
depletion and amortization expense and impairment expense.
"Conversion Price" shall mean the conversion price per share of Common
Stock into which the Series A Preferred and Series B Preferred is convertible,
as such conversion price may be adjusted pursuant to Section 10 hereof. The
initial Conversion Price will be $[2.26]1.
"full Board of Directors" when used in reference to the corporation's
Board of Directors, means the total number of members of the Board of Directors
as fixed by, or in the manner provided in, the Articles of Incorporation and
Bylaws (without regard to any then existing vacancies), including, any members
elected by the holders of the Series B Preferred pursuant hereto.
"Fixed Charge Coverage Ratio" shall mean as of the end of any Rolling 4
Quarter Period, the ratio of (i) the sum of (A) the Consolidated EBITDA for
such Rolling 4 Quarter Period, plus (B) one-third of gross operating rents paid
before sublease income as defined by Standard & Poors Corporation ("Gross
Rents") , if any, for such period to (ii) the sum for such Rolling 4 Quarter
Period of (A) interest expense, both expensed and capitalized, of the
corporation and its consolidated subsidiaries for such period, plus (B)
one-third of Gross Rents for such period, plus (C) scheduled principal
amortization of indebtedness (including borrowed money and capitalized leases)
of the corporation and its consolidated subsidiaries.
"GAAP" shall mean generally accepted accounting principles in the United
States of America from time to time.
"Initial Partnership Affiliates" shall mean the Partnership, the Persons
that are partners of the Partnership as of the Original Issue Date of the
Series B Preferred and any of their respective Affiliates so long as they
remain Affiliates of the Partnership or such Persons.
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"Junior Securities" means the Common Stock or any other series of stock
issued by the corporation ranking junior as to the Series A Preferred and
Series B Preferred in payment of dividends or distributions or upon
liquidation, dissolution, or winding-up of the corporation.
"Market Price" per share of Common Stock as of any date shall mean the
average of the daily Closing Prices for a period of twenty Trading Days ending
on such date.
"Minimum Ownership Amount" shall mean at any time, ownership of (i) at
least [insert number equal to 58% of the shares of Series B Preferred to be
purchased by the Partnership at the first closing] shares of Series B
Preferred or (ii) such number of shares of Common Stock and Underlying Common
Stock which is at least equal to 15 percent of the total number of shares of
Common Stock and Underlying Common Stock outstanding at such time. For
purposes of this definition, ownership of shares of Series B Preferred shall be
considered to be ownership of the corresponding shares of Underlying Common
Stock.
"Minimum Ownership Condition" shall be satisfied at any time if (i) the
Minimum Ownership Amount is owned in the aggregate at such time by one or more
of the Initial Partnership Affiliates, (ii) at least one half of the Minimum
Ownership Amount is owned and held in the aggregate at such time by one or more
of the Rainwater Affiliates, and (iii) the power to vote at least a majority of
the shares of Series B Preferred outstanding at such time is held by Rainwater
Affiliates, which shall be satisfied (A) with respect to any shares of Series B
Preferred owned by the Partnership if a Rainwater Affiliate is at such time the
sole general partner of the Partnership, (B) with respect to any shares owned
by a Rainwater Affiliate if at such time the right to vote such shares is not
shared with any Person who is not a Rainwater Affiliate, and (C) with respect
to any shares owned by a Person other than a Rainwater Affiliate, if at such
time a Rainwater Affiliate shall have the sole right to vote such shares
pursuant to a voting agreement, voting trust, irrevocable proxy or other
similar agreement with terms reasonably satisfactory to the corporation;
provided that, the corporation shall have been presented with appropriate
certifications or other documentation demonstrating that the foregoing
requirements have been met.
"Non-Series A and B Directors" shall mean the members of the Board of
Directors in whose election the holders of Common Stock are entitled to vote
(whether or not holders of shares of any other class or series are also
entitled to vote thereon).
"Original Issue Date" shall mean with respect to the Series A Preferred
or Series B Preferred, as the case may be, the date on which shares of such
series are first issued.
"Parity Security" means any class or series of stock issued by the
corporation ranking on a parity with the Series A Preferred and Series B
Preferred in payment of dividends or distributions or upon liquidation,
dissolution or winding-up of the corporation.
"Partnership" shall mean DNR-Mesa Holdings, L.P., a Texas limited
partnership.
"Partnership Affiliates" shall mean the Partnership, its partners and
their respective Affiliates for so long as they remain Affiliates of the
Partnership or such partners.
"Payable-in-Kind" or "Paid-in-Kind" when used in reference to any
dividend payable on the shares of Series A Preferred or Series B Preferred,
means payment of the dividend by issuance of that number of additional shares
of Series A Preferred or Series B Preferred, as the case may be, that has an
aggregate Stated Value equal to the dollar amount of such dividend then
payable, rounded to the nearest
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whole share (i.e. if less than .5 rounded down, and if .5 or more rounded up).
Shares of Series A Preferred or Series B Preferred issued as dividends
Payable-in-Kind shall be duly authorized, validly issued and nonassessable and,
upon issuance, shall have rights (including without limitation, dividend,
voting, conversion and redemption rights) identical to the outstanding shares
of Series A Preferred and Series B Preferred in respect of which they are
issued.
"Person" means any individual, corporation, association, partnership,
joint venture, limited liability company, trust, estate, or other entity or
organization.
"Rainwater Affiliates" shall mean, at any time, Richard E. Rainwater and
any of his Affiliates at such time. As of the date hereof, the Rainwater
Affiliates include, without limitation, Natural Gas Partners II, L.P. and
Natural Gas Partners III, L.P.
"Rolling 4 Quarter Period" means the most recently ended period of four
consecutive fiscal quarters of the corporation prior to the date of
determination.
"Senior Securities" means any class or series of stock issued by the
corporation ranking senior to the Series A Preferred and Series B Preferred in
payment of dividends or distributions or upon liquidation, dissolution, or
winding-up of the corporation.
"Trading Day" with respect to any security means (i) if such security is
listed or admitted for trading on any national securities exchange, a day on
which such national securities exchange is open for trading, or (ii) if such
security is not listed or admitted to trading on any national securities
exchange, a Business Day.
"Transfer Agent" means American Stock Transfer & Trust Corporation, or
such other agent or agents of the corporation as may be designated by the Board
of Directors as the transfer agent or conversion agent for the Series A
Preferred and Series B Preferred.
"Underlying Common Stock" means at any time, with respect to any share of
Series A Preferred or Series B Preferred, the aggregate number of shares of
Common Stock into which such share is then convertible at such time pursuant to
Section 10 hereof.
SECTION 4. DIVIDENDS AND DISTRIBUTIONS.
(a) The holders of outstanding shares of Series A Preferred and
Series B Preferred shall be entitled to receive, as and when declared by
the corporation, out of funds of the corporation legally available for
the payment of dividends, preferential quarterly dividends at the times
and at the rates provided for in this Section 4. Dividends on shares of
the Series A Preferred and Series B Preferred shall be cumulative and
shall accrue from and including the date of issuance of such shares to
and including the date on which such shares shall have been converted
into Common Stock or redeemed pursuant to Section 7 hereof. Such
dividends shall accrue whether or not there shall be (at the time such
dividend becomes payable or at any other time) profits, surplus or other
funds of the corporation legally available for the payment of dividends.
(b) Dividends shall accrue on each outstanding share of Series A
Preferred and Series B Preferred at the rate of eight percent (8%) per
annum of the Stated Value (the "Dividend Rate") of such share. Dividends
shall be payable quarterly, in arrears, as of the last Business Day of
each
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December, March, June and September, commencing on September 30, 1996
(each, a "Dividend Payment Date").
(c) During the period beginning on the Original Issue Date of the
Series B Preferred and ending on the first Dividend Payment Date on or
following the fourth anniversary thereof (the "Exclusive PIK Period"),
dividends on outstanding shares of Series A Preferred and Series B
Preferred shall be Payable-in-Kind. After the Exclusive PIK Period,
dividends on the shares of Series A Preferred and Series B Preferred
shall be Payable-in-Kind or, at the corporation's option, if the "Stock
Price Threshold" (as defined in subsection (d) below) or the "Coverage
Ratio or Gas Price Threshold" (as defined in subsection (e) below) is
satisfied as of the record date for such dividend, payable in cash.
(d) For purposes hereof, the "Stock Price Threshold" shall be
satisfied as of a record date for a Dividend Payment Date after the
Exclusive PIK Period if the average of the daily Closing Prices for the
Common Stock during a period of ninety (90) consecutive Trading Days
preceding the tenth day prior to such record date, was more than three
times the Conversion Price then in effect. Once the Stock Price
Threshold has been satisfied, it shall be deemed to remain satisfied on
each subsequent quarterly Dividend Payment Date regardless of any
subsequent changes in the price of the Common Stock.
(e) For purposes hereof, the "Coverage Ratio or Gas Price
Threshold" shall be satisfied as of a record date for a Dividend Payment
Date if either (i) the Fixed Charge Coverage Ratio as of the end of the
then most recently ended Rolling 4 Quarter Period is in excess of 2.5; or
(ii) the Average Gas Equivalent Price realized by the corporation during
the then most recently ended Rolling 4 Quarter Period is in excess of
$2.95. As a condition to the payment of cash dividends on any Dividend
Payment Date, the Coverage Ratio or Gas Price Threshold must be satisfied
as of the record date for such quarterly Dividend Payment Date (unless
the Stock Price Threshold has been satisfied, in which case satisfaction
of the Coverage Ratio or Gas Price Threshold shall not be required).
(f) The amount of dividends payable on each Dividend Payment Date
shall be determined by applying the Dividend Rate from but excluding the
immediately preceding Dividend Payment Date (or from but excluding the
date of issuance of shares of Series A Preferred or Series B Preferred,
with respect to the first dividend period) to and including the Dividend
Payment Date.
(g) Notwithstanding the foregoing or anything else herein to the
contrary, however, (i) dividends payable on any Redemption Date (as
defined in Section 7 below), shall be payable in cash or in Common Stock
in accordance with Section 7 hereof, and (ii) dividends payable on any
final distribution date relating to a dissolution, liquidation or winding
up of the corporation, shall be payable in cash only. If the payment
date does not occur on a regular Dividend Payment Date, dividends shall
be calculated on the basis of the actual number of days elapsed from but
excluding the immediately preceding Dividend Payment Date to and
including the Redemption Date or such final distribution date. Dividends
payable on the shares of Series A Preferred and Series B Preferred for
any period of less than a full quarterly dividend period shall be
computed on the basis of a 360-day year comprised of twelve 30-day
months.
(h) To the extent dividends are not paid in cash or Paid-in-Kind
on a Dividend Payment Date, all dividends which shall have accrued on
each share of Series A Preferred and Series B Preferred outstanding as of
such Dividend Payment Date shall be added to the Stated Value of
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such share of Series A Preferred and Series B Preferred and shall remain
a part thereof until paid, and dividends shall accrue at the Dividend
Rate and be paid on such share of Series A Preferred and Series B
Preferred on the basis of the Stated Value, as so adjusted.
(i) Dividends payable on each Dividend Payment Date shall be paid
to record holders of the shares of Series A Preferred and Series B
Preferred as they appear on the books of the corporation at the close of
business on the tenth Business Day immediately preceding the respective
Dividend Payment Date or on such other record date as may be fixed by the
Board of Directors of the corporation in advance of a Dividend Payment
Date, provided that no such record date shall be less than ten nor more
than sixty calendar days preceding such Dividend Payment Date.
(j) So long as any shares of Series A Preferred or Series B
Preferred are outstanding;
(i) No dividend or other distribution shall be declared or
paid, or set apart for payment on or in respect of, any Junior
Securities (other than dividends or distributions payable in shares
of Junior Securities or in rights to purchase Junior Securities),
nor shall any Junior Securities be redeemed, purchased or otherwise
acquired for any consideration (or any money be paid to a sinking
fund or otherwise set apart for the purchase or redemption of any
such Junior Securities).
(ii) No dividend or other distribution, except as described
in the next succeeding sentence, shall be declared or paid, or set
apart for payment on or in respect of, Series A Preferred or Series
B Preferred or any Parity Securities for any period unless full
cumulative dividends on all outstanding shares of Series A
Preferred and Series B Preferred and any Parity Securities have
been or contemporaneously are declared and paid for all dividend
periods terminating on or prior to the date set for payment of such
dividend. When dividends are not paid in full, as aforesaid, on
the shares of Series A Preferred and Series B Preferred and any
Parity Securities, all dividends declared upon such Parity
Securities shall be declared and paid pro rata so that the amounts
of dividends per share declared and paid on the shares of Series A
Preferred and Series B Preferred and such Parity Securities shall
in all cases bear to each other the same ratio that unpaid
dividends per share on the Series A Preferred and Series B
Preferred and on such Parity Securities bear to each other.
(iii) No shares of Series A Preferred or Series B
Preferred or any Parity Securities shall be redeemed, purchased or
otherwise acquired for any consideration (or any money be paid to a
sinking fund or otherwise set apart for the purchase or redemption
of any such Parity Security) by the corporation unless the full
cumulative dividends on all outstanding shares of Series A
Preferred and Series B Preferred shall have been or
contemporaneously are declared and paid for all dividend periods
terminating on or prior to the date on which such redemption,
purchase or other payment is to occur.
SECTION 5. CERTAIN COVENANTS AND RESTRICTIONS. So long as any shares of
Series A Preferred or Series B Preferred are outstanding;
(a) The corporation shall at all times reserve and keep available
for issuance upon the conversion of the shares of Series A Preferred and
Series B Preferred as provided in Section 7 and Section 10, respectively,
such number of its authorized but unissued shares of Common Stock as will
be sufficient to permit the conversion of all outstanding shares of
Series A Preferred and
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Series B Preferred and all other securities and instruments convertible
into shares of Common Stock, and shall take all reasonable action within
its power required to increase the authorized number of shares of Common
Stock necessary to permit the conversion of all outstanding shares of
Series A Preferred and Series B Preferred and all such other securities
and instruments convertible into shares of Common Stock.
(b) The corporation covenants and agrees that all shares of
Common Stock that may be issued as payment of the Redemption Price or
upon exercise of the conversion rights of shares of Series A Preferred
and Series B Preferred will, upon issuance, be fully-paid and
nonassessable.
(c) The corporation will endeavor to make the shares of stock
that may be issued as payment of the Redemption Price or upon exercise of
the conversion rights of shares of Series A Preferred and Series B
Preferred eligible for trading upon any national securities exchange, or
any automated quotation system of a registered securities association,
upon or through which the Common Stock shall then be traded prior to such
delivery.
(d) Prior to the delivery of any securities which the corporation
shall be obligated to deliver upon redemption or conversion of the Series
A Preferred or Series B Preferred, the corporation will endeavor to
comply with all federal and state securities laws and regulations
thereunder requiring the registration of such securities with, or any
approval of or consent to the delivery of such securities by, any
governmental authority.
(e) The corporation shall pay all taxes and other governmental
charges (other than any income or franchise taxes) that may be imposed
with respect to the issue or delivery of shares of Common Stock upon
conversion or redemption of Series A Preferred or Series B Preferred as
provided herein. The corporation shall not be required, however, to pay
any tax or other charge imposed in connection with any transfer involved
in the issue of any certificate for shares of Common Stock in any name
other than that of the registered holder of the shares of the Series A
Preferred or Series B Preferred surrendered in connection with the
conversion or redemption thereof, or involved in the issue of any
certificate for shares of Series A Preferred in exchange for shares of
Series B Preferred, and in such case the corporation shall not be
required to issue or deliver any stock certificate until such tax or
other charge has been paid, or it has been established to the
corporation's satisfaction that no tax or other charge is due.
SECTION 6. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution, or winding-up
of the corporation (in connection with the bankruptcy or insolvency of
the corporation or otherwise), whether voluntary or involuntary, before
any payment or distribution of the assets of the corporation (whether
capital or surplus) shall be made to or set apart for the holders of
shares of any Junior Securities, the holders of the shares of Series A
Preferred and Series B Preferred shall be entitled to receive an amount
per share equal to the Stated Value per share held by them, plus an
amount in cash equal to the full cumulative dividends accrued and unpaid
thereon, to the date of such payment, whether or not declared. No
payment on account of any such liquidation, dissolution or winding-up of
the corporation shall be paid to the holders of the shares of Series A
Preferred or Series B Preferred or the holders of any Parity Securities
unless there shall be paid at the same time to the holders of the shares
of Series A Preferred and Series B Preferred and the holders of any
Parity Securities proportionate amounts determined ratably in proportion
to the full amounts to which the holders of all outstanding shares of
Series A Preferred and Series B Preferred and the holders of all such
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outstanding Parity Securities are respectively entitled with respect to
such distribution. For purposes of this Section 6, neither a
consolidation or merger of the corporation with one or more partnerships,
corporations or other entities nor a sale, lease, exchange or transfer of
all or any substantial part of the corporation's assets for cash,
securities or other property shall be deemed to be a liquidation,
dissolution or winding-up of the corporation, whether voluntary or
involuntary.
(b) After payment of the full amount of the liquidation
preference to which the holders of shares of Series A Preferred and
Series B Preferred are entitled, such holders will not be entitled to any
further participation in any distribution of assets of the corporation.
(c) 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 the amounts distributable in such circumstances shall be
payable, shall be given by first class mail, postage prepaid, not less
than 15 days prior to any payment date stated therein, to the holders of
record of the shares of Series A Preferred and Series B Preferred at
their respective addresses as the same shall appear in the records of the
corporation.
SECTION 7. REDEMPTION. The outstanding shares of Series A Preferred and
Series B Preferred are subject to redemption in accordance with the following
provisions:
(a) Subject to the terms hereof, the corporation may at its
option elect to redeem outstanding shares of Series A Preferred and
Series B Preferred, in whole or in part (pro-rata or by lot among the
outstanding shares of both series), on any Dividend Payment Date after
the thirtieth (30th) day following the tenth (10th) anniversary of the
Original Issue Date of the Series B Preferred Stock.
(b) On June 30, 2008, the corporation shall redeem all of the
shares of Series A Preferred and Series B Preferred outstanding on such
date.
(c) The redemption price per share for Series A Preferred and
Series B Preferred redeemed on any optional or mandatory redemption date
(the "Redemption Price") shall be equal to the Stated Value per share of
the shares to be redeemed plus an amount equal to the aggregate dollar
amount of all accrued and unpaid dividends through the redemption date
that have not been added to the Stated Value of such shares. The
Redemption Price shall be paid in cash from any source of funds legally
available therefor, unless the corporation shall publicly announce at
least 30 days prior to the redemption date that it has elected to make
payment of the Redemption Price in Common Stock, in which case the
Redemption Price shall be payable in Common Stock. If the corporation
elects to pay the Redemption Price in shares of Common Stock, the number
(or fraction) of shares to be issued in payment of the Redemption Price
shall be calculated based on the Market Price per share of Common Stock
as of the fifth Trading Day before the redemption date.
(d) Not less than thirty nor more than sixty days prior the
redemption date, a notice specifying the time and place of such
redemption shall be given by first class mail, postage prepaid, to the
holders of record of the shares of Series A Preferred and Series B
Preferred to be redeemed at their respective addresses as the same shall
appear on the books of the corporation (but no failure to mail such
notice or any defect therein shall affect the validity of the proceedings
for redemption except as to the holder to whom the corporation has failed
to mail such notice or except as to the holder whose notice was
defective), calling upon each such holder of record to
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surrender to the corporation on the redemption date at the place
designated in such notice such holder's certificate or certificates
representing the then outstanding shares of Series A Preferred or Series
B Preferred held by such holder. On or after the Redemption Date, each
holder of shares of Series A Preferred and Series B Preferred called for
redemption shall surrender his certificate or certificates for such
shares to the corporation at the place designated in the redemption
notice and shall thereupon be entitled to receive payment of the
Redemption Price in the manner set forth in Section 7(a) above. If the
redemption is delayed for any reason, dividends shall continue to accrue
on the shares of Series A Preferred and Series B Preferred outstanding,
and shall be added to and become a part of the Redemption Price of such
shares, until the Redemption Price, as so adjusted, for such shares is
paid in full.
(e) If a holder of shares of Series A Preferred or Series B
Preferred called for redemption shall have elected, in accordance with
the provisions of Section 10(b), to convert such shares into Common
Stock, such shares of Series A Preferred or Series B Preferred which are
to be converted into Common Stock shall no longer be subject to
redemption, and conversion of same shall occur in accordance with the
terms of Section 10.
SECTION 8. SHARES TO BE RETIRED. All shares of Series A Preferred and
Series B Preferred repurchased, redeemed, converted or otherwise acquired by
the corporation shall be retired and cancelled and shall be restored to the
status of authorized but unissued shares of Preferred Stock, without
designation as to series, and may thereafter be reissued.
SECTION 9. VOTING RIGHTS.
(a) Except as otherwise provided in this Section 9 or required by
law or any provision of the Articles of Incorporation of the corporation,
the holders of the shares of Series A Preferred and Series B Preferred
shall vote together with the shares of Common Stock as a single class at
any annual or special meeting of shareholders of the corporation upon the
following basis: each holder of shares of Series A Preferred and Series B
Preferred shall be entitled to such number of votes for the shares of
Series A Preferred and Series B Preferred held by such holder on the
record date fixed for such meeting as shall be equal to the whole number
of shares of Underlying Common Stock for such shares of Series A
Preferred and Series B Preferred immediately after the close of business
on the record date fixed for such meeting.
(b) With respect to any matter for which the affirmative vote of
the holders of separate classes or series of the corporation's capital
stock is required by the TBCA, the holders of Series A Preferred and
Series B Preferred shall, except as provided in this Section 9 or
required by law, vote together as a single class with respect to such
matter and the holders of the shares of Series A Preferred and Series B
Preferred shall not be entitled to vote as a separate class or series
apart from each other, including, without limitation, any vote on a
proposal to approve or adopt (i) any plan of merger, consolidation or
share exchange for which the TBCA requires a shareholder vote; (ii) any
disposition of assets for which the TBCA requires a shareholder vote; and
(iii) any dissolution of the corporation for which the TBCA requires a
shareholder vote.
(c) For so long as any shares of Series A Preferred or Series B
Preferred remain outstanding, the corporation shall not, without the
affirmative vote or consent of the holders of a majority of the shares of
Series A Preferred and Series B Preferred voting together as a single
class: (i) authorize, create or issue, or increase the authorized or
issued amount of, any class or series of stock of Senior Securities or
Parity Securities, or any security convertible into or
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exchangeable for Senior Securities or Parity Securities or reclassify or
modify any Junior Securities so as to become Parity Securities or Senior
Securities; provided that if the Series A Preferred and Series B
Preferred are affected differently by such action, the holders of each
series will vote as a separate class; or (ii) amend the Articles of
Incorporation to eliminate cumulative voting.
(d) For so long as any shares of Series B Preferred remain
outstanding, the affirmative vote or consent of the holders of at least a
majority of the shares of Series B Preferred outstanding at the time
shall be necessary to permit, affect or validate the amendment,
alteration or repeal by the shareholders of any provisions of the
Articles of Incorporation (including the Statement of Resolution relating
to the Series A Preferred and Series B Preferred) or Bylaws of the
corporation that would limit the authority of the Board of Directors to
amend or repeal any provision of the corporation's Bylaws or that would
adversely affect any rights, preferences, privileges or voting power of
the Series B Preferred differently from the rights, preferences,
privileges or voting power of the Series A Preferred (to the extent such
rights, preferences, privileges or voting power of such two series are
the same prior to such amendment).
(e) For so long as any shares of Series B Preferred remain
outstanding and the Minimum Ownership Condition is met, the holders of
the Series B Preferred shall have, in addition to the other voting rights
required by law or set forth herein or in the corporation's Articles of
Incorporation, the exclusive right, voting separately as a single class,
to elect the minimum number of directors (such directors are referred to
herein as the "Series B Directors") necessary to constitute a majority of
the full Board of Directors of the corporation (excluding in any such
calculation any Series A Directors). As of the Original Issue Date for
the Series B Preferred, the holders of the Series B Preferred shall have
the right to elect four of the seven members of the corporation's Board
of Directors. The right to elect the Series B Directors pursuant hereto
may be exercised by written consent in accordance with subsection (j) of
this Section 9 or by vote at any annual or special meeting of
shareholders held for the purpose of electing directors. At elections
for the Series B Directors, each holder of Series B Preferred shall be
entitled to one vote for each share held.
(f) The Series B Directors elected as provided herein shall serve
until the next annual meeting or until their respective successors shall
be elected and shall qualify. Any Series B Director may be removed with
or without cause by, and shall not be removed other than by, the vote of
the holders of a majority of the outstanding shares of Series B
Preferred, voting separately as a class, at a meeting called for such
purpose or by written consent in accordance with subsection (j) hereof.
If the office of any Series B Director becomes vacant by reason of death,
resignation, retirement, disqualification or removal from office or
otherwise, the remaining Series B Directors, by majority vote, may elect
a successor, or, alternatively, the holders of a majority of the
outstanding shares of Series B Preferred, voting separately as a class,
at a meeting called for such purpose or by written consent in accordance
with subsection (k) hereof may elect a successor. Any such successor
shall hold office for the unexpired term in respect of which such vacancy
occurred. Upon any termination of the right of the holders of Series B
Preferred to vote for and elect Series B Directors as herein provided (i)
the Series B Directors then serving on the Board of Directors may
continue to hold their office for the remainder of their term, subject to
the right of the majority of the Non-Series A and B Directors to request
their prior resignation, in which case the Series B Directors shall
resign upon such request, and (ii) upon the expiration of the term of
office or earlier resignation of each Series B Director pursuant to this
sentence, the number of members constituting the corporation's Board of
Directors shall automatically be
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reduced accordingly unless a majority of the directors other than the
Series B Directors by resolution determine otherwise and elect additional
directors to fill any resulting vacancies.
(g) The following special voting provisions shall be applicable
to the Series A Preferred Stock:
(i) if the corporation shall be in arrears in the payment of
dividends (whether Payable-in-Kind or in cash) on the shares of
Series A Preferred and Series B Preferred for a total of six
quarterly Divided Payment Dates, then the number of members of the
Board of Directors shall automatically be increased by two
additional directors and the holders of the Series A Preferred,
voting as a separate class, shall have the exclusive right to elect
two directors ("Series A Directors") immediately, and at the next
and every subsequent annual meeting of shareholders called for the
election of directors, at which the term of office of the Series A
Directors expire;
(ii) the right of the holders of Series A Preferred to elect
the Series A Directors as aforesaid shall continue until such time
as dividends accumulated on the Series A Preferred shall have been
paid in full, whether Payable-in-Kind or in cash, at which time the
office of the Series A Directors shall be eliminated and the
special right of the holders of Series A Preferred so to vote
separately as a class for the election of the Series A Directors
shall terminate, subject to revesting at such time as the
corporation shall be in arrears in the payment of dividends on the
outstanding shares of Series A Preferred as set forth in clause (i)
above;
(iii) each Series A Director shall agree, prior to his
election to office, to resign immediately upon any termination of
the right of the holders of Series A Preferred to vote as a
separate class for directors as herein provided, and upon any such
termination, each Series A Director shall forthwith resign and the
size of the Board of Directors shall automatically be reduced
accordingly;
(iv) unless otherwise required to resign as aforesaid, the
term of office of each Series A Director shall terminate upon the
election of a successor Series A Director at any meeting of the
shareholders held for the purpose of electing directors; and
(v) in any case in which the holders of Series A Preferred
shall be entitled to vote pursuant to this Section 9(g), each
holder of Series A Preferred shall be entitled to one vote for each
share of Series A Preferred held.
(h) During any period in which the holders of Series A Preferred
shall be entitled to elect directors pursuant to subsection (g) of this
Section 9, or the holders of Series B Preferred shall be entitled to
elect directors pursuant to subsection (e) of this Section 9 the
following shall be applicable:
(i) if the annual meeting of shareholders of the
corporation is not, for any reason, held within the time
fixed in the Bylaws of the corporation, or if a vacancy shall
exist in the office of a Series A Director or a Series B
Director, a proper officer of the corporation, upon the
written request of the holders of record of at least ten
percent (10%) of the shares of the Series A Preferred or
Series B Preferred then outstanding, as applicable, addressed
to the Secretary of the corporation, shall call a
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special meeting in lieu of the annual meeting of
shareholders, or in the event of a vacancy, a special meeting
of the holders of Series A Preferred or Series B Preferred,
as applicable, for the purpose of electing Series A Directors
or Series B Directors, as applicable, and any such meeting
shall be held at the earliest practicable date at such time
and place as shall be determined by the corporation;
(ii) if such meeting shall not be called by the proper
officer of the corporation within twenty (20) days after
personal service of said written request upon the Secretary
of the corporation, or within (20) days after mailing the
same within the United States by certified mail, addressed to
the Secretary of the corporation at its principal executive
offices, then the holders of record of at least ten percent
(10%) of the outstanding shares of the Series A Preferred or
Series B Preferred, as applicable, may designate in writing
one of their number to call such meeting at the expense of
the corporation, and such meeting may be called by the person
so designated upon the notice required for the annual
meetings of shareholders of the corporation and shall be held
at the principal executive offices of the corporation. Any
holder of Series A Preferred or Series B Preferred, as
applicable, so designated shall have access to the lists of
Series A Preferred or Series B Preferred shareholders to be
called pursuant to the provisions hereof; and
(iii) at any meeting held for the purpose of electing
a director at which the holders of Series A Preferred or
Series B Preferred shall have the right, voting as a
separate class, to elect the Series A Director or Series
B Director pursuant to this Section 9, the presence in person
or by proxy of the holders of at least one-third (1/3) of the
outstanding Series A Preferred or Series B Preferred, as
applicable, shall be required to constitute a quorum of such
Series A Preferred or Series B Preferred, as applicable.
(i) During any period in which the holders of Series B Preferred
shall be entitled to elect directors pursuant to subsection (e) of this
Section 9, (i) the holders of Series B Preferred shall not have the right
or otherwise be entitled to vote in the election of any directors other
than the Series B Directors, (ii) no Series B Director shall have the
right to vote in the election of any person to fill any vacancy created
by the death, resignation, retirement, disqualification or removal from
office or otherwise of any director other than a Series B Director and
all such rights with respect to the Non-Series A and B Directors shall be
exercised for and on behalf of the Board of Directors by a majority of
the Non-Series A and B Directors, and (iii) only the Non-Series A and B
Directors shall have right to vote in any action by or on behalf of the
Board of Directors with respect to nominating persons to serve as
Non-Series A and B Directors. Nothing in clause (ii) or (iii) of this
subsection (i) shall limit or restrict the right of holders of shares of
Common Stock and Series A Preferred to nominate and to elect, subject to
and in accordance with applicable law, the other provisions of the
Articles of Incorporation and the bylaws, persons to serve as Non-Series
A and B Directors. This subsection (i) and the defined terms used herein
may not be amended without (x) the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock and (y) the
affirmative vote of the holders of a majority of the outstanding shares
of Series A Preferred Stock.
(j) Pursuant to Article 9.10A of the TBCA, any action of the
holders of the Series B Preferred, voting as a separate class, which is
required by the TBCA to be taken at any annual or special meeting of the
holders of the Series B Preferred, or is otherwise permitted to be taken
by
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the holders of Series B Preferred at any annual or special meeting
pursuant to the TBCA, the Articles of Incorporation (including the
Statement of Resolution relating to the Series A Preferred and Series B
Preferred) or the corporation's bylaws, may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holder
or holders of shares of Series B Preferred having not less than the
minimum number of votes that would be necessary to take such action at a
meeting at which the holders of all shares of Series B Preferred were
present and voted.
SECTION 10. CONVERSION RIGHTS. Holders of shares of Series A
Preferred and Series B Preferred shall have the right to convert all or a
portion of such shares into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this
Section 10, each share of Series A Preferred and Series B Preferred shall
be convertible at the option of the holder thereof into fully paid, non-
assessable shares of Common Stock. The number (or fraction) of shares of
Common Stock deliverable upon conversion of one share of Series A
Preferred or Series B Preferred shall be determined by dividing the
Stated Value of such share of Series A Preferred or Series B Preferred by
the Conversion Price then in effect. For purpose of such determination,
the Stated Value of each share of Series A Preferred or Series B
Preferred shall be increased by the amount of accrued and unpaid
dividends for all quarterly dividend payment periods ending on or prior
to the date such shares are surrendered to the corporation for conversion
and for the partial dividend period beginning on the date immediately
following the most recent Dividend Payment Date through and including the
date on which such shares are surrendered for conversion.
Notwithstanding the foregoing, holders of shares of Series A Preferred
and Series B Preferred surrendered for conversion shall have the right to
require the corporation to make payment in cash of all such accrued and
unpaid dividends, in lieu of such adjustment to the Stated Value to the
extent funds are legally available therefor.
(b) The conversion of any share of Series A Preferred or Series B
Preferred may be effected by the holder thereof by the surrender of the
certificate for such share to the corporation at the principal office of
the Transfer Agent or to such other agent or agents of the corporation as
may be designated by the Board of Directors. If any shares of Series A
Preferred or Series B Preferred are called for redemption pursuant to
Section 7 hereof, such right of conversion shall cease and terminate as
to the shares called for redemption at the close of business on the
Business Day immediately preceding the redemption date, unless the
corporation shall default in the payment of the Redemption Price, in
which event such conversion right shall remain in effect until full
payment of the Redemption Price has been made.
(c) As promptly as practicable after the surrender of shares of
Series A Preferred and Series B Preferred for conversion, the corporation
shall issue and deliver or cause to be issued and delivered to the holder
of such shares certificates representing the number (or fraction) of
fully paid and non-assessable shares of Common Stock into which such
shares of Series A Preferred and Series B Preferred have been converted
in accordance with the provisions of this Section 10. Subject to the
following provisions of this Section 10, such conversion shall be deemed
to have been made as of the close of business on the date on which the
shares of Series A Preferred and Series B Preferred shall have been
surrendered for conversion in the manner herein provided, so that the
rights of the holder of the shares of Series A Preferred and Series B
Preferred so surrendered shall cease at such time, and the person or
persons entitled to receive the shares of Common Stock upon conversion
thereof shall be treated for all purposes as having become the
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record holder or holders of such shares of Common Stock at such time;
provided, however, that any such surrender on any date when the stock
transfer books of the corporation are closed shall be deemed to have been
made, and shall be effective to terminate the rights of the holder or
holders of the shares of Series A Preferred and Series B Preferred so
surrendered for conversion and to constitute the person or persons
entitled to receive such shares of Common Stock as the record holder or
holders thereof for all purposes, at the opening of business on the next
succeeding day on which such transfer books are open and such conversion
shall be at the Conversion Price in effect at such time.
(d) Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value of the shares of
Common Stock deliverable upon conversion of the shares of Series A
Preferred and Series B Preferred, the corporation will take any corporate
action which may, in the opinion of its counsel, be necessary in order
that the corporation may validly and legally issue fully paid and
non-assessable shares of Common Stock at such adjusted Conversion Price.
(e) The Conversion Price shall be subject to adjustment from time
to time as follows:
(i) In case at any time the corporation shall (A) subdivide
the outstanding shares of Common Stock into a greater number of
shares, or (B) combine the outstanding shares of Common Stock into
a smaller number of shares, the Conversion Price in effect
immediately prior thereto shall be adjusted proportionately so that
the adjusted Conversion Price shall bear the same relation to the
Conversion Price in effect immediately prior to such event as the
total number of shares of Common Stock outstanding immediately
prior to such event shall bear to the total number of shares of
Common Stock outstanding immediately after such event. Such
adjustment shall become effective immediately after the effective
date of a subdivision or combination.
(ii) In case at any time the corporation shall declare,
order, pay or make any dividend or other distribution to holders of
the Common Stock payable in Common Stock, then in each such case,
subject to Section 10(e)(v) hereof, the Conversion Price in effect
immediately prior to the close of business on the record date fixed
for determination of holders of any class of securities entitled to
receive such dividend or distribution shall be reduced to a price
(calculated to the nearest .001 of cent) determined by multiplying
such Conversion Price by a fraction:
(A) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such
dividend or distribution; and
(B) the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such
dividend or distribution.
Shares of Common Stock owned by or held for the account of the
corporation shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made on the date such
dividend is paid or such distribution is made and shall become
effective retroactive to the record date for the determination of
shareholders entitled to receive such dividend or distribution.
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(iii) In case at any time the corporation shall declare,
order, pay or make any dividend or other distribution to all
holders of the Common Stock, other than a dividend payable in
shares of Common Stock (including, without limitation, dividends or
distributions payable in cash, evidences of indebtedness, rights,
options or warrants to subscribe or purchase any Common Stock or
other securities, or any other securities or other property, but
excluding any rights to purchase any stock or other securities if
such rights are not separable from the Common Stock except upon the
occurrence of a contingency beyond the control of the corporation),
then, and in each such case, subject to Section 10(e)(v) hereof,
the Conversion Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders
of Common Stock entitled to receive such dividend or distribution
shall be reduced to a price (calculated to the nearest .001 of a
cent) determined by multiplying such Conversion Price by a
fraction:
(A) the numerator of which shall be the Market Price
per share of Common Stock in effect as of such record date
or, if the Common Stock trades on an ex-dividend basis, on
the Trading Day immediately prior to the date of commencement
of ex-dividend trading, less the value of such dividend or
distribution (as determined in good faith by the Board of
Directors of the corporation) applicable to one share of
Common Stock, and
(B) the denominator of which shall be such Market
Price per share of Common Stock as of such record date or, if
the Capital Stock trades on an ex-dividend basis, on the
Trading Day immediately prior to the date of commencement of
ex-dividend trading.
Such adjustment shall be made on the date such dividend is paid or
such distribution is made and shall become effective retroactive to
the record date for the determination of shareholders entitled to
receive such dividend or distribution.
(iv) In case at any time the corporation issues or sells any
shares of Common Stock or any rights, options or warrants to
subscribe for or purchase shares of Common Stock or shares having
the same rights, privileges and preferences as the Common Stock
("equivalent common stock") or securities convertible into Common
Stock or equivalent common stock, at a price per share of Common
Stock or equivalent common stock (or having a conversion price per
share, if a security is convertible into shares of Common Stock or
equivalent common stock) less than the Market Price of the Common
Stock as of the date of such issue or sale, then upon such issue or
sale the Conversion Price shall be reduced to such Conversion Price
determined by multiplying the Conversion Price in effect
immediately prior to such issue or sale by a fraction, (x) the
numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to such issue or sale
plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock and/or
equivalent common stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be
offered) would purchase at such Market Price and (y) the
denominator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to such issue or sale
plus the number of additional shares of Common Stock and/or
equivalent common stock to be offered for subscription or purchase
(or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be
paid in a consideration part of or all of which shall be in a form
other than cash, the value of such
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consideration shall be determined in good faith by the Board of
Directors of the corporation. Shares of Common Stock owned by or
held for the account of the corporation shall not be deemed
outstanding for the purpose of any such computation. Such issue or
sale adjustment shall be made successively upon the issuance or
sale of shares of Common Stock or equivalent common stock or any
rights, options or warrants to subscribe for or purchase Common
Stock or equivalent common stock or securities convertible into
common stock or equivalent common stock. Notwithstanding the
foregoing, no adjustment of the Conversion Price pursuant to this
Section 10(e)(iv) shall be made upon (A) the conversion or
redemption of shares of Series A Preferred or Series B Preferred;
(B) the payment of any stock dividend on the Series A Preferred or
Series B Preferred; (C) the issuance of options to officers,
directors and employees of the corporation and its subsidiaries, to
purchase shares of Common Stock, including any such options as are
issued and outstanding as of the Original Issue of the Series B
Preferred; (D) the issuance and sale of Common Stock upon exercise
of any rights, options or warrants referenced in the immediately
preceding clause (C) or in Section 10(e)(iii); or (E) the issuance
and sale of Common Stock in an underwritten public offering at a
price to the public of not less than 95% of the Closing Price of
the Common Stock on the date of the pricing of such offering.
(v) If the amount of any adjustment of the Conversion Price
required pursuant to this Paragraph 10 would be less than 1% of the
Conversion Price in effect at the time such adjustment is otherwise
so required to be made, such amount shall be carried forward and an
adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and
any other amount or amounts so carried forward, shall aggregate at
least 1% of such Conversion Price. All calculations under this
Section 10 shall be made to the nearest .001 of a cent.
(vi) Except as herein otherwise expressly provided, for all
purposes of this Section 10(e) the term "Common Stock" shall mean
the Common Stock and any shares of stock or other class of capital
stock of the corporation which is not preferred as to dividends or
assets over any other class of capital stock of the corporation and
which is not subject to redemption, or which is issued to the
holders of shares of Common Stock upon any reclassification
thereof.
(f) In case at any time after the Original Issuance Date, the
corporation shall be a party to any transaction (including without
limitation, a merger, consolidation, statutory share exchange, sale of
all or substantially all of the corporation's assets or recapitalization
of the Common Stock), in each case as a result of which shares of Common
Stock (or any other securities of the corporation then issuable upon
conversion of the Series A Preferred or Series B Preferred) shall be
converted to the right to receive stock, securities or other property
(including cash or any combination thereof) (each of the foregoing
transactions being referred to as a "Fundamental Change Transaction"),
then the shares of Series A Preferred and Series B Preferred remaining
outstanding will thereafter no longer be subject to conversion into
Common Stock (or such other securities) pursuant to this Section 10, but
instead each share shall be convertible into the kind and amount of stock
and other securities and property receivable (including cash) upon the
consummation of such Fundamental Change Transaction by a holder of that
number of shares or fraction thereof of Common Stock (or such other
securities) into which one share of Series A Preferred or Series B
Preferred was convertible immediately prior to such Fundamental Change
Transaction assuming such holder of Common Stock failed to exercise any
right of election as to the kind of consideration to be received in such
Fundamental Change Transaction. The
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corporation shall not be a party to any Fundamental Change Transaction
after which shares of the Series A Preferred and Series B Preferred shall
remain outstanding unless the terms of such Fundamental Change
Transaction are consistent with the provisions of this Section 10(f), and
it shall not consent or agree to the occurrence of any such Fundamental
Change Transaction until the corporation has entered into an agreement
with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the shares of Series A Preferred and Series B
Preferred which will contain provisions enabling the holders of shares of
the Series A Preferred and Series B Preferred which remain outstanding
after such Fundamental Change Transaction to convert such shares into the
consideration received by holders of Common Stock (or any other
securities of the corporation then issuable upon conversion of the Series
A Preferred or Series B Preferred) at the Conversion Price immediately
after such Fundamental Change Transaction. In the event that at any
time, as a result of an adjustment made pursuant to this Section 10, the
Series A Preferred and Series B Preferred shall become subject to
conversion into any securities other than shares of Common Stock,
thereafter the number of such other securities so issuable upon
conversion of the shares of Series A Preferred and Series B Preferred
shall be subject to adjustment from time to time in a manner and on terms
nearly equivalent as practicable to the provisions with respect to the
shares of Series A Preferred and Series B Preferred contained in this
Section 10. The provisions of this Section 10(f) shall similarly apply
to successive Fundamental Change Transactions.
(g) Upon the occurrence of any event requiring an adjustment of
the Conversion Price, then and in any such case the corporation shall
promptly deliver to the holders of shares of Series A Preferred and
Series B Preferred, a notice stating the Conversion Price resulting from
such adjustment, the method of calculation thereof, and setting forth a
brief statement of the facts requiring such adjustment and upon which
such adjustment is based.
(h) In case at any time:
(i) the corporation shall declare or pay to all
holders of Common Stock any dividend (whether payable in
Common Stock, cash, securities or other property);
(ii) there shall be any capital reorganization, or
reclassification of the Common Stock of the corporation or
consolidation or merger of the corporation with, or sale of
all or substantially all of its assets to, another
corporation or other entity;
(iii) there shall be a voluntary or involuntary
dissolution, liquidation, or winding-up of the corporation;
or
(iv) there shall be any other Fundamental Change
Transaction;
then, in any one or more of such cases, the corporation shall give to the
holder of shares of Series A Preferred and Series B Preferred (A) at
least 15 days prior to any event referred to in clause (i) above and at
least 30 days prior to any event referred to in clause (ii), (iii) or
(iv) above, written notice of the date on which the books of the
corporation shall close or records shall be taken for such dividend or
distribution or for determining rights to vote in respect of any such
organization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, or Fundamental Change Transaction and (B) in the
case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, winding-up, or Fundamental Change
Transaction known to the corporation, at least 30 days prior written
notice of the date, or if not
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then known, a reasonable approximation thereof by the corporation) when
the same shall take place. Such notice in accordance with the foregoing
clause (A) shall also specify, in the case of any such dividend or
distribution, the date on which such holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause
(B) shall also specify the date on which such holders of Common Stock
shall be entitled to exchange their Common Stock securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding-up, or
Fundamental Change Transaction, as the case may be.
(i) All shares of Common Stock issuable upon the conversion set
forth in this Section 10 shall be validly issued, fully-paid and
non-assessable.
SECTION 11. RANKING.
(a) The Series A Preferred and the Series B Preferred shall rank
on a parity with each other as to payment of dividends and distributions
and upon liquidation, dissolution or winding-up of the corporation. In
the event the corporation is a party to any merger, consolidation or
share exchange in which the Series A Preferred or Series B Preferred is
converted or exchanged into any other securities, property, cash or other
consideration, the securities, property, cash or other consideration into
which the Series A Preferred and Series B Preferred, respectively, may be
converted or exchanged shall be identical in kind and amount per share as
that into which the Series B Preferred or Series A Preferred, as the case
may be, may be converted or exchanged, and no shares of Series A
Preferred or Series B Preferred shall be converted or exchanged therein
into any securities, property, cash or other consideration unless all
shares of Series A Preferred and Series B Preferred may be converted or
exchanged into the same kind and amount per share of securities,
property, cash or other consideration.
(b) Without limiting the definition of Junior Securities, the
following securities and obligations of the corporation shall rank junior
to the Series A Preferred and Series B Preferred with respect to the
payments required or permitted to be made to the holders thereof pursuant
to their respective governing instruments and payments required to be
made to the holders of the Series A Preferred and Series B Preferred
pursuant hereto: the shares of Common Stock and Series A Junior
Participating Preferred Stock, par value $.01 per share.
SECTION 12. RECORD HOLDERS. The corporation and the Transfer Agent
may deem and treat the record holder of any shares of Series A Preferred and
Series B Preferred as the true and lawful owner thereof for all purposes, and
neither the corporation nor Transfer Agent shall be affected by any notice to
the contrary.
SECTION 13. NOTICE. Except as may otherwise be provided by law or
provided for herein, all notices referred to herein shall be in writing, and
all notices hereunder shall be deemed to have been given upon receipt, in the
case of a notice of conversion given to the corporation as contemplated in
Section 10(b) hereof, or, in all other cases, upon the earlier of receipt of
such notice or three Business Days after the mailing of such notices sent by
Registered Mail (unless first-class mail shall be specifically permitted for
such notice under the terms hereof) with postage prepaid, addressed: If to the
corporation, to its principal executive offices (Attention: Corporate
Secretary) or to any agent of the corporation designated as permitted hereby;
or if to a holder of the Series A Preferred and Series B Preferred, to such
holder at the address of such holder of the Series A Preferred and Series B
Preferred
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as listed in the stock record books of the corporation (which shall include the
records of the Transfer Agent), or to such other address as the corporation or
holder, as the case may be, shall have designated by notice similarly given.
SECTION 14. AUTHORIZATION BY NON-SERIES A AND B DIRECTORS. A
majority of the Non-Series A and B Directors shall make (and no Series B
Director shall be entitled to vote on) any determination required or permitted
to be made by the Board of Directors on behalf of the corporation (i) pursuant
to Section 7(c) hereof, as to whether to make payment of the Redemption Price
of the Series A Preferred and Series B Preferred in cash or in kind, (ii)
pursuant to Section 7(a) hereof, as to whether to exercise the corporation's
option to redeem outstanding shares of Series A Preferred or Series B
Preferred, or (iii) pursuant to Section 4(c) hereof, as to whether to make
payment of any dividends declared by the Board of Directors on the Series A
Preferred and Series B Preferred in cash or in kind; provided that, the Non-
Series A and B Directors shall not be entitled to make any determination to pay
cash dividends unless the corporation shall have sufficient cash legally
available to make such payment in full.
SECTION 15. SUCCESSORS AND TRANSFEREES. The provisions applicable
to shares of Series A Preferred and Series B Preferred shall bind and inure to
the benefit of and be enforceable by the corporation, the respective successors
to the corporation, and by any record holder of shares of Series A Preferred
and Series B Preferred.
SECTION 16. CONVERSION OF SERIES B TO SERIES A SHARES. Upon any
transfer of shares of Series B Preferred (or any transfer of beneficial
ownership of such shares) to any Person other than to any Partnership
Affiliate, such shares shall be automatically converted to shares of Series A
Preferred on a one for one basis, and as a condition to the registration of the
transfer of such shares, the certificate for the shares of Series B Preferred
to be transferred shall be surrendered to the Transfer Agent in exchange for
the issuance of a certificate for the same number of shares of Series A
Preferred registered in the name of the transferee. In addition, at such time
as the Minimum Ownership Condition is no longer met, all shares of Series B
Preferred remaining outstanding shall be automatically converted to shares of
Series A Preferred on a one for one basis and each holder of shares of Series B
Preferred shall surrender to the Transfer Agent the certificates for such
shares in exchange for certificates for the same number of shares of Series A
Preferred registered in the name of such holder.
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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 Texas
of a copy of the foregoing resolution executed by an officer of the
corporation.
Dated: , 1996.
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MESA INC.
By:
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Name:
Title:
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