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EXHIBIT 4b
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 140,000,000, 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, 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.
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 140,000,000. 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.
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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 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.
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"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 & Poor's 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.
"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 34,132,744 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.
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"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 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
December, March, June and September, commencing on September 30, 1996
(each, a "Dividend Payment Date").
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(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 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
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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 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
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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 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
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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 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: (i) 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: (x) authorize, create or issue, or increase the authorized or issued
amount of, any class or series of stock of Senior Securities or
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Parity Securities, or any security convertible into or 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 (y) amend the Articles of Incorporation to eliminate
cumulative voting; or (ii) without the affirmative vote or consent of the
holders of two-thirds of the shares of Series A Preferred voting as a
separate class, adopt any amendment to the Articles of Incorporation or the
bylaws that would materially affect the terms of the Series A Preferred; or
(iii) without the affirmative vote or consent of the holders of at least a
majority of the shares of Series B Preferred voting as a separate class,
adopt any amendment to the Articles of Incorporation or the Bylaws that
would materially affect the terms of the Series B Preferred.
(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.
(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
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
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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 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
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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
to be elected at any meeting of shareholders that is held after the first
meeting of shareholders at which Non-Series A and B Directors are elected
that is held after the Original Issue Date of the Series B Preferred. The
persons to be nominated by or on behalf of the Board of Directors for
election as Non-Series A and B Directors at such first meeting of
shareholders to be held after such Original Issue Date shall be such
persons as shall have most recently been designated as such nominees by
action of the Board of Directors prior to such Original Issue Date (or, if
any of such nominees shall be unable or unwilling to serve, such other
person or persons as shall be designated by the other such nominee or
nominees), unless otherwise agreed after such date by the unanimous vote of
all Non-Series A and B Directors then in office. Nothing in clause (ii) or
(iii) above of this subsection (i), or in the immediately preceding
sentence, 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 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,
nonassessable 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
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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 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
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(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.
(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 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
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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 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
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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 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
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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 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: June 26, 1996.
MESA INC.
By: /s/ STEPHEN K. GARDNER
--------------------------------
Stephen K. Gardner
Vice President and
Chief Financial Officer
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