EXHIBIT 4.2
CERTIFICATE OF DESIGNATIONS, PREFERENCES,
AND RELATIVE RIGHTS AND LIMITATIONS
OF THE
SERIES B SENIOR CONVERTIBLE CUMULATIVE PREFERRED STOCK
OF
CONTANGO OIL & GAS COMPANY, a Delaware corporation
(successor by merger to Contango Oil & Gas Company, a Nevada corporation)
(the "Corporation")
1. DESIGNATION. A series of the Preferred Stock of the Corporation is hereby
designated as "Series B Senior Convertible Cumulative Preferred Stock"
consisting initially of 10,000 authorized shares each having a par value of
$0.04 (hereinafter called the "Series B Preferred Stock"). Shares of the Series
B Preferred Stock shall rank prior to the Corporation's Common Stock (and any
Junior Stock (as hereinafter defined) with respect to the payment of dividends
or distributions and upon liquidation, dissolution, winding-up or otherwise.
(All equity securities of the Corporation to which the Series B Preferred Stock
ranks prior, whether with respect to dividends or distributions or upon
liquidation, dissolution, winding-up or otherwise, including the Common Stock,
are collectively referred to herein as "Junior Stock"; all equity securities of
the Corporation with which the Series B Preferred Stock ranks on a parity,
whether with respect to dividends or distributions or upon liquidation,
dissolution, winding-up or otherwise, are collectively referred to herein as
"Parity Stock"; and all equity securities of the Corporation to which the
Preferred Stock ranks junior, whether with respect to dividends or distributions
or upon liquidation, dissolution, winding-up or otherwise, are collectively
referred to herein as "Senior Stock"). Except for shares of Series B Preferred
Stock issuable in accordance with Section 2 hereof, the Corporation shall not
issue any shares of Series B Preferred Stock after the initial issuance of
Series B Preferred Stock.
2. DIVIDENDS.
(a) The holders of the shares of Series B Preferred Stock shall be entitled
to receive quarterly dividends at a dividend rate equal to 8% per annum (or 2%
per Quarterly Dividend Period) if paid in cash on a current quarterly basis (the
"Cash Dividend Rate") or otherwise at a dividend rate equal to 10% per annum (or
2.5% per Quarterly Dividend Period) if not paid on a current quarterly basis or
if paid in shares of Series B Preferred Stock (the "PIK Dividend Rate") (the
applicable dividend rate being hereinafter referred to as the "Dividend Rate"),
in each case computed on the basis of $1,000 per share, when and as declared by
the Board of Directors of the Corporation, out of funds or shares of Series B
Preferred Stock legally available for the payment of dividends. Quarterly
dividend periods (each a "Quarterly Dividend Period") shall commence on January
1, April 1, July 1 and October 1 in each year, except that the first Quarterly
Dividend Period shall commence on the date of issuance of the Series B Preferred
Stock, and shall end on and include the day immediately preceding the first day
of the next Quarterly Dividend Period.
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Dividends on the shares of Series B Preferred Stock shall be payable on March
31, June 30, September 30 and December 31 of each year (a "Dividend Payment
Date"), commencing September 30, 2000. Each such dividend shall be paid to the
holders of record of the Series B Preferred Stock as they shall appear on the
stock register of the Corporation on such record date, not exceeding 45 days nor
less than 10 days preceding such Dividend Payment Date, as shall be fixed by the
Board of Directors of the Corporation or a duly authorized committee thereof.
If, on any Dividend Payment Date, the holders of the Series B Preferred
Stock shall not have received the full dividends provided for in this Section
2(a) in cash or in kind, then such dividends shall cumulate, whether or not
earned or declared, with additional dividends thereon, compounded quarterly, at
the PIK Dividend Rate applicable to the Series B Preferred Stock as provided in
this Section 2(a), for each succeeding full Quarterly Dividend Period during
which such dividends shall remain unpaid.
(b) The amount of any dividends accrued on any share of the Series B
Preferred Stock on any Dividend Payment Date shall be deemed to be the amount of
any unpaid dividends accumulated thereon to and including such Dividend Payment
Date, whether or not earned or declared. The amount of dividends accrued on any
share of the Series B Preferred Stock on any date other than a Dividend Payment
Date shall be deemed to be the sum of (i) the amount of any unpaid dividends
accumulated thereon to and including the last preceding Dividend Payment Date,
whether or not earned or declared, and (ii) an amount determined by multiplying
(x) the Cash Dividend Rate by (y) a fraction, the numerator of which shall be
the number of days from the last preceding Dividend Payment Date to and
including the date on which such calculation is made and the denominator of
which shall be the full number of days in such Quarterly Dividend Period.
(c) Immediately prior to authorizing or making any distribution in
liquidation with respect to the Series B Preferred Stock (other than a purchase
or acquisition of Series B Preferred Stock pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Series B Preferred
Stock), the Board of Directors shall, to the extent of any funds legally
available therefor, declare a dividend in cash on the Series B Preferred Stock
payable on the distribution date in an amount equal to any accrued and unpaid
dividends on the Series B Preferred Stock as of such date.
(d) The Board of Directors may declare dividends payable in shares of
Series B Preferred Stock in lieu of cash dividends on a Dividend Payment Date.
In the event the Board of Directors elects to declare a dividend payable in
shares of Series B Preferred Stock, each holder of shares of Series B Preferred
Stock shall be entitled to receive such additional shares of Series B Preferred
Stock (or cash in lieu of a fraction thereof) equal to the product of (x) the
number of shares of Series B Preferred Stock held by such holder multiplied by
(y) the PIK Dividend Rate.
3. Priority.
(a) PARITY WITH SERIES A PREFERRED STOCK. Unless otherwise expressly
provided herein, the Series B Preferred Stock shall rank on a parity with
respect to the Corporation's Series A Senior Preferred Convertible Cumulative
Preferred Stock (hereinafter called the "Series A Preferred Stock") in all
respects, including with respect to dividends or distributions,
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redemption or upon liquidation, dissolution, winding-up or otherwise.
Accordingly, the Series A Preferred Stock shall be Parity Stock with respect to
the Series B Preferred Stock, unless otherwise expressly provided herein.
(b) PRIORITY AS TO DIVIDENDS.
(i) Holders of shares of the Series B Preferred Stock shall be
entitled to receive the dividends provided for in Section 2 hereof in preference
to and in priority over any dividends or distributions upon any Junior Stock. No
dividends shall be declared or paid or set apart for payment on any Junior Stock
for any period unless at the time of such declaration or payment or setting
apart for payment (A) full cumulative dividends have been or contemporaneously
are declared and paid in cash (or declared and a sum sufficient for the payment
thereof set apart for such payment) on the Series B Preferred Stock for all
Quarterly Dividend Periods terminating on or prior to the date of payment of
such dividends on Junior Stock, (B) an amount equal to the dividends accrued on
the Series B Preferred Stock from the last Dividend Payment Date to the date of
payment of such dividends on Junior Stock has been declared and set apart in
cash for payment on the Series B Preferred Stock and (C) the dividend payment
for the most recent Quarterly Dividend Period on the Series B Preferred Stock
has been paid entirely in cash.
(ii) No dividends shall be declared or paid or set apart for payment
on any Parity Stock for any period unless at the time of such declaration or
payment or setting aside for payment dividends have been or contemporaneously
are declared and paid in accordance with Section 2 hereof on the Series B
Preferred Stock for all Quarterly Dividend Periods terminating on or prior to
the date of payment of such dividends on Parity Stock. All dividends paid upon
shares of the Series B Preferred Stock and any Parity Stock shall be paid pro
rata so that the amount of dividends paid per share of the Series B Preferred
Stock and such Parity Stock shall in all cases bear to each other the same ratio
that accrued and unpaid dividends per share on the Series B Preferred Stock and
such Parity Stock bear to each other.
(c) PRIORITY ON REDEMPTION. The Corporation shall not, directly or
indirectly, redeem or purchase or otherwise acquire for value any Junior Stock
or Parity Stock unless, at the time of making such redemption, purchase or other
acquisition, full cumulative dividends have been or contemporaneously are
declared and paid in accordance with Section 2 hereof (or declared and a sum (or
shares of Series B Preferred Stock) sufficient for payment thereof set apart for
such payment) on the Series B Preferred Stock for all Quarterly Dividend Periods
terminating on or prior to the date of redemption of Junior Stock and/or Parity
Stock.
4. REDEMPTION. Upon the sale, conveyance or disposition of all or substantially
all of the assets of the Corporation or a sale, conveyance or disposition of a
majority of the outstanding shares of common stock in a transaction or series of
related transactions (except for a merger or consolidation after the
consummation of which the stockholders of the Corporation prior to such merger
or consolidation own a majority of the voting securities of the surviving
corporation or its parent corporation), each holder of Series B Preferred Stock
shall have the right to require that the Corporation redeem all or any part of
such holder's Series B Preferred Stock for cash out of legally available funds
at a price per share equal to the Liquidation Preference (as defined in Section
7(d) but with the accrued and unpaid dividends being paid through the date of
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redemption rather than the Conversion Date). If on the date of such sale,
conveyance or disposition funds legally available for such redemption shall be
insufficient to redeem all of the outstanding shares of Series B Preferred Stock
held by holders who have elected to have their shares redeemed, funds to the
extent legally available shall be used for such purpose and the Corporation
shall effect such redemption pro rata according to the number of shares of
Series B Preferred Stock held by each holder thereof. The redemption
requirements provided hereby shall be continuous, so that if on the date of such
sale, conveyance or disposition such requirements cannot be fully discharged,
without further action by any holder of the Series B Preferred Stock funds
legally available shall be applied therefor until such requirements are
fulfilled. Upon payment in full of the amounts owing under this Section 4 to any
holder of Series B Preferred Stock who has elected to have its shares redeemed,
then notwithstanding that the certificate or certificates evidencing such shares
shall not have been surrendered, the dividends with respect to such shares shall
cease to accrue after the date of such payment in full and all rights with
respect to such shares shall forthwith terminate.
5. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Corporation, the
holders of shares of the Series B Preferred Stock shall be entitled to receive,
out of the assets of the Corporation, whether such assets are capital or surplus
and whether or not any dividends as such are declared, $1,000 per share plus an
amount equal to all accrued and unpaid dividends thereon to the date fixed for
distribution, and no more, before any distribution shall be made to the holders
of Junior Stock with respect to the distribution of assets. If the assets of the
Corporation are not sufficient to pay in full the liquidation payments payable
to the holders of outstanding shares of the Series B Preferred Stock and any
other Parity Stock, then the holders of all such shares shall share ratably in
such distribution of assets in accordance with the amount which would be
otherwise payable on such distribution to the holders of Series B Preferred
Stock and the holders of such Parity Stock were such liquidation payments paid
in full. Except as provided, in this Section 5(a), in the event of any
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of shares of Series B Preferred Stock shall not be entitled to any
additional payments.
(b) Written notice of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation, stating a payment date and the
place where the distributive amounts shall be payable, shall be given by mail,
postage prepaid, not less than 30 days prior to the payment date stated therein,
to the holders of record of the Series B Preferred Stock at their respective
addresses as the same shall appear on the books of the Corporation.
6. VOTING RIGHTS.
(a) GENERAL. In addition to the rights otherwise provided for herein or by
law, holders of Series B Preferred Stock shall be entitled to vote, together
with the holders of Common Stock and any other voting Junior Stock or Parity
Stock, as one class on all matters submitted to a vote of stockholders of the
Corporation, in the same manner and with the same effect as the holders of
Common Stock. In any such vote, each share of Series B Preferred Stock shall
entitle the holder thereof to one vote per share for each share of Common Stock
(including fractional shares) into
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which each share of Series B Preferred Stock is then convertible, rounded to the
nearest one-tenth of a share.
(b) PROTECTIVE PROVISIONS. So long as any Series B Preferred Stock is
outstanding, the holders of the Series B Preferred Stock shall have the voting
power provided for by law and the Corporation covenants and agrees that it shall
not, without the written consent in lieu of a meeting, or the affirmative vote
at a meeting called for such purpose, of holders of Series B Preferred Stock of
record that hold at least a majority of the outstanding Series B Preferred
Stock, voting as a separate class:
(i) amend, alter or repeal, in any manner whatsoever, the
designations, powers, preferences, relative, participating, optional or other
special rights, qualifications, limitations and restrictions of the Series B
Preferred Stock;
(ii) authorize, issue, or agree to authorize or issue, whether by
reclassification or otherwise, any Senior Stock;
(iii) authorize, issue, or agree to authorize or issue, whether by
reclassification or otherwise, any new class or series of stock or any other
securities convertible into equity securities of the Corporation ranking on a
parity with the holders of Series B Preferred Stock with respect to the rights
of redemption, liquidation, preference, voting or dividends, or any increase in
the authorized or designated number of any such new class or series, other than
the Series A Preferred Stock;
(iv) amend, alter or repeal any provision of the articles of
incorporation of the Corporation, including the certificate of designation of
any class or series of stock;
(v) directly or indirectly, redeem, purchase or otherwise acquire for
value (including through an exchange), or set apart money or other property for
any mandatory purchase or other analogous fund for the redemption, purchase or
acquisition of, any shares of Common Stock or other Junior Stock;
(vi) consolidate or merge with or into any other corporation where (1)
the Corporation is not the surviving corporation or (2) the Corporation shall
issue to any person as consideration in respect of such consolidation or merger
any capital stock of the Corporation representing 20% or more of the
Corporation's outstanding capital stock prior to such consolidation or merger;
(vii) sell or convey all or substantially all of the assets of the
Corporation, or dissolve or liquidate the Corporation; or
(viii) incur any indebtedness, liabilities or obligations constituting
Restricted Debt (as defined below), which in the aggregate with all other
Restricted Debt of the Corporation (on a consolidated basis) is in excess of 50%
of the NPV10 (as defined below) of the Proved Reserves (as defined below)
attributable to the properties of the Corporation at the time of incurrence.
For purposes of this Section 6(b), the following terms shall have the
meanings set
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forth below:
"NPV10" means with respect to any Proved Reserves as expected to be
produced from the properties of the Corporation, the net present value of the
future net revenues expected to accrue to the Corporation's interests in such
Reserves during the remaining expected economic lives of such Reserves,
discounted at 10% per annum. Each calculation of such expected future net
revenues shall be made at the time of incurrence in accordance with the then
existing standards of the Society of Petroleum Engineers and Society of
Petroleum Evaluation Engineers, provided that in any event:
(i) appropriate deductions shall be made for (A) direct taxes and
existing burdens, (B) lease operating expenses,
(C) transportation, gathering and marketing burdens, (D) capital
expenditures (including plugging and abandonment costs), and (E)
general and administrative or overhead costs pursuant to the
relevant operating agreements (COPAS); and
(ii) the pricing assumptions and escalations used in determining
NPV10 for any particular Proved Reserves shall be:
(A) the contract price, if any, during the term of any written
oil and gas sales contract between Corporation and
unrelated persons; or
(B) if no sales contract exits:
(I) for volumes of oil and gas swapped or hedged with
investment grade counter parties, the hedged price
net of any costs, expenses or deductions relating
thereto; and
(II) for "naked" or long unhedged volumes, the oil and
gas prices reflected in the NYMEX oil and gas strips
going forward one year with adjustment for basis
(quality and geographical) differentials.
"PROVED RESERVES" means those reserves which are "proved oil and gas
reserves" within the meaning of Rule 4-10 of Regulation S-X, 17 C.F.R. ss.
210.4-10 of the Securities Exchange Commission. In addition, Proved Reserves
must have facilities to process and transport those reserves to market which are
operational at the time of the estimate, or there is a commitment or reasonable
expectation to install such facilities in the future.
"RESTRICTED DEBT" of any Person means debt in any of the following
categories: (i) debt for borrowed money; (ii) debt constituting an obligation to
pay the deferred purchase price of property or services; (iii) debt evidenced by
a bond, debenture, note or similar instrument; (iv) debt which (A) would under
GAAP be shown on the Corporation's balance sheet as a liability and (B) is
payable more than one year from the date of creation thereof (other than
reserves for taxes and contingent obligations); (v) debt constituting principal
under leases capitalized in accordance with GAAP; (vi) debt arising under
conditional sales or other title retention agreements; (vii) debt owing under
direct or indirect guaranties of debt of any other person or constituting
obligations to purchase or acquire or to otherwise protect or insure a
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creditor against loss in respect of debt of any other person (such as
obligations under working capital maintenance agreements, agreements to
keep-well, or agreements to purchase debt, assets, goods, securities or
services), but excluding endorsements in the ordinary course of business of
negotiable instruments in the course of collection; (viii) debt with respect to
letters of credit or applications or reimbursement agreements therefor;
PROVIDED, HOWEVER, that the term "Restricted Debt" shall not include debt which
is 60 days or less past due that was incurred on ordinary trade terms and is
owed by the Corporation incurring the same to vendors, suppliers, or other
persons providing goods and services for use by the Corporation in the ordinary
course of its business.
(c) DIVIDEND DEFAULT. In the event of a Dividend Default (as hereinafter
defined), the number of directors on the Board of Directors of the Corporation
shall be increased by two directors, both of whom shall be nominated and elected
as soon as practicable pursuant to the Bylaws of the Corporation by the holders
of the Series B Preferred Stock, to serve until the later of (i) the date of the
next annual meeting of stockholders and until such directors' successors are
elected and qualify and (ii) the date on which the Dividend Default is cured;
PROVIDED, HOWEVER, that if permitted under applicable law, the holders of the
Series B Preferred Stock shall have the right to elect the same individual to
serve as both directors and, if so elected, such individual shall be treated as
constituting two directors for all purposes including without limitation voting
and quorum. A "Dividend Default" shall occur if, at any time, dividends are not
paid in full (either in cash or in kind as provided for herein) with respect to
all shares of Series B Preferred Stock on any two consecutive Dividend Payment
Dates.
(d) BOARD OF DIRECTORS. If at any time a majority of the holders of the
Series B Preferred Stock has not appointed or nominated for election at least
one of the members of the Corporation's Board of Directors and shares of Series
B Preferred Stock remain outstanding, then the holders of the Series B Preferred
Stock shall be entitled to appoint one observer to the Corporation's Board of
Directors (the "Observer"). Such Observer shall have the right to attend, and
receive all materials distributed for or at, all meetings (telephone and
otherwise) of the Board of Directors (including committees thereof) and shall be
entitled to the same rights and privileges as directors of the Corporation,
except that such Observer shall not be entitled to vote on matters presented to
or discussed by the Board of Directors. The Observer will receive compensation
from the Corporation for his services as observer on an equal basis with the
directors of the Corporation and shall be entitled to be reimbursed by the
Corporation for all reasonable costs and expenses incurred in connection with
his participation in meetings or other activities of the Board of Directors. The
holders of the Series B Preferred Stock will use commercially reasonable efforts
to cause the Observer to keep all information provided to the Observer in
connection with all meetings of the Board of Directors confidential prior to its
becoming public, except that the Observer shall be permitted to disclose such
information (i) to officers, directors, employees, representatives, agents,
auditors, accountants, consultants, advisors, lawyers and affiliates of the
holders of the Series B Preferred Stock in the ordinary course of business who
have been made aware of the confidential nature of the information; (ii) to
prospective assignees and their respective directors, employees, agents and
representatives who have agreed in writing to become subject to this
confidentiality provision, (iii) as required by applicable law, or pursuant to
subpoenas or other legal process, or as requested by governmental agencies and
examiners; (iv) to the extent such information (A) becomes available to the
Observer other than as a result of a breach of this provision or (B) becomes
available to the Observer on a non-
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confidential basis, or (v) to the extent the Corporation shall have consented to
such disclosure in writing.
7. CONVERSION RIGHTS.
(a) VOLUNTARY CONVERSION. At a holder's election, the Series B Preferred
Stock may be converted, in whole or in part, to fully paid and nonassessable
shares of Common Stock at a conversion price of $4.40 per share, as adjusted in
accordance with Section 8 hereof (the "Conversion Price"). The number of shares
of the Common Stock into which a share of Series B Preferred Stock is
convertible shall be equal to the Liquidation Preference (as defined in Section
7(d)) of such share of Series B Preferred Stock divided by the Conversion Price
in effect on the Voluntary Conversion Date (as hereinafter defined).
(b) EXERCISE OF VOLUNTARY CONVERSION PRIVILEGE. In order to exercise the
voluntary conversion privilege, the registered holder of any share of Series B
Preferred Stock to be converted shall surrender the certificate representing
such share at the office of the Corporation and shall give written notice (the
"Conversion Notice") to the Corporation at said office that the holder elects to
convert such shares of Series B Preferred Stock or a specified portion thereof
into shares of Common Stock. As promptly as practicable after the receipt of the
Conversion Notice (such date of receipt, the "Voluntary Conversion Date") and
the surrender of such shares of Series B Preferred Stock, the Corporation shall
issue and deliver to the registered holder of such shares of Series B Preferred
Stock, at the address set forth on the Conversion Notice, a certificate or
certificates for the number of full shares of Common Stock, as applicable,
issuable upon the conversion of such shares of Series B Preferred Stock (or a
specified portion thereof) and cash in respect of any fraction of a share
issuable upon such conversion. Such conversion shall be deemed to have been
effected at the close of business on the Voluntary Conversion Date, and the
holder of such shares of Series B Preferred Stock shall be deemed to have become
the holder of record of the shares of Common Stock represented thereby as of the
Voluntary Conversion Date.
(c) MANDATORY CONVERSION. In the event the mean average traded price of the
Corporation's Common Stock on each of the immediately preceding 20 consecutive
Trading Days (as hereinafter defined) is equal to or greater than $5.00 per
share (as adjusted for any subdivision or combination of outstanding Common
Stock) (a "Mandatory Conversion Event"), the Corporation may elect to convert
all, but not less than all, of the outstanding shares of Series B Preferred
Stock to fully paid and nonassessable shares of Common Stock at the Conversion
Price (as defined in Section 7(a)). In order to effect the mandatory conversion
of the Series B Preferred Stock, the Corporation shall mail notice (the
"Mandatory Conversion Notice") to all holders of outstanding shares of Series B
Preferred Stock within 10 days after the occurrence of a Mandatory Conversion
Event, specifying a date (which must be at least 10 but not more than 30 days
after the date of such notice (the "Mandatory Conversion Date"). The number of
shares of the Common Stock into which a share of Series B Preferred Stock is
convertible shall be equal to the quotient of the Liquidation Preference (as
defined in Section 7(d)) of such share of Series B Preferred Stock divided by
the Conversion Price.
On or before the Mandatory Conversion Date, each holder of Series B
Preferred Stock shall surrender the certificate(s) representing the Series B
Preferred Stock to the
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Corporation at said office, accompanied by a written statement setting forth the
name or names (with address) in which the certificate or certificates for shares
of Common Stock shall be issued. As promptly as practicable thereafter, the
Corporation shall issue and deliver to the registered holder of such shares of
Series B Preferred Stock, at the address specified by the holder, a certificate
or certificates for the full shares of Common Stock issuable upon mandatory
conversion pursuant to this Section 7(c).
For purposes of this Section 7(c), "Trading Day" shall mean (1) (x) if
the Common Stock is listed on at least one stock exchange, a day on which there
is trading on the principal stock exchange on which the Common Stock is listed,
(y) if the Common Stock is not listed on a stock exchange, but sale prices of
the Common Stock are reported on an automated quotation system, a day on which
trading is reported on the principal automated quotation system on which sales
of the Common Stock are reported, or (z) if the Common Stock is not listed on a
stock exchange and sale prices of the Common Stock are not reported on an
automated quotation system, a day on which quotations are reported by National
Quotation Bureau Incorporated, and (2) the volume of shares of Common Stock sold
on such day is 25,000 shares (as adjusted in the same manner and proportion as
the adjustment of a Stock Unit in accordance with Section 8(a) hereof) or more.
For purposes of this Section 7(c), Trading Days shall not be deemed to be
"consecutive" if there shall occur any day which meets the criteria set forth in
clause (1) of the preceding sentence but does not meet the criteria set forth in
clause (2) thereof between one Trading Day and the next Trading Day.
(d) As used in this Section 7, the term "Liquidation Preference" shall mean
the sum of (i) $1,000 per share of Series B Preferred Stock and (ii) accrued and
unpaid dividends on the applicable Conversion Date calculated in accordance with
Sections 2(a) and (b) hereof.
(e) FRACTIONAL SHARES. The Corporation shall not be required to issue
fractional shares of Common Stock upon the conversion of shares of the Series B
Preferred Stock. If shares of the Series B Preferred Stock (or specified
portions thereof, if applicable) shall be presented for conversion which would
result in the issuance of any fraction of a share of Common Stock, the
Corporation may instead pay an amount in cash equal to the Conversion Price on
the day immediately preceding the Voluntary Conversion Date or the Mandatory
Conversion Date, as the case may be, multiplied by such fraction.
(f) RESERVATION OF SHARES. The Corporation shall at all times reserve and
keep available, free from preemptive rights, out of its authorized but unissued
Common Stock, for the purpose of enabling it to set aside shares to satisfy any
obligation to issue shares of Common Stock upon conversion of Series B Preferred
Stock, such number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding shares of Series B Preferred Stock. The shares of
Common Stock issuable upon conversion of shares of Series B Preferred Stock
shall, upon issuance, be duly authorized, validly issued, fully paid,
nonassessable, free of preemptive rights and free and clear of all liens,
charges, security interests and other encumbrances whatsoever.
8. ADJUSTMENT OF NUMBER OF SHARES ISSUABLE UPON CONVERSION AND THE CONVERSION
PRICE. The number of shares issuable upon conversion and the Conversion Price
(and each component thereof) are subject to adjustment from time to time as set
forth in this Section 8 with respect to
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any fact or event described herein occurring after the date hereof. Anything
contained in this Section 8 notwithstanding, any adjustment made pursuant to any
provision of this Section 8 shall be made without duplication of an adjustment
otherwise required by and made pursuant to another provision of this Section 8
on account of the same facts or events.
(a) DEFINITIONS. For purposes of this Section 8, the following terms shall
have the meanings ascribed to such terms below:
"5-DAY AVERAGE PRICE" per share of Common Stock, for purposes
of any provision herein at the date specified in such provision, shall
mean the average closing price of the Common Stock on the securities
exchange or other national market system on which the Common Stock is
then traded over the 5-trading day period immediately prior to such
date or, if the Common Stock is not then traded on a securities
exchange or national market system, the average of the bid and asked
prices on the over-the-counter market on which the Common Stock is then
traded as of the close of such market over the 5-trading day period
immediately prior to such date.
"30-DAY AVERAGE PRICE" per share of Common Stock, for purposes
of any provision herein at the date specified in such provision, shall
mean the average closing price of the Common Stock on the securities
exchange or other national market system on which the Common Stock is
then listed over the 30-trading day period immediately prior to such
date or, if the Common Stock is not then traded on a securities
exchange or national market system, the average of the bid and asked
prices on the over-the-counter market on which the Common Stock is then
traded as of the close of such market over the 30-trading day period
immediately prior to such date.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
Common Stock issued by the Corporation after the Closing Date other
than the following (in each case the "Corporation" shall mean either or
both of the Corporation and Contango Oil & Gas Company, a Nevada
corporation ("Contango Nevada"), and all numbers shall refer to shares
after giving effect to the two-for-one reverse stock split contemplated
by the Agreement and Plan of Merger dated as of December 1, 2000,
between the Corporation and Contango Nevada): (i) any shares of Common
Stock issued pursuant to the outstanding warrants, options and
convertible stock listed on Attachment 1, (ii) shares of Common Stock
issued pursuant to options to purchase Common Stock issued pursuant to
the Corporation's 1999 Stock Incentive Plan, including those options
issued to date and listed on Attachment 1, in an aggregate amount not
to exceed 2,500,000 shares, (iii) any shares of Common Stock issued
upon the exercise of options granted to Juneau Exploration Company, LLC
("JEX") pursuant to the Corporation's exploration agreement with JEX
dated September 1, 1999, as amended, (iv) any shares of Common Stock
issued to Glen Dillon in a number not to exceed 625 shares per month,
(v) any shares of Common Stock issued upon conversion of Series A
Preferred Stock issued to the Trust Company of the West, in its
capacities as Investment Manager and Custodian ("TCW"), (vi) any shares
of Common Stock issued to William Gibbons, the Corporation's treasurer
and assistant secretary, in a number not to
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exceed 1,000 shares per month through December 31, 2000, (vii) any
shares of Common Stock issued pursuant to warrants to purchase up to
62,500 shares of Common Stock issued to Fairfield Industries
Incorporated on or prior to the Closing Date, (viii) any shares of
Common Stock issued pursuant to warrants to purchase up to 62,500
shares of Common Stock issued to JEX on or prior to the Closing Date,
(ix) any shares of Common Stock issued pursuant to warrants to purchase
up to 125,000 shares of Common Stock issued to the Southern Ute Indian
Tribe doing business as the Southern Ute Indian Tribe Growth Fund
("SUIT") on or prior to the Closing Date, (x) any shares of Common
Stock issued pursuant to warrants to purchase up to 250,000 shares of
Common Stock issued to TCW on or prior to the Closing Date, (xi) any
shares of Common Stock issued pursuant to options granted to SUIT on a
quarterly basis to the same extent such options are granted to the
Corporation's outside directors under the 1999 Stock Incentive Plan,
(xii) any shares of Common Stock issued pursuant to options granted to
TCW on a quarterly basis to the same extent such options are granted to
the Corporation's outside directors under the 1999 Stock Incentive
Plan, (xiii) any shares of Common Stock issued upon conversion of the
Corporation's Series B Preferred, and (xiv) any shares of Common Stock
issued pursuant to a 401(k) or other qualified retirement plan for
officers, directors or employees of the Corporation and its affiliates
in an aggregate amount not to exceed 50,000 shares.
"APPRAISED VALUE" shall mean the fair market value of all
outstanding Common Stock, as determined by a written appraisal (the
"APPRAISAL") prepared by a national or major regional investment bank
acceptable to the Board of Directors of the Corporation and the holders
of the Series B Preferred Stock. "Fair market value" is defined for
this purpose as the price in a single transaction determined on a
going-concern basis that would be agreed upon by the most likely
hypothetical buyer for 100% of the equity capital of the Corporation.
In the event that the Corporation and the holders of the Series B
Preferred Stock cannot, in good faith, agree upon an investment bank,
then the Corporation, on the one hand, and the holders of the Series B
Preferred Stock, on the other hand, shall each select an investment
bank, the two investment banks so selected shall select a third
investment bank who shall be directed to prepare the Appraisal and the
term Appraised Value shall mean the appraised value set forth in the
Appraisal prepared in accordance with this definition. The Corporation
shall pay for the cost of any such Appraisal.
"CLOSING DATE" shall mean September 27, 2000.
"CONVERTIBLE SECURITIES" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible or
exchangeable for Additional Shares of Common Stock, either immediately
or upon the arrival of a specified date or the happening of a specified
event.
"CURRENT CONVERSION PRICE" per share of Common Stock, for the
purpose of any provision herein at the date herein specified, shall
mean the amount equal to the quotient resulting from dividing the
Conversion Price per Stock Unit in effect on such date by the number of
shares (including any
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fractional share) of Common Stock comprising a Stock Unit on such date.
"CURRENT MARKET PRICE" per share of Common Stock for the
purposes of any provision herein at a date herein specified, shall mean
the greater of (i) the 30-Day Average Price of the Common Stock or (ii)
the 5-Day Average Price of the Common Stock; PROVIDED, that if the
Current Market Price per share of Common Stock cannot be ascertained by
such methods, then the Current Market Price per share of Common Stock
shall be deemed to be the greater of (i) the net book value per share
of Common Stock, determined in accordance with generally accepted
accounting principles, or (ii) the fair value per share of Common Stock
determined pursuant to the Appraised Value.
"STOCK UNIT" shall mean one share of Common Stock, as such
Common Stock was constituted on the date of original issue of the
Series B Preferred Stock and thereafter shall mean such number of
shares (including any fractional shares) of Common Stock as shall
result from the adjustments specified in this Section 8.
(b) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. In case at any time or
from time to time the Corporation shall:
(i) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Common Stock, or
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any event described in CLAUSES (I) THROUGH (III) above
shall be adjusted so as to consist of the number of shares of Common Stock which
a record holder of the number of shares of Common Stock constituting a Stock
Unit immediately prior to the happening of such event would own or be entitled
to receive after the happening of event described in CLAUSES (I) THROUGH (III)
above.
(c) CERTAIN OTHER DIVIDENDS AND DISTRIBUTIONS. In case at any time or from
time to time the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(i) cash (other than a cash distribution made as a dividend and payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of the Corporation, to the
extent, but only to the extent, that the aggregate of all such dividends paid or
declared after the date hereof, does not exceed the consolidated net income of
the Corporation and its consolidated subsidiaries earned subsequent to the date
hereof determined in accordance with generally accepted accounting principles),
or
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(ii) any evidence of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of Common
Stock) or any other securities or property of any nature whatsoever (other than
cash and other than Convertible Securities or Additional Shares of Common
Stock), or
(iii) any warrants, options or other rights to subscribe for or
purchase (x) any evidences of its indebtedness (other than Convertible
Securities), (y) any shares of its stock (other than Additional Shares of Common
Stock) or (z) any other securities or property of any nature whatsoever (other
than cash and other than Convertible Securities or Additional Shares of Common
Stock),
then the number of shares of Common Stock thereafter comprising a Stock Unit
shall be adjusted to that number determined by multiplying the number of shares
of Common Stock comprising a Stock Unit immediately prior to such adjustment by
a fraction (A) the numerator of which shall be the Current Market Price per
share of Common Stock at the date of taking such record, and (B) the denominator
of which shall be such Current Market Price per share of Common Stock minus the
portion applicable to one share of Common Stock of any such cash so
distributable (if any) and of the fair value of any and all such evidences of
indebtedness, shares of stock, other securities or property, or warrants,
options or other subscription or purchase rights, so distributable (if any).
Such fair value shall be determined pursuant to the Valuation Procedure. The
"Valuation Procedure" is a determination of fair value of any property made in
good faith by the Board of Directors of the Corporation; provided, that if the
holders of a majority of the Series B Preferred Stock object to such
determination within ten days of receipt of written notification thereof, then
the fair value of such property shall be determined in good faith by a
recognized national or major regional investment bank selected by the Board of
Directors, which investment bank is not reasonably objected to by the holders of
a majority of the Series B Preferred Stock. The fees and expenses of such
investment bank shall be paid by the Corporation. A reclassification (other than
a change in par value) of the Common Stock into shares of Common Stock and
shares of any other class of stock shall be deemed a distribution by the
Corporation to the holders of its Common Stock of such shares of such other
class of stock within the meaning of this Section 8(c) and, if the outstanding
shares of Common Stock shall be changed into a larger or smaller number of
shares of Common Stock as a part of such reclassification, shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of Section 8(b).
(d) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case at any time or
from time to time the Corporation shall (except as hereinafter provided) issue,
whether in connection with the merger of a corporation into the Corporation or
otherwise, any Additional Shares of Common Stock for a consideration per share
less than the greater of (i) the Current Conversion Price or (ii) the Current
Market Price per share of Common Stock, then the number of shares of Common
Stock thereafter comprising a Stock Unit shall be adjusted to be the greater of
(A) that number determined by multiplying the number of shares of Common Stock
comprising a Stock Unit immediately prior to such adjustment by a fraction (i)
the numerator of which shall be the Current Conversion Price per share of Common
Stock, and (ii) the denominator of which shall be the consideration per share
received by the Corporation for such Additional Shares of Common Stock or (B)
that number determined by multiplying the number of shares of Common Stock
comprising a Stock Unit immediately prior to such adjustment by a fraction (x)
the numerator of
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which shall be the number of shares of Common Stock outstanding, plus the number
of such Additional Shares of Common Stock so issued, and (y) the denominator of
which shall be the number of shares of Common Stock outstanding, plus the number
of shares of Common Stock which the aggregate consideration for the total number
of such Additional Shares of Common Stock would purchase at the greater of the
Current Conversion Price and the Current Market Price per share of Common Stock.
For purposes of this Section 8(d), the date as of which the Current Market Price
per share of Common Stock shall be computed shall be the earlier of (i) the date
on which the Corporation shall enter into a firm contract for the issuance of
such Additional Shares of Common Stock, or (ii) the date of actual issuance of
such Additional Shares of Common Stock. The provisions of this Section 8(d)
shall not apply to any issuance of Additional Shares of Common Stock for which
an adjustment is provided under Section 8(b). No adjustment of the number of
shares of Common Stock comprising a Stock Unit shall be made under this Section
8(d) upon the issuance of any Additional Shares of Common Stock which are issued
pursuant to the exercise of any warrants, options or other subscription or
purchase rights or pursuant to the exercise of any conversion or exchange rights
in any Convertible Securities, if any such adjustment shall previously have been
made upon the issuance of such warrants, options or other rights or upon the
issuance of such Convertible Securities (or upon the issuance of any warrants,
options or other rights therefor) pursuant to Section 8(e) or Section 8(f).
(e) ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. In case at any time or
from time to time the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a distribution of, or
shall otherwise issue, any warrants, options or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any Convertible Securities and
the consideration per share for which Additional Shares of Common Stock may at
any time thereafter be issuable pursuant to such warrants, options or other
rights or pursuant to the terms of such Convertible Securities shall be less
than the greater of (A) the Current Conversion Price per share of Common Stock
or (B) the Current Market Price per share of Common Stock, then the number of
shares of Common Stock thereafter comprising a Stock Unit shall be adjusted to
be the greater of those numbers determined pursuant to the first sentence of
Section 8(d). All adjustments made pursuant to this Section 8(e) shall be made
on the basis that (i) the maximum number of Additional Shares of Common Stock
issuable pursuant to all such warrants, options or other rights or necessary to
effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued as of the date specified in the last sentence of this
Section 8(e), (ii) the aggregate consideration for such maximum number of
Additional Shares of Common Stock shall be deemed to be the minimum
consideration received and receivable by the Corporation for the issuance of
such Additional Shares of Common Stock pursuant to such warrants, options or
other rights or pursuant to the terms of such Convertible Securities and (iii)
the consideration per share received by the Corporation for such Additional
Shares of Common Stock shall be that number determined by dividing (x) the
aggregate consideration for such maximum number of Additional Shares of Common
Stock (determined as set forth in clause (ii) of this sentence) by (y) the
maximum number of Additional Shares of Common Stock issuable pursuant to all
such warrants, options or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities (determined as set forth in clause
(i) of this sentence). For purposes of this Section 8(e), the computation date
for subclause (i) above and as of which the Current Market Price and the Current
Conversion Price per share of Common Stock shall be computed shall be the
earliest of (A) the date on which the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to
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receive any such warrants, options or other rights, (B) the date on which the
Corporation shall enter into a firm contract for the issuance of such warrants,
options or other rights, and (C) the date of actual issuance of such warrants,
options or other rights.
(f) ISSUANCE OF CONVERTIBLE SECURITIES. In case at any time or from time to
time the Corporation shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a distribution of, or shall otherwise
issue, any Convertible Securities and the consideration per share for which
Additional Shares of Common Stock may at any time thereafter be issuable
pursuant to the terms of such Convertible Securities shall be less than the
greater of (A) the Current Conversion Price per share of Common Stock or (B) the
Current Market Price per share of Common Stock, then the number of shares of
Common Stock thereafter comprising a Stock Unit shall be adjusted to be the
greater of those numbers determined pursuant to the first sentence of Section
8(d). All adjustments made pursuant to this Section 8(f) shall be made on the
basis that (i) the maximum number of Additional Shares of Common Stock necessary
to effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued as of the computation date specified in the
penultimate sentence of this Section 8(f), (ii) the aggregate consideration for
such maximum number of Additional Shares of Common Stock shall be deemed to be
the minimum consideration received and receivable by the Corporation for the
issuance of such Additional Shares of Common Stock pursuant to the terms of such
Convertible Securities and (iii) the consideration per share received by the
Corporation for such Additional Shares of Common Stock shall be that number
determined by dividing (x) the aggregate consideration for such maximum number
of Additional Shares of Common Stock (determined as set forth in clause (ii) of
this sentence) by (y) the maximum number of Additional Shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities (determined as set forth in clause (i) of this sentence). For
purposes of this Section 8(f), the computation date for clause (i) above and as
of which the Current Market Price and the Current Conversion Price per share of
Common Stock shall be computed shall be the earliest of (A) the date on which
the Corporation shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive any such Convertible Securities, (B) the
date on which the Corporation shall enter into a firm contract for the issuance
of such Convertible Securities, and (C) the date of actual issuance of such
Convertible Securities. No adjustment of the number of shares of Common Stock
comprising a Stock Unit shall be made under this Section 8(f) upon the issuance
of any Convertible Securities which are issued pursuant to the exercise of any
warrants, options or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants,
options or other rights pursuant to Section 8(e).
(g) SUPERSEDING ADJUSTMENT OF STOCK UNIT. If, at any time after any
adjustment of the number of shares of Common Stock comprising a Stock Unit shall
have been made pursuant to the foregoing Section 8(e) or Section (f) on the
basis of the issuance of warrants, options or other rights or the issuance of
other Convertible Securities, or after any new adjustment of the number of
shares of Common Stock comprising a Stock Unit shall have been made pursuant to
this Section 8(g),
(i) such warrants, options or rights or the right of conversion or
exchange in such other Convertible Securities shall expire, and a portion or all
of such warrants, options or
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rights, or the right of conversion or exchange in respect of a portion of such
other Convertible Securities, as the case may be, shall not have been exercised,
or
(ii) the consideration per share for which Additional Shares of Common
Stock are issuable pursuant to such warrants, options or rights or the terms of
such other Convertible Securities, shall be increased solely by virtue of
provisions therein contained for an automatic increase in such consideration per
share upon the arrival of a specified date or the happening of a specified
event,
such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such warrants, options
or rights or other Convertible Securities on the basis of:
(iii) treating the number of Additional Shares of Common Stock, if any,
theretofore actually issued or issuable pursuant to the previous exercise of
such warrants, options or rights or such right of conversion or exchange, as
having been issued on the date or dates of such issuance as determined for
purposes of such previous adjustment and for the consideration actually received
and receivable therefor, and
(iv) treating any such warrants, options or rights or any such other
Convertible Securities which then remain outstanding as having been granted or
issued immediately after the time of such expiration or of such increase of the
consideration per share for which such Additional Shares of Common Stock are
issuable under such warrants, options or rights or other Convertible Securities,
and, if and to the extent called for by the foregoing provisions of this Section
8 on the basis aforesaid, a new adjustment of the number of shares of Common
Stock comprising a Stock Unit shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
(h) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION 8. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock comprising a Stock Unit hereinbefore provided
for in this Section 8:
(i) TREASURY STOCK. The sale or other disposition of any issued shares
of Common Stock owned or held by or for the account of the Corporation shall be
deemed an issuance thereof for purposes of this Section 8.
(ii) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants, options or
other rights to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities shall be issued solely for cash consideration, the
consideration received by the Corporation therefor shall be deemed to be the
amount of cash received by the Corporation therefor, or, if such Additional
Shares of Common Stock or Convertible Securities are offered by the Corporation
for subscription, the subscription price, or, if such Additional Shares of
Common Stock or Convertible Securities are sold to underwriters or dealers for
public offering without a
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subscription offering, the initial public offering price, in any such case
excluding any amounts paid or receivable for accrued interest or accrued
dividends and without deduction of any compensation, discounts or expenses paid
or incurred by the Corporation for and in the underwriting of, or otherwise in
connection with, the issue thereof. To the extent that such issuance shall be
for a consideration other than solely for cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to be the
fair value of such consideration at the time of such issuance as determined
pursuant to the Valuation Procedure. The consideration for any Additional Shares
of Common Stock issuable pursuant to any warrants, options or other rights to
subscribe for or purchase the same shall be the consideration received or
receivable by the Corporation for issuing such warrant, options or other rights,
plus the additional consideration payable to the Corporation upon the exercise
of such warrants, options or other rights. The consideration for any Additional
Shares of Common Stock issuable pursuant to the terms of any Convertible
Securities shall be the consideration received or receivable by the Corporation
for issuing any warrants, options or other rights to subscribe for or purchase
such Convertible Securities (if any), plus the consideration paid or payable to
the Corporation in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any, payable to
the Corporation upon the exercise of the right of conversion or exchange in such
Convertible Securities.
(iii) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by the
preceding Sections 8(b) through (h) inclusive shall be made whenever and as
often as any specified event requiring an adjustment shall occur. For the
purpose of any adjustment, any specified event shall be deemed to have occurred
at the close of business on the date of its occurrence.
(iv) FRACTIONAL INTERESTS. In computing adjustments under this Section
8, fractional interests in Common Stock shall be taken into account to the
nearest 1/100th of a share.
(v) WHEN ADJUSTMENT NOT REQUIRED. If the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution thereof to shareholders, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(i) MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS. In case the Corporation
shall merge or consolidate into another corporation, or shall sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business to another corporation and pursuant to the terms of such merger,
consolidation or disposition, shares of common stock of the successor or
acquiring corporation are to be received by or distributed to the holders of
Common Stock of the Corporation, then each holder of Series B Preferred Stock
shall have the right thereafter to receive Stock Units each comprising the
number of shares of common stock of the successor or acquiring corporation
receivable upon or as a result of such merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock comprising a Stock
Unit immediately prior to such event. If, pursuant to the terms of such merger,
consolidation or
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disposition of assets, any cash, shares of stock or other securities or property
of any nature whatsoever (including warrants, options or other subscription or
purchase rights) are to be received by or distributed to the holders of Common
Stock of the Corporation in addition to common stock of the successor or
acquiring corporation, there shall be an adjustment in the number of shares of
Common Stock thereafter comprising a Stock Unit to that number determined by
multiplying the number of shares of Common Stock comprising a Stock Unit
immediately prior to such adjustment by a fraction (x) the numerator of which
shall be the Current Market Price per share of Common Stock at the date of such
merger, consolidation or disposition, and (y) the denominator of which shall be
such Current Market Price per share minus the portion applicable to one share of
Common Stock of any cash so distributed and of the fair value of any and all
such shares of stock, securities or other property. Such fair value shall be
determined pursuant to the Valuation Procedure. In case of any such merger,
consolidation or disposition of assets, the successor or acquiring corporation
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition contained herein to be performed and observed
by the Corporation and all of the obligations and liabilities hereunder and
thereunder, subject to such modification as shall be necessary to provide for
adjustments of Stock Units which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section 8. For the purposes of this Section
8 "common stock of the successor or acquiring corporation" shall include stock
of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is not
subject to redemption. The foregoing provisions of this Section 8(i) shall
similarly apply to successive mergers, consolidations or dispositions of assets.
(j) OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from time
to time the Corporation shall take any action affecting its Common Stock, other
than an action described in any of the foregoing Sections 8(b) to Section 8(i),
inclusive, of this Section 8 and the actions described in clauses (i) through
(xiv) of the definition of Additional Shares of Common Stock, then, unless in
the reasonable opinion of the Board of Directors of the Corporation such action
will not have a materially adverse effect upon the rights of the holders of the
Series B Preferred Stock, the number of shares of Common Stock or other stock
comprising a Stock Unit, or the Conversion Price thereof, shall be adjusted in
such manner and at such time as the Board of Directors of the Corporation may in
good faith determine to be equitable in the circumstances.
(k) NO ADJUSTMENTS FOR CERTAIN TRANSACTIONS. Notwithstanding anything to
the contrary contained herein, the number of shares of Common Stock comprising a
Stock Unit and the Current Conversion Price per Stock Unit shall not be
adjusted, nor be subject to adjustment, on account of the granting of any rights
under a phantom stock plan, stock appreciation rights plan or other deferred
compensation plan to officers, directors or employees of the Corporation or its
affiliates, if (i) no shares of Common Stock are issued or required to be issued
under any such plan and (ii) the only consideration paid or payable to any
participant in such plan is cash.
9. NOTICE TO HOLDERS OF SERIES B PREFERRED STOCK.
(a) NOTICE OF ADJUSTMENT OF STOCK UNIT OR CURRENT CONVERSION PRICE.
Whenever the number of shares of Common Stock comprising a Stock Unit or the
Current Conversion Price per Stock Unit shall be adjusted pursuant to Section 8,
the Corporation shall forthwith obtain a certificate signed by the president of
the Corporation and the principal financial officer of the
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Corporation, setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including a
statement of the fair value, as determined by the Board of Directors of the
Corporation, of any evidences of indebtedness, shares of stock, other securities
or property or warrants, options or other subscription or purchase rights
referred to in Section 8(c), Section 8(h)(ii) or Section 8(i)) and specifying
the number of shares of Common Stock comprising a Stock Unit and (if such
adjustment was made pursuant to Section 8(i) or Section 8(j)) describing the
number and kind of any other shares of stock comprising a Stock Unit, and any
change in the Current Conversion Price thereof after giving effect to such
adjustment or change. The Corporation shall promptly, and in any case within 10
days after the making of such adjustment, cause a signed copy of such
certificate to be delivered to each holder of Series B Preferred Stock. The
Corporation shall keep at its office or agency copies of all such certificates
and cause the same to be available for inspection at said office during normal
business hours by any holder of Series B Preferred Stock or any prospective
purchaser of Series B Preferred Stock designated by a holder.
(b) NOTICE OF CERTAIN CORPORATE ACTION. In case the Corporation shall
propose (i) to pay any dividend payable in cash or in stock of any class to the
holders of its Common Stock or to make any other distribution to the holders of
its Common Stock, or (ii) to offer to the holders of its Common Stock rights to
subscribe for or to purchase any Additional Shares of Common Stock or shares of
stock of any class or any other securities, rights or options, or (iii) to
effect any reclassification of its Common Stock (other than a reclassification
involving only the subdivision or combination of outstanding shares of Common
Stock), or (iv) to effect any capital reorganization, or (v) to effect any
consolidation, merger or sale, change to the Corporation's charter or bylaws,
transfer or other disposition of all or substantially all of its property,
assets or business, or (vi) to effect the liquidation, dissolution or winding up
of the Corporation, then in each such case, the Corporation shall give to each
holder of Series B Preferred Stock, a notice, certified by the president of the
Corporation and the principal financial officer of the Corporation, of such
proposed action, which shall specify the date on which a record is to be taken
for the purposes of such stock dividend, distribution or rights, or the date on
which such reclassification, reorganization, consolidation, merger, sale, change
to the Corporation's charter or bylaws, transfer, disposition, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of Common Stock, if any such date is to be fixed, and
shall also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect of such action on the Common Stock and the
number and kind of any other shares of stock which will comprise a Stock Unit,
and the Current Conversion Price thereof, after giving effect to any adjustment
which will be required as a result of such action. Such notice shall be so given
in the case of any action covered by clause (i) or (ii) above at least twenty
days prior to the record date for determining holders of the Common Stock for
purposes of such action, and in the case of any other such action, at least
thirty days prior to the date of the taking of such proposed action or the date
of participation therein by the holders of Common Stock, whichever shall be the
earlier.
10. NO IMPAIRMENT. Other than in connection with the amendment of its Articles
of Incorporation approved by the requisite number of stockholders, the
Corporation will not, through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation but will at all times in good
faith
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assist in the carrying out of all the provisions of this Certificate and
in the taking of all action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Series B Preferred Stock
against impairment. Without limiting the generality of the foregoing, the
Corporation (i) will not permit the par value of any shares of stock at the time
receivable upon the conversion of the Series B Preferred Stock to exceed the
Current Conversion Price then in effect, (ii) will take all such action as may
be necessary or appropriate in order that the corporation may validly and
legally issue fully paid non-assessable shares of stock on the conversion of the
Series B Preferred Stock, and (iii) will not issue any Additional Shares of
Common Stock or Convertible Securities or take any action which results in any
adjustment of the Current Conversion Price or the number of shares comprising a
Stock Unit if the total number of shares of Common Stock issuable after such
issuance or action upon the conversion or payment of all outstanding dividends
on, all of the then outstanding shares of Series B Preferred Stock will exceed
the total number of shares of Common Stock then authorized by the Corporation's
Articles of Incorporation and available for the purpose of issue upon such
conversion or payment of such dividend.
20
