0000930661-95-000243.txt : 19950811 0000930661-95-000243.hdr.sgml : 19950811 ACCESSION NUMBER: 0000930661-95-000243 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 SROS: NASD SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXUS ENERGY CORP /DE/ CENTRAL INDEX KEY: 0000724176 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 751891531 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08567 FILM NUMBER: 95560880 BUSINESS ADDRESS: STREET 1: 717 N HARWOOD ST- RM 3147 CITY: DALLAS STATE: TX ZIP: 75201-6594 BUSINESS PHONE: 2149532000 FORMER COMPANY: FORMER CONFORMED NAME: DIAMOND SHAMROCK CORP /DE/ DATE OF NAME CHANGE: 19870518 FORMER COMPANY: FORMER CONFORMED NAME: NEW DIAMOND CORP DATE OF NAME CHANGE: 19830908 10-Q 1 FORM 10-Q (6-30-95) SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________ FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(C) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ending June 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(C) OF THE SECURITIES AND EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-8567-2 MAXUS ENERGY CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 75-1891531 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 717 NORTH HARWOOD STREET, DALLAS, TEXAS 75201-6594 (Address of principal executive offices) (Zip Code) (214) 953-2000 (Registrant's telephone number, including area code) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQURIED TO BE FILED BY SECTION 13 OR 15(C) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO THE FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO --- --- Shares of Common Stock outstanding at August 7, 1995: 135,609,772 PART I. FINANCIAL INFORMATION In the opinion of the management of Maxus Energy Corporation, all adjustments (consisting only of normal accruals) necessary for a fair presentation of the consolidated results of operations, consolidated balance sheet and consolidated cash flows at the date and for the periods indicated have been included in the accompanying consolidated financial statements. 2 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS We have reviewed the accompanying consolidated balance sheet of Maxus Energy Corporation (a Delaware corporation) as of June 30, 1995, and the related consolidated statements of income and cash flows for the three-month period then ended in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial information, applying analytical review procedures to the financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. Arthur Andersen LLP Dallas, Texas July 25, 1995 3 MAXUS ENERGY CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) (in millions, except per share)
---------------------------------------------------------------------------------------------------------- 1994 1995 ------------------------ --------------------------- Three Months Six Months Three Months | Three Months Ended Ended Ended | Ended June 30, June 30, March 31, | June 30, ------------ ---------- ------------ | ------------ | REVENUES | Sales and operating revenues $167.5 $354.6 $142.5 | $150.7 Other revenues, net 7.3 13.1 9.6 | 6.2 -------------------- ----------|----------- 174.8 367.7 152.1 | 156.9 -------------------- ----------|----------- COSTS AND EXPENSES | Operating expenses 57.9 122.1 64.7 | 58.0 Gas purchase costs 32.4 75.9 12.7 | 13.2 Exploration, including exploratory dry holes 8.4 18.5 8.9 | 16.8 Depreciation, depletion and amortization 35.2 73.4 29.9 | 45.2 General and administrative expenses 6.6 12.6 4.2 | 4.4 Taxes other than income taxes 2.7 6.8 3.0 | 2.8 Interest and debt expenses 24.9 47.4 24.1 | 34.7 Pre-merger costs - - 42.4 | - Environmental studies and remediation 11.5 11.5 - | - Restructuring: | Gain on sale of assets (201.9) (201.9) - | - Restructuring costs 100.9 100.9 - | - -------------------- ----------|----------- 78.6 267.2 189.9 | 175.1 -------------------- ----------|----------- | Income (Loss) Before Income Taxes 96.2 100.5 (37.8) | (18.2) Income Taxes 66.1 81.6 19.1 | 4.8 -------------------- ----------|----------- Net Income (Loss) 30.1 18.9 (56.9) | (23.0) | Dividend Requirement on Preferred Stock 12.1 24.4 9.6 | 9.6 -------------------- ----------|----------- Income (Loss) Applicable To Common Shares $ 18.0 $ (5.5) $(66.5) | $(32.6) ==================== ==========|=========== Income (Loss) per Common Share $ 0.13 $(0.04) $(0.49) | $(0.24) ==================== ==========|=========== Average Common Shares Outstanding | (in millions) 134.7 134.6 135.5 | 135.6
See Notes to Consolidated Financial Statements (Unaudited). 4 MAXUS ENERGY CORPORATION CONSOLIDATED BALANCE SHEET (in million, except shares)
---------------------------------------------------------------------------------------------------------------------------- December 31, | April 1, June 30, 1994 | 1995 1995 -------------|------------------------- | (Unaudited) (Unaudited) | ASSETS | Current Assets | Cash and cash equivalents $ 40.6 | $ 92.1 $ 33.6 Short-term investments 103.8 | 65.0 40.3 Receivables, less doubtful receivables 152.4 | 127.8 120.5 Taxes receivable 23.8 | 13.7 - Inventories 27.9 | 28.6 33.2 Restricted cash 46.4 | 48.5 32.6 Deferred income taxes 0.3 | 7.6 7.6 Prepaid expenses and other current assets 18.4 | 18.9 21.1 --------------------------------------------------------------------------------------------------|------------------------- Total Current Assets 413.6 | 402.2 288.9 | Properties and equipment, less accumulated | depreciation and depletion $1,611.0, $0.0, and $45.2 1,088.4 | 2,404.7 2,391.8 Investments and long-term receivables 40.2 | 36.7 7.1 Restricted cash 94.2 | 77.1 82.5 Intangible assets, less accumulated amortization of $14.2 35.8 | - - Deferred income taxes 9.4 | - - Deferred charges 25.1 | 15.5 17.4 --------------------------------------------------------------------------------------------------|------------------------- Total Assets $ 1,706.7 | $2,936.2 $2,787.7 ==================================================================================================|========================= | LIABILITIES AND STOCKHOLDERS' EQUITY | Current Liabilities | Long-term debt $ 4.7 | $ 12.7 $ 4.2 Accounts payable 65.1 | 49.8 42.4 Accrued liabilities 101.2 | 263.2 175.0 Taxes payable - | - 10.7 --------------------------------------------------------------------------------------------------|------------------------- Total Current Liabilities 171.0 | 325.7 232.3 | Long-term debt 970.9 | 1,282.7 1,284.5 Advance from parent - | - 1.9 Deferred income taxes 199.3 | 593.5 578.3 Other liabilities and deferred credits 149.4 | 260.9 248.1 $9.75 Redeemable Preferred Stock, $1.00 par value | Authorized and issued shares -1,250,000 125.0 | 125.0 125.0 Stockholders' Equity | $2.50 Preferred Stock, $1.00 par value | Authorized shares -5,000,000 | Issued shares -3,500,000 3.5 | 73.1 70.9 $4.00 Preferred stock, $1.00 par value | Authorized shares -5,915,017 | Issued shares -4,358,658, 4,356,958, and 4,356,958 4.4 | 24.8 20.4 Common Stock, $1.00 par value | Authorized shares -300,000,000 | Issued shares -135,694,722, 135,897,899, and 135,609,772 135.7 | 135.9 135.6 Paid-in capital 988.1 | 118.2 111.9 Accumulated deficit (1,016.4) | - (23.0) Minimum pension liability (18.3) | - - Unrealized gain / (loss) on marketable securities (2.4) | - 1.8 Common Treasury Stock, at cost -295,995 and 310,535 shares (3.5) | (3.6) - --------------------------------------------------------------------------------------------------|------------------------- Total Stockholders' Equity 91.1 | 348.4 317.6 --------------------------------------------------------------------------------------------------|------------------------- Total Liabilities and Stockholders' Equity $ 1,706.7 | $2,936.2 $2,787.7 ==================================================================================================|=========================
See Notes to Consolidated Financial Statements (Unaudited). The Company uses the successful efforts method to account for its oil and gas producing activities. 5 MAXUS ENERGY CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) (in millions)
-------------------------------------------------------------------------------------------------------------------------------- 1994 1995 ---------------------------------------- Six Months Three Months | Three Months Ended Ended | Ended June 30, March 31, | June 30, ---------- ------------ | ------------ | CASH FLOWS FROM OPERATING ACTIVITIES: | Net income (loss) $ 18.9 $(56.9) | $ (23.0) Adjustments to reconcile net income (loss) to net cash provided | by (used in) operating activities: | Depreciation, depletion and amortization 73.4 29.9 | 45.2 Dry hole costs 0.3 1.0 | 6.8 Deferred income taxes 26.8 0.4 | (15.2) Gain on sale of assets (179.3) (1.7) | (0.3) Restructuring costs 91.0 - | - Postretirement benefits 3.4 1.4 | 1.0 Pre-merger costs - 42.4 | - Accretion of discount - - | 1.7 Other 18.2 1.3 | - Changes in components of working capital: | Receivables 10.7 23.8 | 6.7 Inventories, prepaids and other current assets (2.8) (1.4) | (6.7) Accounts payable (37.0) (15.1) | (7.4) Accrued liabilities (6.3) 26.3 | (37.7) Taxes payable / receivable 18.1 10.1 | 24.4 ---------- ------------ | ------------ Net Cash Provided by (Used in) Operating Activities 35.4 61.5 | (4.5) ------------------------------------------------------------------------------------------------------------------|------------- | CASH FLOWS FROM INVESTING ACTIVITIES: | Expenditures for properties and equipment--including | dry hole costs (98.3) (53.6) | (39.3) Expenditures for investments (20.1) - | - Proceeds from sale of assets 312.8 2.1 | 0.6 Proceeds from sale/maturity of short-term investments 4.2 63.4 | 55.9 Purchases of short-term investments (55.5) (24.6) | - Restricted cash 13.2 12.2 | 10.6 Other (6.7) 9.8 | (10.8) ---------- ------------ | ------------ Net Cash Provided by Investing Activities 149.6 9.3 | 17.0 ------------------------------------------------------------------------------------------------------------------|------------- | CASH FLOWS FROM FINANCING ACTIVITIES: | Interest rate swap (5.9) 3.4 | 4.5 Net borrowings from joint venture partners (4.4) - | - Proceeds from issuance of short-term debt 30.0 - | 17.2 Repayment of short-term debt (59.3) - | (17.7) Net proceeds from issuance of long-term debt 61.3 - | 833.9 Repayment of long-term debt (71.7) - | (425.1) Acquisition of common stock, including merger costs - - | (726.1) Capital contribution from parent - - | 250.5 Cash advance from parent - - | 1.9 Stock rights redemption - (13.6) | - Redemption of preferred stock (125.0) - | - Dividends paid on preferred stock (24.4) (9.6) | (9.6) ---------- ------------ | ------------ Net Cash Used in Financing Activities (199.4) (19.8) | (70.5) ------------------------------------------------------------------------------------------------------------------|------------- Net Increase (Decrease) in Cash and Cash Equivalents (14.4) 51.0 | (58.0) Cash and Cash Equivalents at Beginning of Period 128.7 40.6 | 91.6 ------------------------------------------------------------------------------------------------------------------|------------- Cash and Cash Equivalents at End of Period $ 114.3 $ 91.6 | $ 33.6 ==================================================================================================================|=============
See Notes to Consolidated Financial Statements (Unaudited). 6 1. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements have been prepared in conformity with generally accepted accounting principles, the most significant of which are described below. A) CONSOLIDATION AND EQUITY ACCOUNTING The Consolidated Financial Statements include the accounts of Maxus Energy Corporation and all domestic and foreign subsidiaries (the "Company" or "Maxus"). All significant intercompany accounts and transactions have been eliminated. B) STATEMENT OF CASH FLOWS Investments with original maturities of three months or less at the time of acquisition are considered cash equivalents for purposes of the accompanying Consolidated Statement of Cash Flows. Short-term investments include U. S. Treasury Notes and investments with maturities over three months but less than one year. C) INVENTORY VALUATION Inventories are valued at the lower of cost or market, cost being determined primarily by the weighted average cost method. D) PROPERTIES AND EQUIPMENT Properties and equipment are carried at cost. Major additions are capitalized; expenditures for repairs and maintenance are charged against earnings. The Company uses the successful efforts method to account for costs incurred in the acquisition, exploration, development and production of oil and gas reserves. Under this method, all geological and geophysical costs are expensed; all development costs, whether or not successful, are capitalized as costs of proved properties; exploratory drilling costs are initially capitalized, but if the effort is determined to be unsuccessful, the costs are then charged against earnings; depletion is computed based on an aggregation of properties with common geologic structural features or stratigraphic conditions, such as reservoirs or fields. For U. S. unproved properties, a valuation allowance (included as an element of depletion) is provided by a charge against earnings to reflect the impairment of unproven acreage. International non-producing leasehold costs are reviewed semi-annually by management to insure the carrying value is recoverable based upon the geological and engineering estimates of total possible and probable reserves expected to be added over the remaining life of each concession. A pro rata portion of the costs will be transferred to investment in proved properties semi-annually based upon new reserve updates. Effective April 1, 1995, the Company adopted Statement of Financial Accounting Standards No. 121. ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS 121 requires a review of long-lived assets for impairment whenever events or changes in circumstance indicate that the carrying amount of the asset may not be recoverable. If the expected future net cash flows of the long-lived assets is less than the carrying amount of the asset an impairment loss shall be recognized to value the asset at its fair value. Upon merger with YPF, the Company reviewed the valuation of its oil and gas properties to assure the carrying value did not exceed fair market value. Depreciation and depletion related to the costs of all development drilling, successful exploratory drilling and related production equipment is calculated using the unit of production method based upon estimated proved recoverable reserves. Other properties and equipment are depreciated generally on the straight-line method over their estimated useful lives. Estimated future 7 dismantlement, restoration and abandonment costs for major facilities, net of salvage value, are taken into account in determining depreciation, depletion and amortization. The Company capitalizes the interest cost associated with major property additions and mineral development projects while in progress, such amounts being amortized over the useful lives, and applying the same depreciation method, as that used for the related assets. When complete units of depreciable property are retired or sold, the asset cost and related accumulated depreciation are eliminated with any gain or loss reflected in income. When less than complete units of depreciable property are disposed of or retired, the difference between asset cost and salvage value is charged or credited to accumulated depreciation. E) DEFERRED CHARGES Deferred charges are primarily debt issuance costs and are amortized over the terms of the related debt agreements. F) REVENUE RECOGNITION Oil and gas sales are recorded on the entitlements method. Differences between the Company's actual production and its entitlements result in a receivable when underproduction occurs and a payable when overproduction occurs. G) PENSIONS The Company has a number of trusteed noncontributory pension plans covering substantially all full-time employees. The Company's funding policy is to contribute amounts to the plans sufficient to meet the minimum funding requirements under governmental regulations, plus such additional amounts as management may determine to be appropriate. The benefits related to the plans are based on years of service and compensation earned during years of employment. The Company also has a noncontributory supplemental retirement plan for executive officers. The Company has fully accrued its accumulated pension obligation. H) OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS The Company provides certain health care and life insurance benefits for retired employees and certain insurance and other postemployment benefits for individuals whose employment is terminated by the Company prior to their normal retirement. The Company accrues the estimated cost of retiree benefit payments, other than pensions, during employees' active service period. Employees become eligible for these benefits if they meet minimum age and service requirements. The Company accounts for benefits provided after employment but before retirement by accruing the estimated cost of postemployment benefits when the minimum service period is met, payment of the benefit is probable and the amount of the benefit can be reasonably estimated. The Company has fully accrued its accumulated postretirement and postemployment benefits obligation. I) ENVIRONMENTAL EXPENDITURES Environmental liabilities are recorded when environmental assessments and/or remediation are probable and material and such costs to the Company can be reasonably estimated. J) LITIGATION CONTINGENCIES The Company records liabilities for litigation when such amounts are probable and material and can be reasonably estimated. 8 K) INCOME TAXES The Company reports income taxes in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." SFAS 109 requires the use of an asset and liability approach to measure deferred tax assets and liabilities resulting from all expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. L) EARNINGS PER SHARE Primary earnings per share are based on the weighted average number of shares of common stock and common stock equivalents outstanding, unless the inclusion of common stock equivalents has an antidilutive effect on earnings per share. Fully diluted earnings per share are not presented due to the antidilutive effect of including all potentially dilutive common stock equivalents. M) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF CREDIT RISK The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents, short-term investments and trade receivables. The Company's cash equivalents and short-term investments and restricted cash represent high-quality securities placed with various high investment grade institutions. This investment practice limits the Company's exposure to concentrations of credit risk. The trade receivables are dispersed among a broad domestic and international customer base; therefore, concentrations of credit risk are limited. The Company carefully assesses the financial strength of its customers. Letters of credit are the primary security obtained to support lines of credit. The Company has minimal exposure to credit losses in the event of nonperformance by the counterparties to its interest rate swap agreement, natural gas price swap agreements and nonderivative financial assets. The Company does not obtain collateral or other security to support financial instruments subject to credit risk but restricts such arrangements to investment-grade counterparties. N) INVESTMENTS IN MARKETABLE SECURITIES All investments in debt securities and certain investments in equity securities are reported at fair value except for those investments which management has the intent and the ability to hold to maturity. Investments which are held-for-sale are classified based on the stated maturity and management's intent to sell the securities. Unrealized gains and losses on investments in marketable securities are reported as a separate component of stockholders' equity. O) DERIVATIVES The Company periodically hedges the effects of fluctuations in the price of natural gas through price swap agreements and futures contracts. The Company typically hedges no more than 50% of its U. S. gas production. Gains and losses on these hedges are deferred until the related sales are recognized and are recorded as a component of sales and operating revenues. The Company periodically enters into interest rate swap agreements to hedge interest on long-term debt. The gain or loss on interest rate swaps is recognized monthly as an increase or decrease to interest expense. 9 P) TAKE-OR-PAY OBLIGATIONS The Company records payments received for take-or-pay obligations for unpurchased contract volumes as deferred revenue, which is included in Other Liabilities in the consolidated balance sheet. The deferred revenue is recognized in the income statement as quantities are purchased which fulfill the take-or-pay obligation. 2. MERGER On June 8, 1995, a special meeting of the stockholders of the Company was held to approve the Agreement of Merger ("Merger Agreement") dated February 28, 1995, between the Company, YPF Acquisition Corp. (the "Purchaser") and YPF Sociedad Anonima ("YPF"). The holders of the Company's common stock, $1.00 par value per share (the "Shares"), and $4.00 Cumulative Convertible Preferred Stock (the "$4.00 Preferred Stock" and together with the Shares, the "Voting Shares") approved the Merger Agreement, and the Purchaser was merged into the Company (the "Merger") on June 8, 1995 (the "Merger Date"). The Merger was the consummation of the transactions contemplated by a tender offer (the "Offer") which was commenced on March 6, 1995 by the Purchaser for all the outstanding Shares at $5.50 per Share. Pursuant to the Offer, in April 1995 the Purchaser acquired 120,000,613 Shares representing approximately 88.5% of the then-outstanding Shares of the Company. As a result of the Merger, each outstanding Share (other than Shares held by the Purchaser, YPF or any of their subsidiaries or in the treasury of the Company, all of which were cancelled, and Shares of holders who perfected their appraisal rights under Section 262 of the Delaware General Corporation Law) was converted into the right to receive $5.50, and YPF became the sole holder of the Shares. Under the terms of the Merger Agreement, all of the Company's preferred stock, consisting of the $4.00 Preferred Stock, $2.50 Cumulative Preferred Stock and $9.75 Cumulative Convertible Preferred Stock, remain outstanding. YPF currently owns approximately 96.9% of the outstanding Voting Shares. The total amount of funds required by the Purchaser to acquire the entire common equity interest in the Company, including the purchase of Shares pursuant to the Offer and the payment for Shares converted into the right to receive cash pursuant to the Merger, was approximately $762 million. On April 5, 1995, the Purchaser entered into a credit agreement (the "Credit Agreement") with lenders for which The Chase Manhattan Bank (National Association) ("Chase") acted as agent, pursuant to which the lenders extended to the Purchaser a credit facility for up to $550 million (the "Purchaser Facility"). On April 5, 1995, the Purchaser borrowed $442 million under the Purchaser Facility and received a capital contribution of $250 million from YPF. The Purchaser used borrowings under the Purchaser Facility and the funds contributed to it by YPF to purchase 120,000,613 Shares pursuant to the Offer. Pursuant to a commitment letter from Chase, Chase provided two additional credit facilities aggregating $425 million: (i) a credit facility of $250 million extended to Midgard Energy Company ("Midgard"), a wholly owned subsidiary of the Company, and (ii) a credit facility of $175 million extended to Maxus Indonesia, Inc. ("Holdings"), a wholly owned subsidiary of the Company. The proceeds of the loans made pursuant to these facilities were used to repay, in part, the Purchaser Facility, which was assumed by the Company. In addition, the Company applied $8 million of its available cash to repayment of the Purchaser Facility and used approximately $86 million of its available cash to pay holders of Shares converted into the right to receive cash in the Merger. During the second quarter of 1995, the Company used the purchase method to record the acquisition of the Company by YPF. In a purchase method combination, the purchase price is allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. As a result, the assets and liabilities of the Company were revalued to reflect the approximate $762 million purchase price paid by YPF to acquire the Company. The Company's oil and gas properties were assigned carrying amounts based on their relative fair market values. In connection with the purchase price allocation, the Company adopted Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," 10 which requires a review of long-lived assets for impairment whenever events or changes in circumstance indicate that the carrying amount of the asset may not be recoverable. Under SFAS 121, if the expected future cash flows of the long-lived assets is less than the carrying amount of the asset an impairment loss shall be recognized to value the asset at its fair value. Since Maxus revalued its assets and liabilities in the purchase price allocation, there was no impact on the financial statements in 1995 resulting from the adoption of SFAS No. 121. The financial statements reflect the effects of Merger-related transactions in the second quarter of 1995. Periods presented prior to the second quarter of 1995 are presented on a pre-Merger basis and, therefore, are not comparative. In addition, financial statement results for the first two quarters of 1995 are not additive. A) MIDGARD FACILITY Approximately $250 million of the loans under the Purchaser Facility were repaid on June 8, 1995 with funds provided to the Company by Midgard. Midgard provided these funds from the proceeds of a $250 million loan (the "Midgard Loan") extended to it pursuant to a credit agreement (the "Midgard Facility") entered into on such date. In addition, approximately $8 million of the loans outstanding under the Purchaser Facility, including accrued interest on the Purchaser Facility loans, were repaid on June 8, 1995 from cash held by the Company. The Midgard Loan, which was made in a single drawing, will mature on December 31, 2003 and will be repaid in up to 28 consecutive equal quarterly installments commencing on March 31, 1997, subject to semi- annual borrowing base redeterminations. At Midgard's option, the interest rate applicable to the Midgard Loan will be, until March 31, 1997, either (i) the one-, two- or three-month London Interbank Offered Rate ("LIBOR") plus a margin of 1 3/4% or (ii) the Base Rate (as defined in the Midgard Facility) plus a margin of 3/4% and, thereafter, either (iii) the one-, two- or three-month LIBOR plus a margin of 2 1/4% or (iv) the Base Rate plus a margin of 1 1/4%. At June 30, 1995, the interest rate on the Midgard facility based on the two-month LIBOR plus 1 3/4% was 7.8125%. The Midgard Loan is not secured but is guaranteed by YPF and the Company. The agreement evidencing the Midgard Loan contains, among other things, a negative pledge on all assets of Midgard, subject to customary exceptions. It is anticipated that the Midgard Loan will be repaid with funds generated by Midgard's business operations. B) SUBSIDIARIES FACILITY Approximately $175 million of the Purchaser Facility was repaid with funds provided on June 16, 1995 to the Company by Holdings. Holdings provided these funds from the proceeds of a $175 million loan (the "Subsidiaries Loan") extended to it pursuant to a credit agreement (the "Subsidiaries Facility") entered into on such date. The Subsidiaries Loan, which was made in a single drawing on June 16, 1995, will mature on December 31, 2002 and will be repaid in up to 24 consecutive equal quarterly installments commencing on March 31, 1997, subject to semi-annual borrowing base redeterminations. At the option of Holdings, the interest rates applicable to the Subsidiaries Loan will be, until March 31, 1997, either (i) the one-, two- or three-month LIBOR plus a margin of 2 1/4% or (ii) the Base Rate (as defined in the Subsidiaries Facility) plus a margin of 1 1/4% and, thereafter, either (iii) the one-, two- or three-month LIBOR plus a margin of 2 3/4% or (iv) the Base Rate plus a margin of 1 3/4%. At June 30, 1995, the interest rate on the subsidiaries facility based on the one-month LIBOR plus 2 1/4% was 8.3125%. The Subsidiaries Loan to Holdings is secured by the stock of Maxus Northwest Java, Inc. ("Java") and Maxus Southeast Sumatra, Inc. ("Sumatra") (collectively, the "Holdings Subsidiaries") and by the interest of Holdings, Java and Sumatra in certain accounts maintained at Chase into which the proceeds of sales of hydrocarbons are to be deposited, and is guaranteed by Java, Sumatra, YPF and the Company. The agreement evidencing the Subsidiaries Loan contains a negative pledge on all of the other assets of Holdings, subject to customary exceptions. It is anticipated that the Subsidiaries Loan will be repaid with funds generated by the Holdings Subsidiaries' business operations. 11 3. ANALYSIS OF THE MAIN ACCOUNTS OF THE CONSOLIDATED FINANCIAL STATEMENTS Details regarding the significant accounts included in the accompanying financial statements are as follows: Consolidated Balance Sheet Accounts June 30, 1995 ------------- ASSETS A) SHORT-TERM INVESTMENTS: U.S. treasury notes $ 31.3 Other investments 9.0 -------- $ 40.3 ======== B) RECEIVABLES: Trade accounts receivables $ 59.6 Joint interest billings 29.8 IVA receivable 5.9 Crude trading receivables 10.2 Insurance receivables 8.6 Other 7.4 Allowance for doubtful trade receivables (1.0) -------- $ 120.5 ======== C) INVENTORIES: Crude oil $ 4.6 Warehouse/field yard inventory 27.9 Other .7 -------- $ 33.2 ======== D) PROPERTIES AND EQUIPMENT: Oil and gas: Proved $1,508.8 Unproved 742.0 Other 126.7 -------- 2,377.5 Corporate 14.3 -------- $2,391.8 ======== E) DEFERRED CHARGES: Unamortized debt issuance costs $ 16.4 Other 1.1 -------- $ 17.5 ======== 12 LIABILITIES F) ACCRUED LIABILITIES: Environmental remediation $ 22.8 Accrued interest 24.5 Overlift liability 9.0 Merger accrual 54.5 Other 64.2 ------ $175.0 ====== G) LONG-TERM DEBT: Interest Rates Maturity Current Noncurrent ----- -------- ------- ---------- 8.5% Debentures 8.50 1997-2008 $ 75.2 9.375% Notes 9.375 2003 224.2 9.5% Notes 9.50 2003 86.8 9.875% Notes 9.875 2002 219.9 11.25% Debentures 11.25 2013 14.4 11.5% Debentures 11.50 2001-2015 94.3 Medium-term notes 7.57-11.08 1995-2004 $4.1 144.7 Maxus Indonesia credit agreement 8.3125 1997-2002 175.0 Maxus Midgard credit agreement 7.8125 1997-2003 250.0 Advance from parent 1.9 Other 0.1 ---- -------- $4.2 $1,286.4 ==== ======== H) OTHER LIABILITIES AND DEFERRED CREDITS: Environmental remediation $ 95.1 Long-term employee benefit costs 62.5 Litigation contingencies 10.0 Reserve for insurance losses 23.0 Other 57.5 ------ $248.1 ====== 4. TAXES The Company reports income taxes in accordance with SFAS 109. The Company's provision for income taxes was comprised of the following: Three Months Ended June 30, 1995 ------------------ Current Federal........................................... Foreign........................................... $ 19.8 State and local................................... .2 ------ 20.0 Deferred Federal........................................... (6.5) Foreign........................................... (8.7) ------ (15.2) ------ Provision for income taxes............................. $ 4.8 ====== 13 5. RESTRICTED CASH At June 30, 1995, the Company had $115.1 million in restricted cash of which $59.1 million represented collateral for outstanding letters of credit and $15.5 million represented six months of interest on outstanding borrowings as required by the Midgard and Subsidiaries credit agreements. Assets held in trust as required by certain insurance policies totaled $40.5 million. Approximately $32.6 million of collateral for outstanding letters of credit at June 30, 1995, which will be released within twelve months, was classified as a current asset. 6. PREFERRED STOCK The Company has the authority to issue 100,000,000 shares of Preferred Stock, $1.00 par value. The rights and preferences of shares of authorized but unissued Preferred Stock are established by the Company's Board of Directors at the time of issuance. A) $9.75 CUMULATIVE CONVERTIBLE PREFERRED STOCK In 1987, the Company sold 3,000,000 shares of $9.75 Cumulative Convertible Preferred Stock (the "$9.75 Preferred Stock"). Since such time, the Company has entered into various agreements, most recently on June 8, 1995, with the sole holder of the $9.75 Preferred Stock pursuant to which, among other things, the Company has repurchased 500,000 shares and the parties have waived or amended various covenants, agreements and restrictions relating to such stock. Currently, 1,250,000 shares of $9.75 Preferred Stock are outstanding, each receiving an annual cash dividend of $9.75. In addition, 375,000 of such shares (the "Conversion Waiver Shares") each receive an additional quarterly cash payment of $.25 ($.50 in certain circumstances). For the 12-month period commencing February 1, 1995, each share of the $9.75 Preferred Stock has a liquidation value of $101.0836 ($126.4 million in the aggregate) which reduces to $100 at February 1, 1996, in each case plus accrued dividends. Since February 1, 1994, the stock has been subject to mandatory redemption at the rate of 625,000 shares per year. The $9.75 Preferred Stock currently is neither convertible by the holder nor redeemable at the Company's option and has no associated registration rights. The $9.75 Preferred Stock entitles the holder to vote only on certain matters separately affecting such holder, and the $9.75 Preferred Stock other than the Conversion Waiver Shares entitles the holder to elect one individual to the Board of Directors of the Company. In addition, pursuant to the June 8, 1995 agreement, the holder of the $9.75 Preferred Stock waived previously granted rights to approve certain "self-dealing" transactions and certain financial covenants pertaining to the Company, and the Company waived its right of first offer with respect to the transfer of the $9.75 Preferred Stock and certain transfer restrictions on such stock. B) $4.00 CUMULATIVE CONVERTIBLE PREFERRED STOCK Each outstanding share of $4.00 Cumulative Convertible Preferred Stock (the "$4.00 Preferred Stock") is entitled to one vote, is convertible at any time into shares of the Company's Common Stock (2.29751 shares at December 31, 1994), shall receive annual cash dividends of $4.00 per share, is callable at and has a liquidation value of $50.00 per share ($217.9 million in the aggregate at June 30, 1995) plus accrued but unpaid dividends, if any. C) $2.50 CUMULATIVE PREFERRED STOCK Each outstanding share of the $2.50 Preferred Stock shall receive annual cash dividends of $2.50 per share, is callable after December 1, 1998 at and has a liquidation value of $25.00 per share ($87.5 million in the aggregate at June 30, 1994), plus accrued but unpaid dividends, if any. The holders of the shares are entitled to limited voting rights under certain conditions. In the event the Company is in arrears in the payment of six quarterly dividends, the holders of the $2.50 Preferred Stock have the right to elect two members to the Board of Directors until 14 such time as the dividends in arrears are current and a provision is made for the current dividends due. 7. COMMITMENT AND CONTINGENCIES Like other energy companies, Maxus operations are subject to various laws related to the handling and disposal of hazardous substances which require the cleanup of deposits and spills. In addition, Maxus is implementing certain environmental projects related to its former chemicals business ("Chemicals"), sold to Occidental Petroleum Corporation ("Occidental") in 1986 and certain other disposed of businesses. Maxus has agreed to remediate the site of the former agricultural chemical plant in Newark, New Jersey, as required by a consent decree entered into in 1990 by Occidental, the United States Environmental Protection Agency (the "EPA") and the New Jersey Department of Environmental Protection and Energy (the "DEP"). Pursuant to an agreement with the EPA, Maxus is conducting further testing and studies to characterize contaminated sediment in a portion of the Passaic River near the plant site. Maxus has been conducting similar studies under its own auspices for several years. Under an Administrative Consent Order issued by the DEP in 1990 covering sites in Kearny and Secaucus, New Jersey, Maxus will continue to implement interim remedial measures and to perform remedial investigations and feasibility studies and, if necessary, will implement additional remedial actions at various locations where chromite ore residue, allegedly from the former Kearny plant, was utilized, as well as at the plant site. Until 1976, Chemicals operated manufacturing facilities in Painesville, Ohio. Maxus has heretofore conducted many remedial, maintenance and monitoring activities at this site. The former Painesville plant area has been proposed for listing on the national priority list of Superfund sites as designated by the EPA. The scope and nature of further investigation or remediation which may be required cannot be determined at this time. Maxus also has responsibility for Chemicals' share of the remediation cost for a number of other non-plant sites where wastes from plant operations by Chemicals were allegedly disposed of or have come to be located, including several commercial waste disposal sites. At the time of the spin-off by Maxus of Diamond Shamrock, Inc. ("DSI") in 1987, the Company executed a cost-sharing agreement for the partial reimbursement by DSI of environmental expenses related to the Company's disposed of businesses, including Chemicals. DSI will reach its total reimbursement obligation in 1995. The Company's total expenditures for environmental compliance for disposed of businesses, including Chemicals, were $8.6 million in the second quarter of 1995, $2.9 million of which was recovered from DSI under the cost-sharing agreement. Those expenditures are projected to be approximately $10.7 million in the second half of 1995 after recovery from DSI. Reserves, net of cost-sharing by DSI, have been established for environmental liabilities where they are material and probable and can be reasonably estimated. At the date of acquisition, reserves for the above environmental contingencies totaled $124.7 million. At June 30, 1995, the reserve balance was $117.9 million. The Company enters into various operating agreements and capital commitments associated with the exploration and development of its oil and gas properties. Such contractual financial and/or performance commitments are not material. The Company's foreign petroleum exploration, development and production activities are subject to political and economic uncertainties, expropriation of property and cancellation or modification of contract rights, foreign exchange restrictions and other risks arising out of foreign governmental 15 sovereignty over the areas in which the Company's operations are conducted, as well as risks of loss in some countries due to civil strife, acts of war, guerrilla activities and insurrection. Areas in which the Company has significant operations include the United States, Indonesia, Ecuador, Bolivia and Venezuela. 16 MAXUS ENERGY CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION SECOND QUARTER 1995 MERGER On June 8, 1995, a special meeting of the stockholders of Maxus Energy Corporation (the "Company" or "Maxus") was held to approve the Agreement of Merger ("Merger Agreement") dated February 28, 1995, between the Company, YPF Acquisition Corp. (the "Purchaser") and YPF Sociedad Anonima ("YPF"). The holders of the Company's common stock, $1.00 par value per share (the "Shares"), and $4.00 Cumulative Convertible Preferred Stock (the "$4.00 Preferred Stock" and together with the Shares, the "Voting Shares") approved the Merger Agreement, and the Purchaser was merged into the Company (the "Merger") on June 8, 1995 (the "Merger Date"). The Merger was the consummation of the transactions contemplated by a tender offer (the "Offer") which was commenced on March 6, 1995 by the Purchaser for all the outstanding Shares at $5.50 per Share. Pursuant to the Offer, in April 1995 the Purchaser acquired 120,000,613 Shares representing approximately 88.5% of the then-outstanding Shares of the Company. As a result of the Merger, each outstanding Share (other than Shares held by the Purchaser, YPF or any of their subsidiaries or in the treasury of the Company, all of which were cancelled, and Shares of holders who perfected their appraisal rights under Section 262 of the Delaware General Corporation Law) was converted into the right to receive $5.50, and YPF became the sole holder of the Shares. Under the terms of the Merger Agreement, all of the Company's preferred stock, consisting of the $4.00 Preferred Stock, $2.50 Cumulative Preferred Stock and $9.75 Cumulative Convertible Preferred Stock, remain outstanding. YPF currently owns approximately 96.9% of the outstanding Voting Shares. The total amount of funds required by the Purchaser to acquire the entire common equity interest in the Company, including the purchase of Shares pursuant to the Offer and the payment for Shares converted into the right to receive cash pursuant to the Merger, was approximately $762 million. On April 5, 1995, the Purchaser entered into a credit agreement (the "Credit Agreement") with lenders for which The Chase Manhattan Bank (National Association) ("Chase") acted as agent, pursuant to which the lenders extended to the Purchaser a credit facility for up to $550 million (the "Purchaser Facility"). On April 5, 1995, the Purchaser borrowed $442 million under the Purchaser Facility and received a capital contribution of $250 million from YPF. The Purchaser used borrowings under the Purchaser Facility and the funds contributed to it by YPF to purchase 120,000,613 Shares pursuant to the Offer. Pursuant to a commitment letter from Chase, Chase provided two additional credit facilities aggregating $425 million: (i) a credit facility of $250 million extended to Midgard Energy Company ("Midgard"), a wholly owned subsidiary of the Company, and (ii) a credit facility of $175 million extended to Maxus Indonesia, Inc. ("Holdings"), a wholly owned subsidiary of the Company. The proceeds of the loans made pursuant to these facilities were used to repay, in part, the Purchaser Facility, which was assumed by the Company. In addition, the Company applied $8 million of its available cash to repayment of the Purchaser Facility and used approximately $86 million of its available cash to pay holders of Shares converted into the right to receive cash in the Merger. During the second quarter of 1995, the Company used the purchase method to record the acquisition of the Company by YPF. In a purchase method combination, the purchase price is allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. As a result, the assets and liabilities of the Company were revalued to reflect the approximate $762 million purchase price paid by YPF to acquire the Company. The Company's oil and gas properties were assigned carrying amounts based on their relative fair market values. In connection with the purchase price allocation, the Company adopted Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which requires a review of long-lived assets for impairment whenever events or changes in circumstance indicate that the carrying amount of the asset may not be recoverable. Under SFAS 121, if the expected future cash flows of the long-lived assets is less than the carrying amount of the asset an impairment loss shall be recognized to value the asset at its fair value. Since Maxus revalued its assets and liabilities in the purchase price allocation, there was no impact on the financial statements in 1995 resulting from the adoption of SFAS No. 121. 17 The financial statements reflect the effects of Merger-related transactions in the second quarter of 1995. Periods presented prior to the second quarter of 1995 are presented on a pre-Merger basis and, therefore, are not comparative. In addition, financial statement results for the first two quarters of 1995 are not additive. RESULTS OF OPERATIONS Maxus reported a net loss of $23 million for the second quarter of 1995 or, after preferred dividends, a loss of 24 cents per Share. Sales and operating revenues for the second quarter of 1995 were $151 million, compared to $168 million for the same period a year ago. The loss of production from properties divested in 1994, lower volumes of purchased gas, lower oil volumes in Indonesia, and lower U.S. natural gas prices negatively impacted revenues by $39 million. Partially offsetting these declines in the second quarter 1995 were a favorable oil price variance of $11 million in Indonesia and revenue of $10 million from new production in South America. Initial sales from the Company's South American operations were recorded in the third quarter 1994. Net worldwide crude oil production was 61 thousand barrels per day ("mbpd") in the second quarter 1995, compared to 63 mbpd in the same quarter a year ago. Domestic crude oil volumes declined one mbpd during the period due to the loss of production from the divested properties. Declines in crude oil volumes in Indonesia of eight mbpd in the second quarter of 1995 were offset by seven mbpd of crude oil volumes in South America. U.S. natural gas sales of 170 million cubic feet per day ("mmcfpd") in the second quarter of 1995 were down 127 mmcfpd from the same period last year. The decline was driven by the loss of production from divested properties and lower volumes of gas purchased for resale. The average gas price received in the United States was $1.43 per thousand cubic feet ("mcf") in the second quarter 1995 as compared to $2.01 per mcf a year ago. Northwest Java gas volumes of 57 mmcfpd in the second quarter 1995 were five mmcfpd higher than the second quarter 1994. Gas realizations improved to $2.59 per mcf during the second quarter 1995 from $2.08 per mcf during the same period last year due to the change in contract terms which increased the price received for "old" gas production from $0.20 per mcf to $2.65 per mcf on January 1, 1995. Natural gas liquids sales in the United States of 16 mbpd in the second quarter of 1995 were relatively flat compared to the same period last year. The average sales price for U.S. natural gas liquids in the second quarter of 1995 was $10.61 per barrel, an increase of $0.83 per barrel from 1994. Second quarter 1995 depreciation, depletion and amortization ("DD&A") was $45 million, which included $14 million of additional DD&A reflecting the impact of the purchase price allocation on the book value of properties and equipment. The book value of net properties and equipment increased approximately $1.3 billion as a result of the purchase price allocation. Interest and debt expenses of $35 million in the second quarter of 1995 included $9 million of interest expense associated with the Purchaser Facility. Second quarter 1995 interest expense also included $2 million of interest expense associated with the accretion of discount on the Company's existing long-term debt which was revalued downward $115 million to reflect fair market value as a component of the purchase price allocation. The second quarter 1994 results reflected a $101 million pre-tax net benefit from the Company's restructuring activities, which included the sale of the Company's interest in Diamond Shamrock Offshore Partners Limited Partnership ("DSP") and certain domestic oil and gas properties, resulting in pre-tax gain of $202 million. This gain was partially offset by restructuring costs, which included a $70 million write-off associated with the Company's undeveloped Alaska coal leases, costs associated with staff reductions and the write-off of non-producing assets outside the Company's core areas. Second quarter 1995 income tax expense of $5 million included a $15 million deferred tax benefit due primarily to the higher DD&A associated with the write- up of the properties and equipment to fair market 18 value as a result of the Merger. In the short-term, the Company expects to realize additional deferred tax benefits as a result of higher DD&A. FINANCIAL CONDITION The Company's net cash used by operating activities was $5 million in the second quarter of 1995. The $16 million of net cash provided by operating activities before working capital changes was more than offset by working capital requirements of $21 million. Lower accrued liabilities of $38 million resulting from the payment of Maxus incurred pre-Merger costs and accrued interest coupled with lower accounts payable of $7 million were somewhat offset by a U.S. federal income tax refund of $22 million. The Company began the second quarter of 1995 with $92 million of cash and cash equivalents. During the second quarter of 1995, $56 million of short-term investments were liquidated and $11 million of restricted cash was released. Additionally, the Company received $851 million from the issuance of debt under the Purchaser Facility and the Midgard and Holdings credit facilities and a $250 million capital infusion from YPF to partially fund the Merger. The Company spent $5 million to fund operating activities, $39 million for capital expenditures and $10 million for dividends. In connection with the Merger, the Company repaid the Purchaser Facility and paid $726 million to acquire the Shares outstanding and pay Merger costs, leaving a cash and cash equivalents balance of $34 million at June 30, 1995. Of the approximate $762 million purchase price paid by YPF to acquire the Company, as of June 30, 1995 $36 million remains to be paid in respect of Shares and Merger costs. This liability was recorded in accrued liabilities. The Company's exposure to foreign currency fluctuations is minimal as substantially all of the Company's foreign contracts are denominated in U.S. dollars. The Company's only derivative financial instruments are interest rate swap agreements, natural gas price swap agreements and futures contracts, which are not used for trading purposes. During the second quarter of 1995, the impact of these derivative financial instruments on revenues and interest expense was immaterial. FUTURE OUTLOOK The Company currently projects total program spending (capital expenditures plus exploration expenses) for 1995 to be approximately $230 million, $109 million of which was spent during the first half of 1995. Pursuant to the Merger Agreement, in the event that the Company is unable to meet its obligations as they come due, whether at maturity or otherwise, including, solely for the purposes of this undertaking, dividend and redemption payments with respect to the Preferred Stock, YPF has agreed to capitalize the Company in an amount necessary to permit the Company to meet such obligations; provided that YPF's aggregate obligation will be: (i) limited to the amount of debt service obligations under the Midgard Facility and/or the Subsidiaries Facility and (ii) reduced by the amount, if any, of capital contributions by YPF to the Company after the Merger Date and by the amount of the net proceeds of any sale by the Company of common stock or non-redeemable preferred stock after the Merger Date. The foregoing obligations of YPF (the "Keepwell Covenant") will survive until the ninth anniversary of the Merger Date. In addition, on March 7, 1995, YPF announced that its board of directors authorized YPF to guarantee the Company's outstanding long-term debt as of the Merger Date, the principal amount of which is approximately $977 million. The long-term debt covered by the YPF guarantee is the Company's outstanding 11 1/4%, 11 1/2% and 8 1/2% Sinking Fund Debentures, its outstanding 9 7/8%, 9 1/2% and 9 3/8% Notes, and its outstanding medium-term notes. YPF has also guaranteed the payment and performance of the Company s obligations to the holders of its $9.75 Preferred Stock. In addition to maintaining and developing its core areas (Mid-continent, Indonesia and Ecuador) and emerging areas (Bolivia and Venezuela), it is expected the Company will acquire or assume responsibility for YPF's exploration interests in Bolivia, Ecuador, Chile, Peru, Algeria and the U.S. Gulf of Mexico. The Company will continue to focus on maximizing the value of its core producing assets and seek new investment opportunities in new associated ventures. 19 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. A. A special meeting of the Company's stockholders was held on June 8, 1995. The holders of Common Stock and $4.00 Cumulative Convertible Preferred Stock (the "$4.00 Preferred Stock") voted as follows: 1. ADOPTION OF AGREEMENT OF MERGER Common Stock ------------ Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 123,039,246 604,467 176,297 0 $4.00 Preferred Stock --------------------- Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 2,331,461 62,662 39,876 0 2. AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION Common Stock ------------ Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 123,112,223 496,673 211,114 0 $4.00 Preferred Stock --------------------- Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 2,319,740 64,209 50,050 0 3. AMENDMENTS TO THE BY-LAWS Common Stock ------------ Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 123,201,238 420,069 198,703 0 20 $4.00 Preferred Stock ----------------------- Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 2,338,478 54,170 41,351 0 B. The annual meeting of the Company's stockholders was held on August 3, 1995. The holders of Common Stock and the $4.00 Preferred Stock voted as follows: 1. ELECTION OF DIRECTORS CHARLES L. BLACKBURN Common Stock ------------ Votes For Votes Withheld ----------- -------------- 135,609,772 0 $4.00 Preferred Stock --------------------- Votes For Votes Withheld ----------- -------------- 3,925,550 125,203 CEDRIC BRIDGER Common Stock ------------ Votes For Votes Withheld ----------- -------------- 135,609,772 0 $4.00 Preferred Stock --------------------- Votes For Votes Withheld ----------- -------------- 3,998,375 52,378 PETER GAFFNEY Common Stock ------------ Votes For Votes Withheld ----------- -------------- 135,609,772 0 21 $4.00 Preferred Stock --------------------- Votes For Votes Withheld ----------- -------------- 3,996,625 54,128 GEORGE L. JACKSON Common Stock ------------ Votes For Votes Withheld ----------- -------------- 135,609,772 0 $4.00 Preferred Stock --------------------- Votes For Votes Withheld ----------- -------------- 3,928,250 122,503 NELLS LEON Common Stock ------------ Votes For Votes Withheld ----------- -------------- 135,609,772 0 $4.00 Preferred Stock --------------------- Votes For Votes Withheld ----------- -------------- 3,995,900 54,853 J. R. LESCH Common Stock ------------ Votes For Votes Withheld ----------- -------------- 135,609,772 0 $4.00 Preferred Stock --------------------- Votes For Votes Withheld ----------- -------------- 22 3,996,850 53,903 P. DEXTER PEACOCK Common Stock ------------ Votes For Votes Withheld ----------- -------------- 135,609,772 0 $4.00 Preferred Stock --------------------- Votes For Votes Withheld ----------- -------------- 3,997,875 52,878 2. RATIFY APPOINTMENT OF INDEPENDENT ACCOUNTANTS Common Stock ------------ Votes For Votes Against Abstentions ----------- ------------- ----------- 135,609,772 0 0 $4.00 Preferred Stock --------------------- Votes For Votes Against Abstentions ----------- ------------- ----------- 3,997,005 24,239 29,509 3. AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION Common Stock ------------ Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 135,609,772 0 0 0 $4.00 Preferred Stock --------------------- Votes For Votes Against Abstentions Broker Non-Votes ----------- ------------- ----------- ---------------- 2,434,807 145,627 49,227 1,421,092 23 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 3(i).1 -- Amendments to Restated Certificate of Incorporation 3(i).2 -- Restated Certificate of Incorporation, as amended 3(ii).1 -- Amendment to the By-Laws of the Company 3(ii).2 -- By-Laws of the Company, as amended 15.1 -- Letter of Arthur Andersen LLP regarding unaudited interim financial statements 27.1 -- Financial Data Schedule (b) Reports on Form 8-K During the Quarter. April 5, 1995 April 21, 1995 June 8, 1995 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MAXUS ENERGY CORPORATION By: G. R. Brown G. R. Brown, Vice President and Controller, on behalf of the registrant and as its chief accounting officer August 10, 1995 24 Exhibit Index
Exhibit Title Exhibit No. ------------- ----------- Amendments to Restated Certificate of Incorporation 3(i).1 Restated Certificate of Incorporation, as amended 3(i).2 Amendment to the By-Laws of the Company 3(ii).1 By-Laws of the Company, as amended 3(ii).2 Letter of Arthur Andersen LLP regarding unaudited interim financial Statements 15.1 Financial Data Schedule 27.1
25 EX-3.I1 2 AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION Exhibit 3(i).1 ARTICLE FIFTH ARTICLE FIFTH of the Company's Restated Certificate of Incorporation (the "Certificate") was amended on June 8, 1995 to read as follows: FIFTH. In furtherance of, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized and empowered: (a) To make and alter the By-Laws of the Corporation; provided, however, that the By-Laws made by the Board of Directors under the powers hereby conferred may be altered, changed, amended or repealed by the Board of Directors or by the affirmative vote of the holders of a majority of shares having voting power with respect thereto; and (b) From time to time to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Corporation or any of them, shall be open to inspection of stockholders; and no stockholder shall have any right to inspect any account, book or document of the Corporation, except as conferred by applicable law and subject to the rights, if any, of the holders of any series of Preferred Stock. The Corporation may in its By-Laws confer powers upon its Board of Directors in addition to the foregoing and in addition to the powers and authorities expressly conferred upon the Board of Directors by applicable law. ARTICLE SEVENTH ARTICLE SEVENTH of the Certificate was amended on August 10, 1995 to read as follows: SEVENTH. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specific circumstances, special meetings of stockholders of the Corporation may be called only by the Chairman of the Board of Directors and shall be promptly called by the Chairman or the Secretary at the written request of a majority of the Board of Directors, or the holders of a majority of the outstanding Common Stock upon not fewer than ten nor more than 60 days' written notice. ARTICLE EIGHTH, SECTION 1 ARTICLE EIGHTH, SECTION 1 of the Certificate was amended on June 8, 1995 to read as follows: EIGHTH. SECTION 1. Number, Election and Terms of Directors. Subject to the rights of he holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specific circumstances, the number of the Directors of the Corporation shall be fixed from time to time by or pursuant to the By-Laws of the Corporation, or until such director's earlier resignation or removal in accordance with the General Corporation Law of the State of Delaware, this Certificate of Incorporation and the By-Laws. Each director shall hold office for one year after the time of such director's election or until such director's successor is elected and qualified at the next succeeding annual meeting of stockholders of the Corporation or until such director's earlier resignation or removal in accordance with the General Corporation Law of the State of Delaware, this Certificate of Incorporation and By-Laws. ARTICLE EIGHTH, SECTIONS 4, 6 AND 7 ARTICLE EIGHTH, SECTIONS 4, 6 and 7 of the Certificate were amended on August 10, 1995 to delete such SECTIONS in their entirety. ARTICLE EIGHTH, SECTION 5 ARTICLE EIGHTH, SECTION 5 of the Certificate was redesignated as SECTION 4 and amended on August 10, 1995 to read as follows: SECTION 5. Removal. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specified circumstances, any Director may be removed from office only by the affirmative vote of the holders of at least 50% of the combined voting power of the outstanding shares of Voting Stock, voting together as a single class. EX-3.I2 3 RESTATED CERTIFICATE OF INCORPORATION EX - 3.(i).2 RESTATED CERTIFICATE OF INCORPORATION OF MAXUS ENERGY CORPORATION (ORIGINALLY INCORPORATED UNDER THE NAME OF NEW DIAMOND CORPORATION ON JULY 19, 1983) _______________ FIRST. The name of the Corporation (the "Corporation") is Maxus Energy Corporation. SECOND. The registered office of the Corporation in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH. The Corporation is authorized to issue two classes of capital stock, designated Common Stock and Preferred Stock. The amount of total authorized capital stock of the Corporation is 400,000,000 shares, divided into 300,000,000 shares of Common Stock, $1.00 par value, and 100,000,000 shares of Preferred Stock, $1.00 par value. The Preferred Stock may be issued in one or more series. The Board of Directors is hereby authorized to issue the shares of Preferred Stock in such series and to fix from time to time before issuance the number of shares to be included in any series and the designation, relative powers, preferences and rights and qualifications, limitations or restrictions of all shares of such series. The authority of the Board of Directors with respect to each series shall include, without limiting the generality of the foregoing, the determination of any or all of the following: (a) the number of shares of any series and the designation to distinguish the shares of such series from the shares of all other series; (b) the voting powers, if any, and whether such voting powers are full or limited, in such series; (c) the redemption provisions, if any, applicable to such series, including the redemption price or prices to be paid; (d) whether dividends, if any, shall be cumulative or noncumulative, the dividend rate of such series, and the dates and preferences of dividends on such series; (e) the rights of such series upon the voluntary or involuntary dissolution of, or upon any distribution of the assets of, the Corporation; (f) the provisions, if any, pursuant to which the shares of such series are convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock, or any other security, of the Corporation or any other corporation, and price or prices or the rates of exchange applicable thereto; (g) the right, if any, to subscribe for or to purchase any securities of the Corporation or any other corporation; (h) the provisions, if any, of a sinking fund applicable to such series; and (i) any other relative, participating, optional or other special powers, preferences, rights, qualifications, limitations or restrictions thereof; all as shall be determined from time to time by the Board of Directors and shall be stated in said resolution or resolutions providing for the issuance of such Preferred Stock (a "Preferred Stock Designation"). $4.00 Cumulative Convertible Preferred Stock The following is a statement of the powers, preferences, rights, qualifications, limitations and restrictions of the Series, consisting of 5,915,017 shares, $1.00 par value, of the $4.00 Cumulative Convertible Preferred Stock. (A) Number of Shares. The number of shares which shall constitute this Series shall be 5,915,017, which number may be increased or decreased (but not below the number outstanding) from time to time by the Board of Directors of the Corporation. (B) Dividend Rate; Cumulative Date. The annual dividend rate payable on this Series shall be $4.00 per share, cumulative to the extent not paid from September 15, 1983, and in each case payable quarterly on March 15, June 15, September 15 and December 15 in each year, commencing December 15, 1983. (C) Redemption. The Corporation may, at the option of the Board of Directors, redeem the whole or any part of the then-outstanding shares of this Series, at any time or from time to time, upon notice duly given as hereinafter specified, at the following prices per share if redeemed during the 12-month period beginning December 15 of the year indicated: 1982............ $53.20 1983............ 52.80 1984............ 52.40 1985............ 52.00 1986............ 51.60 1987............ 51.20 1988............ 50.80 1989............ 50.40
and thereafter at $50.00 per share, together in each case with a sum, for each share so redeemed, computed at the rate of $4.00 per annum from and after the last regular quarterly payment date applicable to $4.00 Series C Cumulative Convertible Preferred Shares of Natomas Company, -2- irrespective of whether such date precedes or follows the date of issuance of this Series, on which the quarterly dividend was paid in full (the "Accrual Date"), to and including such date fixed for redemption, less the aggregate of the dividends theretofore and on such redemption date paid on such Series, but computed without interest; provided that unless provision has been made for payment in full of dividends on all shares of outstanding Preferred Stock of the Corporation for all past dividend periods and the current period, no sum shall be set aside for the redemption of any shares of this Series nor shall any shares of this Series be purchased or otherwise acquired by the Corporation. (D) Notice of Redemption. Notice of redemption of shares of this Series, as described in division (C) hereof, shall be given as follows: (1) Notice of every such redemption of shares of this Series shall be given by publication at least once a week in each of two successive weeks in a newspaper printed in the English language and customarily published on each business day and of general circulation in the city in which the Corporation maintains its principal executive offices and in the Borough of Manhattan, The City of New York, commencing at least 20 but not more than 60 days prior to the date fixed for such redemption. Notice of every such redemption shall also be mailed at least 20 but not more than 60 days prior to the date fixed for such redemption to the holders of record of the shares so 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 nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares so to be redeemed. (2) In case of redemption of a part only of this Series at the time outstanding, the redemption may be either pro rata or by lot. The Board of Directors shall prescribe the manner in which the drawings by lot or the pro rata redemption shall be conducted and, subject to the provisions herein and in the Certificate of Incorporation contained, the terms and conditions upon which the shares of this Series shall be redeemed from time to time. (3) If such notice of redemption shall have been duly given by publication or if the Corporation shall have given to the bank or trust company designated by the Corporation pursuant to this subdivision (3) irrevocable authorization promptly to give or to complete such notice of publication, and if on or before the redemption date specified therein the funds necessary for such redemption shall have been deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares so called for redemption, with a bank or trust company in good standing, designated in such notice, organized under the laws of the United States of America or of the State of New York, doing business in the Borough of Manhattan, The City of New York, having a capital, surplus and undivided profits aggregating at least $5,000,000 according to its last published statement of condition, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, from and after the time of such deposit, all shares so called for redemption shall no longer be deemed to be outstanding and all rights with respect to such shares shall forthwith cease and terminate, except only the right of the holders thereof to receive from such deposit the funds so deposited, without interest, and the right to exercise on or before the close of business on the date fixed for redemption, privileges of exchange or conversion, if any, not -3- theretofore expiring. Any interest accrued on such funds shall be paid to the Corporation from time to time. (4) Any funds so set aside or deposited by the Corporation which shall not be required for such redemption because of the exercise of any right of conversion or exchange subsequent to the date of such deposit shall be released or repaid to the Corporation. Any funds so set aside or deposited, as the case may be, and unclaimed at the end of six years from such redemption date shall be released or repaid to the Corporation, after which the holders of the shares so called for redemption shall look only to the Corporation for payment thereof. (5) In connection with any redemption of shares of this Series, the Corporation may arrange for the purchase and conversion of any shares of this Series by an agreement with one or more investment banking firms or other purchasers to purchase such shares by paying to or for the account of the holders thereof on or before the close of business on the date fixed for such redemption an amount not less than the redemption price (plus accrued and unpaid dividends) payable by the Corporation on redemption of such shares. Any shares of this Series tendered by the holders thereof for redemption or not duly surrendered for conversion or deemed converted by the holders thereof prior to the close of business on the date fixed for redemption shall be deemed acquired by such purchasers from such holders immediately prior to the close of business on the date fixed for such redemption and surrendered by such purchasers for conversion pursuant to such agreement, subject to payment of the amount indicated above. Such amount shall be deposited, in trust for the pro rata benefit of the holders of shares of this Series entitled thereto, with a bank or trust company described in subdivision (3) of this division, and such deposit shall in all respects be treated as though made by the Corporation pursuant thereto. (6) If the Market Value of the Conversion Unit (as hereinafter defined) on the date fixed for the redemption of shares of this Series is at least equal to 120% of the amount payable in respect of each share of this Series upon such redemption in accordance with division (C) hereof, then shares of this Series not duly surrendered for conversion by the holders thereof prior to the close of business on the date fixed for redemption shall nevertheless be deemed to be converted by such holders into shares of Common Stock pursuant to division (H) hereof immediately prior to such time; provided, however, that no certificates for Common Stock issuable upon such conversion shall be issued to any holder of shares of this Series so converted or dividends paid or other distributions made on the Common Stock so issued to such holder unless and until such holder shall surrender to the Corporation the certificates for the shares of this Series so converted. Upon such surrender, there shall be paid to the holder of such certificates the aggregate amount of dividends and other distributions that but for the provisions hereof would have been paid by the Corporation with respect to the Common Stock issued on such conversion, but without interest thereon. Until certificates representing shares of this Series have been so surrendered such certificates shall be deemed for all corporate purposes, other than the payment of dividends or distributions, to evidence ownership of the Common Stock issued upon conversion of such shares. For purposes of this subdivision (6), the "Conversion Unit" at any time shall be deemed to be the number of shares of Common Stock into which each share of this Series then may be converted, as provided in division (H) -4- hereof, and the "Market Value of the Conversion Unit" on any date fixed for the redemption of shares of this Series shall be deemed to be the amount determined by multiplying (i) the Conversion Unit on such date by (ii) the closing price per share of Common Stock on such date, determined as provided in subdivision (3) of division (H) hereof. (E) Liquidation. The amount which shall be paid to the holders of shares of this Series in the event of any voluntary or involuntary total liquidation, dissolution or winding up of the Corporation shall be $50.00 per share on each outstanding share of this Series, plus in respect of each share of this Series a sum computed at the rate of $4.00 per annum from and after the Accrual Date, to and including the date fixed for such payment, less the aggregate of dividends theretofore paid thereon, but computed without interest. (F) Ratable Treatment. In the event that the amounts payable in accordance with division (E) hereof are not paid in full, each share of this Series shall, together with outstanding shares of all other series of Preferred Stock of the Corporation, share ratably, without priority of one series over the other, in the payment of dividends, including accumulations, if any, in the proportion that the amount of dividends, including accumulations, if any, then payable on each share bears to the aggregate of such amounts then payable on all Preferred Stock of the Corporation and in any distribution of assets other than by way of dividends in the proportion that the sum payable on each share bears to the aggregate of the amounts so payable on all shares of Preferred Stock of the Corporation. (G) Limitation on Dividends. So long as any of the shares of this Series shall remain outstanding, no dividend whatever shall be paid or declared, and no distribution made, on any junior shares, other than a dividend payable solely in junior shares, nor shall any junior shares be acquired for a consideration by the Corporation or by any company a majority of the voting shares of which is owned by the Corporation, unless all dividends on the shares of this Series accrued for all past quarterly dividend periods shall have been paid and the full dividends thereon for the then current quarterly dividend period shall have been paid or declared and duly provided for. (H) Conversion Rights. The terms upon which the holders of shares of this Series may convert the same into shares of any other class or classes are as follows: (1) Subject to the provisions for adjustment hereinafter set forth and to the provisions of the division (D) hereof, each of the shares of this Series shall be convertible, at the option of the holder, upon surrender to any Transfer Agent for such shares or to the Corporation if no such Transfer Agent exists, of the certificate for the share to be converted, into 1.2280 fully paid and non-assessable shares of Common Stock of the Corporation. The right to convert shares of this Series called for redemption shall terminate at the close of business on the date fixed for redemption, unless the Corporation shall default in the payment of the redemption price determined as provided in division (C) hereof; upon conversion of any shares of this Series, no allowance or adjustment shall be made for dividends on either class of shares, but nothing in this subdivision shall relieve the Corporation from its obligation to pay any dividends which shall have been declared and shall be payable to holders of shares of this Series of record as of a date prior to such conversion even though the payment date for such dividend is subsequent to the date of conversion. -5- (2) The number of shares of Common Stock into which each of the shares of this Series is convertible shall be subject to adjustment from time to time as follows: (i) In case the Corporation shall (a) pay a dividend on its Common Stock in shares of the Corporation, (b) subdivide its outstanding Common Stock, (c) combine its outstanding Common Stock into a smaller number of shares, or (d) issue by reclassification of its Common Stock (whether pursuant to a merger or consolidation or otherwise) any shares of the Corporation, then each holder of a share of this Series shall be entitled to receive upon the conversion of such share, the number of shares of the Corporation which he would have owned or have been entitled to receive after the happening of any of the events described above had such share been converted immediately prior to the happening of such event. Such adjustment shall be made whenever any of the events listed above shall occur. An adjustment made pursuant to this subdivision shall become effective retroactively with respect to conversions made subsequent to the record date in the case of a stock dividend, and shall become effective on the effective date in the case of a subdivision, combination or reclassification. (ii) In case the Corporation shall issue rights or warrants to the holders of its Common Stock as such entitling them to subscribe for or purchase Common Stock, at a price per share less than the current market price per share of Common Stock (as defined in subdivision (3) below) on the record date for determination of stockholders entitled to receive such rights or warrants, then in each such case the number of shares of Common Stock into which each share of this Series shall thereafter be convertible shall be determined by multiplying the number of shares of Common Stock into which such share of this Series was theretofore convertible by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such current market price. For the purposes of this subdivision, the issuance of rights or warrants to subscribe for or purchase shares or securities convertible into shares of Common Stock shall be deemed to be the issuance of rights or warrants to purchase the shares of Common Stock into which such shares or securities are convertible at an aggregate offering price equal to the aggregate offering price of such shares or securities plus the minimum aggregate amount (if any) payable upon conversion of such shares or securities into shares of Common Stock. Such adjustment shall be made whenever any such rights or warrants are issued, and shall become effective retroactively with respect to conversions made subsequent to the record date for the determination of stockholders entitled to receive such rights or warrants. (iii) In case the Corporation shall distribute to holders of its Common Stock (whether pursuant to a merger or consolidation or otherwise) evidences of its indebtedness or assets (excluding cash distributions after August 31, 1983 not exceeding the aggregate net earnings of the Corporation and its subsidiaries on a consolidated basis after such date -6- less dividends paid after such date on shares other than shares of Common Stock, all determined in accordance with generally accepted accounting principles) or rights to subscribe (excluding those referred to in paragraph (ii) above) then in each such case the number of shares of Common Stock into which each share of this Series shall thereafter be convertible shall be determined by multiplying the number of shares of Common Stock into which such share of this Series was therefore convertible by a fraction of which the numerator shall be the current market price per share of the Common Stock (as defined in subdivision (3) below) on the record date for determination of stockholders entitled to receive such distribution, and of which the denominator shall be such current market price per share of the Common Stock less the fair value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive, and described in a statement filed with each Transfer Agent for the shares of this Series) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made, and shall become effective retroactively with respect to conversions made subsequent to the record date for the determination of stockholders entitled to receive such distribution. (3) For the purposes of any computation under subdivision (2) above, the current market price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the 30 consecutive full business days commencing 45 full business days before the day in question. The closing price for each day shall be the last sales price regular way or, in case no sale takes place on such day, the average of the closing bid and asked prices regular way, in either case (i) as officially quoted by the New York Stock Exchange Composite Tape or (ii) if, in the reasonable judgment of the Board of Directors of the Corporation, the New York Stock Exchange, Inc. is no longer the principal United States market for the Common Stock, then as quoted on the principal United States stock exchange or market for the Common Stock as determined by the Board of Directors of the Corporation, or (iii) if, in the reasonable judgment of the Board of Directors of the Corporation there exists no principal United States stock exchange or market for the Common Stock, then as reasonably determined by the Board of Directors of the Corporation. (4) No adjustment in the conversion rate shall be required unless such adjustment (plus any adjustments not previously made by reason of this subdivision (4)) would require an increase or decrease of at least 1% in the number of shares of Common Stock into which each share of this Series is then convertible; provided, however, that any adjustments which by reason of this subdivision (4) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under division (H) shall be made to the nearest one-hundred thousandth of a share. (5) Whenever any adjustment is required in the shares into which shares of this Series is convertible, the Corporation shall forthwith (i) file with each Transfer Agent for this Series a statement describing in reasonable detail the adjustment and the method of calculation used, and (ii) cause a copy of such statement to be mailed to the holders of record of the shares of this Series as of the effective date of such adjustment. -7- (6) No fractional share or scrip representing fractional shares shall be issued upon the conversion of shares of this Series. If any such conversion would otherwise require the issuance of a fractional share, an amount equal to such fraction multiplied by the closing price (determined as provided in subdivision (3) above) of the shares of Common Stock on the day of conversion shall be paid to the holder in cash by the Corporation. (7) The certificate of any independent firm of public accountants of recognized standing selected by the Board of Directors shall be evidence of the correctness of any computation made under this division (H). (8) All shares of this Series redeemed, purchased or otherwise acquired by the Corporation or surrendered to it for conversion into Common Stock as provided above shall be cancelled and thereupon restored to the status of authorized but unissued Preferred Stock undesignated as to series. (9) The Corporation shall be entitled to make such increases in the conversion rate, in addition to those required by this division (H), as shall be determined by the Board of Directors, as evidenced by a resolution thereof, which are advisable in order to avoid taxation so far as practicable of any dividend of shares or rights to shares, or any event treated as such a dividend to the recipients for federal income tax purposes. (10) The shares of this Series shall be deemed to have been converted and the person converting the same to have become the holder of record of shares of Common Stock, for the purpose of receiving dividends and for all other purposes whatever, as of the date when a certificate or certificates for such shares of this Series are surrendered to the Corporation as aforesaid. The Corporation shall not be required to make any such conversion, and no surrender of the shares of this Series shall be effective for such purpose, while the books for the transfer of either the shares of Common Stock or of this Series are closed for any purpose, but the surrender of such shares of this Series for conversion during any period while such books are closed shall become effective for all purposes of conversion immediately upon the reopening of such books, as if the conversion had been made on the date such shares of this Series were surrendered. (11) The Corporation shall at all times reserve and keep available out of its authorized Common Stock the full number of shares into which all shares of this Series from time to time outstanding are convertible. If at any time the number of authorized and unissued shares of Common Stock shall not be sufficient to effect the conversion of all outstanding shares of this Series at the conversion rate then in effect, the Corporation shall take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized and unissued Common Stock to such number as shall be sufficient for such purpose. (l) Voting Rights. Except as may otherwise be provided by law or in this division (l), the holders of the shares of this Series shall be entitled to vote at a rate of one vote per share as a class with the holders of all other shares of capital stock of the Corporation then entitled to vote, and not as a separate class, on a non-cumulative basis for election of directors and upon all other matters -8- which may be submitted to a vote of holders of the Corporation's Common Stock at any annual or special meeting thereof. In addition to the voting rights in respect of the election of directors set forth in the preceding paragraph, the shares of this Series shall have the voting rights set forth below: (1) So long as any of the shares of this Series are outstanding, the consent of the holders of at least a majority of the then-outstanding shares of this Series, given in person or by proxy at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (i) Any increase in the authorized amount of Preferred Stock or the authorization, or any increase in the authorized amount, of any class of shares of the Corporation ranking on a parity with the Preferred Stock. (ii) The sale, lease or conveyance (other than by mortgage) of all or substantially all of the property or business of the Corporation or the consolidation or merger of the Corporation into any other corporation, unless the corporation resulting from such merger or consolidation shall have thereafter no class of shares, either authorized or outstanding, ranking prior to or on a parity with shares corresponding to the shares of Preferred Stock, except the same number of shares with no greater rights and preferences than the shares of Preferred Stock authorized immediately preceding such consolidation or merger and unless each holder of shares of Preferred Stock immediately preceding such consolidation or merger shall receive the same number of shares, with substantially the same rights and preferences, of the resulting corporation; provided, however, that the resulting corporation may have authorized and outstanding such additional shares having preferences or priorities over or being on a parity with the shares of Preferred Stock as the holders of Preferred Stock of the Corporation may have previously authorized pursuant to the Certificate of Incorporation; and provided, further, that this requirement of consent by the holders of shares of Preferred Stock shall not be deemed to apply to or operate to prevent either the purchase by the Corporation of the assets or shares, in whole or in part, of any other corporation, or the sale by the Corporation or any subsidiary of all or part of the capital shares or assets of other corporations, including a subsidiary, or the sale of a division or divisions of the Corporation or of any subsidiary, or any other sale of property or assets which constitutes less than substantially all of the property or assets of the Corporation. (2) So long as any of the shares of this Series are outstanding, the consent of the holders of at least 66 2/3% of the then-outstanding shares of this Series given in person or by proxy, at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (i) The authorization, or any increase in the authorized amount, of any class of shares of the Corporation ranking prior to the shares of Preferred Stock. -9- (ii) The amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation, or the amendment, alteration, repeal or adoption of any resolution contained in a certificate of designation filed pursuant to Section 151 of the General Corporation Law of the State of Delaware in the office of the Secretary of State of the State of Delaware, which would affect adversely any right, preference, privilege or voting power of the shares of this Series or shares of any other series of Preferred Stock or the holders thereof. (3) Without limiting the rights, if any, of holders of any other series of Preferred Stock, in case the Corporation shall be in arrears in the payment of six quarterly dividends, whether or not successive, on the outstanding shares of this Series or any other outstanding series of Preferred Stock, the holders of shares of this Series voting separately as a class and in addition to their other voting rights shall have the exclusive right to elect two additional directors beyond the number to be elected by all stockholders at the next annual meeting of stockholders called for the election of directors, and at every subsequent such meeting at which the terms of office of the directors so elected by the holders of shares of this Series expire, provided such arrearage exists on the date of such meeting or subsequent meetings, as the case may be. The right of the holders of shares of this Series voting separately as a class to elect two members of the Board of Directors of the Corporation as aforesaid shall continue until such time as all dividends accumulated on all shares of Preferred Stock shall have been paid in full and provision has been made for the payment in full of the dividends for the current quarter, at which time the special right of the holders of shares of this Series so to vote separately as a class for the election of Directors shall terminate, subject to revesting at such time as the Corporation shall be in arrears in the payment of six quarterly dividends, whether or not successive, on the outstanding shares of this Series or any other outstanding series of Preferred Stock. If the annual meeting of stockholders of the Corporation is not, for any reason, held on the date fixed in the By-Laws at a time when the holders of shares of this Series, voting separately and as a class, shall be entitled to elect directors, or if vacancies shall exist in both of the two offices of directors elected by the holders of shares of this Series, the Chairman of the Board of the Corporation shall, upon the written request of the holders of record of at least 10% of the shares of this Series then outstanding addressed to the Secretary of the Corporation, call a special meeting in lieu of the annual meeting of stockholders, or, in the event of such vacancies, a special meeting of the holders of shares of this Series, for the purpose of electing directors. Any such meeting shall be held at the earliest practicable date at the place for the holding of the annual meeting of stockholders or as otherwise determined pursuant to the By-Laws. If such meeting shall not be called by the Chairman of the Board of the Corporation within 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 holder of record of at least 10% of the outstanding shares of this Series 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 meeting of stockholders of the Corporation and shall be held at the place for holding the annual meetings of stockholders or as otherwise determined pursuant to the By-Laws. Any holder -10- of shares of this Series so designated shall have access to the lists of stockholders to be called pursuant to the provisions hereof. At any meeting held for the purpose of electing directors at which the holders of shares of this Series shall have the right to elect directors as aforesaid, the presence in person or by proxy of the holders of at least 33 1/3% of the outstanding shares of this Series shall be required to constitute a quorum of such shares of this Series. In the event any meeting of the holders of shares of this Series shall be held for the purpose of electing directors pursuant to this subdivision (3), nothing contained herein shall preclude the Corporation from simultaneously calling and holding a meeting of any other class or series of capital stock of the Corporation which may have voting rights to elect directors. Any vacancy occurring in the office of director elected by the holders of shares of this Series may be filled by the remaining director elected by the holders of the shares of such class, unless and until such vacancy shall be filled by the holders of the shares of such class. Any director to be elected by the holders of shares of this Series shall agree, prior to his election to office, to resign upon any termination of the right of the holders of shares of this Series to vote as a class for directors as herein provided, and upon any such termination the directors then in office elected by the holders of shares of this Series shall forthwith resign. (J) Certain Taxes. The Corporation shall pay any and all taxes which may be imposed upon it with respect to the issuance and delivery of shares of Common Stock upon the conversion of the shares of this Series as herein provided. The Corporation shall not be required in any event to pay any transfer or other taxes by reason of the issuance of such shares of Common Stock in names other than those in which the shares of this Series surrendered for conversion may stand, and no such conversion or issuance of shares of Common Stock shall be made unless and until the person requesting such issuance has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation and its transfer agent, if any, that such tax has been paid. (K) No Sinking Fund. No sinking fund shall be provided for the purchase or redemption of the shares of this Series. (L) No Preemptive Rights. The holders of shares of this Series are not entitled to any preemptive or other rights to subscribe for or to purchase any shares or securities of any class which may at any time be issued, sold or offered for sale by the Corporation. (M) Rank. All shares of Preferred Stock, including this Series, shall be of equal rank with each other regardless of series, and shall be identical with each other except as provided in the Certificate of Incorporation or in a certificate of designation filed pursuant to Section 151 of the General Corporation Law of the State of Delaware with the Secretary of State of the State of Delaware. -11- Each holder of Common Stock of the Corporation entitled to vote shall have one vote for each share thereof held except in the case of any election of Directors as provided in Section 4 of Article Eighth. Except as may be provided in this Certificate of Incorporation or by the Board of Directors in a Preferred Stock Designation, the Common Stock shall have the exclusive right to vote for the election of Directors and for all other purposes, and holders of Preferred Stock shall not be entitled to receive notice of any meeting of stockholders at which they are not entitled to vote or consent. The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes, and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable laws. $2.50 Cumulative Preferred Stock The following is a statement of the powers, preferences, rights, qualifications, limitations and restrictions of the Series, consisting of 5,000,000 shares, $1.00 par value, of the $2.50 Cumulative Preferred Stock. SECTION 1. Designation and Amount. The shares of this Series shall be designated as the "$2.50 Cumulative Preferred Stock" and the number of shares constituting this Series shall be 5,000,000, which number, subject to the provisions of the Certificate of Incorporation, may be increased or decreased by the Board of Directors without a vote of stockholders; provided, however, that such number may not be decreased below the number of the then currently outstanding shares of this Series. SECTION 2. Dividends. The holders of shares of this Series, in preference to the holders of shares of the Common Stock of the Corporation and of any other capital stock of the Corporation ranking junior to this Series as to payment of dividends, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, cumulative cash dividends at the annual rate of $2.50 per share, and no more, in equal quarterly payments on the fifteenth day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing March 15, 1994. Dividends shall begin to accrue and be cumulative from the date of original issue of this Series. The amount of dividends so payable shall be determined on the basis of twelve 30-day months and a 360-day year. Accumulated but unpaid dividends shall not bear interest. Dividends paid on the shares of this Series in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of this Series entitled to receive payment of a dividend declared thereon, which record date shall be no more than sixty days prior to the date fixed for the payment thereof. SECTION 3. Redemption. The shares of this Series shall not be redeemable prior to December 1, 1998. On or after that date, the Corporation shall have the right, at its sole option and -12- election, to redeem the whole or any part of the then-outstanding shares of this Series, at any time or from time to time, upon notice duly given as hereinafter specified, at a price per share of $25.00, plus dividends accumulated but unpaid to the redemption date; provided that unless provision has been made for payment in full of dividends on all shares of outstanding Preferred Stock of the Corporation for all past dividend periods and the current period, no sum shall be set aside for the redemption of any shares of this Series nor shall any shares of this Series be purchased or otherwise acquired by the Corporation. Notice of every such redemption of shares of this Series shall be given by publication at least once a week in each of two successive weeks in a newspaper printed in the English language and customarily published on each business day and of general circulation in the city in which the Corporation maintains its principal executive offices and in the Borough of Manhattan, The City of New York, commencing at least 30 but not more than 60 days prior to the date fixed for such redemption. Notice of every such redemption shall also be mailed at least 30 but not more than 60 days prior to the date fixed for such redemption to the holders of record of the shares so 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 nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares so to be redeemed. In case of redemption of a part only of this Series at the time outstanding, the redemption may be either pro rata or by lot. The Board of Directors shall prescribe the manner in which the drawings by lot or the pro rata redemption shall be conducted and, subject to the provisions herein and in the Certificate of Incorporation contained, the terms and conditions upon which the shares of this Series shall be redeemed from time to time. If such notice of redemption shall have been duly given by publication or if the Corporation shall have given to the bank or trust company designated by the Corporation as hereinafter specified irrevocable authorization promptly to give or to complete such notice of publication, and if on or before the redemption date specified therein the funds necessary for such redemption shall have been deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares so called for redemption, with a bank or trust company in good standing, designated in such notice, organized under the laws of the United States of America or of the State of New York, doing business in the Borough of Manhattan, The City of New York, having a capital, surplus and undivided profits aggregating at least $5,000,000 according to its last published statement of condition, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, from and after the time of such deposit, all shares so called for redemption shall no longer be deemed to be outstanding and all rights with respect to such shares shall forthwith cease and terminate, except only the right of the holders thereof to receive from such deposit the funds so deposited, without interest. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so set aside or deposited, as the case may be, and unclaimed at the end of two years from such redemption date shall be released or repaid to the Corporation, after which the holders of the shares so called for redemption shall look only to the Corporation for payment thereof. SECTION 4. Liquidation. The amount which shall be paid to the holders of shares of this Series in the event of any voluntary or involuntary total liquidation, dissolution or winding up of -13- the Corporation shall be $25.00 per share on each outstanding share of this Series, plus an amount equal to all dividends accumulated but unpaid to the date of such payment. SECTION 5. Ratable Treatment. In the event that the amounts payable in accordance with Section 4 hereof are not paid in full, each share of this Series shall, together with outstanding shares of all other series of Preferred Stock of the Corporation, share ratably, without priority of one series over the other, in the payment of dividends, including accumulations, if any, in the proportion that the amount of dividends, including accumulations, if any, then payable on each share bears to the aggregate of such amounts then payable on all Preferred Stock of the Corporation and in any distribution of assets other than by way of dividends in the proportion that the sum payable on each share bears to the aggregate of the amounts so payable on all shares of Preferred Stock of the Corporation. SECTION 6. Limitation on Dividends. So long as any of the shares of this Series shall remain outstanding, no dividend whatever shall be paid or declared, and no distribution made, on any junior shares, other than a dividend payable solely in junior shares, nor shall any junior shares be acquired for a consideration by the Corporation or by any company a majority of the voting shares of which is owned by the Corporation, unless all dividends on the shares of this Series accrued for all past quarterly dividend periods shall have been paid and the full dividends thereon for the then current quarterly dividend period shall have been paid or declared and duly provided for. SECTION 7. Voting Rights. The holders of the shares of this Series shall have no voting rights whatsoever, except for any voting rights to which they may be entitled under the laws of the State of Delaware, and except as follows: (a) So long as any of the shares of this Series are outstanding, the consent of the holders of at least a majority of the then-outstanding shares of this Series, given in person or by proxy at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (i) Any increase in the authorized amount of Preferred Stock or the authorization, or any increase in the authorized amount, of any class of shares of the Corporation ranking on a parity with the Preferred Stock. (ii) The sale, lease or conveyance (other than by mortgage) of all or substantially all of the property or business of the Corporation or the consolidation or merger of the Corporation into any other corporation, unless the corporation resulting from such merger or consolidation shall have thereafter no class of shares, either authorized or outstanding, ranking prior to or on a parity with shares corresponding to the shares of Preferred Stock, except the same number of shares with no greater rights and preferences than the shares of Preferred Stock authorized immediately preceding such consolidation or merger and unless each holder of shares of Preferred Stock immediately preceding such consolidation or merger shall receive the same number of shares, with substantially the same rights and preferences, of the resulting corporation; provided, however, that the resulting corporation may have authorized and outstanding -14- such additional shares having preferences or priorities over or being on a parity with the shares of Preferred Stock as the holders of Preferred Stock of the Corporation may have previously authorized pursuant to the Certificate of Incorporation; and provided, further, that this requirement of consent by the holders of shares of Preferred Stock shall not be deemed to apply to or operate to prevent either the purchase by the Corporation of the assets or shares, in whole or in part, of any other corporation, or the sale by the Corporation or any subsidiary of all or part of the capital shares or assets of other corporations, including a subsidiary, or the sale of a division or divisions of the Corporation or of any subsidiary, or any other sale of property or assets which constitutes less than substantially all of the property or assets of the Corporation. (b) So long as any of the shares of this Series are outstanding, the consent of the holders of at least 66 2/3% of the then-outstanding shares of this Series given in person or by proxy, at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (i) The authorization, or any increase in the authorized amount, of any class of shares of the Corporation ranking prior to the shares of Preferred Stock. (ii) The amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation, or the amendment, alteration, repeal or adoption of any resolution contained in a certificate of designation filed pursuant to Section 151 of the General Corporation Law of the State of Delaware in the office of the Secretary of State of the State of Delaware, which would affect adversely any right, preference, privilege or voting power of the shares of this Series or shares of any other series of Preferred Stock or the holders thereof. (c) Without limiting the rights, if any, of holders of any other series of Preferred Stock, in case the Corporation shall be in arrears in the payment of six quarterly dividends, whether or not successive, on the outstanding shares of this Series or any other outstanding series of Preferred Stock, the holders of shares of this Series voting separately as a class and in addition to their other voting rights shall have the exclusive right to elect two additional directors beyond the number to be elected by all stockholders at the next annual meeting of stockholders called for the election of directors, and at every subsequent such meeting at which the terms of office of the directors so elected by the holders of shares of this Series expire, provided such arrearage exists on the date of such meeting or subsequent meetings, as the case may be. The right of the holders of shares of this Series voting separately as a class to elect two members of the Board of Directors of the Corporation as aforesaid shall continue until such time as all dividends accumulated on all shares of Preferred Stock shall have been paid in full and provision has been made for the payment in full of the dividends for the current quarter, at which time the special right of the holders of shares of this Series so to vote separately as a class for the election of Directors shall terminate, subject to revesting at such time as the Corporation shall be in arrears in the payment of six quarterly dividends, whether or not successive, on the outstanding shares of this Series or any other outstanding series of Preferred Stock. If the annual meeting of stockholders of the Corporation is not, for any -15- reason, held on the date fixed in the By-Laws at a time when the holders of shares of this Series, voting separately and as a class, shall be entitled to elect directors, or if vacancies shall exist in both of the two offices of directors elected by the holders of shares of this Series, the Chairman of the Board of the Corporation shall, upon the written request of the holders of record of at least 10% of the shares of this Series then outstanding addressed to the Secretary of the Corporation, call a special meeting in lieu of the annual meeting of stockholders, or, in the event of such vacancies, a special meeting of the holders of shares of this Series, for the purpose of electing directors. Any such meeting shall be held at the earliest practicable date at the place for the holding of the annual meeting of stockholders or as otherwise determined pursuant to the By-Laws. If such meeting shall not be called by the Chairman of the Board of the Corporation within 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 holder of record of at least 10% of the outstanding shares of this Series 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 meeting of stockholders of the Corporation and shall be held at the place for holding the annual meetings of stockholders or as otherwise determined pursuant to the By- Laws. Any holder of shares of this Series so designated shall have access to the lists of stockholders to be called pursuant to the provisions hereof. At any meeting held for the purpose of electing directors at which the holders of shares of this Series shall have the right to elect directors as aforesaid, the presence in person or by proxy of the holders of at least 33 1/3% of the outstanding shares of this Series shall be required to constitute a quorum of such shares of this Series. In the event any meeting of the holders of shares of this Series shall be held for the purpose of electing directors pursuant to this subdivision (c), nothing contained herein shall preclude the Corporation from simultaneously calling and holding a meeting of any other class or series of capital stock of the Corporation which may have voting rights to elect directors. Any vacancy occurring in the office of director elected by the holders of shares of this Series may be filled by the remaining director elected by the holders of the shares of such class, unless and until such vacancy shall be filled by the holders of the shares of such class. Any director to be elected by the holders of shares of this Series shall agree, prior to his election to office, to resign upon any termination of the right of the holders of shares of this Series to vote as a class for directors as herein provided, and upon any such termination the directors then in office elected by the holders of shares of this Series shall forthwith resign. SECTION 8. No Sinking Fund. No sinking fund shall be provided for the purchase or redemption of the shares of this Series. SECTION 9. No Preemptive Rights. The holders of shares of this Series are not entitled to any preemptive or other rights to subscribe for or to purchase any shares or securities of any class which may at any time be issued, sold or offered for sale by the Corporation. -16- SECTION 10. Rank. All shares of Preferred Stock, including this Series, shall be of equal rank with each other regardless of series, and shall be identical with each other except as provided in the Certificate of Incorporation or in a certificate of designation filed pursuant to Section 151 of the General Corporation Law of the State of Delaware with the Secretary of State of the State of Delaware. $9.75 Cumulative Convertible Preferred Stock The following is a statement of the powers, preferences, rights, qualifications, limitations and restrictions of the Series, consisting of 2,500,000 shares, $1.00 par value, of the $9.75 Cumulative Convertible Preferred Stock. SECTION 1. Designation and Amount. The shares of such series shall be designated as the "$9.75 Cumulative Convertible Preferred Stock" (the "$9.75 Preferred Stock") and the number of shares constituting such series shall be 2,500,000 which number may be decreased (but not increased) by the Board of Directors without a vote of stockholders; provided, however, that such number may not be decreased below the number of then currently outstanding shares of $9.75 Preferred Stock. SECTION 2. Dividends and Distributions. (a) The holders of shares of $9.75 Preferred Stock, in preference to the holders of shares of the Common Stock, $1.00 par value (the "Common Stock"), of the Corporation and of any other capital stock of the Corporation ranking junior to the $9.75 Preferred Stock as to payment of dividends, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, cumulative cash dividends at the annual rate of $9.75 per share, and no more (except as otherwise provided in paragraph (b) of this Section 2), in equal quarterly payments on the fifteenth day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date which is at least 10 days after the date of original issue of the $9.75 Preferred Stock. (b) If the ratio (expressed as a percentage) of Consolidated Funded Debt (as defined in Section 10 hereof) to Gross Tangible Worth (as defined in Section 10 hereof) of the Corporation and its Subsidiaries (as defined in Section 10 hereof) or of any successor Person to the Corporation and its Subsidiaries or of any Person of which the Corporation is a Subsidiary and the Subsidiaries of such Person (the "Reporting Entity"), computed as if all such Persons and the Corporation were consolidated pursuant to generally accepted accounting principles, exceeds 60% as of the last day of the calendar quarter for two or more consecutive calendar quarters, then retroactively effective for the Quarterly Dividend Payment Date in the first calendar quarter in which such ratio exceeds 60%, the holders of shares of $9.75 Preferred Stock, in preference to the holders of shares of Common Stock and of any other capital stock of the Corporation ranking junior to the $9.75 Preferred Stock as to payment of dividends, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, cumulative cash dividends at the annual rate of $10.75 per share (rather than at the annual rate of $9.75 per share as provided in paragraph -17- (a) of this Section 2), and no more, in equal quarterly payments on each Quarterly Dividend Payment Date until such ratio is 60% or less as of the last day of the calendar quarter for four consecutive calendar quarters. After such period, the holders of shares of $9.75 Preferred Stock will be entitled to receive dividends at the annual rate of $9.75 per share as provided in paragraph (a) of this Section 2 until such ratio again exceeds 60% as of the last day of the calendar quarter for two or more consecutive calendar quarters. (c) Dividends payable pursuant to paragraph (a) or (b) of this Section 2 shall begin to accrue and be cumulative from the date of original issue of the $9.75 Preferred Stock. The amount of dividends so payable shall be determined on the basis of twelve 30-day months and a 360-day year. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of $9.75 Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of $9.75 Preferred Stock entitled to receive payment of a dividend declared thereon, which record date shall be no more than sixty days prior to the date fixed for the payment thereof. SECTION 3. Voting Rights. The holders of shares of $9.75 Preferred Stock shall have the following voting rights: (a) So long as more than 750,000 shares of $9.75 Preferred Stock are issued and outstanding, the holders of the outstanding shares of $9.75 Preferred Stock, voting separately as a single series, in person or by proxy, shall be entitled to elect one or more directors of the Corporation, in the number and manner specified in this paragraph (a) and, subject to the provisions of the Restated Certificate of Incorporation of the Corporation and of any other Certificate of Designations, Preferences and Rights relating to any other class or series of capital stock of the Corporation having a preference over the Common Stock as to dividends or upon liquidation, the holders of shares of Common Stock and of any such other class or series of capital stock of the Corporation, voting together as a class, shall be entitled to elect the remaining directors of the Corporation; provided, however, that until such time as any waiting period with respect to any acquisition of shares of $9.75 Preferred Stock required to expire under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, including any extensions thereof, shall have expired or been terminated, the holders of shares of $9.75 Preferred Stock acquired in such acquisition shall not have the right to vote for the election of directors. So long as the number of shares of $9.75 Preferred Stock specified in this sentence are issued and outstanding, the number of directors of the Corporation which the holders of shares of $9.75 Preferred Stock, voting separately as a single series, shall be entitled to elect shall be the following: -18-
Number of Number of Shares Directors ---------------- --------- 2,250,000 or more............................ 3 1,500,000 or more but less than 2,250,000.... 2 750,001 or more but less than 1,500,000...... 1
(b) So long as more than 300,000 shares of $9.75 Preferred Stock are issued and outstanding, the affirmative vote of the holders of at least a majority of the outstanding shares of $9.75 Preferred Stock, voting separately as a single series, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, shall be necessary to authorize any transaction defined as a "Self-Dealing Transaction" in Section 3 of Article NINTH of the Restated Certificate of Incorporation of the Corporation, as in effect on February 1, 1987. (c) The affirmative vote of the holders of at least 66 2/3% of the outstanding shares of $9.75 Preferred Stock, voting separately as a single series, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, shall be necessary to (i) authorize, or to increase the authorized number of shares of, or to issue, any class or series of the Corporation's capital stock ranking prior (either as to dividends or upon liquidation, dissolution or winding up) to the $9.75 Preferred Stock or (ii) amend, repeal or change any of the provisions of the Restated Certificate of Incorporation of the Corporation or the provisions of the Certificate of Designations, Preferences and Rights of $9.75 Cumulative Convertible Preferred Stock which embodies this resolution, in any manner which would alter or change the powers, preferences or special rights of the shares of $9.75 Preferred Stock so as to affect them adversely. (d) The foregoing rights of holders of shares of $9.75 Preferred Stock to take any actions as provided in this Section 3 may be exercised at any annual meeting of stockholders or at a special meeting of stockholders held for such purpose. At each meeting of stockholders at which the holders of shares of $9.75 Preferred Stock shall have the right, voting separately as a single series, to elect directors of the Corporation as provided in this Section 3 or to take any other action, the presence in person or by proxy of the holders of record of one-third of the total number of shares of $9.75 Preferred Stock then outstanding and entitled to vote on the matter shall be necessary and sufficient to constitute a quorum. At any such meeting or at any adjournment thereof, (i) the absence of a quorum of the holders of shares of $9.75 Preferred Stock shall not prevent the election of directors other than those to be elected by the holders of shares of $9.75 Preferred Stock and the absence of a quorum of the holders of shares of any other class or series of capital stock shall not prevent the election of directors to be elected by the holders of shares of $9.75 Preferred Stock or the taking of any other action as provided in this Section 3; and -19- (ii) in the absence of a quorum of the holders of shares of $9.75 Preferred Stock, a majority of the holders of such shares present in person or by proxy shall have the power to adjourn the meeting as to the actions to be taken by the holders of shares of $9.75 Preferred Stock from time to time and place to place without notice other than announcement at the meeting until a quorum shall be present. For the taking of any action as provided in this Section 3 by the holders of shares of $9.75 Preferred Stock, each such holder shall have one vote for each share of such stock standing in his name on the transfer books of the Corporation as of any record date fixed for such purpose or, if no such date be fixed, at the close of business on the Business Day (as defined in Section 10 hereof) next preceding day on which notice is given, or if notice is waived, at the close of business on the Business Day next preceding the day on which the meeting is held. Each director elected by the holders of shares of $9.75 Preferred Stock as provided in paragraph (a) of this Section 3 shall, unless his term shall expire earlier, hold office until the annual meeting of stockholders next succeeding his election or until his successor, if any, is elected and qualified. In case any vacancy shall occur among the directors elected by the holders of shares of $9.75 Preferred Stock as provided in paragraph (a) of this Section 3, such vacancy may be filled for the unexpired portion of the term by vote of the remaining directors or director theretofore elected by such holders, or such directors' or director's successors in office. If any such vacancy is not so filled within 20 days after the creation thereof, the Chairman of the Board of the Corporation shall call a special meeting of the holders of shares of $9.75 Preferred Stock to be held as promptly as practicable and such vacancy or vacancies shall be filled at such special meeting. Any director elected by the holders of shares of $9.75 Preferred Stock may be removed from office by vote of the holders of at least a majority of the outstanding shares of $9.75 Preferred Stock. A special meeting of the holders of shares of $9.75 Preferred Stock may be called by a majority vote of the Board of Directors for the purpose of removing a director in accordance with the provisions of this paragraph (d). The Chairman of the Board of the Corporation shall, in any event, within 10 days after delivery to the Corporation at its principal office of a request to call such a special meeting signed by the holders of at least 20% of the outstanding shares of $9.75 Preferred Stock, call a special meeting for such purpose to be held as promptly as practicable after the delivery of such request. If the Corporation shall not set a date for an annual meeting to elect directors within thirteen months of the previous annual meeting, then within 10 days after delivery to the Corporation at its principal office of a request to call such an annual meeting signed by the holders of at least 20% of the outstanding shares of $9.75 Preferred Stock, the Chairman of the Board of the Corporation shall call an annual meeting to be held as promptly as practicable after the delivery of such request. -20- (e) Except as provided herein or in the Restated Certificate of Incorporation of the Corporation, or as required by law, the holders of shares of $9.75 Preferred Stock shall have no voting rights and their consent shall not be required for the taking of any corporate action. SECTION 4. Certain Restrictions. (a) Whenever quarterly dividends payable on shares of $9.75 Preferred Stock as provided in Section 2 hereof are in arrears, thereafter and until all accrued and unpaid dividends, whether or not declared, on the outstanding shares of $9.75 Preferred Stock shall have been paid in full or declared and set apart for payment, or whenever the Corporation shall not have redeemed shares of $9.75 Preferred Stock at a time required by paragraph (b) of Section 5 hereof, thereafter and until all mandatory redemption obligations which have come due shall have been satisfied or all necessary funds have been set apart for payment, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of capital stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the $9.75 Preferred Stock, other than dividends or distributions payable in capital stock ranking junior (as to dividends and upon liquidation, dissolution or winding up) to the $9.75 Preferred Stock; or (ii) declare or pay dividends, or make any other distributions, on any shares of capital stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the $9.75 Preferred Stock, other than dividends or distributions payable in capital stock ranking junior (as to dividends and upon liquidation, dissolution or winding up) to the $9.75 Preferred Stock, except dividends paid ratably on the $9.75 Preferred Stock and all capital stock ranking on a parity with the $9.75 Preferred Stock and on which dividends are payable or in arrears, in proportion to the total amounts to which the holders of all such shares are then entitled. (b) Whenever quarterly dividends payable on shares of $9.75 Preferred Stock as provided in Section 2 hereof are in arrears, thereafter and until all accrued and unpaid dividends, whether or not declared, on the outstanding shares of $9.75 Preferred Stock shall have been paid in full or declared and set apart for payment, or whenever the Corporation shall not have redeemed shares of $9.75 Preferred Stock at a time required by paragraph (b) of Section 5 hereof, thereafter and until all mandatory redemption obligations which have come due shall have been satisfied or all necessary funds have been set apart for payment, the Corporation shall not: (i) redeem or purchase or otherwise acquire for consideration any shares of capital stock ranking (either as to dividends or upon liquidation, dissolution or winding up) junior to, or on a parity with, the $9.75 Preferred Stock; or (ii) redeem or purchase or otherwise acquire for consideration any shares of $9.75 Preferred Stock; provided, that the Corporation may elect to redeem all outstanding shares of $9.75 Preferred Stock pursuant to paragraph (a) of Section 5 hereof, or may redeem shares of $9.75 Preferred Stock pro rata (or in full, if fewer than 750,000 shares of $9.75 Preferred Stock are then outstanding) pursuant to paragraph (a) or paragraph (b) of Section 5 hereof, or may otherwise redeem shares of $9.75 Preferred Stock pursuant to paragraph (c) of Section 5 hereof or clause (iv) (B) of paragraph (b) of Section 8 hereof. -21- (c) The Corporation shall not permit any Subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of capital stock of the Corporation unless the Corporation could, pursuant to paragraph (b) of this Section 4, purchase such shares at such time and in such manner. SECTION 5. Redemption. (a) Except as otherwise provided in paragraph (c) of this Section 5 and clause (iv) (B) of paragraph (b) of Section 8, the Corporation shall not have any right to redeem shares of $9.75 Preferred Stock prior to August 1, 1995. On and after such date, subject to the restrictions contained in Section 4 hereof, the Corporation shall have the right, at its sole option and election, to redeem shares of $9.75 Preferred Stock, in whole or in part, at any time and from time to time at the redemption prices per share set forth below plus an amount per share equal to all unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of redemption. If redeemed during the period beginning August 1, 1995 and ending January 31, 1996, at a price of $101.0836, and thereafter, at a price of $100.00 (b) On each February 1 commencing on February 1, 1994 (so long as any shares of $9.75 Preferred Stock remain outstanding), the Corporation shall redeem 750,000 shares of $9.75 Preferred Stock (or, if fewer than 750,000 shares of $9.75 Preferred Stock are then outstanding, the number of shares then outstanding), by paying therefor in cash $100.00 per share plus an amount per share equal to all unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of redemption. The Corporation may apply to its mandatory redemption obligations, on a pro rata basis with respect to mandatory redemption payments to be made, any shares of $9.75 Preferred Stock purchased, redeemed or otherwise acquired (other than upon conversion) by it which have not been previously credited against its mandatory redemption obligations. (c) The Corporation shall have the right to redeem shares of $9.75 Preferred Stock in accordance with paragraph 7D of the Preferred Stock Purchase Agreement dated February 1, 1987 between the Corporation and The Prudential Insurance Company of America, as it may be amended from time to time, and including any additional parties which become subject to said paragraph 7D, in accordance with the procedures specified therein. (d) If less than all shares of $9.75 Preferred Stock at the time outstanding are to be redeemed, the shares to be redeemed shall be selected pro rata, except in the event of a redemption made pursuant to paragraph (c) of this Section 5. (e) Except for a redemption made pursuant to paragraph (c) of this Section 5 or clause (iv) (B) of paragraph (b) of Section 8, notice of any redemption of shares of $9.75 Preferred Stock shall be mailed at least thirty, but not more than sixty, days prior to the date fixed for redemption to each holder of shares of $9.75 Preferred Stock to be redeemed, at such holder's address as it appears on the transfer books of the Corporation. In order to facilitate the -22- redemption of shares of $9.75 Preferred Stock, the Board of Directors may fix a record date for the determination of shares of $9.75 Preferred Stock to be redeemed, or may cause the transfer books of the Corporation for the $9.75 Preferred Stock to be closed, not more than sixty days or less than thirty days prior to the date fixed for such redemption. (f) On the date of any redemption being made pursuant to paragraph (a) or (b) of this Section 5 which is specified in the notice given pursuant to paragraph (e), the Corporation shall, and at any time after such notice shall have been mailed and before such date of redemption the Corporation may, deposit for the benefit of the holders of shares of $9.75 Preferred Stock called for redemption the funds necessary for such redemption with a bank or trust company in the Borough of Manhattan, the City of New York, having a capital and surplus of at least $500,000,000. Any monies so deposited by the Corporation and unclaimed at the end of two years from the date designated for such redemption shall revert to the general funds of the Corporation. After such reversion, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof and any holder of shares of $9.75 Preferred Stock so called for redemption shall look only to the Corporation for the payment of the redemption price. In the event that monies are deposited pursuant to this paragraph (f) in respect of shares of $9.75 Preferred Stock that are converted in accordance with the provisions of Section 8 hereof, such monies shall, upon such conversion, revert to the general funds of the Corporation and, upon demand, such bank or trust company shall pay over to the Corporation such monies and shall be relieved of all responsibility to the holders of such converted shares in respect thereof. Any interest accrued on funds deposited pursuant to this paragraph (f) shall be paid from time to time to the Corporation for its own account. (g) Upon the deposit of funds pursuant to paragraph (f) in respect of shares of $9.75 Preferred Stock called for redemption pursuant to paragraph (a) or (b) of this Section 5, notwithstanding that any certificates for such shares shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed outstanding, the rights to receive dividends thereon shall cease to accrue from and after the date of redemption designated in the notice of redemption and all rights of the holders of shares of $9.75 Preferred Stock called for redemption shall cease and terminate, excepting only the right to receive the redemption price therefor and the right to convert such shares into shares of Common Stock until the close of business on the second Business Day (as defined in Section 10 hereof) preceding the date of redemption, in accordance with Section 8 hereof. SECTION 6. Reacquired Shares. Any shares of $9.75 Preferred Stock converted, redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation, and upon the filing of an appropriate certificate with the Secretary of State of the State of Delaware, become authorized but unissued shares of Preferred Stock, $1.00 par value, of the Corporation and may be reissued as part of another series of Preferred Stock, $1.00 par value, of the Corporation subject to the conditions or restrictions on issuance set forth herein. -23- SECTION 7. Liquidation, Dissolution or Winding Up. (a) Except as provided in paragraph (b) of this Section 7, upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of capital stock of the Corporation ranking junior (upon liquidation, dissolution or winding up) to the $9.75 Preferred Stock unless, prior thereto, the holders of shares of $9.75 Preferred Stock shall, subject to Section 8 hereof, have received (A) the liquidation value per share set forth below, plus an amount per share equal to all unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payments or (B) if such payment occurs prior to February 1, 1990 the greater of the amount determined pursuant to clause (i) (A) and the Trading Value (as defined in Section 10 hereof) per share of $9.75 Preferred Stock on the date of such payment; or (ii) to the holders of shares of capital stock ranking on a parity (upon liquidation, dissolution or winding up) with the $9.75 Preferred Stock, except distributions made ratably on the $9.75 Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. For purposes of clause (i) (A) above the liquidation value per share shall be during each 12-month period beginning February 1: 1987.......................... $109.7500 1988.......................... $108.6667 1989.......................... $107.5834 1990.......................... $106.5001 1991.......................... $105.4168 1992.......................... $104.3335 1993.......................... $103.2502 1994.......................... $102.1669 1995.......................... $101.0836 1996 and thereafter........... $100.00.
(b) If the Corporation shall commence a voluntary case under the Federal bankruptcy laws or any other applicable Federal or State bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or State bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of 90 consecutive days and on account of any such event the Corporation shall liquidate, dissolve or wind up, no distribution shall be made (i) to the holders of shares of capital stock of the Corporation ranking junior (upon liquidation, dissolution or winding up) to the $9.75 Preferred Stock unless, prior thereto, the holders of shares of $9.75 Preferred -24- Stock shall have received $100.00 per share, plus an amount per share equal to all unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment or (ii) to the holders of shares of capital stock ranking on a parity (upon liquidation, dissolution or winding up) with the $9.75 Preferred Stock, except distributions made ratably on the $9.75 Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. (c) Neither the consolidation, merger or other business combination of the Corporation with or into any other Person or Persons nor the sale of all or substantially all of the assets of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 7. SECTION 8. Conversion. Each share of $9.75 Preferred Stock may be converted at any time on or after February 1, 1990, at the option of the holder thereof, into shares of Common Stock, on the terms and conditions set forth in this Section 8. (a) Subject to the provisions for adjustment hereinafter set forth, each share of $9.75 Preferred Stock shall be convertible in the manner hereinafter set forth into 5.84 fully paid and nonassessable shares of Common Stock. (b) The number of shares of Common Stock into which each share of $9.75 Preferred Stock is convertible shall be subject to adjustment from time to time as follows: (i) In case the Corporation shall at any time or from time to time declare a dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common Stock or subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares or combine or reclassify the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then, and in each such case, the number of shares of Common Stock into which each share of $9.75 Preferred Stock is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock which the holder of a share of $9.75 Preferred Stock would have been entitled to receive after the happening of any of the events described above had such share been converted immediately prior to the happening of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this clause (i) shall become effective (A) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (B) in the case of any such subdivision, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective. (ii) In case the Corporation shall at any time or from time to time issue shares of Common Stock (or securities convertible into shares of Common Stock) at a price per share (or having a conversion price per share) less than $100.00 divided by the number -25- of shares of Common Stock into which a share of $9.75 Preferred Stock is then convertible (the "Conversion Price"), disregarding for the purposes of this clause (ii) any limitations on conversion set forth in the first sentence of this Section 8, as of the date of issuance of such shares or of such convertible securities, then, and in each such case, the number of shares of Common Stock into which each share of $9.75 Preferred Stock is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (A) the number of shares of Common Stock into which such share was convertible on the day immediately prior to such date by (B) a fraction, the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding on such date and (2) the number of additional shares of Common Stock issued (or into which the convertible securities may convert), and the denominator of which shall be the sum of (1) the number of shares of Common Stock outstanding on such date and (2) the number of shares of Common Stock which the aggregate consideration receivable by the Corporation for the total number of shares of Common Stock so issued (or into which the convertible securities may convert) would purchase at such Conversion Price on such date. An adjustment made pursuant to this clause (ii) shall be made on the next Business Day following the date on which any such issuance is made and shall be effective retroactively immediately after the close of business on such date. For purposes of this clause (ii), the aggregate consideration receivable by the Corporation in connection with the issuance of shares of Common Stock or of securities convertible into shares of Common Stock shall be deemed to be equal to the sum of the aggregate offering price (before deduction of reasonable underwriting discounts or commissions and expenses) of all such securities plus the minimum aggregate amount, if any, payable upon conversion of any such convertible securities into shares of Common Stock. The issuance of any shares of Common Stock (whether treasury shares or newly issued shares) pursuant to a dividend or distribution on, or subdivision, combination or reclassification of, the outstanding shares of Common Stock requiring an adjustment in the conversion ratio pursuant to clause (i) of this paragraph (b), or pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation, and the investment of additional optional amounts, in shares of Common Stock, in any such case at a price per share of not less than 85% of the current market price (determined as provided in such plans) per share of Common Stock, or pursuant to any employee benefit plan or program of the Corporation at a price per share of not less than the current market price (determined as provided in such plans or programs), or pursuant to any option, warrant, right, or convertible security outstanding as of the date hereof (including, but not limited to, the Common Stock Purchase Rights issued pursuant to the Rights Agreement between the Corporation and Ameritrust Company National Association, dated as of October 29,1986, as amended as of December 18, 1986, and supplemented and amended as of February 1, 1987, and as it may be further amended from time to time (the "Rights Agreement"), and the $2.07 Cumulative Convertible Preferred Stock, $1.00 par value, and the $4.00 Cumulative Convertible Preferred Stock, $1.00 par value) shall not be deemed to constitute an issuance of Common Stock or convertible securities by the Corporation to which this clause (ii) applies. -26- (iii) In case the Corporation shall at any time or from time to time declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its Subsidiaries by way of dividend or spin-off, except pursuant to the Rights Agreement) on its Common Stock, other than (A) regular quarterly dividends payable in cash out of surplus plus dividends payable in cash in an aggregate amount of up to $200 million or (B) shares of Common Stock which are referred to in clause (i) of this paragraph (b), then, and in each such case, the number of shares of Common Stock into which each share of $9.75 Preferred Stock is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (1) the number of shares of Common Stock into which such share was convertible on the day immediately prior to the record date fixed for the determination of stockholders entitled to receive such dividend or distribution by (2) a fraction, the numerator of which shall be the Current Market Price per share of Common Stock as of such record date, and the denominator of which shall be such Current Market Price per share of Common Stock less the Fair Market Value per share of Common Stock (as determined in good faith by the Board of Directors of the Corporation, a certified resolution with respect to which shall be mailed to each holder of shares of $9.75 Preferred Stock) of such dividend or distribution; provided, however, that in the event of a distribution of shares of capital stock of a Subsidiary of the Corporation (a "Spin-Off") made to holders of shares of Common Stock, the numerator of such fraction shall be the sum of the Current Market Price per share of Common Stock as of the 35th Trading Day after the effective date of such Spin-Off and the Current Market Price of the number of shares (or the fraction of a share) of capital stock of the Subsidiary which is distributed in such Spin-Off in respect of one share of Common Stock as of such 35th Trading Day and the denominator of which shall be the Current Market Price per share of Common Stock as of such 35th Trading Day. An adjustment made pursuant to this clause (iii) shall be made upon the opening of business on the next Business Day following the date on which any such dividend or distribution is made and shall be effective retroactively immediately after the close of business on the record date fixed for the determination of stockholders entitled to receive such dividend or distribution; provided, however, if the proviso to the preceding sentence applies, then such adjustment shall be made and be effective as of such 35th Trading Day after the effective date of such Spin-Off. (iv) In case at any time the Corporation shall be a party to any transaction (including, without limitation, a merger, consolidation, sale of all or substantially all of the Corporation's assets, liquidation or recapitalization of the Common Stock and excluding any transaction to which clause (i), (ii) or (iii) of this paragraph (b) applies) in which the previously outstanding Common Stock shall be changed into or exchanged for different securities of the Corporation or common stock or other securities of another corporation or interests in a noncorporate entity or other property (including cash) or any combination of any of the foregoing (each such transaction being herein called the "Transaction," the date of consummation of the Transaction being herein called the "Consummation Date," the Corporation (in the case of a recapitalization of the Common -27- Stock to which this clause (iv) applies or any other such transaction in which the Corporation retains substantially all of its assets and survives as a corporation) or such other corporation or entity (in each other case) being herein called the "Acquiring Company," and the common stock (or equivalent equity interests) of the Acquiring Company being herein called the "Acquirer's Common Stock"), then, as a condition of the consummation of the Transaction, lawful and adequate provisions shall be made so that each holder of shares of $9.75 Preferred Stock shall be entitled, at the election of the $9.75 Preferred Stock as provided in the following sentence, to the treatment accorded pursuant to sub-clause (A) (1) or (A) (2) and, to the extent applicable, (A) (3) or, under the circumstances specified therein, sub-clause (B) or (C) of this clause (iv). The selection by the holders of shares of $9.75 Preferred Stock of the treatment to be accorded such shares from among the alternatives specified in the preceding sentence shall require the affirmative vote of the holders of at least 66 2/3% of the outstanding shares of $9.75 Preferred Stock, voting in person or by proxy, at a meeting of such stockholders, which vote shall be taken on or before the later of (1) the 30th day following the Consummation Date, and (2) the 60th day following the date of delivery or mailing to such holder of the last proxy statement relating to the vote on the Transaction by the holders of the Common Stock, and which vote shall bind all holders of shares of $9.75 Preferred Stock and their transferees; if the holders of shares of $9.75 Preferred Stock are unable to or for any other reason do not make a selection, then the Board of Directors of the Corporation shall make such selection, in accordance with this clause (iv), from among the alternatives specified in this clause (iv). Notwithstanding the foregoing, any holder of $9.75 Preferred Stock shall in all events be entitled to the treatment accorded pursuant to sub-clause (A) (3) in the event the circumstances specified therein shall occur. Any selection made by the holders of shares of $9.75 Preferred Stock in accordance with the preceding sentence shall be communicated in writing to the Corporation as promptly as practicable after the vote referred to above shall have been taken. (A) In case of any Transaction, each share of $9.75 Preferred Stock shall continue to remain outstanding and shall be subject to all the provisions of the Certificate of Designations, Preferences and Rights of $9.75 Cumulative Convertible Preferred Stock which embodies this resolution, as in effect prior to such Transaction except that (1) each share of $9.75 Preferred Stock shall thereafter be convertible (subject to the limitations on conversion set forth in the first sentence of this Section 8) into, in lieu of the Common Stock issuable upon such conversion prior to the Consummation Date, shares of the Acquirer's Common Stock, unless the Acquiring Company fails to meet the requirements set forth in (4), (5) and (6) below, in which case shares of the common stock of the corporation (herein called a "Parent") which directly or indirectly controls the Acquiring Company if it meets the requirements set forth in (4), (5) and (6) below, at a conversion price per share equal to the Conversion Price in effect immediately prior to the Consummation Date multiplied by a fraction the numerator of which is the market price per share (determined in the same manner as -28- provided in the definition of Current Market Price) of the Acquirer's Common Stock or the Parent's common stock, as the case may be, immediately prior to the Consummation Date and the denominator of which is the Current Market Price per share of Common Stock immediately prior to the Consummation Date (subject in each case to adjustments from and after the Consummation Date as nearly equivalent as possible to the adjustments provided for in this paragraph (b) of this Section 8), or (2) each share of $9.75 Preferred Stock shall thereafter be convertible (subject to the limitations on conversion set forth in the first sentence of this Section 8) into, in lieu of the Common Stock issuable upon such conversion prior to the Consummation Date, the amount of securities or other property to which such holder would actually have been entitled as a holder of shares of Common Stock upon the consummation of the Transaction if such holder had converted such shares of $9.75 Preferred Stock immediately prior to such Transaction (subject to adjustments from and after the Consummation Date as nearly equivalent as possible to the adjustments provided for in this paragraph (b) of this Section 8); provided that if in connection with the Transaction a tender or exchange offer shall have been made and there shall have been acquired pursuant thereto more than 50% of the outstanding shares of Common Stock, and if the holders of shares of $9.75 Preferred Stock so designate in the notice given to the Corporation which specifies their selection of this alternative (A) (2), each holder of such shares shall be entitled to receive upon conversion thereof, the amount of securities or other property to which such holder would actually have been entitled as a holder of shares of Common Stock if such holder had converted such shares of $9.75 Preferred Stock prior to the expiration of such tender or exchange offer and accepted such offer and had sold therein the percentage of all the shares of Common Stock issuable upon conversion of its shares of $9.75 Preferred Stock equal to the percentage of shares of the then outstanding Common Stock so purchased in the tender or exchange offer, with the remaining portion of its shares of $9.75 Preferred Stock thereafter being convertible into the amount of securities or other property to which such holder would actually have been entitled upon the consummation of the Transaction as a holder of shares of Common Stock if such holder had converted such shares of $9.75 Preferred Stock immediately prior to such Transaction (subject to adjustments from and after the Consummation Date as nearly equivalent as possible to the adjustments provided for in this paragraph (b) of this Section 8), or (3) if neither the Acquiring Company nor the Parent meets the requirements set forth in (4), (5) and (6) below, each share of $9.75 Preferred Stock shall thereafter be convertible into, in lieu of the Common Stock issuable upon such conversion prior to the Consummation Date (and subject to the limitations on conversion set forth in the first sentence of this Section 8), an amount in cash equal to the Fair Market Value in cash, as of the -29- Consummation Date (computed without interest), of the shares of capital stock or other securities or property (other than cash) to which the holder of shares of $9.75 Preferred Stock would be entitled, pursuant to (2) above (including the proviso thereof, if applicable) upon conversion of each such share, as determined by an independent investment banking firm (with an established national reputation as a valuer of equity securities) selected by the Corporation, plus the cash, if any, into which each such share of $9.75 Preferred Stock would be convertible pursuant to (2) above. The Corporation agrees to obtain, and deliver to each holder of shares of $9.75 Preferred Stock a copy of the determination of such an independent investment banking firm within 15 days after the Consummation Date of any Transaction to which (3) is applicable. The requirements referred to above in the case of the Acquiring Company or its Parent are that immediately after the Consummation Date: (4) it is a solvent corporation or other entity organized under the laws of any State of the United States of America having its common stock or, in the case of an entity other than a corporation, equivalent equity securities, listed on the New York Stock Exchange or the American Stock Exchange or quoted by the NASDAQ National Market System or any successor thereto or comparable system, and such common stock or equivalent equity security continues to meet the requirements for such listing or quotation, (5) it is required to file, and in each of its three fiscal years immediately preceding the Consummation Date (or since its inception) has filed, reports with the Securities and Exchange Commission (the "Commission") pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and (6) in the case of the Parent, such Parent is required to include the Acquiring Company in the consolidated financial statements contained in the Parent's Annual Report on Form 10-K as filed with the Commission and is not itself included in the consolidated financial statements of any other Person (other than its consolidated subsidiaries). Notwithstanding anything contained herein to the contrary, the Corporation shall not effect any Transaction unless prior to the consummation thereof each corporation or entity (other than the Corporation) which may be required to deliver any securities or other property upon the conversion of shares of $9.75 Preferred Stock, or the satisfaction of conversion rights as provided herein shall assume, by written instrument delivered to each holder of shares of $9.75 Preferred Stock, the obligation to deliver to such holder such securities or other property to which, in accordance with the foregoing provisions, such holder may be entitled, and such corporation or entity shall have similarly delivered to each holder of shares of $9.75 -30- Preferred Stock an opinion of counsel for such corporation or entity, which opinion shall state that the rights, powers and privileges of the outstanding shares of $9.75 Preferred Stock, including, without limitation, the conversion provisions applicable thereto, if any, shall thereafter continue in full force and effect and shall be enforceable against such corporation or entity in accordance with the terms hereof and thereof. (B) Notwithstanding the foregoing, if the Consummation Date of a Transaction in which the Corporation is a party occurs prior to February 1, 1990 and if during any period of 12 consecutive months ending on or prior to February 1, 1990, the daily average of all the closing sales prices for each month during such period shall have been less than $14.75 (as such price shall be adjusted in accordance with this sub-clause (B)), the shares of $9.75 Preferred Stock shall, if the holders of shares of $9.75 Preferred Stock shall so select, in the manner prescribed above in this clause (iv), be redeemed by the Corporation for, or exchanged in a Transaction which is a merger or consolidation for, a cash amount equal to $100.00 per share plus an amount per share equal to all unpaid dividends thereon, including accrued dividends, whether or not declared, to the date such Transaction is consummated; provided, that if such Transaction is a merger or consolidation, a definitive agreement for any such merger or consolidation is entered into within 20 days after the end of such 12-month period and is consummated within 75 days thereafter, and if such Transaction is other than a merger or consolidation, it is consummated within 75 days after the end of such 12-month period. The price set forth in the preceding sentence shall from and after the record date for a dividend or distribution requiring an adjustment in the conversion rate pursuant to clause (iii) of this paragraph (b) be reduced by the Fair Market Value per share of Common Stock of such dividend or distribution as determined pursuant to clause (iii) and shall also be appropriately adjusted in the event of an occurrence requiring an adjustment in the conversion rate pursuant to clause (i) of this paragraph (b). (C) In case of any Transaction, provision may be made, in lieu of the adjustments hereinbefore provided for in this clause (iv), for each share of $9.75 Preferred Stock to be exchanged for or to be converted in such Transaction, in a manner and for consideration other than as specified in any of sub-clauses (A) or (B); provided, however, that any such treatment shall require both (1) the approval of the Board of Directors of the Corporation, which approval includes the affirmative vote of at least 80% of the directors then in office other than those who have been elected pursuant to paragraph (a) of Section 3 hereof and (2) the favorable opinion of an independent investment banking firm (with an established national reputation as a valuer of equity securities) selected by the Board of Directors of the Corporation which is to the effect that the Transaction is fair to the holders of shares of $9.75 Preferred Stock, and to the holders of shares of Common Stock in view of the treatment in such Transaction of the $9.75 Preferred Stock. -31- All calculations under this paragraph (b) shall be made to the nearest one one-hundredth of a share. (c) If any adjustment in the number of shares of Common Stock into which each share of $9.75 Preferred Stock may be converted required pursuant to this Section 8 would result in an increase or decrease of less than 1% in the number of shares of Common Stock into which each share of $9.75 Preferred Stock is then convertible, the amount of any such adjustment shall be carried forward and adjustment with respect thereto shall be made at the earlier of (i) 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 the number of shares of Common Stock into which each share of $9.75 Preferred Stock is then convertible or (ii) three years after the date on which such adjustment otherwise would have been made. (d) The Board of Directors may increase the number of shares of Common Stock into which each share of $9.75 Preferred Stock may be converted, in addition to the adjustments required by this Section 8, as shall be determined by it (as evidenced by a resolution of the Board of Directors) to be advisable in order to avoid or diminish any income deemed to be received by any holder for federal income tax purposes of shares of Common Stock or $9.75 Preferred Stock resulting from any events or occurrences giving rise to adjustments pursuant to this Section 8 or from any other similar event. (e) The holder of any shares of $9.75 Preferred Stock may exercise his right to convert such shares into shares of Common Stock by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of $9.75 Preferred Stock to be converted accompanied by a written notice stating that such holder elects to convert all or a specified whole number of such shares in accordance with the provisions of this Section 8 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. Other than such taxes, the Corporation will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of $9.75 Preferred Stock pursuant hereto. As promptly as practicable, and in any event within five business days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Corporation that such taxes have been paid), the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of $9.75 Preferred Stock so converted shall be entitled and (ii) if less than the full number of shares of $9.75 Preferred Stock evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Such conversion shall be deemed to have -32- been made at the close of business on the date of giving of such notice and of such surrender of the certificate or certificates representing the shares of $9.75 Preferred Stock to be converted so that the rights of the holder thereof as to the shares being converted shall cease except for the right to receive shares of Common Stock in accordance herewith, and the person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. The Corporation shall not be required to convert, and no surrender of shares of $9.75 Preferred Stock shall be effective for that purpose, while the transfer books of the Corporation for the Common Stock are closed for any purpose (but not for any period in excess of 15 days); but the surrender of shares of $9.75 Preferred Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such shares of $9.75 Preferred Stock were surrendered, and at the conversion rate in effect at the date of such surrender. (f) Subject to the limitations on conversion set forth in the first sentence of Section 8 hereof, shares of $9.75 Preferred Stock may be converted at any time up to the close of business on the second Business Day preceding the date fixed for redemption of such shares pursuant to Section 5 hereof. (g) Upon conversion of any shares of $9.75 Preferred Stock, the holder thereof shall not be entitled to receive any accumulated, accrued or unpaid dividends in respect of the shares so converted; provided, that such holder shall be entitled to receive any dividends on such shares of $9.75 Preferred Stock declared prior to such conversion if such holder held such shares on the record date fixed for the determination of holders of shares of $9.75 Preferred Stock entitled to receive payment of such dividend. (h) In connection with the conversion of any shares of $9.75 Preferred Stock, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Current Market Price per share of Common Stock on the day on which such shares of $9.75 Preferred Stock are deemed to have been converted. (i) The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the $9.75 Preferred Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of $9.75 Preferred Stock. The Corporation shall from time to time, in accordance with the laws of Delaware, increase the authorized amount of Common Stock if at any time the number of authorized shares of Common Stock remaining unissued shall not be sufficient to permit the conversion at such time of all then outstanding shares of $9.75 Preferred Stock. SECTION 9. Reports as to Adjustments. Whenever the number of shares of Common Stock into which each share of $9.75 Preferred Stock is convertible is adjusted as provided in Section 8 hereof, the Corporation shall promptly mail to the holders of record of the outstanding shares of $9.75 Preferred Stock at their respective addresses as the same shall appear in the Corporation's stock -33- records a notice stating that the number of shares of Common Stock into which the shares of $9.75 Preferred Stock are convertible has been adjusted and setting forth the new number of shares of Common Stock (or describing the new stock, securities, cash or other property) into which each share of $9.75 Preferred Stock is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof, and when such adjustment became effective. SECTION 10. Definitions. For the purposes of the Certificate of Designations, Preferences and Rights of $9.75 Cumulative Convertible Preferred Stock which embodies this resolution: "Business Day" means any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Consolidated Assets" at any time means the assets of the Corporation and its Subsidiaries or of any successor Person to the Corporation and its Subsidiaries or of any Reporting Entity and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles as of February 1, 1987. "Consolidated Funded Debt" at any time means the Funded Debt of the Corporation and its Subsidiaries or of any successor Person to the Corporation and its Subsidiaries or of any Reporting Entity and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles as of February 1, 1987. "Current Market Price" per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of Common Stock for the 30 consecutive Trading Days immediately prior to such date. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, 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 the Common Stock is 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 the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sale 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 National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors. If the Common Stock is not publicly held or so listed or publicly traded, "Current Market Price" shall mean the Fair Market Value per share as determined in good faith by the Board of Directors of the Corporation. "Fair Market Value" means the amount which a willing buyer would pay a willing seller in an arm's-length transaction. -34- "Funded Debt" of any Person means (i) all obligations for money borrowed, (ii) all obligations evidenced by a note, bond, debenture or similar evidence of indebtedness, (iii) all obligations representing the deferred and unpaid purchase price for property or services, (iv) all capitalized lease and production payment obligations and (v) all guarantees of obligations of others of the types specified in clauses (i) through (iv) above, in each case where such obligations mature, or which are extendible or renewable at the option of the obligor on such obligations to a time, more than 12 months after the time of the computation of the amount of Funded Debt in the respective amounts which would be shown for such obligations, under generally accepted accounting principles, on a balance sheet of such Person as a liability item other than a current liability. "Generally accepted accounting principles" means with respect to any computation required or permitted hereunder such accounting principles which are generally accepted as of February 1, 1987. "Gross Tangible Worth" at any time means Consolidated Assets less the sum of (i) all current liabilities (excluding any thereof which are by their terms extendible or renewable at the option of the obligor thereon to a time more than 12 months after the time as of which the amount thereof is being computed), (ii) total intangibles, (iii) deferred taxes, (iv) other liabilities (excluding Funded Debt) and (v) minority interests in unconsolidated Subsidiaries of the Corporation and its Subsidiaries or of any successor Person to the Corporation and its Subsidiaries or of any Reporting Entity and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles as of February 1, 1987. "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. "Subsidiary" of any Person means any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. "Trading Day" means a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Trading Value" per share of $9.75 Preferred Stock on any particular date is the product of (i) the number of shares of Common Stock into which one share of $9.75 Preferred Stock is convertible on such date (disregarding for the purposes of this definition any limitations on conversion set forth in Section 8 hereof) and (ii) the then-Current Market Price per share of Common Stock. "Voting Stock" means the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors. SECTION 11. Rank. The $9.75 Preferred Stock shall rank on a parity as to dividends and upon liquidation, dissolution or winding up with the outstanding shares of the Corporation's $2.07 -35- Cumulative Convertible Preferred Stock, $1.00 par value, and $4.00 Cumulative Convertible Preferred Stock, $1.00 par value. Junior Preferred Stock, Series A The following is a statement of the powers, preferences, rights, qualifications, limitations and restrictions of the Series, consisting of 3,250,000 shares, $1.00 par value of the Junior Preferred Stock, Series A. SECTION 1. Designation and Amount. The shares of such series shall be designated as the "Junior Preferred Stock, Series A" (the "Junior Preferred Stock") and the number of shares constituting such series shall be 3,250,000, which number, subject to the provisions of the Certificate of Incorporation, may be increased or decreased by the Board of Directors without a vote of stockholders; provided, however, that such number may not be decreased below the number of the then currently outstanding shares of Junior Preferred Stock plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Junior Preferred Stock. SECTION 2. Dividends and Distributions. (a) Subject to the rights of the holders of any shares of the Corporation's $4.00 Cumulative Convertible Preferred Stock, $9.75 Cumulative Convertible Preferred Stock and any other series of Preferred Stock (or any similar stock) ranking senior to the Junior Preferred Stock with respect to dividends, the holders of shares of Junior Preferred Stock, in preference to the holders of Common Stock with a par value of $1.00 per share (the "Common Stock") of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, cumulative quarterly dividends payable in cash on the fifteenth day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Junior Preferred Stock, in an amount per share (rounded to the nearest cent), subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Junior Preferred Stock. In the event the Corporation shall at any time after September 12, 1988 (the "Rights Declaration Date") declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted -36- by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) The Corporation shall declare a dividend or distribution on the Junior Preferred Stock as provided in paragraph (a) of this Section immediately before it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date, and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the Junior Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Junior Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Junior Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Junior Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 50 calendar days prior to the date fixed for the payment thereof. SECTION 3. Voting Rights. The holders of shares of Junior Preferred Stock shall have the following voting rights: (a) Subject to the provision for adjustment hereinafter set forth, each share of Junior Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. -37- (b) Except as otherwise provided herein or by law, the holders of shares of Junior Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (c) Except as set forth in Section 11 hereof, or as required by law, holders of Junior Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. SECTION 4. Certain Restrictions. (a) Whenever quarterly dividends or other dividends or distributions payable on the Junior Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Junior Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Junior Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Junior Preferred Stock, or any shares of stock ranking on a parity with the Junior Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the -38- Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. SECTION 5. No Redemption. The shares of Junior Preferred Stock shall not be redeemable. SECTION 6. Reacquired Shares. Any shares of Junior Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. SECTION 7. Liquidation, Dissolution or Winding Up. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, no distribution or payment shall be made (a) to the holders of Common Stock or any other shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock unless, prior thereto, the holders of shares of Junior Preferred Stock shall have received an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of Common Stock, plus an amount equal to all accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, or (b) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except distributions made ratably on the Junior Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time after the Rights Declaration Date declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event under the proviso in clause (a) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. SECTION 8. Consolidation, Merger, Etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Junior Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater -39- or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Junior Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock outstanding immediately prior to such event. SECTION 9. Fractional Shares. The Corporation may issue fractions and certificates representing fractions of a share of Junior Preferred Stock in integral multiples of one one-hundredth of a share of Junior Preferred Stock, or in lieu thereof, at the election of the Board of Directors of the Corporation at the time of the first issue of any shares of Junior Preferred Stock, evidence such fractions by depositary receipts, pursuant to an appropriate agreement between the Corporation and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences of Junior Preferred Stock. In the event that fractional shares of Junior Preferred Stock are issued, the holders thereof shall have all the rights provided herein for holders of full shares of Junior Preferred Stock in the proportion with such fraction bears to a full share. SECTION 10. Rank. The Junior Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets in liquidation, unless the terms of any such series shall provide otherwise. SECTION 11. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Junior Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least a majority of the outstanding shares of Junior Preferred Stock, voting separately as a class. FIFTH. In furtherance of, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized and empowered: (a) To make and alter the By-Laws of the Corporation; provided, however, that the By-Laws made by the Board of Directors under the powers hereby conferred may be altered, changed, amended or repealed by the Board of Directors or by the affirmative vote of the holders of a majority of shares having voting power with respect hereto; and (b) From time to time to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Corporation or any of them, shall be open to inspection of stockholders; and no stockholder shall have any right to inspect any account, book or document of the Corporation, except as conferred by applicable law and subject to the rights, if any, of the holders of any series of Preferred Stock. The Corporation may in its By-Laws confer powers upon its Board of Directors in addition to the foregoing and in addition to the powers and authorities expressly conferred upon the Board of Directors by applicable law. -40- SIXTH. The stockholders and Board of Directors of the Corporation shall have power to hold their meetings and to have one or more offices of the Corporation within or without the State of Delaware, and to keep the books of the Corporation outside of the State of Delaware at such place or places as may from time to time be designated by the Board of Directors. SEVENTH. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specific circumstances, special meetings of stockholders of the Corporation may be called only by the Chairman of the Board of Directors and shall be promptly called by the Chairman or the Secretary at the written request of a majority of the Board of Directors, or the holders of a majority of the outstanding Common Stock upon not fewer than ten nor more than 60 days' written notice. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the combined voting power of all shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, change, amend, repeal, or adopt any provision inconsistent with, this Article Seventh. EIGHTH. SECTION 1. Number, Election and Terms of Directors. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specific circumstances, the number of the Directors of the Corporation shall be fixed from time to time by or pursuant to the By-Laws of the Corporation, or until such director's earlier resignation or removal in accordance with the General Corporation Law of the State of Delaware, this Certificate of Incorporation and the By-Laws. Each director shall hold office for one year after the time of such director's election or until such director's successor is elected and qualified at the next succeeding annual meeting of stockholders of the Corporation or until such director's earlier resignation or removal in accordance with the General Corporation Law of the State of Delaware, this Certificate of Incorporation and By-Laws. SECTION 2. Stockholder Nomination of Director Candidates and Introduction of Business. Advance notice of stockholder nominations for the election of Directors and advance notice of business to be brought by stockholders before an annual meeting shall be given in the manner provided in the By-Laws of the Corporation. -41- SECTION 3. Newly Created Directorships and Vacancies. Except as otherwise provided for or fixed pursuant to the provisions of Article Fourth of this Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect Directors under specified circumstances, newly created directorships resulting from any increase in the number of Directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled only by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors. Any Director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new directorship was created or the vacancy occurred and until such Director's successor shall have been elected and qualified. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of an incumbent Director. SECTION 4. Removal. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specified circumstances, any Director may be removed from office only by the affirmative vote of the holders of at least 50% of the combined voting power of the outstanding shares of Voting Stock, voting together as a single class. -42- NINTH. SECTION 1. Prevention of Greenmail. Any direct or indirect purchase or other acquisition by the Corporation of any Voting Stock of any class from any Interested Stockholder at a price in excess of the Market Price shall, except as hereinafter provided, require the affirmative vote of the holders of at least a majority of the combined voting power of the Voting Stock, voting as a single class, excluding any votes cast with respect to shares of Voting Stock beneficially owned by such Interested Stockholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law in or any agreement with any national securities exchange, or otherwise, but no such affirmative vote shall be required with respect to any purchase or other acquisition of securities made as part of (a) a tender or exchange offer by the Corporation to purchase securities of the same class made on the same terms to all holders of such securities and complying with the applicable requirements of the United States securities laws and the rules and regulations thereunder, (b) the redemption of any shares of Preferred Stock pursuant to the provisions of Article Fourth of this Certificate of Incorporation or any Preferred Stock Designation, or (c) pursuant to an open-market purchase program conducted in accordance with the requirements of Rule 10b-18 promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, or any successor rule or regulation. SECTION 2. Prevention of Self-Dealing. In addition to any action, including any vote by stockholders required by law or this Certificate of Incorporation, the approval or authorization of any Self-Dealing Transaction shall require either (a) the approval of a majority of Disinterested Directors or (b) the affirmative vote of the holders of at least a majority of the combined voting power of the Voting Stock, voting together as a single class, excluding any votes cast with respect to shares of Voting Stock beneficially owned by an Interested Stockholder which is directly or indirectly a party, or an Affiliate or Associate of which is directly or indirectly a party, to such Self-Dealing Transaction. SECTION 3. Certain Definitions. For the purpose of this Article Ninth: (a) A "person" shall mean any individual, firm, corporation or other entity. (b) "Voting Stock" shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors. In any vote required by or provided for in this Article Ninth, each share of Voting Stock shall have the number of votes granted to it generally in the election of Directors. (c) "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary) who or which: (i) is the beneficial owner, directly or indirectly, of more than 5% of the outstanding Voting Stock; or -43- (ii) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of more than 5% of the outstanding Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any Voting Stock of the Corporation which at any time within the two-year period immediately prior to the date in question was beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (d) A person shall be a "beneficial owner" of any shares of Voting Stock: (i) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates had any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Voting Stock. (e) In determining whether a person is an Interested Stockholder pursuant to paragraph (c) of this Section 3, any class of Voting Stock outstanding shall be deemed to include any Voting Stock deemed owned through application of paragraph (d) of this Section 3 but shall not include any other securities of such class which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (f) "Self-Dealing Transaction" means any of the following transactions: (i) any merger or consolidation of the Corporation or any Subsidiary with (a) any Interested Stockholder or (b) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate of an Interested Stockholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate fair market value of $25,000,000 or more or any loan, advance, guarantee or other financial assistance, including any tax credit or other tax advantages, -44- to or with any Interested Stockholder or any Affiliate of any Interested Stockholder which involves a financial obligation or benefit of $25,000,000 or more; or (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $25,000,000 or more; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of any Interested Stockholder; or (v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of Voting Stock of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder. (g) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1985. (h) "Subsidiary" means any corporation of which a majority of any class of shares of such corporation entitled to vote generally in the election of directors is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in paragraph (c) of this Section 3, the term "Subsidiary" shall mean only a corporation of which a majority of the combined voting power of all shares of such corporation entitled to vote generally in the election of directors is owned, directly or indirectly, by the Corporation. (i) "Disinterested Director" means any member of the Board of Directors of the Corporation who is unaffiliated with the Interested Stockholder and was a member of the Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Disinterested Director who is unaffiliated with the Interested Stockholder and is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board of Directors. (j) "Market Price" means the average of the closing sales prices on the 20 regular trading days immediately preceding the date of any binding agreement to purchase shares of Voting Stock of the class of Voting Stock in question on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such class of Voting Stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such class of Voting Stock is not listed on such -45- Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such class of Voting Stock is listed, or, if such class of Voting Stock is not listed on any such exchange, the last closing bid quotations with respect to a share of such class of Voting Stock immediately preceding the time in question on the National Association of Securities Dealers, Inc., Automated Quotations System or any system then in use (or any other system of reporting or ascertaining quotations then available), or if such class of Voting Stock is not so quoted, the fair market value at the time in question of such stock as determined by the Board of Directors in good faith. SECTION 4. Powers of the Board of Directors. A majority of the Disinterested Directors, or, if there are no Disinterested Directors, a majority of the members of the Board of Directors then in office, shall have the power to determine, for the purposes of this Article Ninth, on the basis of information known to them, (a) whether a person is an Interested Stockholder, (b) the number of shares of Voting Stock beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, and (d) whether the assets or financial obligations or benefits which are the subject of any Self-Dealing Transaction have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Self-Dealing Transaction has, an aggregate fair market value of or involve $25,000,000 or more. A majority of the Disinterested Directors, or, if there are no Disinterested Directors, a majority of the members of the Board of Directors then in office, shall have the further power to interpret all of the terms and provisions of this Article Ninth. SECTION 5. Amendment, Repeal, etc. Notwithstanding anything contained in this Certificate of Incorporation or the By-Laws of the Corporation to the contrary, the alteration, change, amendment, repeal or adoption of any provisions inconsistent with this Article Ninth shall require the affirmative vote of the holders of a majority of the combined voting power of the outstanding Voting Stock, excluding any votes cast with respect to shares of Voting Stock beneficially owned by any Interested Stockholder, voting together as a single class, but in no event less than the affirmative vote of 80% of combined voting power of the outstanding shares of Voting Stock, including shares of Voting Stock beneficially owned by any Interested Stockholder, voting together as a single class. TENTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, including in a Preferred Stock Designation, in the manner now or hereafter prescribed by applicable law and this Certificate of Incorporation, including any applicable Preferred Stock Designation, and all rights conferred upon stockholders herein are created subject to this reservation. ELEVENTH. A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Law as the same exists or may hereafter be amended. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. -46- EX-3.II1 4 AMENDMENT TO THE BYLAWS Exhibit 3(ii).1 BY-LAW 15, PARAGRAPH (A) The Company's By-Law 15, Paragraph (a) was amended on June 8, 1995 to read as follows: 15. Board of Directors. (a) Number, election and terms. Except as otherwise fixed by, or pursuant to the provisions of, Article Fourth of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specified circumstances, the number of the Directors of the Corporation shall be eight (8) unless otherwise fixed from time to time by resolution of the Board of Directors but shall be fixed at no fewer than three (3) nor more than fifteen (15). EX-3.II2 5 BYLAWS OF THE COMPANY Exhibit 3(ii).2 MAXUS ENERGY CORPORATION BY-LAWS AS AMENDED APRIL 21, 1995 ------------------------------------------------- MAXUS ENERGY CORPORATION DALLAS, TEXAS 75201 MAXUS ENERGY CORPORATION BY-LAWS TABLE OF CONTENTS
PAGE ---- OFFICES 1. Delaware...................................................... 1 2. Dallas and Elsewhere.......................................... 1 STOCKHOLDERS' MEETINGS 3. Place......................................................... 1 4. Annual Meeting................................................ 1 5. Special Meetings.............................................. 1 6. Notice of Stockholder Business................................ 1 7. Inspectors.................................................... 2 8. Quorum........................................................ 2 9. Voting........................................................ 2 10. List of Stockholders.......................................... 3 11. Order of Business............................................. 3 NOMINATION OF DIRECTOR CANDIDATES 12. Notification of Nominees...................................... 3 13. Substitution of Nominees...................................... 4 14. Compliance with Procedures.................................... 4 DIRECTORS 15. Board of Directors............................................ 4 16. Responsibilities.............................................. 6 17. Powers........................................................ 6 18. Compensation.................................................. 7 19. Resignation................................................... 7 20. Meetings...................................................... 7 21. Notices....................................................... 7 22. Quorum........................................................ 7 23. Committees of the Board of Directors.......................... 7 OFFICERS 24. Executive Officers............................................ 8 25. Authority of the Board of Directors........................... 8 26. Term of Office................................................ 8 27. Compensation of Executive Officers............................ 8 28. Other Officers and Agents..................................... 8
ii 29. Direction and Compensation of Other Officers.................. 8 30. Bond.......................................................... 8 31. President..................................................... 9 32. Vice Presidents............................................... 9 33. Secretary and Assistant Secretaries........................... 9 34. Treasurer and Assistant Treasurers............................ 9 35. Controller and Assistant Controllers.......................... 10 36. General Counsel and Deputy and Assistant General Counsels.............................................. 10 INDEMNIFICATION 37. Damages and Expenses.......................................... 10 38. Insurance..................................................... 14 STOCK RECORDS 39. Form of Certificates.......................................... 14 40. Classes of Stock: Rights...................................... 14 41. Transfers..................................................... 15 42. Lost Certificates............................................. 15 43. Record Dates.................................................. 15 GENERAL 44. Contracts, Checks, Etc. ...................................... 15 45. Fiscal Year................................................... 15 46. Annual Statement.............................................. 15 47. Form of Notices............................................... 16 48. Seal.......................................................... 16 49. By-Law Amendment.............................................. 16 50. Certificate of Incorporation and Applicable Law............... 16
iii BY-LAWS OFFICES 1. Delaware. The Corporation's registered office in the State of Delaware shall be in the City of Wilmington, County of New Castle, State of Delaware, and the name of the registered agent in charge thereof is The Corporation Trust Company. 2. Dallas and Elsewhere. The Corporation shall also have an office at such place in the City of Dallas, County of Dallas, State of Texas, and may also have offices at such other places, as the Board of Directors may from time to time appoint or the business of the Corporation may require. STOCKHOLDERS' MEETINGS 3. Place. Meetings of the stockholders shall be held at such place as the Board of Directors shall determine. 4. Annual Meeting. The annual meeting of the stockholders for the election of Directors, the receiving of reports and the transaction of such other business as may properly be brought before the meeting shall be held on such date and at such time as the Board of Directors determines. 5. Special Meetings. Special meetings of the stockholders for any purpose may be called by the President and shall be promptly called by the President or by the Secretary at the written request of a majority of the Board of Directors upon not fewer than 10 nor more than 60 days' written notice. The request shall be sent to the President and the Secretary and shall state the purposes of the proposed meeting. Special meetings of holders of the outstanding Preferred Stock may be called in the manner and for the purposes provided in the resolutions of the Board of Directors providing for the issue of such stock (a "Preferred Stock Designation"). Business transacted at special meetings shall be confined to the purposes stated in the notice. 6. Notice of Stockholder Business. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) 1 otherwise properly be requested to be brought before the meeting by a stockholder. For business to be properly requested to be brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 80 days prior to the meeting; provided, however, that in the event that the date of the meeting is not publicly announced by the Corporation by mail, press release or otherwise more than 90 days prior to the meeting, notice by the stockholder to be timely must be delivered to the Secretary of the Corporation not later than the close of business on the tenth day following the day on which such announcement of the date of the meeting was communicated to stockholders. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this By-Law 6. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this By-Law 6, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. 7. Inspectors. The Board of Directors shall appoint inspectors of election to act as judges of the voting and to determine those entitled to vote at any stockholders' meeting, or any adjournment thereof, in advance of such meeting, but if the Board of Directors fails to make such appointments or if an appointee fails to serve, the chairman of the stockholders' meeting may appoint substitute inspectors. 8. Quorum. Except as otherwise provided in a Preferred Stock Designation, the holders of stock having a majority of voting power entitled to vote at any stockholders' meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business thereat. If, however, such majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time without notice, other than announcement at the meeting of the time and place of the adjourned meeting, until the requisite amount of voting stock shall be present or represented or the meeting has been adjourned permanently. At such adjourned meeting, at which the requisite amount of voting stock shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally called. 9. Voting. At each meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy appointed by a legally sufficient instrument. The vote for Directors, the vote upon any questions set forth in the Proxy Statement for the meeting and the vote upon any other action of business at the discretion of the chairman of the stockholders' meeting shall be by written ballot. The vote upon any other question before the 2 meeting shall be by written ballot upon the demand of stockholders voting at least 15% of the shares represented at the meeting. All questions, except election or removal of Directors or as otherwise provided in these By-Laws, the Certificate of Incorporation of the Corporation (the "Certificate of Incorporation") or the Preferred Stock Designation for any series of Preferred Stock, shall be decided by a majority vote of those shares present or represented and voting, and, with respect to any election or question to be decided by any class of stock voting as a class, by a majority vote of those shares present or represented and voting of that class. 10. List of Stockholders. A complete list of the stockholders entitled to vote at any meeting shall be available for examination by such persons for any proper purpose, for such period of time and at such place as is required by law. 11. Order of Business. Unless otherwise determined by the Board of Directors prior to the meeting, the chairman of the stockholders' meeting shall determine the order of business and shall have the authority in his discretion to regulate the conduct of any such meeting, including, without limitation, by imposing restrictions on the persons (other than stockholders of the Corporation or their duly appointed proxies) who may attend any such stockholders' meeting, whether any stockholder or his proxy may be excluded from any stockholders' meeting based upon any determination by the chairman, in his sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat, and the circumstances in which any person may make a statement or ask questions at any stockholders' meeting. NOMINATION OF DIRECTOR CANDIDATES 12. Notification of Nominees. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of Directors generally. However, any stockholder entitled to vote in the election of Directors generally may nominate one or more persons for election as Directors at a meeting only if written notice of such stockholder's intent to make such nomination or nominations has been received by the Secretary of the Corporation not less than 80 days in advance of such meeting; provided, however, that in the event that the date of the meeting was not publicly announced by the Corporation by mail, press release or otherwise more than 90 days prior to the meeting, notice by the stockholder to be timely must be delivered to the Secretary of the Corporation not later than the close of business on the tenth day following the day on which such announcement of the date of the meeting was communicated to stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote for the election of Directors on the date of such notice and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person 3 or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each nominee to serve as a director of the Corporation if so elected. 13. Substitution of Nominees. In the event that a person is validly designated as a nominee in accordance with By-Law 12 and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directors or the stockholder who proposed such nominee, as the case may be, may designate a substitute nominee upon delivery, not fewer than five days prior to the date of the meeting for the election of such nominee of a written notice to the Secretary setting forth such information regarding such substitute nominee as would have been required to be delivered to the Secretary pursuant to By-Law 12 had such substitute nominee been initially proposed as a nominee. Such notice shall include a signed consent to serve as a Director of the Corporation, if elected, of each such substitute nominee. 14. Compliance with Procedures. If the chairman of the meeting for the election of Directors determines that a nomination of any candidate for election as a Director at such meeting was not made in accordance with the applicable provisions of By-Laws 12 and 13, such nomination shall be void; provided, however, that nothing in By-Laws 12 or 13 shall be deemed to limit any voting rights upon the occurrence of dividend arrearages provided to holders of Preferred Stock pursuant to the Preferred Stock Designation for any series of Preferred Stock. DIRECTORS 15. Board of Directors. (a) Number, election and terms. Except as otherwise fixed by, or pursuant to the provisions of, Article Fourth of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specified circumstances, the number of the Directors of the Corporation shall be eight (8) unless otherwise fixed from time to time by resolution of the Board of Directors but shall be fixed at no fewer than three (3) nor more than fifteen (15). (b) Cumulative Voting In Certain Circumstances. In any election of Directors of the Corporation on or after the date on which the Corporation becomes aware that any 30% Stockholder (as defined below) has become a 30% Stockholder, and until such time as no 30% Stockholder any longer exists, there shall be cumulative voting for election of Directors so that any holder of shares of the Corporation entitled to vote generally in the election of Directors may cumulate the voting power represented by his shares and give one candidate a number of votes equal to the number of Directors to be elected multiplied by the number of votes to which such 4 shares are entitled, or distribute such votes on the same principle among as many candidates for election as such holder of shares determines. For the purposes of this Section (b) of By-Law 15, a 30% Stockholder shall mean any person (other than the Corporation and any other corporation of which a majority of the voting power of the capital stock entitled to vote generally in the election of directors is owned, directly or indirectly, by the Corporation) who or which is the beneficial owner, directly or indirectly of 30% or more of the voting power of all shares of the Corporation entitled to vote generally in the election of Directors. For the purpose of this By-Law 15: (1) A "person" shall mean any individual, firm, corporation or other entity. (2) A person shall be a "beneficial owner" of any shares of stock of the Corporation: (i) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates (as defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1985) has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; (iii) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of stock of the Corporation; provided, however, that no person shall be deemed to be a "beneficial owner" of any shares of Voting Stock solely by reason of such person's right to vote or to acquire such Voting Stock pursuant to any agreement or instrument approved by a majority of the Board of Directors. (3) In determining whether a person is a holder of 30% or more of the voting power of all shares of the Corporation entitled to vote generally in the election of Directors pursuant to Section (b) of this By-Law 15, any class of such shares outstanding shall be deemed to include any such shares deemed owned through application of paragraph (2) of this Section (b) but shall not include any other securities of such class which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (c) Newly created directorships and vacancies. Except as otherwise provided for or fixed by 5 or pursuant to the provisions of Article Fourth of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, newly created directorships resulting from any increase in the number of Directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled only by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors. Any Director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new directorship was created or the vacancy occurred and until such Director's successor shall have been elected and qualified. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director. (d) Removal. Subject to the rights of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect Directors under specified circumstances, any Director may be removed from office only by the affirmative vote of the holders of at least 80% of the combined voting power of the outstanding shares of stock entitled to vote generally in the election of Directors, voting together as a single class; provided that notwithstanding the foregoing provisions of this Section (d), if at any time when cumulative voting is permitted pursuant to Section (b) of this By-Law 15 less than the entire Board of Directors is to be removed, no Director may be removed from office if the votes cast against his removal would be sufficient to elect him as a Director if then cumulatively voted at an election of the class of Directors of which he is a part. (e) Chairman of the Board. The Board may elect one of its members Chairman of the Board, who shall preside at all meetings of the Board. The Chairman of the Board shall also preside at all meetings of stockholders unless the Board of Directors designates another person to preside. 16. Responsibilities. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. 17. Powers. In addition to the powers and authorities expressly conferred by these By-Laws, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. 18. Compensation. The Board of Directors may establish such compensation for, and reimbursement of the expenses of, Directors for attendance at meetings of the Board of Directors or committees, or for other services by Directors to the Corporation, as the Board of Directors may determine. 19. Resignation. Any Director may resign at any time by giving written notice of his resignation to the President or the Secretary. 20. Meetings. Immediately after the adjournment of the annual meeting of the stockholders 6 each year, the Directors elected thereat shall, without notice, convene the annual meeting of Directors for the organization of the Board of Directors, the election of officers and members of committees and the transaction of any other business which may properly come before the meeting. If a quorum of the Board of Directors shall not be present, the President shall call a meeting for such purposes as promptly as is practicable. Except as otherwise provided in this By-Law 20, Directors may hold their regular and special meetings at such times and places and have one or more offices and keep the books of the Corporation at such places as the Board of Directors determines. 21. Notices. No notice of regular meetings of the Board of Directors need be given. Special meetings of the Board of Directors may be called by the President upon notice to each Director, given either in person or by mail, telephone, telegram, telex or similar medium of communication; special meetings shall be called by the President or the Secretary on like notice, on the written request of three Directors. At least 24 hours' notice of special meetings shall be given to each Director. 22. Quorum. Subject to the provisions of Section (c) of By-Law 15, at all meetings of the Board of Directors, a majority of the total number of Directors shall constitute a quorum for the transaction of business and, except for the designation of committees (as provided in By-Law 23) and the removal of executive officers (as provided in By-Law 25), the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum is not present, a majority of the Directors present may adjourn the meeting without notice other than announcement until a quorum is present. 23. Committees of the Board of Directors. The Board of Directors, by resolution passed by a majority of the whole Board of Directors, may designate one or more committees, each committee to consist of two or more Directors. A committee shall have and exercise the powers of the Board of Directors in the direction of the management of the business and affairs of the Corporation to the extent provided in the resolution. Each committee shall have such name as may be determined by the Board of Directors. Except as may be otherwise provided in a resolution or resolutions duly adopted by the Board of Directors, a majority of the members of a committee shall constitute a quorum and a majority vote of the members at a meeting at which a quorum is present shall be the act of the committee. A committee shall keep minutes of its proceedings, and shall report its proceedings to the Board of Directors when required or when requested by a Director to do so. OFFICERS 24. Executive Officers. At the annual meeting of the Board of Directors each year, or such other times as the Board of Directors may determine, the Board of Directors may elect the following 7 executive officers: President One or more Vice Presidents General Counsel Treasurer Controller 25. Authority of the Board of Directors. The executive officers shall have the duties, responsibilities and authorities as are reflected in these By- Laws or in resolutions of the Board of Directors, but at all times the actions of the executive officers shall be subject to the review, delegation, redetermination, direction and control of the Board of Directors. Any number of executive offices may be held by the same person. The President shall be a member of the Board of Directors. At any meeting the Board of Directors may elect additional executive officers, fill vacancies and, by vote of a majority of the whole Board of Directors, remove any executive officer. 26. Term of Office. An executive officer shall hold office until he retires, resigns or is removed by majority vote of the whole Board of Directors. An officer may resign at any time by giving written notice of his resignation to the President or the Secretary. 27. Compensation of Executive Officers. The executive officers shall receive such compensation as shall be fixed by the Board of Directors. 28. Other Officers and Agents. The President may appoint the Secretary, such Assistant Secretaries, Assistant Treasurers, Assistant Controllers, Deputy General Counsels, Assistant General Counsels and other officers and agents as the President shall deem necessary or proper in the conduct of the affairs of the Corporation with such designations, titles, seniority, duties and responsibilities as he shall deem advisable. The President shall report appointments of other officers and agents to the Board of Directors. 29. Direction and Compensation of Other Officers. All officers and agents appointed by the President shall perform their duties under the direction of the President and shall receive compensation as from time to time shall be fixed by the President and shall hold their offices at the pleasure of the President. 30. Bond. If required by the Board of Directors, any and every officer or agent shall give the Corporation a bond in a sum and with one or more sureties satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. 31. President. The President shall be the chief executive officer of the Corporation. He shall have such duties and responsibilities as may be assigned to him by the Board of Directors. He shall be the senior officer of the Corporation and shall have overall responsibility for the 8 management and direction of the business and affairs of the Corporation. In addition, he shall perform such other duties and services and shall have such other authority and responsibilities as shall be assigned to or required of him from time to time by the Board of Directors or the Executive Committee of the Board of Directors. 32. Vice Presidents. Each Vice President, however titled, shall perform such duties and services and shall have such authority and responsibilities as shall be assigned to or required of him from time to time by the Board of Directors, the Executive Committee of the Board of Directors or the President. 33. Secretary and Assistant Secretaries. (a) The Secretary shall attend all meetings of the stockholders and all meetings of the Board of Directors and record all proceedings of the meetings of the stockholders and of the Board of Directors, and he shall perform like duties for the standing committees when requested by the Board of Directors or the President. He shall give, or cause to be given, notice of all meetings of the stockholders and meetings of the Board of Directors. He shall perform such duties as may be prescribed to him by the President. He shall have charge of the seal of the Corporation and authority to affix the seal to any instrument. He or any Assistant Secretary may attest to the corporate seal by handwritten or facsimile signature. The Secretary shall keep and account for all books, documents, papers and records of the Corporation except those for which some other officer or agent has been designated or is otherwise properly accountable. He shall have authority to sign stock certificates. (b) Assistant Secretaries, in the order of their seniority, shall assist the Secretary and, if the Secretary is unavailable or fails to act, perform the duties and exercise the authorities of the Secretary. 34. Treasurer and Assistant Treasurers. (a) The Treasurer shall have the custody of the funds and securities belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Treasurer with the prior approval of the Chairman or the President. He shall disburse the funds and pledge the credit of the Corporation as may be directed by the Board of Directors and shall render to the Board of Directors and the President, as and when required by them, or any of them, an account of all his transactions as Treasurer. (b) Assistant Treasurers, in the order of their seniority, shall assist the Treasurer and, if the Treasurer is unable or fails to act, perform the duties and exercise the powers of the Treasurer. 35. Controller and Assistant Controllers. (a) The Controller shall be the chief accounting officer of the Corporation. He shall keep full 9 and accurate accounts of receipts and disbursements in books belonging to the Corporation in accordance with accepted accounting methods and procedures. He shall initiate periodic audits of the accounting records, methods and systems of the Corporation. He shall render to the Board of Directors and the President, as and when required by them, or any of them, a statement of the financial condition of the Corporation. (b) Assistant Controllers, in the order of their seniority, shall assist the Controller and, if the Controller is unable or fails to act, perform the duties and exercise the powers of the Controller. 36. General Counsel and Deputy and Assistant General Counsels. (a) The General Counsel shall be the chief legal officer of the Corporation. He shall provide legal counsel and advice to the Board of Directors and to the officers with respect to compliance with applicable laws and regulations. He shall also provide or obtain legal defense of the Corporation. He shall render to the Board of Directors and the President, as and when required by them, or any of them, a report on the status of claims against, and pending litigation of, the Corporation. (b) Deputy and Assistant General Counsels, in the order of their seniority, shall assist the General Counsel and, if the General Counsel is unable or fails to act, perform the duties and exercise the powers of the General Counsel. INDEMNIFICATION 37. Damages and Expenses. (a) Actions, Suits or Proceedings Other Than by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was or has agreed to become a Director, officer, employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not meet the standards of conduct set forth in this Section (a). 10 (b) Actions or Suits by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a Director, officer, employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorney's fees) actually and reasonably incurred by him or on his behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper. (c) Indemnification for Costs, Charges and Expenses of Successful Party. Notwithstanding the other provisions of this By-Law 37, to the extent that a Director, officer, employee or agent of the Corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Sections (a) and (b) of this By-Law 37, or in the defense of any claim, issue or matter therein, he shall be indemnified against all costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. (d) Determination of Right to Indemnification. Any indemnification under Sections (a) and (b) of this By-Law 37 (unless ordered by a court) shall be paid by the Corporation unless a determination is made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders, that indemnification of the Director, officer, employee or agent is not proper in the circumstances because he has not met the applicable standards of conduct set forth in Sections (a) and (b) of this By-Law 37. (e) Advance of Costs, Charges and Expenses. Costs, charges and expenses (including attorneys' fees) incurred by a person referred to in Sections (a) and (b) of this By-Law 37 in defending a civil or criminal action, suit or proceeding (including investigations by any government agency and all costs, charges and expenses incurred in preparing for any threatened action, suit or proceeding) shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding; provided, however, that the payment of such costs, charges and expenses incurred by a Director or officer in his capacity as a Director or officer (and not in any other 11 capacity in which service was or is rendered by such person while a Director or officer) in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by or on behalf of the Director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such Director or officer is not entitled to be indemnified by the Corporation as authorized in this By-Law 37. No security shall be required for such undertaking and such undertaking shall be accepted without reference to the recipient's financial ability to make repayment. The repayment of such charges and expenses incurred by other employees and agents of the Corporation which are paid by the Corporation in advance of the final disposition of such action, suit or proceeding as permitted by this Section (e) may be required upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may, in the manner set forth above, and subject to the approval of such Director, officer, employee or agent of the Corporation, authorize the Corporation's counsel to represent such person, in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. (f) Procedure for Indemnification. Any indemnification under Sections (a), (b), or (c) or advance of costs, charges and expenses under Section (e) of this By-Law 37 shall be made promptly, and in any event within 60 days, upon the written request of the Director, officer, employee or agent directed to the Secretary of the Corporation. The right to indemnification or advances as granted by this By-Law 37 shall be enforceable by the Director, officer, employee or agent in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within 60 days. Such person's costs and expenses incurred in connection with successfully establishing his right to indemnification or advances, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section (e) of this By-Law 37 where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Sections (a) or (b) of this By-Law 37, but the burden of proving that such standard of conduct has not been met shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections (a) and (b) of this By-Law 37, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (g) Other Rights; Continuation of Right to Indemnification. The indemnification provided by this By-Law 37 shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any law (common or statutory), agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Corporation, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the estate, heirs, executors and administrators 12 of such person. All rights to indemnification under this By-Law 37 shall be deemed to be a contract between the Corporation and each Director, officer, employee or agent of the Corporation who serves or served in such capacity at any time while this By-Law 37 is in effect. No amendment or repeal of this By- Law 37 or of any relevant provisions of the Delaware General Corporation Law or any other applicable laws shall adversely affect or deny to any Director, officer, employee or agent any rights to indemnification which such person may have, or change or release any obligations of the Corporation, under this By-Law 37 with respect to any costs, charges, expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement which arise out of an action, suit or proceeding based in whole or substantial part on any act or failure to act, actual or alleged, which takes place before or while this By-Law 37, as adopted by the Board of Directors of the Corporation on April 17, 1986, is in effect. The provisions of this Section (g) shall apply to any such action, suit or proceeding whenever commenced, including any such action, suit or proceeding commenced after any amendment or repeal of this By-Law 37. (h) For purposes of this By-Law: (1) "the Corporation" shall include any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its Directors, officers, and employees or agents, so that any person who is or was a Director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this By-Law 37 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued; (2) "other enterprises" shall include employee benefit plans, including but not limited to any employee benefit plan of the Corporation; (3) "serving at the request of the Corporation" shall include any service which imposes duties on, or involves services by, a Director, officer, employee, or agent of the Corporation with respect to an employee benefit plan, its participants, or beneficiaries, including acting as a fiduciary thereof; (4) "fines" shall include any penalties and any excise or similar taxes assessed on a person with respect to an employee benefit plan; (5) A person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in Sections (a) and (b) of this By-Law 37; (6) Service as a partner, trustee or member of management or similar 13 committee of a partnership or joint venture, or as a Director, officer, employee or agent of a corporation which is a partner, trustee or joint venturer, shall be considered service as a Director, officer, employee or agent of the partnership, joint venture, trust or other enterprise. (i) Savings Clause. If this By-Law 37 or any portion hereof shall be invalidated on any ground by a court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Director, officer, employee and agent of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this By-Law 37 that shall not have been invalidated and to the full extent permitted by applicable law. 38. Insurance. The Corporation shall purchase and maintain insurance on behalf of any person who is or was or has agreed to become a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him or on his behalf in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of By-Law 37, provided that such insurance is available on acceptable terms as determined by a vote of a majority of the entire Board of Directors. STOCK RECORDS 39. Form of Certificates. The certificates representing stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be mechanically signed with a facsimile of the signature of the President or a Vice President, and a facsimile of the signature of the Secretary or an Assistant Secretary, and shall also be signed by, or bear the facsimile signature of, a duly authorized officer or agent of any properly designated transfer agent of the Corporation. Such certificates may be issued and delivered notwithstanding that the person whose facsimile signature appears thereon shall have ceased to be such officer at the time the certificates are issued and delivered. 40. Classes of Stock: Rights. The designations, preferences and relative participating, optional or other special rights of the various classes of stock or series thereof, and the qualifications, limitations or restrictions thereof, shall be set forth in full or summarized on the face or back of the certificates which the Corporation issues to represent its stock, or in lieu thereof, such certificates shall set forth the office of the Corporation from which the holders of certificates may obtain a copy of such information. 41. Transfers. Subject to restrictions on the transfer of stock, the Corporation shall make 14 transfers of stock on its books upon surrender of the certificate for the shares to the Corporation or its duly appointed transfer agent duly endorsed by the stockholder named in the certificate or his duly authorized attorney. 42. Lost Certificates. An executive officer may direct a new certificate to be issued in place of certificates theretofore issued by the Corporation and alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. As a condition precedent to the issuance thereof, the officer may require the claimant to advertise the alleged loss, theft or destruction in such manner as the officer may require and to give the Corporation a bond in such sum as he may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the issuance of the new certificate. 43. Record Dates. The Board of Directors may fix in advance a date, not more than 60 days nor fewer than 10 days prior to the date of any meeting of stockholders, nor more than 60 prior to the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. GENERAL 44. Contracts, Checks, Etc. All contracts, agreements, checks, drafts, notes, bonds, bills of exchange and orders for the payment of money shall be signed or endorsed by the persons whom the Board of Directors prescribes therefor. 45. Fiscal Year. The fiscal year of the Corporation shall be the calendar year, except as otherwise determined from time to time by the Board of Directors. 46. Annual Statement. The Board of Directors shall cause an independent public accountant, selected from time to time by the Board of Directors, to examine in accordance with generally accepted auditing standards, prior to the annual meeting of the stockholders in each year, the books and records of the Corporation and the financial statements for the preceding fiscal year, which statements shall set forth the financial position as of the close of, and the results of operations of the Corporation for, the preceding fiscal year, and the Board of Directors shall cause such accountant or firm of accountants to render to the Board of Directors its opinion with respect 15 thereto. The Board of Directors shall cause copies of the financial statements together with the opinion to be sent to all stockholders entitled to vote at the annual meeting in the year succeeding the year to which the financial statements apply and to be available to stockholders attending the annual meeting. 47. Form of Notices. Whenever notice is required to be given to any Director or officer or stockholder, such notice may be given either in person or by mail, telephone or telegram, telex or similar medium of communication, except as provided in By-Law 6, By-Law 12 or By-Law 21. Except as provided in By-Law 6, By-Law 12 or By-Law 21, if mailed, the notice will be deemed given when deposited in the United States mail, postage prepaid, addressed to the stockholder, officer or Director at such address as appears on the books of the Corporation, or, in default of other address, to such Director, officer or stockholder at the General Post Office in the City of Dallas, Texas, or the City of Cleveland, Ohio. If given in person or by telephone, notice will be deemed given when communicated, and if given by telegram, telex or similar medium of communication, notice will be deemed given when properly dispatched. Any stockholder, Director or officer may waive any notice required to be given under these By-Laws. 48. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 49. By-Law Amendment. Subject to the provisions of the Certificate of Incorporation, these By-Laws may be altered, changed, amended or repealed at any regular meeting of the stockholders (or at any special meeting thereof duly called for that purpose) by a majority vote of the shares represented and entitled to vote at such meeting; provided that in the notice of such special meeting notice of such purpose shall be given. Subject to the laws of the State of Delaware, the Certificate of Incorporation and these By-Laws, the Board of Directors may by majority vote of those present at any meeting at which a quorum is present amend these By-Laws, or enact such other By-Laws as in their judgement may be advisable for the regulation of the conduct of the affairs of the Corporation. 50. Certificate of Incorporation and Applicable Law. These By-Laws are subject to the provisions of the Certificate of Incorporation and applicable law. 16 EX-15.1 6 LETTER OF ARTHUR ANDERSEN EXHIBIT 15.1 Maxus Energy Corporation: We are aware that Maxus Energy Corporation has incorporated by reference in its Registration Statements No. 33-61350 on Form S-3 and No. 33-6693, No. 33-28353, No. 33-47538, No. 33-55857, No. 33-55938, No. 33-55918 and No. 2-85403 on Form S-8 its Form 10-Q for the quarter ended June 30, 1995, which includes our report dated July 25, 1995, covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statement prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Arthur Andersen LLP ARTHUR ANDERSEN LLP Fort Worth, Texas August 10, 1995 EX-27 7 FINANCIAL DATA SCHEDULE
5 1,000,000 3-MOS DEC-31-1995 JUN-30-1995 34 40 121 1 33 289 2,392 45 2,788 232 1,285 136 125 91 91 2,788 151 157 71 136 4 0 35 (18) 5 (23) 0 0 0 (23) (0.24) 0