CERTIFICATE OF INCORPORATION

                                       OF

                        CALLON PETROLEUM HOLDING COMPANY

 

                                   ARTICLE ONE

 

         The name of the Corporation is Callon Petroleum Holding Company.

 

                                   ARTICLE TWO

 

         The address of the Corporation's registered office in the State of

Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware, 19801,

and the name of its registered agent at such address is The Corporation Trust

Company.

 

                                  ARTICLE THREE

 

         The nature of the business or purposes to be conducted or promoted is

to engage in any lawful act or activity for which corporations may be organized

under the General Corporation Law of Delaware ("Act"),

 

                                  ARTICLE FOUR

 

         The Corporation shall have authority to issue two classes of stock, and

the total number authorized shall be one (1) share of Common Stock of the par

value of one cent ($.01) each, and one (1) share of Preferred Stock of the par

value of one cent ($.01) each. A description of the different classes of stock

of the Corporation and a statement of the designations and the powers,

preferences and rights, and the qualifications, limitations or restrictions

thereof, in respect of each class of such stock are as follows:

 

                  1.       ISSUANCE IN CLASS OR SERIES. The Common Stock or

         Preferred Stock may be issued from time to time in one or more series,

         or either or both of the Common and Preferred Stock may be divided into

         additional classes and such classes into one or more series. The terms

         of a class or series, including all rights and preferences, shall be as

         specified in the resolution or resolutions adopted by the Board of

         Directors designating such class or series which resolution or

         resolutions the Board of Directors is hereby expressly authorized to

         adopt. Such resolution or resolutions with respect to a class or series

         shall specify all or such of the rights or preferences of such class or

         series as the Board of Directors shall determine, including, without

         limitation, any or all of the following, if applicable: (a) the number

         of shares to constitute such class or series and the distinctive

         designation thereof; (b) the dividend or manner for determining the

         dividend payable with respect to the shares of such class or series and

         the date or dates from which dividends shall accrue, whether such

         dividends shall be cumulative, and, if cumulative, the date or dates

         from which dividends shall accumulate and whether the shares in such

         class or series shall be entitled to preference or priority over any

         other class or series of stock of the Corporation with respect to

         payment of dividends; (c) the terms and conditions, including price or

         a manner for determining the price, of redemption, if any, of the

         shares of such class or series; (d) the terms and conditions of a

         retirement or sinking fund, if any, for the purchase or redemption of

         the shares of such class or series; (e) the amount which the shares of

         such class or series shall be entitled to receive, if any, in the event

         of any liquidation, dissolution or winding up of the Corporation and

         whether such shares shall be entitled to a preference

 

<PAGE>

 

         or priority over shares of another class or series with respect to

         amounts received in connection with any liquidation, dissolution or

         winding up of the Corporation; (f) whether the shares of such class or

         series shall be convertible into, or exchangeable for, shares of stock

         of any other class or classes, or any other series of the same or any

         other class or classes of stock, of the Corporation and the terms and

         conditions of any such conversion or exchange; (g) the voting rights,

         if any, of shares of stock of such class or series in addition to those

         granted herein, if any; (h) the status as to reissuance or sale of

         shares of such class or series redeemed, purchased or otherwise

         reacquired or surrendered to the Corporation on conversion; (i) the

         conditions and restrictions, if any, on the payment of dividends or on

         the making of other distributions on, or the purchase, redemption or

         other acquisition by the Corporation or any subsidiary, of any other

         class or series of stock of the Corporation ranking junior to such

         shares as to dividends or upon liquidation; (j) the conditions, if any,

         on the creation of indebtedness of the Corporation, or any subsidiary,

         and (k) such other preferences, rights, restrictions and qualifications

         as the Board of Directors may determine.

 

                  All shares of the Common Stock shall rank equally and all

         shares of the Preferred Stock shall rank equally, and be identical

         within their classes in all respects regardless of series, except as to

         terms which may be specified by the Board of Directors pursuant to the

         above provisions. All shares of any one series of a class of Common

         Stock or Preferred Stock shall be of equal rank and identical in all

         respects, except that shares of any one series issued at different

         times may differ as to the dates which dividends thereon shall accrue

         and be cumulative.

 

                  2.       OTHER PROVISIONS. Shares of Common Stock or Preferred

         Stock of any class or series may be issued with such voting powers,

         full or limited, or no voting powers, and such designations,

         preferences and relative participating, option or special rights, and

         qualifications, limitations or restrictions thereof, as shall be stated

         and expressed in the resolution or resolutions providing for the

         issuance of such stock adopted by the Board of Directors. Any of the

         voting powers, designations, preferences, rights and qualifications,

         limitations or restrictions of any such class or series of stock may be

         made dependent upon facts ascertainable outside the resolution or

         resolutions of the Board of Directors providing for the issue of such

         stock by the Board of Directors, provided the manner in which such

         facts shall operate upon the voting powers, designations, preferences,

         rights and qualifications, limitations or restrictions of such class or

         series is clearly set forth in the resolution or resolutions providing

         for the issue of such stock adopted by the Board of Directors.

 

                  3.       COMMON STOCK. Except as otherwise provided in any

         resolution or resolutions adopted by the Board of Directors providing

         for the issuance of a class or series of Preferred Stock or Common

         Stock, the Common Stock shall (a) have the exclusive voting power of

         the corporation; (b) entitle the holders thereof to one vote per share

         at all meetings of the stockholders of the Corporation; (c) entitle the

         holders to share ratably, without preference over any other shares of

         the Corporation, in all assets of the Corporation in the event of any

         dissolution, liquidation or winding up of the Corporation; and (d)

         entitle the record holders thereof on such record dates as are

         determined, from time to time, by the Board of Directors to receive

         such dividends, if any, if, as and when declared by the Board of

         Directors.

 

                                  ARTICLE FIVE

 

         The Corporation is to have perpetual existence.

 

                                     - 2 -

<PAGE>

 

                                   ARTICLE SIX

 

                  1.       NUMBER, ELECTION AND TERM OF DIRECTORS. The business

         and affairs of the Corporation shall be managed by a Board of

         Directors, which, subject to the rights of holders of shares of any

         class of series of Preferred Stock of the Corporation then outstanding

         to elect additional directors under specified circumstances, shall

         consist of not less than three nor more than twenty-one persons. The

         exact number of directors within the minimum and maximum limitations

         specified in the preceding sentence shall be fixed from time to time by

         either (i) the Board of Directors pursuant to a resolution adopted by a

         majority of the entire Board of Directors or (ii) the affirmative vote

         of the holders of 80% or more of the voting power of all of the shares

         of the Corporation entitled to vote generally in the election of

         directors voting together as a single class. No decrease in the number

         of directors constituting the Board of Directors shall shorten the term

         of any incumbent director. The directors shall be divided into three

         classes as nearly equal in number as possible, with the term of office

         of the first class to expire at the 1995 annual meeting of

         stockholders, the term of office of the second class to expire at the

         1996 annual meeting of stockholders, and the term of office of the

         third class to expire at the 1997 annual meeting of stockholders, and

         with the members of each class to hold office until their successors

         shall have been elected and qualified At each annual meeting of

         stockholders following such initial classification and election,

         directors elected to succeed those directors whose terms expire shall

         be elected for a term of office to expire at the third succeeding

         annual meeting of stockholders after their election.

 

                  2.       STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES.

         Advance notice of stockholder nominations for the election of directors

         shall be submitted to the Board of Directors at least 120 days in

         advance of the scheduled date for the next annual meeting of

         stockholders.

 

                  3.       NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to

         the rights of the holders of any series of any Preferred Stock then

         outstanding, newly created directorships resulting from any increase in

         the authorized number of directors and any vacancies in the Board of

         Directors resulting from the death, resignation, retirement,

         disqualification, removal from office or other cause may be filled by a

         majority vote of the directors then in office even though less than a

         quorum, or by a sole remaining director.

 

                  4.       REMOVAL. Subject to the rights of the holders of any

         series of any Preferred Stock then outstanding, any director or the

         entire Board of Directors, may be removed from office at any annual or

         special meeting called for such purpose, and then only for cause and

         only by the affirmative vote of the holders of 80% or more of the

         voting power of all of the shares of the Corporation entitled to vote

         generally in the election of directors, voting together as a single

         class. As used herein, cause shall mean only the following: conviction

         of a felony or proof, beyond the existence of a reasonable doubt, that

         a director has committed grossly negligent or wilful misconduct

         resulting in a material detriment to the Corporation or committed a

         material breach of his fiduciary duty to the Corporation resulting in a

         material detriment to the Corporation.

 

                  5.       AMENDMENT, REPEAT, ETC. Notwithstanding anything

         contained in this Certificate of Incorporation to the contrary, the

         affirmative vote of the holders of 80% or more of the voting power of

         all of the shares of the Corporation entitled to vote generally in the

         election of directors, voting together as a single class, shall be

         required to alter, amend or adopt any provision inconsistent with or

         repeal this Article Six, or to alter, amend, adopt any provision

         inconsistent with or repeal comparable sections of the Bylaws of the

         Corporation.

 

                                     - 3 -

<PAGE>

 

                                  ARTICLE SEVEN

 

         Subject to the rights of the holders of any series of Preferred Shares

then outstanding, Any action required or permitted to be taken by the

stockholders of the Corporation must be effected at a duly called annual or

special meeting of stockholders of the Corporation and may not be effected by

any consent in writing by such stockholders unless all of the stockholders

entitled to vote thereon consent thereto in writing. Notwithstanding anything

contained in this Certificate of Incorporation to the contrary, the affirmative

vote of the holders of 80% or more of the voting power of all the shares of the

Corporation entitled to vote generally in the election of directors, voting

together as a single class, shall be required to call a special meeting of

stockholders or to alter, amend or adopt any provision inconsistent with or

repeal this Article Seven, or to alter, amend or adopt any provision

inconsistent with comparable sections of the Bylaws.

 

                                  ARTICLE EIGHT

 

         The Corporation shall have the power to indemnify its present or former

directors, officers, employees and agents or any person who served or is serving

at the request of the Corporation as a director, officer, employee or agent of

another corporation, partnership, joint venture, trust or other enterprise to

the fun extent permitted by the General Corporation Law of Delaware. Such

indemnification shall not be deemed exclusive of any other rights to which such

person may be entitled, under any Bylaws, agreements, vote of stockholders or

disinterested directors, or otherwise.

 

                                  ARTICLE NINE

 

         A director of the Corporation shall not be personally liable to the

Corporation or its stockholders for monetary damages or breach of fiduciary duty

as a director, except for liability (i) for any breach of the director's duty of

loyalty to the Corporation or its stockholders, (if) for acts or omissions not

in good faith or which involved intentional misconduct or a knowing violation of

law, (iii) under Section 174 of the Act, or, (iv) for any transaction from which

the director derived an improper personal benefit.

 

                                   ARTICLE TEN

 

         In furtherance and not in limitation of the powers conferred by

statute, the board of directors is expressly authorized to make, alter or repeal

the Bylaws of the corporation.

 

                                 ARTICLE ELEVEN

 

         The name and address of the incorporator is as follows:

 

                                 George G. Young III

                                 Butler & Binion

                                 1700 First Interstate Bank Plaza

                                 Houston, Texas 77002

 

         In Witness Whereof, this certificate of incorporation was executed by

the above named individual on this 28th day of March, 1994.

 

                                                /s/ George G. Young III

                                                --------------------------------

                                                George G. Young III

 

                                     - 4 -

<PAGE>

 

                                                           STATE OF DELAWARE

                                                          SECRETARY OF STATE

                                                       DIVISION OF CORPORATIONS

                                                       FILED 04:30 PM 08/04/1994

                                                           944145890 - 2390003

 

                            CERTIFICATE OF AMENDMENT

 

                                       OF

 

                          CERTIFICATE OF INCORPORATION

 

                  Callon Petroleum Holding Company, a corporation organized and

existing under and by virtue of the General Corporation Law of the State of

Delaware (the "Corporation"),

 

                  DOES HEREBY CERTIFY:

 

                  FIRST: That the Board of Directors of the Corporation, by the

unanimous written consent of its members, filed with the minutes of the Board,

adopted a resolution proposing and declaring advisable the following amendment

to the Certificate of Incorporation of the Corporation:

 

                  RESOLVED, that the Certificate of Incorporation of the

         Corporation be amended by chanting Section 1. of the Article thereof

         numbered "SIX" so that, as amended, Section 1. of said Article shall be

         and read as follow:

 

                                  "ARTICLE SIX

 

                  1.       NUMBER, ELECTION AND TERM OF DIRECTORS. The business

         and affairs of the Corporation shall be managed by a Board of

         Directors, which, subject to the rights of holders of shares of any

         class or series of Preferred Stock of the Corporation then outstanding

         to elect additional directors under specified circumstances, shall

         consist of no more than twenty-one person. The number of initial

         directors shall be two. Thereafter, the exact number of director

         within the maximum limitations as specified above shall be fixed from

         time to time by either (i) the Board of Directors pursuant to a

         resolution adopted by a majority of the entire Board of Directors or

         (ii) the affirmative vote of the holders of 80% or more of the voting

         power of all of the shares of the Corporation entitled to vote

         generally in the election of directors voting together as a single

         class. No decrease in the number of directors constituting the Board of

         Directors shall shorten the term of any incumbent director. The

         directors shall be divided into three classes as nearly equal in number

         as possible, with the term of office of the first class to expire at

         the first annual meeting of stockholders following their election, the

         term of office of the second class to expire at the second annual

         meeting of stockholders following their election, and the term of

         office of the third class to expire at the third annual meeting of

         stockholders following their election, and with the members of each

         class to hold office until their successors shall have been elected and

         qualified. At each annual meeting of stockholders following such

         initial classification and election, directors elected to succeed those

         directors whose terms expire shall be elected for a term of office to

         expire at the third succeeding annual meeting of stockholders after

         their election. Notwithstanding the foregoing, the above provisions

         regarding classification of directors shall be applicable only in the

         event that the Board of Directors is composed of three or more

         directors. Election of directors need not be by written ballot, except

         as otherwise provided in the Bylaws."

 

<PAGE>

 

                  SECOND: That in lieu of a meeting and vote of stockholders,

the sole stockholder of the Corporation has given its written consent to the

amendment in accordance with the provisions of Section 228 of the General

Corporation Law of the State of Delaware.

 

                  THIRD: That the amendment was duly adopted in accordance with

the applicable provisions in Sections 242 and 228 of the General Corporation Law

of the State of Delaware.

 

                  IN WITNESS WHEREOF, the Corporation has caused this

Certificate to be signed by Fred L. Callon, its President, and attested by H.

Michael Tatum, Jr., its Secretary, this 2nd day of August, 1994.

 

                                                CALLON PETROLEUM HOLDING COMPANY

 

                                                By /s/ Fred L. Callon

                                                   -----------------------------

                                                   Fred L. Callon, President

 

ATTEST

 

/s/ H. Michael Tatum Jr.

--------------------------------

H. Michael Tatum Jr., Secretary

 

                                     - 2 -

 

<PAGE>

 

    STATE OF DELAWARE

   SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 04:30 PM 09/16/1994

  944174625 - 2390003

 

                              CERTIFICATE OF MERGER

 

                                       OF

 

                       CALLON CONSOLIDATED PARTNERS, L.P.

                        (a Delaware limited partnership)

 

                                  with and into

 

                        CALLON PETROLEUM HOLDING COMPANY

                            (a Delaware corporation)

 

         Callon Consolidated Partners, L.P., a Delaware limited partnership, for

the purpose of merging with Callon Petroleum Holding Company, a Delaware

corporation, hereby certifies as follows:

 

         1.       The name and jurisdiction of formation or organization of each

                  of the constituent entities are:

 

                           Name                               Jurisdiction

 

                  Callon Petroleum Holding Company              Delaware

                  Callon Consolidated Partners, L.P.            Delaware

 

         2.       An agreement and plan of consolidation has been approved,

                  adopted, certified, executed and acknowledged by each of the

                  constituent entities in accordance with section 263 of the

                  Delaware General Corporation Law.

 

         3.       The name of the surviving corporation is Callon Petroleum

                  Holding Company, which shall herewith be changed to Callon

                  Petroleum Company.

 

         4.       The amendments or changes in the Certificate of Incorporation

                  of the surviving corporation are as follows:

 

                  (i)      Article One is amended and replaced in its entirety

                           with the following Article One:

 

                                  "ARTICLE ONE

 

                           The name of the Corporation is Callon Petroleum

                           Company."

 

                  (ii)     The first sentence of Article Four is amended and

                           replaced in its entirety with the following sentence:

 

                           "The Corporation shall have authority to issue two

                           classes of stock, and the total number authorized

                           shall be 20,000,000 shares of Common Stock of the par

                           value of one cent ($.01) each, and 2,500,000 shares

                           of Preferred Stock of the par value of one cent

                           ($.01) each."

 

<PAGE>

 

                  5.       The executed agreement and plan of consolidation is

                           on file at the principal place of business of the

                           surviving corporation, the address of which is:

 

                                      Callon Petroleum Holding Company

                                      200 North Canal Street

                                      Natchez, Mississippi 39120

 

                  6.       A copy of the agreement and plan of consolidation

                           will be furnished by Callon Petroleum Holding

                           Company, on request and without cost, to any partner

                           or stockholder of a constituent entity.

 

                  IN WITNESS WHEREOF, this Certificate of Merger has been duly

executed as of the 16th day of September 1994, and is being filed by Callon

Petroleum Holding Company, the surviving corporation.

 

                                          CALLON PETROLEUM HOLDING COMPANY

 

                                          By: /s/ FRED L. CALLON

                                              ----------------------------------

                                              FRED L. CALLON, President

 

Attest:

 

/s/ H. Michael Tatum, Jr.

---------------------------

H. Michael Tatum, Jr., Secretary

 

                                     - 2 -

 

<PAGE>

 

                                    AMENDMENT

                                       TO

                          CERTIFICATE OF INCORPORATION

                                       OF

                            CALLON PETROLEUM COMPANY

 

         The undersigned, Robert A. Mayfield, Corporate Secretary of Callon

Petroleum Company, a corporation organized and existing under the laws of the

State of Delaware (the "CORPORATION"), does hereby certify as follows:

 

         FIRST:   The name of the Corporation is Callon Petroleum Company

 

         SECOND:  This Amendment (the "AMENDMENT") to the Certificate of

Incorporation of the Corporation (the "CERTIFICATE") was duly adopted in

accordance with the provisions of Section 242 of the Delaware General

Corporation Law. The Board of Directors has duly adopted resolutions setting

forth and declaring advisable this Amendment and the holders of a majority of

the outstanding stock of the Corporation entitled to vote at the special meeting

of the stockholders called for the purpose of voting on the Amendment have voted

in favor of this Amendment.

 

         THIRD:   The Certificate is hereby amended by amending and restating

the first sentence of Article Four to be and read as follows:

 

         "The Corporation shall have authority to issue two classes of stock,

         and the total number authorized shall be 30,000,000 shares of Common

         Stock, par value $.01 per share, and 2,500,000 shares of Preferred

         Stock, par value $.01 per share."

 

         IN WITNESS WHEREOF, the undersigned has executed this Amendment on

behalf of the Corporation and has attested such execution and does verify and

affirm, under penalty of perjury, that this Amendment is the act and deed of

the Corporation and that the facts stated herein are true as of this 23rd day of

January, 2004.

 

                                         CALLON PETROLEUM COMPANY

 

                                         By: /s/ Robert A. Mayfield

                                             ------------------------------

                                         Robert A. Mayfield, Corporate Secretary

 

<PAGE>

 

                                                          STATE OF DELAWARE

                                                         SECRETARY OF STATE

                                                      DIVISION OF CORPORATIONS

                                                      FILED 04:30 PM 11/22/1995

                                                        950272690 - 2390003

 

                           CERTIFICATE OF DESIGNATIONS

 

                            CALLON PETROLEUM COMPANY

 

                        $2.125 CONVERTIBLE EXCHANGEABLE

                           PREFERRED STOCK, SERIES A

 

         Callon Petroleum Company, a corporation organized and existing under

and by virtue of The General Corporation Law of the State of Delaware (the

"Corporation"), DOES HEREBY CERTIFY:

 

         That the following resolutions, establishing and designating a series

of shares and fixing and determining the designations, preferences, limitations

and relative rights thereof, were duly adopted by the Board of Directors of the

Corporation or an authorized committee thereof on November 21, 1995.

 

         RESOLVED, that pursuant to Article Four of the Certificate of

         Incorporation of the Corporation, as amended, which authorizes the

         issuance of 22,500,000 shares of capital stock ("Stock"), consisting of

         2,500,000 shares of Preferred Stock of the par value of $.01 per share,

         none of which is currently outstanding, and 20,000,000 shares of Common

         Stock of the par value of $.01 per share (the "Common Stock"), the

         Corporation hereby provides for the issuance of a series of Preferred

         Stock, designated as $2.125 Convertible Exchangeable Preferred Stock,

         Series A, and hereby fixes the designations, preferences, limitations

         and relative rights of the shares of the $2.125 Convertible

         Exchangeable Preferred Stock, Series A, in addition to those set forth

         in such Article Four, which shall be as follows:

 

         SECTION 1. DESIGNATION; NUMBER OF SHARES. The shares of the series

authorized by this resolution shall be designated as "$2.125 Convertible

Exchangeable Preferred Stock, Series A" (the "Convertible Preferred Stock"). The

number of shares initially constituting such series shall be limited to one

million three hundred eighty thousand (1,380,000). Such number of shares may be

decreased, at any time and from time to time, by resolution of the Board of

Directors; provided, however, that no decrease shall reduce the number of shares

of Convertible Preferred Stock to a number less than the number of shares then

outstanding. The liquidation value of the Convertible Preferred Stock shall be

$25.00 per share.

 

         SECTION 2. DIVIDENDS.

 

         (a)      AMOUNT. The holders of Convertible Preferred Stock shall be

entitled to receive, when and if declared by the Board of Directors, out of

funds legally available for the payment of dividends, cash dividends at the rate

of $2.125 per share per annum, and no more, payable in equal quarterly payments

on January 15, April 15, July 15, and October 15 in each year, commencing

January 15, 1996, except that if such date is not a business day then such

dividend shall be payable on the next succeeding business day (the "Dividend

 

<PAGE>

 

Payment Date" or "Dividend Payment Dates") (as used herein, the term "business

day" shall mean any day except a Saturday, Sunday or day on which banking

institutions are authorized or required by law to close in New York City or in

the City of Natchez, Mississippi). Such dividends shall be cumulative (whether

or not declared) and shall accrue, without interest, from the first day in which

such dividend may be payable as provided herein, except that with respect to the

first quarterly dividend, such dividend shall accrue from the date of issuance

of such shares of Convertible Preferred Stock. Dividends shall be payable to

holders of record as they appear on the share transfer records of the

Corporation on such record dates as may be fixed by the Board of Directors, not

more than 60 days nor less than 10 days preceding such Dividend Payment Date.

Dividends in arrears may be declared and paid at any time, without reference to

any regular Dividend Payment Date, to holders of record on such date, not more

than 60 days preceding the payment date thereof, as may be fixed by the Board of

Directors of the Corporation. The amount of dividends payable on shares of

Convertible Preferred Stock for each full quarterly dividend period shall be

computed by dividing by four the annual rate per share set forth in this

subsection (a). Dividends payable on the Convertible Preferred Stock for the

initial dividend period and for any period less than a full quarterly period

shall be computed on the basis of a 360-day year of twelve 30-day months.

 

         (b)      PRIORITY. If dividends upon any shares of Convertible

Preferred Stock, or any other outstanding class or series of stock of the

Corporation ranking on a parity with the Convertible Preferred Stock as to

dividends, are in arrears, all dividends or other distributions declared upon

each class or series of such stock (other than dividends paid in stock of the

Corporation ranking junior to the Convertible Preferred Stock as to dividends

and upon liquidation, dissolution or winding up) may only be declared pro rata

so that in all cases the amount of dividends or other distributions declared per

share on the Convertible Preferred Stock and such class or series bear to each

other the same ratio that the accrued and unpaid dividends per share on the

shares of the Convertible Preferred Stock and such class or series bear to each

other. Except as set forth above, if dividends upon any shares of Convertible

Preferred Stock, or any other outstanding stock of the Corporation ranking on a

parity with the Convertible Preferred Stock a$ to dividends, are in arrears: (i)

no dividends (in cash, stock or other property) may be paid, declared or set

aside for payment or any other distribution made on any stock of the Corporation

ranking junior to the Convertible Preferred Stock as to dividends (other than

dividends or distributions in stock of the Corporation ranking junior to the

Convertible Preferred Stock as to dividends and upon liquidation, dissolution or

winding up) and upon liquidation, dissolution or winding up; and (ii) DO stock

of the Corporation ranking junior to or on a parity with the Convertible

Preferred Stock as to dividends and upon liquidation, dissolution and winding up

may be redeemed, purchased or otherwise acquired pursuant to a sinking fund or

otherwise, except by conversion of such stock into, or exchange of such stock

for, stock of the Corporation ranking junior to the Convertible Preferred Stock

as to dividends and upon liquidation, dissolution or winding up.

 

                                      -2-

 

<PAGE>

 

         (c)      NO INTEREST. No interest, sum of money in lieu of interest, or

other property or securities shall be payable in respect of any dividend payment

or payments which are accrued but unpaid. Dividends paid on shares of

Convertible Preferred Stock in an amount less than the total amount of such

dividends at the time accumulated and payable on such shares shall be allocated

pro rata on a share-by-share basis among all such shares at the time

outstanding.

 

         SECTION 3. CONVERSION PRIVILEGE.

 

         (a)      RIGHT OF CONVERSION. Each share of Convertible Preferred Stock

shall be convertible at the option of the holder thereof at any time prior to

the close of business on the fifth business day prior to the date fixed for

redemption of such share as herein provided, into fully paid and nonassessable

shares of Common Stock, at a rate per full share of Convertible Preferred Stock

determined by dividing $25.00 by the conversion price per share of Common Stock

in effect on the date such share is surrendered for conversion, or into such

additional or other securities, cash or property and at such other rates as

required in accordance with the provisions of this Section 3. For purposes of

this resolution, the "conversion price" per share of Common Stock shall

initially be $11.00 and shall be adjusted from time to time in accordance with

the provisions of this Section 3. Each share of Convertible Preferred Stock may

be converted in whole or in part.

 

         (b)      CONVERSION PROCEDURES. Any holder of shares of Convertible

Preferred Stock desiring to convert such shares into Common Stock shall

surrender the certificate or certificates evidencing such shares of Convertible

Preferred Stock at the office of the transfer agent for the Convertible

Preferred Stock, which certificate or certificates, if the Corporation shall so

require, shall be duly endorsed to the Corporation or in blank, or accompanied

by proper instruments of transfer to the Corporation or in blank, accompanied by

irrevocable written notice to the Corporation that the holder elects to convert

such shares of Convertible Preferred Stock and specifying the name or names

(with address or addresses) in which a certificate or certificates evidencing

shares of Common Stock are to be issued.

 

         Except as otherwise described in this paragraph, no payments or

adjustments in respect of dividends on shares of Convertible Preferred Stock

surrendered for conversion, whether paid or unpaid and whether or not in

arrears, or on account of any dividend on the Common Stock issued upon

conversion shall be made by the Corporation upon the conversion of any shares of

Convertible Preferred Stock. The holder of record of shares of Convertible

Preferred Stock on a dividend record date who surrenders such shares for

conversion during the period between such dividend record date and the

corresponding dividend payment date will be entitled to receive the dividend on

such dividend payment date notwithstanding the conversion of such shares;

provided, however, that unless such shares, prior to such surrender, had been

called for redemption on a redemption date

 

                                      -3-

 

<PAGE>

 

during the period between such dividend record date and the date after such

dividend payment date, such shares must be accompanied, upon surrender for

conversion, by payment from the holder to the Corporation of an amount equal to

the dividend payable on such shares on that dividend payment date.

 

         The Corporation shall, as soon as practicable after such surrender of

certificates evidencing shares of Convertible Preferred Stock accompanied by the

written notice and compliance with any other conditions herein contained,

deliver at such office of such transfer agent to the person for whose account

such shares of Convertible Preferred Stock were so surrendered, or to the

nominee or nominees of such person, certificates evidencing the number of full

shares of Common Stock to which such person shall be entitled as aforesaid,

together with a cash adjustment in respect of any fraction of a share of Common

Stock as hereinafter provided. Such conversion shall be deemed to have been made

as of the date of such surrender of the shares of Convertible Preferred Stock to

be converted, and the person or persons entitled to receive the Common Stock

deliverable upon conversion of such Convertible Preferred Stock shall be treated

for all purposes as the record bolder or holders of such Common Stock on such

date.

 

         (c)      ADJUSTMENT OF CONVERSION PRICE. The conversion price at which

a share of Convertible Preferred Stock is convertible into Common Stock shall be

subject to adjustment from time to time as follows:

 

                  (i)      In case the Corporation shall pay or make a dividend

         or other distribution on its Common Stock exclusively in Common Stock

         or shall pay or make a dividend or other distribution on any other

         class or series of capital stock of the Corporation which dividend or

         distribution includes Common Stock, the conversion price in effect at

         the opening of business on the day following the date fixed for the

         determination of stockholders entitled to receive such dividend or

         other distribution shall be reduced by multiplying such conversion

         price by a fraction of which the numerator shall be the number of

         shares of Common Stock outstanding at the close of business on the date

         fixed for such determination and the denominator shall be the sum of

         such number of shares and the total number of shares constituting or

         included in such dividend or other distribution, such reduction to

         become effective immediately after the opening of business on the day

         following the date fixed for such determination. For the purposes of

         this paragraph (i), the number of shares of Common Stock at any time

         outstanding shall not include shares held in the treasury of the

         Corporation. The Corporation shall not pay any dividend or make any

         distribution on shares of Common Stock held in the treasury of the

         Corporation.

 

                  (ii)     In case the Corporation shall pay or make a dividend

         or other distribution on its Common Stock consisting exclusively of, or

         shall otherwise issue

 

                                      -4-

 

<PAGE>

 

         to all holders of its Common Stock, rights or warrants entitling the

         holders thereof to subscribe for or purchase shares of Common Stock at

         a price per share less than the current market price per share

         (determined as provided in paragraph (vi) of this Section 3(c)) of the

         Common Stock on the date fixed for the determination of stockholders

         entitled to receive such rights or warrants, the conversion price in

         effect at the opening of business on the day following the date fixed

         for such determination shall be reduced by multiplying such conversion

         price by a fraction of which the numerator shall be the number of

         shares of Common Stock outstanding at the close of business on the date

         fixed for such determination plus the number of shares of Common Stock

         which the aggregate of the offering price of the total number of shares

         of Common Stock so offered for subscription or purchase would purchase

         at such current market price and the denominator shall be the number of

         shares of Common Stock outstanding at the close of business on the date

         fixed for such determination plus the number of shares of Common Stock

         so offered for subscription or purchase, such reduction to become

         effective immediately after the opening of business on the day

         following the date fixed for such determination. In case any rights or

         warrants referred to in this paragraph (ii) in respect of which an

         adjustment shall have been made shall expire unexercised, the

         conversion price shall be readjusted at the time of such expiration to

         the conversion price that would have been in effect if no adjustment

         had been made on account of the distribution or issuance of such

         expired rights or warrants.

 

                  (iii)    In case outstanding shares of Common Stock shall be

         subdivided into a greater number of shares of Common Stock, the

         conversion price in effect at the opening of business on the day

         following the day upon which such subdivision becomes effective shall

         be proportionately reduced, and conversely, in case outstanding shares

         of Common Stock shall each be combined into a smaller number of shares

         of Common Stock, the conversion price in effect at the opening of

         business on the day following the day upon which such combination

         becomes effective shall be proportionately increased, such reduction or

         increase, as the case may be, to become effective immediately after the

         opening of business on the day following the day upon which such

         subdivision or combination becomes effective.

 

                  (iv)     Subject to the last sentence of this paragraph (iv),

         in case the Corporation shall, by dividend or otherwise, distribute to

         all holders of its Common Stock evidences of its indebtedness, shares

         of any class or series of capital stock, cash or assets (including

         securities, but excluding any rights or warrants referred to in

         paragraph (ii) of this Section 3(c), any dividend or distribution paid

         exclusively in cash and any dividend or distribution referred to in

         paragraph (i) of this Section 3(c)), the conversion price in effect on

         the day following the date fixed for the payment of such distribution

         (the date fixed for payment being referred to as the "Reference Date")

         shall be reduced by

 

                                      -5-

 

<PAGE>

 

         multiplying such conversion price by a fraction of which the numerator

         shall be the current market price per share (determined as provided in

         paragraph (vi) of this Section 3(c)) of the Common Stock on the

         Reference Date less the fair market value (as determined in good faith

         by the Board of Directors, whose determination shall be conclusive and

         described in a resolution of the Board of Directors) on the Reference

         Date of the portion of the evidences of indebtedness, shares of capital

         stock, cash and assets so distributed applicable to one share of Common

         Stock, and the denominator shall be such current market price per share

         of the Common Stock, such reduction to become effective immediately

         prior to the opening of business on the day following the Reference

         Date. If the Board of Directors determines the fair market value of any

         distribution for purposes of this paragraph (iv) by reference to the

         actual or when issued trading market for any securities comprising such

         distribution, it must in doing so consider the prices in such market

         over the same period used in computing the current market price per

         share of Common Stock pursuant to paragraph (vi) of this Section 3(c).

         For purposes of this paragraph (iv), any dividend or distribution that

         includes shares of Common Stock or rights or warrants to subscribe for

         or purchase shares of Common Stock shall be deemed to be (A) a dividend

         or distribution of the evidences of indebtedness, cash, assets or

         shares of capital stock other than such shares of Common Stock or

         rights or warrants (making any conversion price reduction required by

         this paragraph (iv)) immediately followed by (B) a dividend or

         distribution of such shares of Common Stock or such rights or warrants

         (making any further conversion price reduction required by paragraph

         (i) or (ii) of this Section 3(c)), except (1) the Reference Date of

         such dividend or distribution as defined in this paragraph (iv) shall

         be substituted as "the date fixed for the determination of stockholders

         entitled to receive such dividend or other distribution," "the date

         fixed for the determination of stockholders entitled to receive such

         rights or warrants" and "the date fixed for such determination" within

         the meaning of paragraphs (i) and (ii) of this Section 3(c) and (2) any

         shares of Common Stock included in such dividend or distribution shall

         not be deemed "outstanding at the close of business on the date fixed

         for such determination" within the meaning of paragraph (i) of this

         Section 3(c).

 

                  (v)      In case the Corporation shall pay or make a dividend

         or other distribution on its Common Stock exclusively in cash

         (excluding (A) cash that is part of a distribution referred to in

         paragraph (iv) above and (B) in the case of any quarterly cash dividend

         on the Common Stock, the portion thereof that does not exceed the per

         share amount of the next preceding quarterly cash dividend on the

         Common Stock (as adjusted to appropriately reflect any of the events

         referred to in paragraphs (i), (ii), (iii) and (iv) of this Section

         3(c)), or all of such quarterly cash dividend if the amount thereof per

         share of Common Stock multiplied by four does not exceed 15% of the

         current market price per share (determined as

 

                                      -6-

 

<PAGE>

 

         provided in paragraph (vi) of this Section 3(c)) of the Common Stock on

         the trading day next preceding the date of declaration of such

         dividend, the conversion price in effect immediately prior to the

         opening of business on the day following the date fixed for the payment

         for such distribution shall be reduced by multiplying such conversion

         price by a fraction of which the numerator shall be the current market

         price per share (determined as provided in paragraph (vi) of this

         Section 3(c)) of the Common Stock on the date fixed for the payment of

         such distribution less the amount of cash so distributed and not

         excluded as provided above applicable to one share of Common Stock, and

         the denominator of which shall be such current market price per share

         of the Common Stock, such reduction to become effective immediately

         prior to the opening of business on the day following the date fixed

         for the payment of such distribution.

 

                  (vi)     For the purpose of any computation under paragraph

         (ii), (iii), (iv) or (v) of this Section 3(c), 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 five consecutive trading days

         ending with and including the date in question; provided, however, that

         (A) if the "ex" date (as hereinafter defined) for any event (other than

         the issuance or distribution requiring such computation) that requires

         an adjustment to the conversion price pursuant to paragraph (i), (ii),

         (iii), (iv) or (v) above ("Other Event") occurs after the fifth trading

         day prior to the date in question and prior to the "ex" date for the

         issuance or distribution requiring such computation (the "Current

         Event"), the closing price for each trading day prior to the "ex" date

         for such Other Event shall be adjusted by multiplying such closing

         price by the same fraction by which the conversion price is so required

         to be adjusted as a result of such Other Event, (B) if the "ex" date

         for any Other Event occurs after the "ex" date for the Current Event

         and on or prior to the date in question, the closing price for each

         trading day on and after the "ex" date for such Other Event shall be

         adjusted by multiplying such closing price by the reciprocal of the

         fraction by which the conversion price is so required to be adjusted as

         a result of such Other Event, (C) if the "ex" date for any Other Event

         occurs on the "ex" date for the Current Event, one of those events

         shall be deemed for purposes of clauses (A) and (B) of this proviso to

         have an "ex" date occurring prior to the "ex" date for the other event,

         and (D) if the "ex" date for the Current Event is on or prior to the

         date in question, after taking into account any adjustment required

         pursuant to clause (B) of this proviso, the closing price for each

         trading day on or after such "ex" date shall be adjusted by adding

         thereto the amount of any cash and the fair market value on the date in

         question (as determined in good faith by the Board of Directors in a

         manner consistent with any determination of such value for purposes of

         paragraph (iv) or (v) of this Section 3(c), whose determination shall

         be conclusive and described in a resolution of the Board of Directors)

         of the portion of the rights, warrants,

 

                                     - 7 -

<PAGE>

 

         evidences of indebtedness, shares of capital stock or assets being

         distributed applicable to one share of Common Stock. For purposes of

         this paragraph, the term "ex" date, (1) when used with respect to any

         issuance 01 distribution, means the first date on which the Common

         Stock trades regular way on the relevant exchange or in the relevant

         market from which the closing price was obtained without the right to

         receive such issuance or distribution and (2) when used with respect to

         any subdivision or combination of shares of Common Stock, means the

         first date on which the Common Stock trades regular way on such

         exchange or in such market after the time at which such subdivision or

         combination becomes effective.

 

                  (vii)    No adjustment in the conversion price shall be

         required unless such adjustment would require an increase or decrease

         of at least 1% in the conversion price; provided, however, that any

         adjustments which by reason of this paragraph (vii) are not required to

         be made shall be carried forward and taken into account in any

         subsequent adjustment.

 

                  (viii)   Whenever the conversion price is adjusted as herein

         provided:

 

                           (A)      the Corporation shall compute the adjusted

                  conversion price and shall prepare a certificate signed by a

                  Vice President or the Treasurer of the Corporation setting

                  forth the adjusted conversion price and showing in reasonable

                  detail the facts upon which such adjustment is based, and such

                  certificate shall forthwith be filed with the transfer agent

                  for the Convertible Preferred Stock; and

 

                           (B)      as soon as practicable after the adjustment,

                  the Corporation shall mail to all record holders of

                  Convertible Preferred Stock at their last addresses as they

                  shall appear in stock transfer books of the Corporation a

                  notice stating that the conversion price has been adjusted and

                  setting forth the adjusted conversion price.

 

                  (ix)     The Corporation from time to time may reduce the

         conversion price by any amount for any period of time if the period is

         at least twenty days, the reduction is irrevocable during the period

         and the Board of Directors shall have made a determination that such

         reduction would be in the best interest of the Corporation, which

         determination shall be conclusive. Whenever the conversion price is

         reduced pursuant to the preceding sentence, the Corporation shall mail

         to the record holders of Convertible Preferred Stock a notice of the

         reduction at least fifteen days prior to the date the reduced

         conversion price takes effect, and such notice shall state the reduced

         conversion price and the period it will be in effect

 

                                      -8-

 

<PAGE>

 

         (d)      NO FRACTIONAL SHARES. No fractional shares of Common Stock

shall be issued upon conversion of the Convertible Preferred Stock. If more than

one certificate evidencing shares of Convertible Preferred Stock shall be

surrendered for conversion at such time by the holder, the number of full shares

issuable upon conversion thereof shall be computed on the basis of the aggregate

number of shares of Convertible Preferred Stock so surrendered. Instead of any

fractional share of Common Stock that would otherwise be issuable to a holder

upon conversion of any shares of Convertible Preferred Stock, the Corporation

shall pay a cash adjustment in respect of such fractional share in an amount

equal to the same fraction of the closing price of the Common Stock on the day

of conversion or, if the day of conversion is not a trading day, on the next

preceding trading day.

 

         (e)      RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE OF ASSETS. In

the event that the Corporation shall be a party to any transaction pursuant to

which the Common Stock is converted into the right to receive other securities,

cash or other property (including without limitation any recapitalization or

reclassification of the Common Stock (other than a change in par value, or from

par value to no par value, or from no par value to par value, or as a result of

a subdivision or combination of the Common Stock), any consolidation of the

Corporation with, or merger of the Corporation into, any other person, any

merger or another person into the Corporation (other than a merger which does

not result in a reclassification, conversion, exchange or cancellation of

outstanding shares of Common Stock), any sale or transfer of all or

substantially all of the assets of the Corporation or any share exchange), then

lawful provisions shall be made as part of the terms of such transaction whereby

the holder of each share of Convertible Preferred Stock then outstanding shall

have the right thereafter to convert such share only into the kind and amount of

securities, cash and other property receivable upon such transaction by a holder

of the number of shares of Common Stock into which such share might have been

converted immediately prior to such transaction provided, however, that if the

holders of Common Stock were entitled by the terms of the transaction to make an

election to receive securities, cash or property, or any combination of the

foregoing, lawful provision shall be made as part of the terms of such

transaction whereby the holder of each share of Convertible Preferred Stock then

outstanding shall have the right thereafter to convert such share only into the

kind and amount of securities, cash or other property receivable upon such trans

action by a holder of the number of shares of Common Stock who made one of the

elections provided for in such transaction (as determined by the Board of

Directors, whose determination shall be conclusive) into which such share might

have been converted immediately prior to such transaction. The Corporation or

the person formed by such consolidation or resulting from such merger or which

acquires such shares or which acquires the Corporation's shares, as the case may

be, shall make provisions in its certificate or articles of incorporation or

other governing document to establish such right Such certificate or articles of

incorporation or other governing document shall provide for adjustments which,

for events subsequent to the effective date of such certificate or articles

 

                                      -9-

 

<PAGE>

 

of incorporation or other governing document, shall be as nearly equivalent as

may be practicable to the adjustments provided for in this Section 3. The above

provisions shall similarly apply to successive transactions of the foregoing

type.

 

         (f)      RESERVATION OF SHARES; ETC. The Corporation shall at all tunes

reserve and keep available, free from preemptive rights out of its authorized

and unissued Common Stock, solely for the purpose of effecting the conversion of

the Convertible Preferred Stock, such number of shares of its Common Stock as

shall from time to time be sufficient to effect the conversion of all shares of

Convertible Preferred Stock from time to time outstanding. The Corporation shall

from time to time, in accordance with the laws of the State of Delaware, in good

faith and as expeditiously as possible endeavor to cause the authorized number

of shares of Common Stock to be increased if at any time the number of shares of

authorized and unissued Common Stock shall not be sufficient to permit the

conversion of all the then outstanding shares of Convertible Preferred Stock.

 

         If any shares of Common Stock required to be reserved for the purposes

of conversion of the Convertible Preferred Stock hereunder require registration

with or approval of any governmental authority under any Federal or State law

before such shares may be issued upon conversion, the Corporation will in good

faith and as expeditiously as possible endeavor to cause such shares to be duly

registered or approved as the case may be. If the Common Stock is listed on any

national securities exchange, the Corporation will, if permitted by the rules of

such exchange, list and keep listed on such exchange, upon official notice of

issuance, all shares of Common Stock issuable upon conversion of the Convertible

Preferred Stock, for so long as the Common Stock continues to be so listed.

 

         (g)      PRIOR NOTICE OF CERTAIN EVENTS. In case:

 

                  (i)      the Corporation shall (A) declare any dividend (or

         any other distribution) on its Common Stock, other than (1) a dividend

         payable in shares of Common Stock or (2) a dividend payable in cash out

         of its retained earnings other than any special or nonrecurring or

         other extraordinary dividend or (B) declare or authorize a redemption

         or repurchase of in excess of 10% of the then outstanding shares of

         Common Stock; or

 

                  (ii)     the Corporation shall authorize the granting to all

         holders of Common Stock of rights or warrants to subscribe for or

         purchase any shares of stock of any class or series or of any other

         rights or warrants; or

 

                  (iii)    of any reclassification of Common Stock (other than a

         subdivision or combination of the outstanding Common Stock, or a change

         in par value, or from par value to no par value, or from no par value

         to par value), or of any consolidation or merger to which the

         Corporation is party and for which approval

 

                                      -10-

 

<PAGE>

 

         of any stockholders of the Corporation shall be required, or of the

         sale or transfer of all or substantially all of the assets of the

         Corporation or of any share exchange whereby the Corporation is

         converted into other securities, cash or other property; or

 

                  (iv)     of the voluntary or involuntary dissolution,

         liquidation or winding up of the Corporation;

 

         then the Corporation shall cause to be filed with the transfer agent

         for the Convertible Preferred Stock, and shall cause to be mailed to

         all holders of record of the Convertible Preferred Stock at their last

         addresses as they shall appear upon the stock transfer books of the

         Corporation, at least 15 days prior to the applicable record or

         effective date hereinafter specified, a notice stating (x) the date on

         which a record (if any) is to be taken for the purpose of such

         dividend, distribution, redemption, repurchase, or grant of rights or

         warrants or, if a record is not to be taken, the date as of which the

         holders of Common Stock of record to be entitled to such dividend,

         distribution, redemption, repurchase, rights or warrants are to be

         determined or (y) the date on which such reclassification,

         consolidation, merger, sale, transfer, share exchange, dissolution,

         liquidation or winding up is expected to become effective and the date

         as of which it is expected that holders of Common Stock of record shall

         be entitled to exchange their shares of Common Stock for securities,

         cash or other property deliverable upon such reclassification,

         consolidation, merger, sale, transfer, share exchange, dissolution,

         liquidation or winding up (but no failure to mail such notice or any

         defect therein or in the mailing thereof shall affect the validity of

         the corporate action required to be specified in such notice).

 

         (h)      CERTAIN ADDITIONAL RIGHTS. In case the Corporation shall, by

dividend or otherwise, declare or make a distribution on its Common Stock

referred to in Section 3(c)(iv) or 3(c)(v) (including, without limitation,

dividends or distribution referred to in the last sentence of Section 3(c)(iv)),

the holder of each share of Convertible Preferred Stock upon the conversion

thereof subsequent to the close of business on the date fixed for the

determination of stockholders entitled to receive such distribution and prior to

the effectiveness of the conversion price adjustment in respect of such

distribution, shall also be entitled to receive for each share of Common Stock

into which such share of Convertible Preferred Stock is converted, the portion

of the shares of Common Stock, rights, warrants, evidences of indebtedness,

shares of capital stock, cash and assets as distributed applicable to one share

of Common Stock; provided, however, that at the election of the Corporation

(whose election shall be evidenced by a resolution of the Board of Directors)

with respect to all holders so converting, the Corporation may, in lieu of

distributing to such holder any portion of such distribution not consisting of

cash or securities of the Corporation, pay such holder an amount in cash equal

to the fair market value thereof (as determined in good

 

                                      -11-

 

<PAGE>

 

faith by the Board of Directors, which determination shall be conclusive). If

any conversion of a share of Convertible Preferred Stock described in the

immediately preceding sentence occurs prior to the payment date for a

distribution to holders of Common Stock which the holder of the share of

Convertible Preferred Stock so converted is entitled to receive in accordance

with the immediately preceding sentence, the Corporation may elect (such

election to be evidenced by a resolution of the Board of Directors) to

distribute to such holder a due bill for the shares of Common Stock, rights,

warrants, evidences of indebtedness, shares of capital stock, cash or assets to

which such holder is so entitled, provided that such due bill (a) meets any

applicable requirements of the principal national securities exchange or other

market on which the Common Stock is then traded and (b) requires payment or

delivery of such shares of Common Stock, rights, warrants, evidences of

indebtedness, shares of capital Stock, cash or assets no later than the date of

payment or delivery thereof to holders of shares of Common Stock receiving such

distribution.

 

         SECTION 4. SPECIAL CONVERSION RIGHTS.

 

         (a)      CHANGE OF CONTROL. Upon the occurrence of a Change of Control

(as defined in Section 4(e)) with respect to the Corporation, each holder of

Convertible Preferred Stock shall have the right, at the holder's option, for a

period of 30 days after the mailing of a notice by the Corporation that a Change

of Control has occurred, to convert all, but not less than all, of such holder's

Convertible Preferred Stock into Common Stock of the Corporation at an adjusted

conversion price per share equal to the Market Value (as defined in Section

4(e)) of the Common Stock. The Corporation may, at its option, in lieu of

providing Common Stock upon any such special conversion, provide the holder with

cash equal to the Market Value of the Common Stock multiplied by the number of

shares of Common Stock into which such Convertible Preferred Stock would have

been convertible immediately prior to such Change of Control. The special

conversion right arising upon a Change of Control shall only be applicable with

respect to the first Change of Control that occurs after the first date of

issuance of any Convertible Preferred Stock. Convertible Preferred Stock which

becomes convertible pursuant to a special conversion right shall, unless so

converted, remain convertible pursuant to Section 3 at the conversion price in

effect immediately before the effective date of the Change of Control, subject

to subsequent adjustment as provided in Section 3(c).

 

         (b)      FUNDAMENTAL CHANGE. Upon the occurrence of a Fundamental

Change (as defined in Section 4(e)) with respect to the Corporation, each holder

of Convertible Preferred Stock shall have a special conversion right, at the

holder's option, for a period of 30 days after the mailing of a notice by the

Corporation that a Fundamental Change has occurred, to convert all, but not less

than all, of such holder's Convertible Preferred Stock into the kind and amount

of cash, securities, property or other assets receivable upon such Fundamental

Change by a holder of the number of shares of Common Stock into which such

Convertible Preferred Stock would have been convertible immediately prior to

such

 

                                      -12-

 

<PAGE>

 

Fundamental Change at an adjusted conversion price equal to the Market Value of

the Common Stock. The Corporation or a successor corporation, as the case may

be, may, at its option and in lieu of providing the consideration as required

above upon such conversion, provide the bolder with cash equal to the Market

Value of the Common Stock multiplied by the number of shares of Common Stock

into which such Convertible Preferred Stock would have been convertible

immediately prior to such Fundamental Change. Convertible Preferred Stock which

becomes convertible pursuant to a special conversion right shall, unless

converted, remain convertible pursuant to Section 3 into the kind and amount of

cash, securities, property or other assets that the holders of the Convertible

Preferred Stock would have owned immediately after the Fundamental Change if the

holders had converted the Convertible Preferred Stock immediately before the

effective date of the Fundamental Change, subject to subsequent adjustment under

the provisions contemplated by Section 3(c), if applicable.

 

         (c)      NOTICE. Upon the occurrence of a Change of Control or a

Fundamental Change with respect to the Corporation, within 30 days after such

occurrence, the Corporation shall mail to each bolder of Convertible Preferred

Stock a notice of such occurrence (the "Special Conversion Notice") setting

forth the following:

 

                  (i)      the event constituting the Change of Control or

         Fundamental Change;

 

                  (ii)     the date upon which the applicable special conversion

         right will terminate;

 

                  (iii)    the Market Value of the Common Stock;

 

                  (iv)     the conversion price then in effect under Section 3

         and the continuing conversion rights, if any, under Section 3;

 

                  (v)      the name and address of the paying agent and

         conversion agent;

 

                  (vi)     that holders who want to convert Convertible

         Preferred Stock must satisfy the requirements of Section 4(d) and must

         exercise such conversion right within the 30-day period after the

         mailing of such notice by the Corporation;

 

                  (vii)    that exercise of such conversion right shall be

         irrevocable and no dividends on the Convertible Preferred Stock (or

         portions thereof) tendered for conversion shall accrue from and after

         the conversion date; and

 

                                      -13-

 

<PAGE>

 

                  (viii)   that the Corporation (or a successor corporation, if

         applicable) may, at its option, elect to pay cash (specifying the

         amount thereof per share) for all Convertible Preferred Stock tendered

         for conversion.

 

         (d)      EXERCISE PROCEDURES. A bolder of Convertible Preferred Stock

must exercise the special conversion right within the 30-day period after the

mailing of the Special Conversion Notice or such special conversion right shall

expire. Such right must be exercised in accordance with Section 3(b) to the

extent the procedures in Section 3(b) are consistent with the special provisions

of this Section 4. Exercise of such conversion right shall be irrevocable and no

dividends on the Convertible Preferred Stock tendered for conversion shall be

payable in respect of the period from the list dividend payment date preceding

the conversion date through the conversion date. The conversion date with

respect to the exercise of a special conversion right arising upon a Change of

Control or Fundamental Change shall be the 30th day after the mailing of the

Special Conversion Notice.

 

         (e)      DEFINITIONS. The following definitions shall apply to terms

used in this Section 4:

 

                  (i)      A "Change of Control" with respect to the Corporation

         shall be deemed to have occurred at such time as any person (within the

         meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act)),

         including a group (within the meaning of Rule 13d-5 under the Exchange

         Act), together with any of its Affiliates or Associates, files or

         becomes obligated to file a report (or any amendment or supplement

         thereto) on Schedule 13D or 14D-1 pursuant to the Exchange Act,

         disclosing that such person has become the beneficial owner of either

         (A) 50% or more of the shares of Common Stock of the Corporation then

         outstanding or (B) securities representing 50% or more of the combined

         voting power of the Voting Stock (as defined below) of the Corporation

         then outstanding; provided a Change of Control shall not be deemed to

         have occurred (i) with respect to any transaction that constitutes a

         Fundamental Change, (ii) as a result of a person becoming or being

         deemed the beneficial owner of Common Stock because such person or an

         affiliate of such person is or becomes a party to the Stockholders'

         Agreement among the Callon Family and NOCO Enterprises, L.P., dated

         September 16,1994 as amended from time to time (the "Stockholders'

         Agreement"), or (iii) as a result of a person currently a party to the

         Stockholders' Agreement or an affiliate of such person acquiring

         beneficial ownership of Common Stock. As used herein, a person shall be

         deemed to have "beneficial ownership" with respect to, and shall be

         deemed to "beneficially own," any securities of the Corporation in

         accordance with Section 13 of the Exchange Act and the rules and

         regulations (including Rule 13d-3, Rule 13d-5 and any successor rules)

         promulgated by the Securities and Exchange Commission thereunder;

 

                                      -14-

 

<PAGE>

 

         provided that a person shall be deemed to have beneficial ownership of

         all securities that any such person has a right to acquire whether such

         right is exercisable immediately or only after the passage of time and

         without regard to the 60-day limitation referred to in Rule 13d-3 and,

         provided further, that a beneficial owner of Convertible Preferred

         Stock shall not be deemed to beneficially own the Common Stock into

         which such Convertible Preferred Stock is convertible solely by reason

         of ownership of the Convertible Preferred Stock. An "Affiliate" of a

         specified person is a person that directly or indirectly controls, or

         is controlled by or is under common control with, the person specified.

         AN "Associate" of a person means (i) any corporation or organization,

         other than the Corporation or any subsidiary of the Corporation, of

         which the person is an officer or partner or is, directly or

         indirectly, the beneficial owner of 10% or more of any class of equity

         securities; (ii) any trust or estate in which the person has a

         substantial beneficial interest or as to which the person serves as

         trustee or in a similar fiduciary capacity; and (iii) any relative or

         spouse of the person or any relative of the spouse, who has the same

         home as the person or who is a director or officer of the person or any

         of its parents or subsidiaries.

 

                  (ii)     "Exchange Act" means the Securities Exchange Act of

         1934, as amended, and as in effect on the date hereof.

 

                  (iii)    A "Fundamental Change" with respect to the

         Corporation means (A) the occurrence of any transaction or event in

         connection with which all or substantially all of the Common Stock of

         the Corporation shall be exchanged for, converted into, acquired for or

         constitute solely the right to receive cash, securities, property or

         other assets (whether by means of an exchange offer, liquidation,

         tender offer, consolidation, merger, combination, reclassification,

         recapitalization or otherwise) or (B) the conveyance, sale, lease,

         assignment, transfer or other disposal of all or substantially all for

         the Corporation's property, business or assets; provided, however, that

         a Fundamental Change shall not be deemed to have occurred with respect

         to either of the following transactions or events: (1) any transaction

         or event in which more than 50% (by value as determined in good faith

         by the Board of Directors) of the consideration received by holders of

         Common Stock consists of Marketable Stock (as defined below); or (2)

         any consolidation or merger of the Corporation in which the holders of

         Common Stock of the Corporation immediately prior to such transaction

         own, directly or indirectly, (x) 50% or more of the common stock of the

         surviving corporation (or of the ultimate parent of such surviving

         corporation) outstanding at the time immediately after such

         consolidation or merger and (y) securities representing 50% or more of

         the combined voting power of the surviving corporation's Voting Stock

         (or for the Voting Stock of the ultimate parent of such surviving

         corporation) outstanding at such time. The phrase "all or substantially

 

                                      -15-

<PAGE>

         all" as used in this definition in reference to the Common Stock shall

         mean 66% or more of the aggregate outstanding Common Stock.

 

                  (iv)     "Voting Stock" means, with respect to any person,

         capital stock of such person having general voting power under ordinary

         circumstances to elect at least a majority of the board of directors,

         managers or trustees of such person (irrespective of whether or not at

         the time capital stock of any other class or classes shall have or

         might have voting power by reason of the happening of any contingency).

 

                  (v)      The "Market Value" of the Common Stock or any other

         Marketable Stock shall be the average of the last reported sales prices

         of the Common Stock or such other Marketable Stock, as the case may be,

         for the five business days ending on the last business day preceding

         the date of the Change of Control or Fundamental Change; provided,

         however, that if the Marketable Stock is not traded on any national

         securities exchange or similar quotation system as described in the

         definition of "Marketable Stock" during such period, then the Market

         Value of such Marketable Stock shall be the average of the last

         reported sales' prices per share of such Marketable Stock during the

         first five business days commencing with the first day after the date

         on which such Marketable Stock was first distributed to the general

         public and traded on the New York Stock Exchange, the American Stock

         Exchange, the Nasdaq National Market or any similar system of automated

         dissemination of quotations of securities prices in the United States.

 

                  (vi)     "Marketable Stock" shall mean Common Stock or common

         stock of any corporation that is the successor (or of the ultimate

         parent of such successor) to all or substantially all of the business

         or assets of the Corporation as a result of a Fundamental Change, which

         is (or will, upon distribution thereof, be) listed or quoted on the New

         York Stock Exchange, the American Stock Exchange, the Nasdaq National

         Market or any similar system of automated dissemination of quotations

         of securities prices in the United States.

 

         SECTION 5. GENERAL CLASS AND SERIES VOTING RIGHTS. Except as provided

in this Section 5 and in Section 6 hereof or as specifically required by the

laws of the State of Delaware or by the provisions of the Certificate of

Incorporation of the Corporation, as amended, the Convertible Preferred Stock

shall have no voting rights. The shares of Convertible Preferred Stock shall

have the following voting rights:

 

         (a)      So long as any shares of Convertible Preferred Stock remain

outstanding, the vote or consent of the holders of at least two-thirds of the

shares of Convertible Preferred Stock outstanding at the time (voting separately

as a class) given in person or by

 

                                      -16-

 

<PAGE>

 

proxy, either in writing or 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, creation or issuance, or any

         increase in the authorized or issued amount, of any class or series of

         stock (including any class or series of preferred stock) ranking prior

         (as that term is hereinafter defined in this Section 5) to the

         Convertible Preferred Stock; or

 

                  (ii)     The amendment, alteration or repeal, whether by

         merger, consolidation or otherwise, of any of the provisions of the

         Certificate of Incorporation or of these resolutions which would alter,

         change or repeal the powers, preferences, or special rights of the

         shares of the Convertible Preferred Stock so as to affect them

         adversely.

 

         (b)      The foregoing voting provisions shall not apply if, at or

prior to the time when the act with respect to which such vote would otherwise

be required shall be effected, all outstanding shares of Convertible Preferred

Stock shall have been redeemed or sufficient funds and/or shares of Common Stock

shall have been deposited in trust to effect such redemption.

 

         (c)      For purposes of this resolution, any class or series of stock

of the Corporation shall be deemed to rank:

 

                  (i)      prior to the Convertible Preferred Stock as to

         dividends or as to distribution of assets upon liquidation, dissolution

         or winding up, if the holders of such class or series shall be entitled

         to the receipt of dividends or amounts distributable upon liquidation,

         dissolution or winding up, as the case may be, in preference or

         priority to the holders of Convertible Preferred Stock;

 

                  (ii)     on a parity with the Convertible Preferred Stock as

         to dividends or as to distribution of assets upon liquidation,

         dissolution or winding up, whether or not the dividend rates, dividend

         payment dates, or redemption or liquidation prices per share thereof

         shall be different from those of the Convertible Preferred Stock, if

         the holders of such class or series of stock and the Convertible

         Preferred Stock shall be entitled to the receipt of dividends or of

         amounts distributable upon liquidation, dissolution or winding up, as

         the case may be, in proportion to their respective dividend rates or

         liquidation prices, without preference or priority one over the other;

         and

 

                  (iii)    junior to the Convertible Preferred Stock as to

         dividends or as to distribution of assets upon liquidation, dissolution

         or winding up, if such class or series shall be Common Stock or if the

         holders of the Convertible Preferred

 

                                      -17-

 

<PAGE>

 

         Stock shall be entitled to the receipt of dividends or of amounts

         distributable upon liquidation, dissolution or winding up, as the case

         may be, in preference or priority to the holders of shares of such

         class or series.

 

         (d)      The holders of Convertible Preferred Stock shall also be

entitled to vote on certain amendments or supplements to the Indenture

establishing the 8.5% Convertible Subordinated Debentures due 2010, of the

Corporation, for which the Convertible Preferred Stock may be exchanged as

described in Section 9 hereof and as provided in Article Nine of such Indenture.

 

         SECTION 6. DEFAULT VOTING RIGHTS.

 

         (a)      ELECTION OF DIRECTORS. Whenever, at any time or times,

dividends payable on the shares of Convertible Preferred Stock shall be in

arrears in an amount equal to at least six quarterly dividends (whether or not

consecutive), the holders of the outstanding shares of Convertible Preferred

Stock shall have the exclusive right (voting separately as a class) to elect two

directors of the Corporation.

 

         (b)      VOTE PER SHARE. At elections for such directors, each holder

of Convertible Preferred Stock shall be entitled to one vote for each share of

Convertible Preferred Stock held. Upon the vesting of such right with the

holders of Convertible Preferred Stock, the maximum authorized number of members

of the Board of Directors shall automatically be increased by two, which shall

be of the class or classes selected by the Corporation's Board of Directors

which has the least number of director positions then currently filled, and the

two vacancies so created shall be filled by vote of the holders of the

outstanding shares of Convertible Preferred Stock as hereinafter set forth. The

right of the holders of Convertible Preferred Stock, voting separately as a

class to elect members of the Board of Directors of the Corporation shall

continue until such time as all dividends accrued and unpaid on the Convertible

Preferred Stock shall have been paid or declared and funds set aside to provide

for payment in full, at which time such right shall terminate, except as herein

or by law expressly provided, subject to revesting in the event of each and

every subsequent default of the character above mentioned.

 

         (c)      MEETINGS. Whenever the voting right described in subsection

(a) above shall have vested in the holders of the Convertible Preferred Stock,

the right may be exercised initially either at a special meeting of the holders

of the Convertible Preferred Stock called as hereinafter provided, or at any

annual meeting of stockholders held for the purpose of electing directors, and

thereafter at each successive annual meeting.

 

         (d)      CALL OF MEETING. At any time when the voting right described

in subsection (a) above shall have vested in the holders of the Convertible

Preferred Stock, and if the right shall not already have been initially

exercised, a proper officer of the Corporation

 

                                      -18-

 

<PAGE>

 

shall, upon the written request of the holders of record of 10% in number of the

shares of the Convertible Preferred Stock then outstanding, addressed to the

Secretary of the Corporation, call a special meeting of the holders of the

Convertible Preferred Stock for the purpose of electing directors. Such meeting

shall be held at the earliest practicable date upon the notice required for

annual meetings of stockholders at the place for holding of annual meetings of

stockholders of the Corporation, or, if none, at a place designated by the

Secretary of the Corporation. If the meeting shall not be called by the proper

officers of the Corporation within 30 days after the personal service of such

written request upon the Secretary of the Corporation, or within 30 days after

mailing it within the United States of America, by registered mail, addressed to

the Secretary of the Corporation at its principal office (such mailing to be

evidenced by the registry receipt issued by the postal authorities), then the

holders of record of 10% in number of the shares of the Convertible Preferred

Stock then outstanding may designate in writing one of their members to call

such meeting at the expense of the Corporation, and such meeting may be called

by such person so designated upon the notice required for annual meetings of

stockholders and shall be held at the same place as is elsewhere provided for in

this subsection (d). Any holder of the Convertible Preferred Stock shall have

access to the share transfer books of the Corporation as permitted under the

Delaware General Corporation Law for the purpose of causing a meeting of the

stockholders to be called pursuant to the provisions of this subsection (d).

Notwithstanding the provisions of this subsection (d), however, no such special

meeting shall be held during a period within 60 days immediately preceding the

date fixed for the next annual meeting of stockholders.

 

         (e)      QUORUM. At any meeting held for the purpose of electing

directors at which the holders of the Convertible Preferred Stock shall have the

right to elect directors as provided herein, the presence in person or by proxy

of the holders of 50% of the then outstanding shares of the Convertible

Preferred Stock shall be required and be sufficient to constitute a quorum of

the holders of the Convertible Preferred Stock for the election of directors. At

any such meeting or adjournment thereof (i) the absence of a quorum of the

holders of the Convertible Preferred Stock shall not prevent the election of

directors other than those to be elected by the holders of the Convertible

Preferred Stock and the absence of a quorum or quorums of the holders of other

classes or series of capital stock entitled to elect such other directors shall

not prevent the election of directors to be elected by the holders of the

Convertible Preferred Stock and (ii) in the absence of a quorum of the holders

of the Convertible Preferred Stock, a majority of the holders present in person

or by proxy of the Convertible Preferred Stock shall have the power to adjourn

the meeting, or appropriate portion thereof for the election of directors which

the holders of the Convertible Preferred Stock are entitled to elect, from time

to time, without notice other than announcement at the meeting, until a quorum

shall be present. The Chairman of the Board or the President of the Corporation

shall preside at any such meeting.

 

                                      -19-

 

<PAGE>

 

         (f)      TERM. Each director elected by the holders of shares of

Convertible Preferred Stock shall continue to serve as a director until such

time as all dividends accrued and unpaid on the Convertible Preferred shall have

been paid or declared and funds set aside to provide for payments in full, at

which time the term of office of all persons elected as directors by the holders

of shares of Convertible Preferred Stock shall forthwith terminate and the

number of members of the Board of Directors of the Corporation shall be reduced

accordingly. Whenever the term of office of the directors elected by the holders

of Convertible Preferred Stock voting as a class shall end and the special

voting powers vested in the holders of Convertible Preferred Stock as provided

in this Section 6 shall have expired, the number of directors shall be such

number as may be provided for in the By-Laws irrespective of any increase made

pursuant to the provisions of this Section 6.

 

         SECTION 7. OPTIONAL REDEMPTION.

 

         (a)      REDEMPTION PRICE. The Corporation may at its option, at any

time during the twelve-month periods beginning on or after December 31, 1998, in

the years indicated below, redeem all, or any numbers less than all, of the

outstanding shares of Convertible Preferred Stock, provided that the Convertible

Preferred Stock may not be redeemed, in whole or in part, prior to December 31,

1998. All redemption of shares of Convertible Preferred Stock shall be effected

at the applicable redemption prices set forth below:

 

<TABLE>

<CAPTION>

If Redemption Date During the                          Redemption Price

Twelve-Month Period Beginning                             Per Share

-----------------------------                          ----------------

<S>                                                    <C>

1998..............................................         $ 26.488

1999..............................................           26.275

2000..............................................           26.063

2001..............................................           25.850

2002..............................................           25.638

2003..............................................           25.425

2004..............................................           25.213

2005 and thereafter ..............................           25.000

</TABLE>

 

                                      -20-

 

<PAGE>

 

plus, in each case, an amount equal to all dividends (whether or not declared)

accrued and unpaid on such share of Convertible Preferred Stock to the date

fixed for redemption (the price from time to time to redeem the Convertible

Preferred Stock excluding any dividends (whether or not declared) accrued and

unpaid, is referred to herein as the "Redemption Price").

 

         (b)      ACCRUED DIVIDENDS. The Corporation may not purchase, redeem or

otherwise acquire for value any shares of Convertible Preferred Stock or shares

of any other series of preferred stock then outstanding ranking on a parity with

or junior to the Convertible Preferred Stock unless all accrued dividends on all

shares of Convertible Preferred Stock then outstanding shall have been paid or

declared and a sum sufficient for the payment thereof set apart. No sinking find

shall be established for the Convertible Preferred Stock.

 

         (c)      NOTICE OF REDEMPTION. Notice of any proposed redemption of

shares of Convertible Preferred Stock shall be mailed to each record holder of

the shares of Convertible Preferred Stock to be redeemed at least 30 but not

more than 60 days prior to the date fixed for such redemption (herein referred

to as the "Redemption Date"). Each such notice shall set forth the following:

 

                  (i)      the Redemption Date;

 

                  (ii)     the Redemption Price per share;

 

                  (iii)    the place for payment and for delivering the stock

         certificate(s) and transfer instrument(s) in order to receive the

         Redemption Price;

 

                  (iv)     the shares of Convertible Preferred Stock to be

         redeemed;

 

                  (v)      the then effective Conversion Price;

 

                  (vi)     the price of the Common Stock on the last trading day

         prior to the date of the notice: and

 

                  (vii)    that the right of holders of shares of Convertible

         Preferred Stock being redeemed to exercise their conversion right shall

         terminate as to such shares at the close of business on fifth business

         day prior to the date fixed for redemption (provided that no default by

         the Corporation in the payment of the applicable Redemption Price

         (including any accrued and unpaid dividends) shall have occurred and be

         continuing).

 

                                      -21-

<PAGE>

 

         Any notice mailed in such manner shall be conclusively deemed to have

been duly given regardless of whether such notice is in fact received. If less

than all the outstanding shares of Convertible Preferred Stock are to be

redeemed, the Corporation will select those to be redeemed ratably or by lot in

a manner determined by the Board of Directors. In order to facilitate the

redemption of the Convertible Preferred Stock, the Board of Directors may fix a

record date for determination of holders of Convertible Preferred Stock to be

redeemed, which shall not be more than 30 days prior to the Redemption Date with

respect thereto.

 

         The holder of any shares of Convertible Preferred Stock redeemed

pursuant to this Section 7 upon any exercise of the Corporation's redemption

right shall not be entitled to receive payment of the Redemption Price for such

shares until such bolder shall cause to be delivered to the place specified in

the notice given with respect to such redemption (i) the certificate(s)

representing such share of Convertible Preferred Stock and (ii) transfer

instrument(s) sufficient to transfer such shares of Convertible Preferred Stock

to the Corporation free of any adverse interest. No interest shall accrue on the

Redemption Price of any share of Convertible Preferred Stock after the

Redemption Date.

 

         At the close of business on the Redemption Date for any share of

Convertible Preferred Stock, such share shall (provided the Redemption Price

(including any accrued and unpaid dividends to the Redemption Date) of such

shares has been paid or properly provided for) be deemed to cease to be

outstanding and all rights of any person other than the Corporation in such

share shall be extinguished on the Redemption Date for such share (including all

rights to receive future dividends with respect to such share) except for the

right to receive the Redemption Price (including any accrued and unpaid

dividends to the Redemption Date), without interest for such share in accordance

with the provisions of this Section 7, subject to applicable escheat laws.

 

         In the event that any shares of Convertible Preferred Stock shall be

converted into Common Stock prior to the Redemption Date pursuant to Section 3

or 4, then (i) the Corporation shall not have the right to redeem such shares

and (ii) any funds, securities or other property which shall have been deposited

for the payment of the Redemption Price for such shares shall be returned to the

Corporation immediately after such conversion (subject to declared dividends

payable to holders of shares of Convertible Preferred Stock on the record date

for such dividends being so payable, to the extent set forth in Section 3

hereof, regardless of whether such shares are converted subsequent to such

record date and prior to the related Dividend Payment Date) and any shares of

Common Stock reserved for issuance upon redemption of such converted shares need

no longer be so reserved.

 

         Notwithstanding the foregoing provisions of this Section 7, and subject

to the provisions of Section 2 hereof, if a dividend upon any shares of

Convertible Preferred Stock is past due, (i) no share of the Convertible

Preferred Stock may be redeemed, except by

 

                                      -22-

 

<PAGE>

 

means of a redemption pursuant to which all outstanding shares of the

Convertible Preferred Stock are simultaneously redeemed and all accrued

dividends paid and (ii) the Corporation shall not purchase or otherwise acquire

any shares of the Convertible Preferred Stock, except pursuant to a purchase or

exchange offer made on the same terms to all holders of the Convertible

Preferred Stock.

 

         SECTION 8. RANK; LIQUIDATION. Upon any voluntary or involuntary

dissolution, liquidation or winding up of the Corporation (for the purposes of

this Section 8, a "Liquidation"), the holders of Convertible Preferred Stock

shall be entitled to be paid out of the assets of the Corporation available for

distribution to its stockholders, an amount equal to $25.00 per share of

Convertible Preferred Stock then held by such stockholder plus all dividends

(whether or not declared or due) accrued and unpaid on such share on the date

fixed for the distribution of assets of the Corporation to the holders of

Convertible Preferred Stock. The shares of Convertible Preferred Stock shall

rank prior to the shares of Common Stock and any other class or series of stock

of the Corporation ranking junior to the Convertible Preferred Stock, so that

the holders of the Convertible Preferred Stock shall receive the full amount to

which they shall be entitled before any distribution of assets shall be made to

the holders of the Common Stock or the holders of any other stock that ranks

junior to the Convertible Preferred Stock in respect of distributions upon the

Liquidation of the Corporation.

 

         If upon any Liquidation of the Corporation, the assets available for

distribution to the holders of Convertible Preferred Stock and any other stock

of the Corporation ranking on a parity with the Convertible Preferred Stock upon

Liquidation which shall then be outstanding (hereinafter in this paragraph

called the "Total Amount Available") shall be insufficient to pay the holders of

all outstanding shares of Convertible Preferred Stock and all other such parity

stock the full amounts (including all dividends accrued and unpaid) to which

they shall be entitled by reason of such Liquidation of the Corporation, then

there shall be paid to the holders of the Convertible Preferred Stock in

connection with such Liquidation of the Corporation, an amount equal to the

product derived by multiplying the Total Amount Available times a fraction, the

numerator of which shall be the full amount to which the holders of the

Convertible Preferred Stock shall be entitled under the terms of the preceding

paragraph by reason of such Liquidation of the Corporation and the denominator

of which shall be the total amount which would have been distributed by reason

of such Liquidation of the Corporation with respect to the Convertible Preferred

Stock and all other stock ranking on a parity with the Convertible Preferred

Stock upon Liquidation then outstanding had the Corporation possessed sufficient

assets to pay the maximum amount which the holders of all such stock would be

entitled to receive in connection with such Liquidation of the Corporation.

 

         The voluntary sale, conveyance, lease, exchange or transfer of all or

substantially all of the property or assets of the Corporation, or the merger or

consolidation of the

 

                                      -23-

 

<PAGE>

 

Corporation into or with any other corporation, or the merger of any other

corporation into the Corporation, or any purchase or redemption of some or all

of the shares of any class or series of stock of the Corporation, shall not be

deemed to be a Liquidation of the Corporation of the purposes of this Section 8

(unless in connection therewith the Liquidation of the Corporation is

specifically approved).

 

         The holder of any shares of Convertible Preferred Stock shall not be

entitled to receive any payment owed for such shares under this Section 8 until

such holder shall cause to be delivered to the Corporation (i) the

certificate(s) representing such shares of Convertible Preferred Stock and (ii)

transfer instrument(s) satisfactory to the Corporation and sufficient to

transfer such shares of Convertible Preferred Stock to the Corporation free of

any adverse interest. No interest shall accrue on any payment upon Liquidation

after the due date thereof.

 

         After payment of the full amount of the liquidating distribution to

which they are entitled, the holders of shares of the Convertible Preferred

Stock will not be entitled to any further participation in any distribution of

assets by the Corporation.

 

         SECTION 9. EXCHANGE.

 

         (a)      EXCHANGE FOR DEBENTURES. The shares of Convertible Preferred

Stock may be exchanged, in whole but not in part, at the option of the

Corporation, for its 8.5% Convertible Subordinated Debentures due 2010 (the

"Debentures") on any Dividend Payment Date commencing on January 15,1998. The

Debentures are to be issued under an Indenture (the "Indenture") between the

Corporation and Bank One, Columbus, N.A., as trustee (together with any

successor trustee, the "Trustee"), substantially in the form filed as an exhibit

to the Corporation's Registration Statement on Form S-1 (Registration No.

33-96700) as filed with the Securities and Exchange Commission, completed as set

forth therein and with such changes as may be required by law or usage. Holders

of the outstanding shares of Convertible Preferred Stock will be entitled to

receive $25.00 principal amount of the Debentures in exchange for each share of

Convertible Preferred Stock held by them at the time of exchange, provided that

such exchange may not occur unless all accrued and unpaid dividends on the

Convertible Preferred Stock through the Dividend Payment Date established as the

exchange date have been paid or set aside for payment. Any such exchange shall

be effected in the same manner and, upon the same notice, as a redemption of the

Convertible Preferred Stock pursuant to Section 7, as aforesaid. Upon any such

exchange, the shares of Convertible Preferred Stock shall (provided such

exchange is duly and properly effected) be deemed to cease to be outstanding as

of the close of business on the date established for such exchange, and all

rights of any holder thereof shall be extinguished except the right to receive

Debentures in exchange therefore and the right to receive accrued and unpaid

dividends on such shares of Convertible Preferred Stock to the date established

for such exchange. As in the case of a redemption of shares of

 

                                      -24-

 

<PAGE>

 

Convertible Preferred Stock pursuant to Section 7, holders of shares of

Convertible Preferred Stock must surrender such shares a order to receive the

Debentures for which such shares have been exchanged, but upon such surrender

such holders will be entitled to receive all interest accrued and unpaid on such

Debentures from the date of exchange at the time and in the manner that such

interest would be paid in the ordinary course pursuant to the Indenture pursuant

to which such Debentures shall be issued. Dividends due on the shares of

Convertible Preferred Stock on the Dividend Payment Date on which the exchange

is effected will be mailed to holders in the regular course.

 

         (b)      DELIVERY OF DOCUMENTS. No exchange of the Convertible

Preferred Stock for Debentures may be effected unless prior to such exchange the

Corporation causes to be delivered to the Trustee the documents specified in

Section 303 the Indenture.

 

         SECTION 10. PAYMENTS. The Corporation may provide funds for any

payment of the Redemption Price for any shares of Convertible Preferred Stock or

any amount distributable with respect to any Convertible Preferred Stock under

Sections 7 and 8 hereof by depositing such funds with a bank or trust company

selected by the Corporation having a net worth of at least $50,000,000, in trust

for the benefit of the holders of such shares of Convertible Preferred Stock

under arrangements providing irrevocably for payment upon satisfaction of any

conditions to such payments by the holders of such shares of Convertible

Preferred Stock which shall reasonably be required by the Corporation. The

Corporation shall be entitled to make any deposit of funds contemplated by this

Section 10 under arrangements designed to permit such funds to generate interest

or other income for the Corporation, and the Corporation shall be entitled to

receive all interest and other income earned by any funds while they shall be

deposited as contemplated by this Section 10, provided that the Corporation

shall maintain on deposit funds sufficient to satisfy all payments which the

deposit arrangement shall require to be paid by the Corporation.

 

         Any payment which may be owed for the payment of the Redemption Price

for any shares of Convertible Preferred Stock pursuant to Section 7 or the

payment of any amount distributable with respect to any shares of Convertible

Preferred Stock under Section 8 shall be deemed to have been "paid or properly

provided for" upon the earlier to occur of: (i) the date upon which such funds

sufficient to make such payment shall be deposited in a manner contemplated by

the preceding paragraph or (ii) the date upon which a check payable to the

person entitled to receive such payment shall be delivered to such person or

mailed to such person at either the address of such person then appearing on the

books of the Corporation or such other address as the Corporation shall deem

reasonable. The Corporation may deposit Debentures or shares of Common Stock to

be exchanged for shares of Convertible Preferred Stock in the manner

contemplated by the preceding paragraph, but, with respect to Debentures, the

interest accruing on such Debentures shall accrue to the former holders of the

Convertible Preferred Stock entitled thereto.

 

                                      -25-

 

<PAGE>

 

         Subject to applicable escheat laws, if the conditions precedent to the

disbursement of any funds deposited by the Corporation pursuant to this Section

10 shall not have been satisfied within six months after the establishment of

the trust for such funds, then (i) such funds shall be returned to the

Corporation upon its request; (ii) after such return, such funds shall be free

of any trust which shall have been impressed upon them; (iii) the person

entitled to this payment for which such funds shall have been originally

intended shall have the right to look only to the Corporation for such payment,

subject to applicable escheat laws; and (iv) the trustee which shall have held

such funds shall be relieved of any responsibility for such funds upon the

return of such funds to the Corporation.

 

         SECTION 11. STATUS OF REACQUIRED SHARES. Shares of Convertible

Preferred Stock issued and reacquired by the Corporation (including, without

limitation, shares of Convertible Preferred Stock which have been redeemed

pursuant to the terms of Section 7 hereof; shares of Convertible Preferred Stock

which have been converted into shares of Common Stock and shares of Convertible

Preferred Stock which have been exchanged for Debentures) shall have the status

of authorized and unissued shares of preferred stock, undesignated as to series,

subject to later issuance.

 

         SECTION 12. PREEMPTIVE RIGHTS. The Convertible Preferred Stock is not

entitled to any preemptive or subscription rights in respect of any securities

of the Corporation.

 

         SECTION 13. MISCELLANEOUS.

 

         (a)      TRANSFER TAXES. The Corporation shall pay any and all stock

transfer and documentary stamp taxes that may be payable in respect of any

issuance and delivery of shares of Convertible Preferred Stock or shares of

Common Stock or other securities issued on account of Convertible Preferred

Stock pursuant hereto or certificates or instruments evidencing such shares or

securities. The Corporation shall not, however, be required to pay any such tax

which may be payable in respect of any transfer involved in the issuance or

delivery of shares of Convertible Preferred Stock or Common Stock or other

securities in a name other than that in which the shares of Convertible

Preferred Stock with respect to which such shares or other securities are issued

or delivered were registered, or in respect of any payment to any person with

respect to any such shares or securities other than a payment to the registered

holder thereof; and shall not be required to make any such issuance, delivery or

payment unless and until the person otherwise entitled to such issuance,

delivery or payment has paid to the Corporation the amount of any such tax or

has established, to the satisfaction of the Corporation, that such tax has been

paid or is not payable.

 

         (b)      FAILURE TO DESIGNATE STOCKHOLDER OR PAYEE. In the event that a

holder of shares of Convertible Preferred Stock shall not by written notice

designate the name in

 

                                      -26-

 

<PAGE>

 

which shares of Common Stock to be issued upon conversion or redemption of such

shares, or Debentures to be issued upon exchange of such shares, should be

registered or to whom payment upon redemption of shares of Convertible Preferred

Stock should be made or the address to which the certificates or instruments

evidencing such shares, Debentures or such payment should be sent, the

Corporation shall be entitled to register such shares or Debentures and make

such payment in the name of the holder of such Convertible Preferred Stock as

shown on the records of the Corporation and to send the certificates or

instruments evidencing such shares or such payment to the address of such holder

shown on the records of the Corporation.

 

         (c)      REGISTRAR AND TRANSFER AGENT. The Corporation may appoint, and

from time to time discharge and change, a transfer agent for the Convertible

Preferred Stock.

 

         (d)      SEVERABILITY. Whenever possible, each provision hereof shall

be interpreted in such a manner as to be effective and valid under applicable

law, but if any provision hereof is held to be prohibited by or invalid under

applicable law, such provision shall be ineffective only to the extent of such

prohibition or invalidity, without invalidating or otherwise adversely affecting

the remaining provisions hereof. If a court of competent jurisdiction should

determine that a provision hereof would be valid or enforceable if a period of

time were extended or shortened or a particular percentage were increased or

decreased, then such court may make such change as shall be necessary to render

the provision in question effective and valid under applicable law.

 

         IN WITNESS WHEREOF, this Statement of Designation establishing a series

of shares has been made under the hand of the undersigned, the President of the

Corporation, this 22nd day of November, 1995.

 

                                                    CALLON PETROLEUM COMPANY

 

                                                    By /s/ Fred L. Callon

                                                       -------------------------

                                                       Fred L. Callon, President

 

Attest

 

By /s/ H. Michael Tatum, Jr.

   -----------------------------

   H. Michael Tatum, Jr.

   Secretary

 

                                      -27-

 

<PAGE>

 

                                                           STATE OF DELAWARE

                                                          SECRETARY OF STATE

                                                       DIVISION OF CORPORATIONS

                                                       FILED 04:30 PM 11/27/1995

                                                          950274310 - 2390003

 

                            CERTIFICATE OF CORRECTION

 

                            CALLON PETROLEUM COMPANY

 

         Callon Petroleum Company, a corporation organized and existing under

and by virtue of The General Corporation Law of the State of Delaware (the

"Corporation"), DOES HEREBY CERTIFY:

 

         1.       That the Corporation filed a Certificate of Designations (the

"Original Certificate") with the Delaware Secretary of State on November 22,

1995, setting forth the resolutions, establishing and designating a series of

shares and fixing and determining the designations, preferences, limitations and

relative rights thereof, for the Corporation's $2.125 Convertible Exchangeable

Preferred Stock, Series A (the "Convertible Preferred Stock"); and

 

         2.       That the Original Certificate contained certain inaccuracies

in Section 3 (a), Section 3(c)(vi), Section 6(f), the third paragraph of Section

8 and the third paragraph of Section 10 that the Corporation desires to correct

with this Certificate of Correction pursuant to Section 103(f) of The General

Corporation Law of the State of Delaware; and

 

         3.       That, as corrected, Section 3(a) of the Original Certificate

shall be and read as follows:

 

                  (a)      RIGHT OF CONVERSION. Each share of Convertible

         Preferred Stock shall be convertible at the option of the holder

         thereof at any time prior to the close of business on the day prior to

         the date fixed for redemption of such share as herein provided, into

         fully paid and nonassessable shares of Common Stock, at a rate per full

         share of Convertible Preferred Stock determined by dividing $25.00 by

         the conversion price per share of Common Stock in effect on the date

         such share is surrendered for conversion, or into such additional or

         other securities, cash or property and at such other rates as required

         in accordance with the provisions of this Section 3. For purposes of

         this resolution, the "conversion price" per share of Common Stock shall

         initially be $11.00 and shall be adjusted from tine to time in

         accordance with the provisions of this Section 3. Each share of

         Convertible Preferred Stock may be converted in whole or in part.

 

         4.       That, as corrected, Section 3(c)(vi) of the Original

Certificate shall be and read as follows:

 

                  (vi)     For the purpose of any computation under paragraph

         (ii), (iii), (iv) or (v) of this Section 3(c), 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 five consecutive trading days

         ending with and including the date in question; provided, however, that

         (A) if the "ex" date (as hereinafter

 

<PAGE>

 

         defined) for any event (other than the issuance or distribution

         requiring such computation) that requires an adjustment to the

         conversion price pursuant to paragraph (i), (ii), (iii), (iv) or (v)

         above ("Other Event") occurs after the third trading day prior to the

         date in question and prior to the "ex" date for the issuance or

         distribution requiring such computation (the "Current Event"), the

         closing price for each trading day prior to the "ex" date for such

         Other Event shall be adjusted by multiplying such closing price by the

         same fraction by which the conversion price is so required to be

         adjusted as a result of such Other Event, (B) if the "ex" date for any

         Other Event occurs after the "ex" date for the Current Event and on or

         prior to the date in question, the closing price for each trading day

         on and after the "ex" date for such Other Event shall be adjusted by

         multiplying such closing price by the reciprocal of the fraction by

         which the conversion price is so required to be adjusted as a result of

         such Other Event, (C) if the "ex" date for any Other Event occurs on

         the "ex" date for the Current Event, one of those events shall be

         deemed for purposes of clauses (A) and (B) of this proviso to have an

         "ex" date occurring prior to the "ex" date for the other event, and (D)

         if the "ex" date for the Current Event is on or prior to the date in

         question, after taking into account any adjustment required pursuant to

         clause (B) of this proviso, the closing price for each trading day on

         or after such "ex" date shall be adjusted by adding thereto the amount

         of any cash and the fair market value on the date in question (as

         determined in good faith by the Board of Directors in a manner

         consistent with any determination of such value for purposes of

         paragraph (iv) or (v) of this Section 3(c), whose determination shall

         be conclusive and described in a resolution of the Board of Directors)

         of the portion of the rights, warrants, evidences of indebtedness,

         shares of capital stock or assets being distributed applicable to one

         share of Common Stock. For purposes of this paragraph, the term "ex"

         date, (1) when used with respect to any issuance or distribution, means

         the first date on which the Common Stock trades regular way on the

         relevant exchange or in the relevant market from which the closing

         price was obtained without the right to receive such issuance or

         distribution and (2) when used with respect to any subdivision or

         combination of shares of Common Stock, means the first date on which

         the Common Stock trades regular way on such exchange or in such market

         after the time at which such subdivision or combination becomes

         effective.

 

         5.       That, as corrected, Section 6(f) of the Original Certificate

shall be and read as follows:

 

                  (f)      TERM. Each director elected by the holders of shares

         of Convertible Preferred Stock shall continue to serve as a director

         until such time as (i) his successor shall have been duly elected and

         shall qualify or (ii)

 

                                      -2-

 

<PAGE>

 

         all dividends accrued and unpaid on the Convertible Preferred Stock

         shall have been paid or declared and funds set aside to provide for

         payment in full, at which time the term of office of all persons

         elected as directors by the holders of shares of Convertible Preferred

         Stock shall forthwith terminate and the number of members of the Board

         of Directors of the Corporation shall be reduced accordingly. Whenever

         the term of office of the directors elected by the holders of

         Convertible Preferred Stock voting as a class shall end and the special

         voting powers vested in the holders of Convertible Preferred Stock as

         provided in this Section 6 shall have expired, the number of directors

         shall be such number as may be provided for in the By-Laws irrespective

         of any increase made pursuant to the provisions of this Section 6.

 

         6.       That, as corrected, the third paragraph of Section 8 of the

Original Certificate shall be and read as follows:

 

                  The voluntary sale, conveyance, lease, exchange or transfer of

         all or substantially all of the property or assets of the Corporation,

         or the merger or consolidation of the Corporation into or with any

         other corporation, or the merger of any other corporation into the

         Corporation, or any purchase or redemption of some or all of the shares

         of any class or series of stock of the Corporation, shall not be deemed

         to be a Liquidation of the Corporation for purposes of this Section 8

         (unless in connection therewith the Liquidation of the Corporation is

         specifically approved).

 

         7.       That, as corrected, the third paragraph of Section 10 of the

Original Certificate shall be and read as follows:

 

                  Subject to applicable escheat laws, if the conditions

         precedent to the disbursement of any funds deposited by the Corporation

         pursuant to this Section 10 shall not have been satisfied within six

         months after the later of (a) the redemption payment date and (b) the

         establishment of the trust for such funds, then (i) such funds shall be

         returned to the Corporation upon its request; (ii) after such return,

         such funds shall be free of any trust which shall have been impressed

         upon them; (iii) the person entitled to this payment for which such

         funds shall have been originally intended shall have the right to look

         only to the Corporation for such payment, subject to applicable escheat

         laws; and (iv) the trustee which shall have held such funds shall be

         relieved of any responsibility for such funds upon the return of such

         funds to the Corporation.

 

                                      -3-

<PAGE>

 

         IN WITNESS WHEREOF, this Statement of Correction has been made under

the hand of the undersigned, the President of the Corporation, this 27th day of

November, 1995.

 

                               CALLON PETROLEUM COMPANY

 

                               By /s/ Fred L. Callon

                                  -------------------------

                                  Fred L. Callon, President

 

Attest

 

By /s/ H. Michael Tatum, Jr.

   --------------------------

   H. Michael Tatum, Jr.

   Secretary

 

                                      -4-

<PAGE>

 

                                                           STATE OF DELAWARE

                                                          SECRETARY OF STATE

                                                       DIVISION OF CORPORATIONS

                                                       FILED 01:00 PM 04/07/2000

                                                          001178331 - 2390003

 

                                 CERTIFICATE OF

                     DESIGNATION, PREFERENCES AND RIGHTS OF

                            SERIES B PREFERRED STOCK

 

                                       OF

 

                            CALLON PETROLEUM COMPANY

 

         Pursuant to Section 151 of the General Corporation Law of the State of

Delaware

 

         We, Fred L. Callon, President, and Robert A. Mayfield, Secretary, of

Callon Petroleum Company (the "Corporation"), a corporation organized and

existing under the General Corporation Law of the State of Delaware (UK "GCL"),

in accordance with the provisions of Section 103 of the GCL, DO HEREBY CERTIFY;

 

         That pursuant to the authority conferred upon the Board of Directors

(the "Board") by the Certificate of Incorporation of the Corporation, as

amended, the said Board on March 30, 2000, adopted the following resolutions

creating a series of one hundred thousand shares of Preferred Stock, par value

$0.01 per share, designated as Series B Preferred Stock:

 

         RESOLVED, that, pursuant to the authority vested in the Board In

accordance with the provisions of its Certificate of Incorporation, as amended,

the Board does hereby create, authorize and provide for the issuance upon the

exercise of the Corporation's Preferred Stock Purchase Rights, of a series of

Preferred Stock of the Corporation, and does hereby fix and state that the

designations, amounts, powers, preferences and relative and other special rights

and the qualifications, limitations or restrictions thereof are as follows:

 

SERIES B PREFERRED STOCK

 

         SECTION 1.       DESIGNATION AND AMOUNT. The shares of such series

shall be designated as Series B Preferred Stock and the number of shares

constituting such series shall be 100,000.

 

         SECTION 2.       DIVIDENDS AND DISTRIBUTIONS.

 

                  (A)      Subject to the prior and superior rights of the

holders of any shares of any series of Preferred Stock ranking prior and

superior to the shares of Series B Preferred Stock with respect to dividends,

the holders of shares of Series B Preferred Stock shall be entitled to receive,

when, as and if declared by the Board of Directors out of funds legally

available for that purpose, quarterly dividends payable to cash on the 1st day

of July, October, January, April, in each year commencing July 1, 2000 (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 Series B Preferred Stock, in an amount per

share (rounded to the nearest cent) equal to the greater of (a) $0.01 or (b)

subject to the provision for adjustment hereinafter set forth, one thousand

(1,000) times the aggregate per share amount of all cash dividends, and one

thousand (1,000) 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 the common stock of the Corporation, par value $0.01 per share ("the

Common Stock"), or a subdivision of the outstanding shares of Common Stock (by

reclassification or otherwise),

 

<PAGE>

 

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 Series B

Preferred Stock. In the event the Corporation shall at any time after March 30,

2000 (the "Rights Declaration Date") (i) declare any dividend on Common Stock

payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,

or (iii) combine the outstanding Common Stock into a smaller number of shares,

than in each such case the amount to which holders of shares of Series B

Preferred Stock were entitled immediately prior to such event under clause (b)

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.

 

                  (B)      The Corporation shall declare a dividend or

distribution on the Series B Preferred Stock as provided in paragraph (A) above

immediately after 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

Series B 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 Series B Preferred Stock from the Quarterly Dividend

Payment Date next preceding the date of issue of such shares of Series B

Preferred Stock, 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 Series B 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 Series

B 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

Series B Preferred Stock entitled to receive payment of a dividend or

distribution declared thereon, which record date shall be no more than thirty

(30) days prior to the date fixed for the payment thereof.

 

         SECTION 3.        VOTING RIGHTS. The holders of shares of Series B

Preferred Stock shall have the following voting rights:

 

                  (A)      Subject to the provision for adjustment hereinafter

set forth, share of Series B Preferred Stock shall entitle the holder thereof to

one thousand (1,000) votes on all matters submitted to a vote of the

stockholder of the Corporation. In the event the Corporation Shall at any time

after the Rights Declaration Date (i) declare any dividend on Common Stock

payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,

or (iii) combine the outstanding Common Stock into a smaller number of shares,

then in each such case the number of votes per share to which holders of shares

of Series B 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

 

<PAGE>

 

immediately after such event and the denominator of which is the number of sham

of Common Stock that were outstanding immediately prior to such event.

 

                  (B)      Except as otherwise provided herein or by law, the

holders of shares of Series B 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. Except as otherwise provided herein or by

law, the holders of the shares of Series B Preferred Stock shall not be entitled

to vote as a separate class on any matters submitted to a vote of the

stockholders.

 

                  (C)      (i) If at any time dividends on any Series B

Preferred Stock shall be in arrears in an amount equal to six (6) quarterly

dividends thereon, the holders of the Series B Preferred Stock, voting at a

separate series from all other series of Preferred Stock and classes of capital

stock, shall be entitled to elect two members of the Board of Directors in

addition to any directors elected by any other series, class or classes of

securities, and the authorized number of directors will automatically be

increased by two. Promptly thereafter, the Board of Directors of this

Corporation shall, as soon as may be practicable, call a special meeting of

holders of Series B Preferred Stock for the purpose of electing such members of

the Board of Directors. Said special meeting shall in any event be held within

45 days of the occurrence of such arrearage.

 

                           (ii)     During any period when the holders of Series

B Preferred Stock, voting as a separate series, shall be entitled and shall have

exercised their right to elect two directors, then and during such time as such

right continues (a) the then authorized number of directors shall be increased

by two, and the holders of Series B Preferred Stock, voting as a separate

series, shall be entitled to elect the additional directors so provided for, and

(b) each such additional director shall not be a member of any existing class of

the Board of Directors, but shall serve until the next annual meeting of

stockholders for the election directors, or until his successor shall be elected

and shall qualify, or until his right to hold such office terminates pursuant to

the provisions of this Section 3(C).

 

                           (iii)    A director elected pursuant to the terms

hereof may be removed with or without cause by the holders of Series B Preferred

Stock entitled to vote in an election of such Director.

 

                           (iv)     If during any interval between annual

meetings of stockholders for the election of directors and while the holders of

Series B Preferred Stock shall be entitled to elect two directors, there is no

such director in office by reason of resignation, death or removal, then,

promptly thereafter, the Board of Directors shall call a special meeting of the

holders of Series B Preferred Stock for the purpose of filling such vacancy and

such vacancy shall be filled at such special meeting. Such special meeting shall

in any event be held within 90 days of the occurrence of such vacancy, unless an

annual meeting of stockholders is scheduled during such 90-day period.

 

                           (v)      At such time as the arrearage is My cured,

and all dividends accumulated and unpaid on any shares of Series B Preferred

Stock outstanding are paid, and, in addition thereto, at least one regular

dividend has been paid subsequent to curing such arrearage, the term of office

of any directors elected pursuant to this Section 3(C), or his successor, shall

automatically terminates, and the authorized number of directors shall

automatically decrease by two, the rights of the holders of the shares of the

Series B Preferred Stock to vote as provided in

 

<PAGE>

 

this Section 3(C) shall cease, subject to renewal from time to time upon the

same terms and conditions, and the holders of shares of the Series B Preferred

Stock shall have only the limited voting rights elsewhere herein set forth.

 

         (D)      Except as set forth herein, holders of Series A 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 Series B 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 Series B Preferred Stock

outstanding shall have been paid in full, the Corporation shall not:

 

                           (i)      declare or pay dividends on, make any other

distributions on, or redeem or purchase or otherwise acquire for consideration

any shares of (stock ranking junior (either as to dividends or upon liquidation,

dissolution or winding up) to, the Series B Preferred Stock:

 

                           (ii)     declare or pay dividends on, 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 Series B

Preferred Stock, except dividends paid ratably on the Series B Preferred Stock

and all such junior 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 on a parity (either is to dividends or

upon liquidation, dissolution or winding up) with the Series B Preferred Stock,

provided that the Corporation may at any time redeem, purchase or otherwise

acquire shares of any such parity 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 Series B Preferred Stock; or

 

                           (iv)     purchase not otherwise acquire for

consideration any shares of Series B Preferred Stock, or any shares of stock

ranking on a parity with the Series B Preferred Stock, except in accordance with

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 Corporation could, under paragraph (A) of

this Section 4, purchase or otherwise acquire such shares at such time and in

such manner.

 

<PAGE>

 

         SECTION 5.        REACQUIRED SHARES. Any shares of Series B Preferred

Stock purchased or otherwise acquired by the Corporation in any manner

whatsoever shall be retired and canceled 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 6.        LIQUIDATION, DISSOLUTION OR WINDING UP.

 

                  (A)      Upon any liquidation (voluntary or otherwise),

dissolution or winding up of the Corporation, no distribution shall be made to

the holders of shares of stock ranting junior (either as to dividends or upon

liquidation, dissolution or winding up) to the Series B Preferred Stock unless,

prior thereto, the holders of shares of Series B Preferred Stock shall have

received $180 per share, plus an amount equal to accrued and unpaid dividends

and distributions thereon, whether or not declared, to the date of such payment

(the "Series B Liquidation Preference"), plus the Series B Pro Rata Liquidation

Preference, as defined below. The "Series B Pro Rata Liquidation Preference"

means the ratable and proportionate share of to assets to be distributed to the

holders of Series B Preferred Stock after subtracting (i) the amount of the

Series B Liquidation Preference to be distributed to the holders of shares of

Series B Preferred Stock as provided in the previous sentence and (ii) the

amount of the Common Adjustment to be distributed to the holders of shares of

Common Stock, as provided in the next sentence, in the ratio of the Adjustment

Number (as defined below) to one (1) with respect to all outstanding shares of

Preferred Stock and Common Stock, on a per share basis, respectively. Following

the payment of the full amount of me Series B Liquidation Preference and the

Series B Pro Rata Liquidation Preference, the holders of shares of Common Stock

shall receive an amount per share (the "Common Adjustment") equal to the

quotient obtained by dividing (i) the Series B Liquidation Preference by (ii)

one thousand (1,000) (as appropriately adjusted as set forth in paragraph (C) of

this Section to reflect such events as stock spirits, stock dividends and

recapitalizations with respect to the Common Stock) (such number in clause (ii)

immediately above being referred to as the "Adjustment Number"). Following the

payment of the full amount of the Series B Liquidation Preference, the Series B

Pro Rata Liquidation Preference and the Common Adjustment in respect of all

outstanding shares of Series B Preferred Stock and Common Stock, respectively,

holders of shares of Common Stock shall receive their ratable and proportionate

share of the remaining assets to be distributed.

 

                  (B)      In the event, however, that there are not sufficient

assets available to permit payment in full of the Series B Liquidation<