<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PENNACO ENERGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
Pennaco Energy, Inc.
1050 17th Street
Suite 700
Denver, Colorado 80265
April 14, 2000
To Our Stockholders:
You are cordially invited to attend the year 2000 Annual Meeting of
Stockholders of Pennaco Energy, Inc., to be held on Tuesday, May 16, 2000, at
9:00 a.m., Mountain Time, at The Westin Tabor Center located at 1672 Lawrence
Street, Denver, Colorado. A notice of the meeting, proxy statement, and form of
proxy are enclosed with this letter.
At the meeting, we will report on the progress of the Company, comment on
matters of interest and respond to your questions. A copy of the Company's
Annual Report to Stockholders for the 1999 fiscal year accompanies this mailing.
Stockholders can vote their shares by proxy by marking their votes on the
proxy/voting instructions card, or by attending the meeting in person.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. EVEN IF YOU
PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL READ THE ENCLOSED PROXY
STATEMENT AND THE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD AND THEN VOTE
BY COMPLETING, SIGNING, DATING AND MAILING THE PROXY CARD IN THE ENCLOSED,
POSTAGE PRE-PAID ENVELOPE. You may vote your shares in person if you attend the
Annual Meeting thereby canceling any proxy previously given. If your shares are
not registered in your own name and you would like to attend the meeting, please
ask the broker, trust, bank or other nominee that holds the shares to provide
you with evidence of your share ownership.
We appreciate your interest in the Company.
Sincerely,
Gregory V. Gibson
Vice President-Legal and Secretary
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2000
TO THE STOCKHOLDERS OF PENNACO ENERGY, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Pennaco
Energy, Inc. (the "Company") will be held at The Westin Tabor Center located at
1672 Lawrence Street, Denver, Colorado on Tuesday, May 16, 2000 at 9:00 a.m.,
Mountain Time, for the following purposes:
1. to elect one Class I director until his successor is duly elected and
qualified;
2. to approve a proposal to change Pennaco's state of incorporation from
Nevada to Delaware, through a merger of the Company into its wholly-owned
subsidiary, and all of the effects of a reincorporation, including (a) the
conversion of the Company's outstanding securities into corresponding securities
of the surviving corporation and (b) certain amendments to the Company's
Articles of Incorporation necessary to conform to Delaware corporate law, as
described in the accompanying Proxy Statement;
3. to approve an amendment to the Company's 1998 Stock Option and
Incentive Plan, as amended (the "Plan"), to increase the number of shares of
the Company's common stock, par value $.001 per share (the "Common Stock"),
reserved for issuance thereunder from 4,500,000 shares to 5,500,000 shares;
6. to ratify the appointment of KPMG LLP as independent certified public
accountants for the 2000 fiscal year; and
7. to transact such other business as may properly come before the
meeting or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on March 17, 2000 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the meeting and at any postponement or adjournment thereof. A list of
such stockholders will be available during normal business hours at the offices
of the Company for inspection at least ten days prior to the Annual Meeting.
You are cordially invited to attend this meeting.
By order of the Board of Directors,
Gregory V. Gibson
Vice President, Legal and Secretary
Denver, Colorado
April 14, 2000
<PAGE>
PENNACO ENERGY, INC.
1050 17TH STREET
SUITE 700
DENVER, COLORADO 80265
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
General Information
This statement (the "Proxy Statement") is being furnished in connection
with the solicitation of proxies by the Board of Directors of Pennaco Energy,
Inc. ("Pennaco" or the "Company") for use at the Annual Meeting of Stockholders
of the Company to be held at The Westin Tabor Center, 1672 Lawrence Street,
Denver, Colorado on Tuesday, May 16, 2000, at 9:00 a.m., Mountain Time, and at
any postponement or adjournment thereof (the "Annual Meeting"). The Annual
Meeting is being held for the purposes set forth in this Proxy Statement. This
Proxy Statement and the enclosed form of proxy (the "Proxy Card") are first
being mailed on or about April 14, 2000.
Proxy Card
The shares represented by any Proxy Card which is properly executed and
received by the Company prior to or at the Annual Meeting (each, a "Conforming
Proxy") will be voted in accordance with the specifications made thereon.
Conforming Proxies that are properly signed and returned but on which no
specifications have been made by the stockholder will be voted in favor of the
proposals described in the Proxy Statement. The Board of Directors is not aware
of any matters that are expected to come before the Annual Meeting other than
those described in the Proxy Statement. However, if any other matters are
properly brought before the Annual Meeting, the persons named in the Proxy Card
will vote the shares represented by each Conforming Proxy on those matters as
instructed by the Board of Directors, or in the absence of express instructions
from the Board of Directors, in accordance with their own best judgment. A
stockholder who has executed and delivered a Conforming Proxy may revoke that
Conforming Proxy at any time before it is voted by:
- executing a new proxy with a later date and delivering the new
proxy to the Secretary of the Company;
- voting in person at the Annual Meeting; or
- giving record of written notice of the revocation to the
Secretary of the Company.
Quorum and Other Matters
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the issued and outstanding shares of Common Stock, is necessary
and sufficient to constitute a quorum. Shares of Common Stock represented by
Conforming Proxies will be counted as present at the Annual Meeting for purposes
of determining a quorum, without regard to whether the proxy is marked as
casting a vote or abstaining. Shares of Common Stock held by nominees that are
voted on at least one matter coming before the Annual Meeting will also be
counted as present for purposes of determining a quorum, even if the beneficial
owner's discretion has been withheld (a "broker non-vote") for voting on some or
all other matters.
-1-
<PAGE>
The Director will be elected by a favorable vote of a plurality of the
shares of Common Stock present, in person or by proxy, at the Annual Meeting and
entitled to vote. Accordingly, abstentions and broker non-votes will not affect
the outcome of the election of directors.
All other matters to come before the Annual Meeting require the approval of
a majority of the shares of Common Stock present, in person or by proxy, at the
Annual Meeting and entitled to vote. Therefore, abstentions will have the same
effect as votes against the proposals on such matters. Broker non-votes,
however, will be deemed shares not present to vote on such matters, and
therefore will not count as votes for or against the proposals, and will not be
included in calculating the number of votes necessary for approval of such
matters.
Solicitation of Proxies
This solicitation of proxies is being made by the Board of Directors of the
Company and all expenses of this solicitation will be borne by the Company. The
Company expects to reimburse brokerage houses, banks, and other fiduciaries for
reasonable expenses of forwarding proxy materials to beneficial owners.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The outstanding voting securities of the Company consist entirely of shares
of Common Stock. Each share of Common Stock entitles its owner to one vote upon
each matter to come before the Annual Meeting. Only stockholders of record at
the close of business on March 17, 2000 (the "Record Date") will be entitled to
vote at the Annual Meeting and at any postponement or adjournment thereof. At
the close of business on the Record Date, the Company had outstanding 19,086,440
shares of Common Stock.
Security Ownership of Certain Beneficial Owners
To the Company's knowledge, the following persons are the only persons who
are beneficial owners of more than five percent of the Company's Common Stock
based on the number of shares outstanding on March 17, 2000:
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Class(1)
---------------- ---------------- -------------------
<S> <C> <C>
Franklin Resources, Inc. 2,027,700(2) 10.6%
777 Mariners Island Blvd.
San Mateo, CA 94404
Centennial Energy Partners, L.L.C. 1,883,100(3) 9.9%
900 Third Ave., Suite 1801
New York, New York 10022
R.I.S. Resources International Corp. 1,250,000 6.6%
609 West Hastings Street, 11th Floor
Vancouver, British Columbia V 6B 4W4, Canada
</TABLE>
______________
(1) For purposes of computing the percentage of outstanding shares held by
each person or group of persons named above, any security which such
person or persons has the right to acquire within 60 days after March 17,
2000 is deemed to be outstanding, but is not deemed to be outstanding in
computing the percentage ownership of any other person.
-2-
<PAGE>
(2) Pursuant to a Schedule 13G filed January 28, 2000, the shares
beneficially owned by Franklin Resources, Inc. are beneficially owned by
one or more open or closed-end investment companies or other managed
accounts which are advised by direct and indirect investment advisory
subsidiaries (the "Adviser Subsidiaries") of Franklin Resources, Inc.
("FRI"). Such advisory contracts grant to such Adviser Subsidiaries all
investment and/or voting power over the securities owned by such advisory
clients. Therefore, such Adviser Subsidiaries may be deemed to be, for
purposes of Rule 13d-3 under the Securities Exchange Act of 1934, the
beneficial owner of the securities covered by this statement.
Beneficial ownership by investment advisory subsidiaries and other
affiliates of FRI is being reported in conformity with the guidelines
articulated by the SEC staff in Release No. 34-39538 (January 12, 1998)
relating to organizations, such as FRI, where related entities exercise
voting and investment powers over the securities being reported
independently from each other. The voting and investment powers held by
Franklin Mutual Advisers, LLC ("FMA"), formerly Franklin Mutual Advisers,
Inc., an indirect wholly owned investment advisory subsidiary of FRI, are
exercised independently from FRI and from all other investment advisor
subsidiaries of FRI (FRI, its affiliates and investment advisor
subsidiaries other than FMA are collectively referred to herein as "FRI
affiliates"). Furthermore, FMA and FRI internal policies and procedures
establish informational barriers that prevent the flow between FMA and
the FRI affiliates of information that relates to the voting and
investment powers over the securities owned by their respective advisory
clients. Consequently, FMA and the FRI affiliates are each reporting the
securities over which they hold investment and voting power separately
from each other.
Charles B. Johnson and Rupert H. Johnson, Jr. (the "Principal FRI
Shareholders") each own in excess of 10% of the outstanding Common Stock
of FRI and are the principal shareholders of FRI. FRI and the Principal
FRI Shareholders may be deemed to be, for purposes of Rule 13d-3 under
the 1934 Act, the beneficial owner of securities held by persons and
entities advised by FRI subsidiaries. FRI, the Principal FRI
Shareholders and each of the Adviser Subsidiaries disclaim any economic
interest or beneficial ownership in any of the securities covered by this
statement.
(3) Pursuant to a Schedule 13G filed March 7, 2000, the shares beneficially
owned by Centennial Energy Partnership, L.L.C. may also be attributed to
Peter K. Seldin. Mr. Seldin is the managing member of Centennial Energy
Partners, L.L.C. and has been delegated the authority to vote and dispose
of the 1,883,100 shares of Common Stock it beneficially owns.
-3-
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares of Common Stock of
the Company beneficially owned as of March 17, 2000 by each of the directors,
each of the named executive officers, and by all directors and executive
officers as a group. Unless otherwise noted, each of the named persons and
members of the group has sole voting and investment power with respect to the
shares shown. Unless otherwise noted, each person's address is c/o Pennaco
Energy, Inc., 1050 17th Street, Suite 700, Denver, Colorado 80265.
<TABLE>
<CAPTION>
Shares of the Percent of the
Name of Beneficial Owner (1) Company's Common Stock Company's Common Stock (2)
---------------------------- ---------------------- --------------------------
<S> <C> <C>
Paul M. Rady 1,157,144(3) 6.1%
Glen C. Warren, Jr. 463,228(4) 2.4%
Gregory V. Gibson 135,000(5) *
Terrell A. Dobkins 93,750(6) *
David W. Lanza 67,500(7) *
Brian A. Kuhn 56,250(8) *
All officers and directors as a group 1,972,872(9) 10.3%
(seven persons)
</TABLE>
______________
* Represents less than 1% of the Common Stock outstanding.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days of March 17, 2000 upon the exercise
of warrants or options. Each beneficial owner's percentage ownership is
determined by assuming that options or warrants that are held by such
person (but not those held by any other person) and which are exercisable
within 60 days of March 17, 2000 have been exercised.
(2) Assumes 19,086,440 shares outstanding plus, for each individual, any
securities that specific person has the right to acquire upon exercise of
presently exercisable stock options and options that are exercisable within
60 days of March 17, 2000. Options and warrants held by persons other than
the specific individual for whom an ownership interest percentage is being
calculated are not considered in calculating that specific individual's
ownership interest percentage.
(3) Includes 100,000 shares issuable upon the exercise of presently exercisable
stock options, exercisable at a price of $2.50 per share, 100,000 shares
issuable upon the exercise of presently exercisable stock options
exercisable at $3.19 per share and 100,000 shares issuable upon the
exercise of presently exercisable stock options exercisable at a price of
$5.00 per share
(4) Includes 50,000 shares issuable upon the exercise of presently exercisable
stock options exercisable at a price of $2.50 per share, 38,228 shares
issuable upon the exercise of presently exercisable stock options
exercisable at $3.25 per share, 62,500 shares issuable upon the exercise of
presently exercisable stock options exercisable at $3.19 per share and
50,000 shares exercisable upon the exercise of presently exercisable stock
options exercisable at $5.00 per share.
(5) Includes 100,000 shares issuable upon the exercise of presently exercisable
stock options exercisable at a price of $1.25 per share and 35,000 shares
issuable upon the exercise of presently exercisable stock options
exercisable at a price of $3.19 per share. Mr. Gibson's address is 2 Park
Plaza, Suite 450, Irvine, California 92614.
(6) Includes 27,404 shares issuable upon the exercise of presently exercisable
stock options exercisable at $3.25 per share and 31,250 shares issuable
upon the exercise of presently exercisable stock options exercisable at
$3.19 per share.
-4-
<PAGE>
(7) Includes 15,000 shares issuable upon the exercise of presently exercisable
stock options exercisable at a price of $3.19 per share. Mr. Lanza's
address is 710 3rd Street, Marysville, California 95901.
(8) Includes 25,000 shares issuable upon the exercise of presently exercisable
stock options exercisable at $3.25 per share, 12,500 shares issuable upon
the exercise of presently exercisable stock options exercisable at $2.50
per share and 18,750 shares issuable upon the exercise of presently
exercisable stock options at $3.19 per share.
(9) Includes 699,382 shares issuable upon the exercise of presently exercisable
stock options.
PROPOSAL 1
ELECTION OF DIRECTOR
The Company's Amended and Restated Articles of Incorporation and bylaws
provide that the number of directors on the Board shall be fixed from time to
time by the Board of Directors but shall not be less than one nor more than nine
persons. The Articles of Incorporation divides the Board of Directors into
three classes, designated as Class I, Class II and Class III. Each class of
directors is to be elected to serve a three-year term and is to consist, so far
as possible, of one-third of the number of directors required at the time to
constitute a full Board. If the number of directors is not evenly divided into
thirds, the Board of Directors shall determine which class or classes shall have
one extra director. The Board of Directors presently consists of five
directors, one in Class I, two in Class II and two in Class III, whose terms of
office expire with the 2000, 2001 and 2002 annual meetings, respectively, and
until their successors are elected and qualified.
The term of office of the current Class I Director expires at the time of
the 2000 Annual Meeting of Stockholders, or as soon thereafter as his successor
is elected and qualified. Mr. Petersen has been nominated to serve an
additional three-year term as Class I Director to be elected by the holders of
the Common Stock. Mr. Petersen has consented to be named in this Proxy
Statement and to serve as a director if elected.
It is the intention of the persons named in the accompanying proxy card to
vote for the election the nominee named below unless a stockholder has withheld
such authority. The affirmative vote of holders of a plurality of the Common
Stock present in person or by proxy at the 2000 Annual Meeting of Stockholders
and entitled to vote is required for election of the nominee.
If, at the time of or prior to the 2000 Annual Meeting of Stockholders, the
nominee should be unable or decline to serve, the discretionary authority
provided in the proxy may be used to vote for a substitute designated by the
Board of Directors. The Board of Directors has no reason to believe that any
substitute nominee will be required. No proxy will be voted for a greater
number of persons than the number of nominees named herein.
Director Nominee - Class I Director (Term expiring at the 2003 Annual Meeting
of Stockholders)
KURT M. PETERSEN DIRECTOR SINCE 1999
Mr. Petersen is a partner in the natural resources department of Davis,
Graham & Stubbs, LLP, a Denver law firm. Mr. Petersen has been an attorney
specializing in oil and gas, mining, real estate, tax and environmental issues
for over 14 years and has extensive experience in the acquisition and
divestiture of producing and non-producing oil and gas properties. Mr. Petersen
is also a member of the Board of Trustees of the National Outdoor Leadership
School.
-5-
<PAGE>
REQUIRED VOTE
The nominee shall be elected by a plurality of the votes cast in the
election by the holders of the Common Stock represented and entitled to vote at
the Annual Meeting, assuming the existence of a quorum.
The Board of Directors Recommends a Vote for the Election of Mr. Petersen
-------------------------------------------------------------------------
as a Director
- -------------
Directors Continuing in Office
Class II
The Class II Directors, whose present term of office as directors will
continue after the meeting and expire at the 2001 Annual Meeting of
Stockholders, and certain additional information with respect to each of them,
are as follows:
GLEN C. WARREN, JR. DIRECTOR SINCE 1998
Mr. Warren, Chief Financial Officer and Executive Vice President, joined
the Company in July 1998 as its Chief Financial Officer, Executive Vice
President and Director. Prior to assuming his duties as Pennaco's Chief
Financial Officer, Mr. Warren was an investment banker with Lehman Brothers Inc.
in New York. Prior to Lehman Brothers, Mr. Warren was also an investment banker
with Dillon, Read & Co., Inc. and Kidder, Peabody & Co. Incorporated with a
total of nine years of investment banking experience. Mr. Warren also has six
years of oil and gas exploration and production experience with Amoco Production
Company in New Orleans, Louisiana.
DAVID W. LANZA DIRECTOR SINCE 1998
Mr. Lanza, has been a real estate developer, oil and gas real property and
lease developer, and business owner in California, Nevada, Colorado, Texas and
Wyoming for the past ten years. He is currently the President of Hust Brothers,
a commercial real estate and development company, Vice President and principal
of Hust Brothers Inc., a national automotive wholesale company, and President
and principal of Colusa Motor Sales. Mr. Lanza has majority interest in
Marysville Auto Parts which owns and operates 13 automotive chain stores.
Class III
The Class III Directors, whose present term of office as directors will
continue after the meeting and expire at the 2002 Annual Meeting of
Stockholders, and certain additional information with respect to each of them,
are as follows:
PAUL M. RADY DIRECTOR SINCE 1998
Mr. Rady, Chief Executive Officer and President, became Chairman of the
Board of Directors of Pennaco in September 1999. He joined the Company in June
1998 as its Chief Executive Officer, President and Director. Mr. Rady was with
Barrett Resources Corporation, an oil and gas exploration and production company
listed on the New York Stock Exchange, for approximately eight years. During his
tenure at Barrett, Mr. Rady held various executive positions including his most
recent position as Chief Executive Officer, President and Director. Other
positions held by Mr. Rady were Chief Operating Officer, Executive Vice
President-Exploration, and Chief Geologist-Exploration Manager. Prior to his
employment at Barrett, Mr. Rady was with Amoco Production Company based in
Denver, Colorado for approximately ten years.
-6-
<PAGE>
GREGORY V. GIBSON DIRECTOR SINCE 1998
Mr. Gibson, Vice President-Legal and Secretary, has been an attorney
specializing in securities and securities broker dealerships for over 15 years.
Mr. Gibson is a southern California-based practicing attorney with the law firm
of Gibson, Haglund & Paulsen. Mr. Gibson is also an officer and director of
Ubrandit.com, a southern California based company that provides internet
services. Prior to his present affiliations, Mr. Gibson was corporate counsel
for three years to Global Resource Investment Limited, a southern California-
based broker-dealer specializing in resource and foreign publicly traded
securities. Prior to working at Global, Mr. Gibson was practicing securities and
international law with the law firms of Gibson & Haglund and Gibson, Ogden &
Johnson.
Board of Directors and Board Committees
During 1999, the Company's Board of Directors was comprised of five
directors. The Board of Directors has established an Audit Committee and a
Compensation Committee as its standing committees. The Board of Directors does
not have a nominating committee or any committees performing similar functions.
During fiscal 1999, the Board of Directors held 14 meetings and took
action by written consent on five occasions. During fiscal 1999, the Audit
Committee held two meetings and the Compensation Committee held one meeting.
Each director other than Mr. Petersen, whose term as a director began on
December 7, 1999, attended at least 75% of the total number of Board of
Directors meetings held during the fiscal year.
The Audit Committee consists of Mr. Petersen and Mr. Lanza and the
Compensation Committee consists of Mr. Petersen and Mr. Lanza. The Audit
Committee reviews the financial statements and independent auditors' report
including recommendations for the independent auditors regarding internal
controls and other matters. The Compensation Committee administers management
incentive compensation plans and makes recommendations to the Board with respect
to the compensation of directors and officers of the Company.
-7-
<PAGE>
EXECUTIVE OFFICERS AND OTHER SIGNIFICANT EMPLOYEES
The following sets forth certain information with respect to the executive
officers and other significant employees of the Company as of the date of this
Proxy Statement. All officers of the Company serve at the pleasure of the
Company's Board of Directors until their successors are elected and qualified.
Biographical information for Messrs. Rady, Warren and Gibson can be found above
under the caption "Directors Continuing in Office."
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Paul M. Rady 46 Chairman of the Board, Chief Executive Officer, President
Glen C. Warren, Jr. 44 Chief Financial Officer, Executive Vice President, Director
Gregory V. Gibson 50 Vice President-Legal, Secretary, Director
Terrell A. Dobkins 47 Vice President - Production
Brian A. Kuhn 41 Vice President - Land
</TABLE>
Terrell A. Dobkins, Vice President - Production. Mr. Dobkins has over 20
years experience in the petroleum industry. Mr. Dobkins started his career at
Amoco Production Company where he had extensive experience in Rocky Mountain low
permeability gas reservoirs and worked in operations, completions and reservoir
engineering. Mr. Dobkins worked as a Manager for three years at American Hunter
Exploration where he was involved in all U.S. operations and engineering. More
recently, Mr. Dobkins was employed for eight years by Barrett Resources
Corporation, most recently as Manager of Acquisitions, and was involved in the
development of several projects, including completions, operations and reservoir
engineering.
Brian A. Kuhn, Vice President - Land. Mr. Kuhn has 18 years experience in
the oil and gas industry as a landman. Mr. Kuhn worked as a landman for thirteen
years at Amoco Production Company from June 1980 to April 1993. While at Amoco,
Mr. Kuhn spent three years in the Powder River Basin and other basins of the
Rocky Mountain region. Most recently, Mr. Kuhn was employed as a Division
Landman for five years at Barrett Resources Corporation where he worked in the
Rocky Mountain region and numerous other basins. Mr. Kuhn has extensive
experience in the acquisition of producing properties, testifying as expert
witness before state regulatory agencies, management of lease acquisition and
negotiation of both large and small exploration transactions.
-8-
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth, for fiscal 1998 and 1999, the compensation
paid to the Company's current Chief Executive Officer and its other three most
highly compensated executive officers with annual compensation in excess of
$100,000 for the fiscal year 1999 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------------------- -------------
Securities
Name and Other Annual Underlying
Principal Position Year Salary Compensation(1) Options (#)
- --------------------------- -------- ------------- --------------------- -------------
<S> <C> <C> <C> <C>
Paul M. Rady............... 1999 $178,116 1,277,750
Chairman, Chief Executive 1998 $ 65,077(2)
Officer and President
Glen C. Warren, Jr. ....... 1999 $148,533 830,978
Chief Financial Officer and 1998 $ 46,680(3)
Executive Vice President
Terrell A. Dobkins......... 1999 $134,574 381,250
Vice President - Production 1998 $ 46,465(4)
Brian A. Kuhn.............. 1999 $109,570 250,000
Vice President - Land 1998 $ 41,548(5)
</TABLE>
(1) We recognized non-cash compensation expense relating to restricted Common
Stock and warrants purchased by Mr. Warren, and stock options issued to Mr.
Dobkins and Mr. Kuhn in the third quarter of 1998. This non-cash expense
was recognized in accordance with APB No. 25, "Accounting for Stock Issued
to Employees."
(2) Mr. Rady became an executive officer on June 16, 1998, compensated at an
annual salary of $120,000. Mr. Rady's annual salary was increased to
$180,000 in January 1999.
(3) Mr. Warren became an executive officer on July 2, 1998, compensated at an
annual salary of $100,000. Mr. Warren's annual salary was increased to
$150,000 in January 1999.
(4) Mr. Dobkins became an executive officer on July 6, 1998, compensated at an
annual salary of $95,000. Mr. Dobkin's annual salary was increased to
$120,000 in January 1999.
(5) Mr. Kuhn became an executive officer on July 9, 1998, compensated at an
annual salary of $87,000. Mr. Kuhn's annual salary was increased to
$110,000 in January 1999.
-9-
<PAGE>
Option Grants in Last Fiscal Year
The following table provides information regarding stock options granted to
the Named Executive Officers during fiscal 1999.
<TABLE>
<CAPTION>
Percent of
Total Options
Number of Granted to
Securities Employees as of Exercise
Underlying the Period Ended Price
Name Options Granted December 31, 1999 Per Share Expiration Date(s)
---- --------------- ----------------- --------- ------------------
<S> <C> <C> <C> <C>
Paul M. Rady............ 400,000 31.0% $ 3.19 January 21, 2005 through
January 21, 2008 (1)
27,750(2) 2.2% $11.13 October 20, 2003
50,000 3.9% $ 9.50 December 17, 2005 through
December 17, 2008(1)
Glen C. Warren, Jr...... 250,000 19.4% $ 3.19 January 21, 2005 through
January 21, 2008 (1)
27,750(2) 2.2% $11.13 October 20, 2003
40,000 3.1% $ 9.50 December 17, 2005 through
December 17, 2008(1)
Terrell A. Dobkins...... 125,000 9.7% $ 3.19 January 21, 2005 through
January 21, 2008 (1)
30,000 2.3% $ 9.50 December 17, 2005 through
December 17, 2008(1)
Brian A. Kuhn........... 75,000 5.8% $ 3.19 January 21, 2005 through
January 21, 2008(1)
25,000 1.9% $ 9.50 December 17, 2005 through
December 17, 2008(1)
</TABLE>
- ---------------
(1) Option expiration date is five years subsequent to vesting which occurs
ratably over a four year period from the date of grant.
(2) Anti-dilution provision of employment agreement provides for option
issuance equal to 1% of any new equity issuance with the exercise price
equivalent to the offering price. The Company issued 2,775,000 new shares
at $11.125 per share in a public offering completed on October 20, 1999.
-10-
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised in -
Options Held at the - Money Options Held at
December 31, 1999 December 31, 1999 (1)
----------------------------------------- ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------------- -------------------- ------------- ---------------
<S> <C> <C> <C> <C>
Paul M. Rady............ 200,000 1,077,750 $ 850,000 $ 4,474,000
Glen C. Warren, Jr...... 125,000 705,978 $ 543,750 $ 2,896,583
Terrell A. Dobkins...... 38,750 342,500 $ 184,063 $ 1,534,063
Brian A. Kuhn........... 37,500 212,500 $ 187,500 $ 923,250
</TABLE>
- --------------
(1) Options are "in-the-money" if the closing market price of the Company's
Common Stock exceeds the exercise price of the options. The exercise price
of the options granted to the Named Executive Officers is $2.50-$11.125 per
share. The value of unexercised options for each of the Named Executive
Officers represents the difference between the exercise price of such
options and the closing price of the Company's Common Stock on December 31,
1999 ($8.00 per share).
Employment Agreements
The Company has entered into four-year employment agreements with Paul M.
Rady, who was hired by the Company in June 1998, and Glen C. Warren, Jr., who
was hired in July 1998.
The employment agreement with Mr. Rady provides for bonus compensation
equal to 2% of the Company's net cash flow, participation in the Company's
standard insurance plans for its executives, and participation in the Company's
other incentive compensation programs at the discretion of the Board of
Directors. Mr. Rady's salary has been adjusted by the Board to a current rate
of $180,000 per year. Mr. Rady was granted 400,000 stock options exercisable at
$2.50 per share and 400,000 stock options exercisable at $5.00 per share which
vest ratably over a four-year period commencing in June 1998. Mr. Rady's stock
options are subject to accelerated vesting in the event of his termination
without cause or in the event of a change of control of the Company. The stock
options expire in 2008, subject to earlier termination if the employment is
terminated. If Mr. Rady's employment with the Company is terminated without
cause prior to June 1, 1999, Mr. Rady is entitled to termination compensation of
$2,000,000. If Mr. Rady's employment with the Company is terminated without
cause after June 1, 1999, Mr. Rady is entitled to termination compensation of
$3,000,000. Mr. Rady's employment agreement automatically renews on each
anniversary of the effective date after June 1, 2001 for an additional two years
unless the Company notifies Mr. Rady in writing 90 days prior to such
anniversary that it will not be renewing his employment agreement.
The employment agreement with Mr. Warren provides for bonus compensation of
$150,000 for 1999 and equal to 1% of the Company's net cash flow thereafter,
participation in the Company's standard insurance plans for its executives, and
participation in the Company's other incentive compensation programs at the
discretion of the Board of Directors. Mr. Warren's salary has been adjusted by
the Board to a current rate of $150,000 per year. Mr. Warren was granted
200,000 stock options exercisable at $2.50 per share, 100,000 stock options
exercisable at $3.25 per share, and 200,000 stock options exercisable at $5.00
per share which vest ratably over a four-year period commencing in July 1998.
The stock options expire in 2008. Mr. Warren's stock options are subject to
accelerated vesting in the event of his termination without cause or in the
event of a change of control of the Company. If Mr. Warren's employment with
the Company is terminated without cause prior to July 1, 1999, Mr. Warren is
entitled to termination compensation of $400,000. If Mr. Warren's employment
with the Company is terminated without cause after July 1, 1999 but before July
1, 2000, Mr. Warren is entitled to termination compensation of $750,000. If Mr.
Warren's employment with the Company is terminated without cause after July 1,
2000, Mr. Warren is entitled to termination
-11-
<PAGE>
compensation of $1,250,000. Mr. Warren's employment agreement automatically
renews on each anniversary of the effective date after June 1, 2002 for an
additional year, unless the Company notifies Mr. Warren in writing 90 days prior
to such anniversary that it will not be renewing his employment agreement.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company are not paid any fees or
additional compensation for services rendered as members of the Board of
Directors or any committee thereof. Directors who are not employees of the
Company receive a fee of $20,000 annually.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of Mr. Lanza and Mr. Petersen, each of whom is a non-employee director
of the Company.
The Committee reviews and approves executive compensation, makes grants of
long-term incentives, and determines the compensation to be paid to the Chief
Executive Officer and each of the other officers of the Company. The goal of the
executive compensation program is to reward executives for their performance and
enhancement of stockholder value.
The Company's executive compensation program is designed to attract and
retain executives who are key to the long-term success of the Company and align
compensation with the attainment of the Company's business goals and the
increase of share value. The Company uses the same philosophy as the Committee
in establishing compensation for employees other than officers.
Executive compensation consists of (i) salary, (ii) annual performance
bonuses, and (iii) long-term incentives. The Committee reviews executive
compensation annually and makes appropriate adjustments based on (i) Company
performance, (ii) individual performance and (iii) changes in an executive's
duties and responsibilities.
Salary. The Committee desires that overall compensation reflect the
performance of each individual executive over time. Base salaries are set at
levels subjectively determined by the Committee to adequately reward and retain
capable executives, including the President and Chief Executive Officer. The
Committee considers the importance of and skills required in a particular
executive position in establishing salary.
At the beginning of each fiscal year, the Committee reviews and establishes
the annual salary of each officer, including the Chief Executive Officer. The
Committee makes an independent, subjective determination of the appropriate
level of each officer's salary to determine such amount or if a salary has been
fixed by contract which limits decreases, to determine the amount of the
increase, if any. The Committee does not use any mechanical formulations or
weighting of any of the factors considered.
Annual Performance Incentives. The Company has established an annual bonus
plan for the Chief Executive Officer and Chief Financial Officer that is based
on net cash flows.
Long Term Incentives. In an effort to properly align the long-term
interests of the Company's management and stockholders, the Committee may make
awards under the Plan, which was approved by the Company's full board on March
24, 1998. The aggregate number of shares which may be issued under the Plan to
all officers, directors and employees is 4,500,000. The Committee believes that
the Plan enables the Company to attract and retain the highest quality managers.
Under the Plan, the Committee is responsible for establishing who receives
awards, the terms of the awards, requisite conditions and the size of the
awards. Awards to any recipient are made by a subjective determination by the
Committee, which considers the person's past performance and current
responsibilities, as well as the amount of awards previously made to that
person.
-12-
<PAGE>
CEO Compensation. Mr. Rady was elected President and Chief Executive
Officer in June of 1998 and his salary was established at $120,000 to reflect
his duties. Mr. Rady's annual salary was increased to $180,000 in January of
1999.
Section 162(m) of the Internal Revenue Code of 1986 places a limit of
$1,000,000 on the amount of compensation that may be deducted by the Company in
any one fiscal year with respect to the Chief Executive Officer and the other
four most highly compensated individuals who are executive officers as of the
end of the fiscal year. This deduction limitation, however, does not apply to
certain "performance based" compensation. The Committee intends to generally
design and implement compensation plans that qualify for full deductibility in
accordance with Section 162(m). The Company, however, may from time to time pay
other compensation to its executive officers that may not be deductible.
Respectfully Submitted,
David W. Lanza
Kurt M. Petersen
-13-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Petersen is a partner in the law firm of Davis, Graham & Stubbs, LLP.
During 1999, Davis, Graham provided various legal services to the Company. The
fees for such services in 1999 equaled approximately $286,000.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During fiscal 1999, no executive officer of the Company served as (1) a
member of the compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee, the entire board
of directors) of another entity, one of whose executive officers served on the
Board of Directors of the Company, or (2) a director of another entity, one of
whose executive officers served on the Board of Directors of the Company or its
subsidiaries.
During fiscal 1999, no member of the compensation committee (or board
committee performing equivalent functions) (1) was an officer or employee of the
Company or (2) was formerly an officer of the Company. Mr. Petersen, a member
of the compensation committee, is a partner with the law firm Davis, Graham &
Stubbs, LLP. During 1999, Davis, Graham provided various legal services to the
Company. See "Certain Relationships and Related Transactions," above.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who beneficially own
more than ten percent of the Company's Common Stock, to file reports of their
beneficial ownership (Forms 3, 4, and 5, and any amendment thereto) with the
Securities and Exchange Commission. Executive officers, directors, and greater-
than-ten percent holders are required to furnish the Company with copies of the
forms that they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers and directors were complied with during its fiscal year
1999 with the following exceptions:
- Mr. Rady failed to file a timely initial report on Form 4, but the
required report has been subsequently filed;
- Mr. Warren failed to file a timely initial report on Form 4, but the
required report has been subsequently filed; and
- Mr. Lanza failed to file a timely initial report on Form 4, but the
required report has been subsequently filed.
-14-
<PAGE>
STOCK PERFORMANCE GRAPH
The following performance graph compares the Company's cumulative total
stockholder return on its Common Stock with the cumulative total return on (1)
the American Stock Exchange Market Value Index and (2) the S&P 600 Oil and Gas
(Exploration and Production) Index as a peer group stock index (the "Peer Group
Index") which consists of fifteen publicly traded companies in the same industry
or line-of-business as the Company. The cumulative total return computations set
forth in the Performance Graph assume the investment of $100 in the Company's
Common Stock, the American Stock Exchange Market Value Index and the Peer Group
Index on January 1, 1999. The Company is listed on the American Stock
Exchange. The Company believes that the comparison for 1999 to the American
Stock Exchange Market Value Index is appropriate.
The Performance Graph and related description shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference and shall not otherwise
be deemed filed with the Securities and Exchange Commission.
[PERFORMANCE GRAPH APPEARS HERE]
35977 12/98 12/99
---------------------------------------------
Pennaco Energy, Inc. 100 101.74 224.53
---------------------------------------------
Peer Group 100 61.78 80.7
---------------------------------------------
Amex Market Value 100 95.9 124.12
---------------------------------------------
-15-
<PAGE>
PROPOSAL 2
APPROVAL OF A CHANGE IN THE COMPANY'S STATE OF INCORPORATION FROM NEVADA
TO DELAWARE INCLUDING RELATED CHANGES TO THE ARTICLES OF INCORPORATION
AND BYLAWS
Reincorporation in Delaware
For the reasons set forth below, the Board of Directors believes that it
is in the best interests of the Company and its stockholders to change the state
of incorporation of the Company from Nevada to Delaware. Stockholders are urged
to read this section of the Proxy Statement and the exhibits carefully before
voting on the reincorporation proposal. Throughout the Proxy Statement, the
terms the "Company," "Pennaco" or "Pennaco Nevada" refer to the existing Nevada
corporation and the terms "Delaware Company" or "Pennaco Delaware" refer to
Pennaco Energy, Inc., a Delaware corporation and a wholly-owned subsidiary of
the Company. Pennaco Delaware is the proposed successor to the Company.
The Board of Directors believes reincorporation in Delaware will allow it
to more effectively perform its duties. Although the Nevada General Corporation
Law, or Nevada GCL, is similar to Delaware General Corporation Law, or Delaware
GCL, there is a lack of predictability under Nevada corporate law resulting from
the limited body of case law interpreting the Nevada GCL. The Delaware GCL and
the court decisions construing it, on the other hand, are widely regarded as the
most extensive and well-defined body of corporate law in the United States. This
body of case law is based in part on Delaware's long-established policy of
encouraging companies to incorporate in that state. In furtherance of that
policy, Delaware has been a leader in adopting comprehensive, modern and
flexible corporate laws that are periodically updated and revised to meet
changing business needs. As a result, many major corporations have initially
chosen Delaware for their corporate domicile or have subsequently reincorporated
in Delaware in a manner similar to that proposed by Pennaco. The Delaware
courts have also developed considerable expertise in dealing with corporate
issues, and a substantial body of case law has developed construing Delaware
corporate law and establishing public policies with respect to corporate legal
issues. For example, relative to other states, Delaware provides greater
guidance to directors in the context of dealing with major transactions, along
with more general corporate matters. The Board of Directors believes that the
overall effect of the reincorporation will be to enhance its ability to consider
all appropriate courses of action with respect to significant transactions for
the benefit of all stockholders. Moreover, the Board believes that enhanced
certainty with respect to the duties of directors is a significant benefit to
Pennaco and its stockholders and could be an important factor in attracting and
retaining quality persons to serve on the Board of Directors.
At the effective time of the Reincorporation Merger, Pennaco Delaware will
be governed by the Delaware GCL, by the Delaware Certificate attached as Annex B
and the Bylaws attached as Annex C. With certain exceptions, Delaware corporate
law is substantially similar to Nevada corporate law. Material differences in
stockholder rights and the powers of management between the Delaware law and the
Nevada law are discussed below under "Material Differences Between the
Corporation Laws of Delaware and Nevada." Except for the changes required to
conform to applicable Delaware law, the Delaware Certificate will be
substantially similar to the Nevada Articles. See "Differences Between the
Charters of Pennaco Nevada and Pennaco Delaware," below.
Certain Consequences of the Reincorporation Merger
The reincorporation merger will not result in any change in our business,
management, assets, liabilities or net worth. We will continue to maintain our
principal executive offices in Denver, Colorado. The capitalization,
consolidated financial condition and results of operations of Pennaco Delaware
immediately after the consummation of the reincorporation merger will be the
same as those of Pennaco immediately prior to the consummation of the
reincorporation merger. Consummation of the reincorporation merger is subject
to stockholder approval. Upon satisfaction of that condition, and the
satisfaction or waiver of the other conditions precedent to the reincorporation
merger, the reincorporation merger will be consummated as follows:
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<PAGE>
Effective Date. The reincorporation merger will take effect at the later
of the date on which a certificate of Merger is filed with the Secretary of
State of Delaware and Articles of Merger are filed with the Secretary of State
of Nevada (the "Effective Date"), which filing is anticipated to be made as soon
as practicable after the approval of the merger agreement attached as Annex A by
the Stockholders, and fulfillment or waiver of the other conditions to the
reincorporation merger. On the effective date, the separate corporate existence
of the Company will cease, and stockholders of Pennaco Nevada will become
stockholders of Pennaco Delaware governed by Delaware corporate law, the
Delaware Certificate and the Delaware Bylaws.
Management After the Reincorporation Merger. On the effective date, the
Board of Directors of Pennaco Delaware will consist of those persons then
serving as directors of Pennaco Nevada. The directors will continue to hold
office as directors of Pennaco Delaware for the same term for which they would
otherwise serve as directors of Pennaco Nevada. The individuals serving as
executive officers of Pennaco Nevada will serve as executive officers of Pennaco
Delaware.
Warrants; Stock Option Plans; Stock Option Agreement. The Company has
warrants outstanding to purchase 90,000 shares of Pennaco Nevada Common Stock.
Each warrant outstanding immediately prior to the reincorporation merger will
become entitled to purchase the same number of shares of Pennaco Delaware Common
Stock upon the same terms and conditions as in effect immediately prior to the
effective date. Our stock option plan will not be changed in any material
respect by the reincorporation merger. Each option to purchase shares of
Pennaco Nevada Common Stock outstanding immediately prior to the reincorporation
merger pursuant to the Stock Option Plan will become entitled to purchase the
same number of shares of the Pennaco Delaware Common Stock upon the same terms
and conditions as in effect immediately prior to the effective date. Pennaco
Nevada currently has an effective registration statement under the Securities
Act under which shares of Pennaco Nevada Common Stock are issuable upon the
exercise of the stock options. Pennaco Nevada also has an effective
registration statement under the Securities Act under which certain shares of
Pennaco Nevada Common Stock purchased in several private placements may be
resold. We intend to file amendments to these registration statements to
continue the registration of these shares.
Indebtedness of the Company. All indebtedness of Pennaco Nevada
outstanding on the effective date will be assumed by Pennaco Delaware in
connection with the reincorporation merger. No indebtedness of Pennaco Nevada
will be accelerated as a result of the proposed transaction.
Amendment, Deferral or Termination of the Merger Agreement. The merger
agreement provides that the Boards of Directors of Pennaco Nevada and Pennaco
Delaware may amend the merger agreement prior to or after approval of the
reincorporation merger by the stockholders but not later than the effective
date. However, no amendment may be made that is not approved by the
stockholders if such approval is required by applicable law. The merger
agreement also provides that the Board of Directors may terminate and abandon
the reincorporation merger or defer its consummation for a reasonable period,
notwithstanding stockholder approval, if in the opinion of the Board of
Directors, the action would be in the best interests of Pennaco.
Material Federal Income Tax Consequences
The following is a discussion of the material federal income tax
consequences that are expected to result to the holders of Pennaco common stock
who receive Pennaco Delaware common stock in exchange for their shares of
Pennaco common stock pursuant to the reincorporation merger. This discussion
does not intend to deal with all aspects of federal income taxation that may
affect particular stockholders in light of their individual circumstances and,
in particular, does not address tax considerations that may affect the treatment
of certain special status taxpayers such as stockholders who are dealers in
securities, who acquired their Pennaco common stock through stock option or
stock purchase programs or other employee plans and foreign taxpayers. In
addition, no information is provided in this discussion with respect to tax
considerations under any applicable foreign, state or local laws. This
discussion is based upon current law. Future legislative, judicial or
administrative changes or interpretations could alter or modify the
-17-
<PAGE>
following statements and conclusions, and any of these changes or
interpretations could be retroactive and could affect the tax consequences to
stockholders.
No ruling from the IRS or an opinion of counsel concerning the federal
income tax consequences of the reincorporation merger has been or will be
requested. The consequences described in this discussion are not binding on the
IRS or the courts and no assurance can be given that contrary positions will not
be successfully asserted by the IRS or adopted by a court if the issues are
litigated. Stockholders are urged to consult their own tax advice advisors to
determine their particular United States federal, state, local or foreign income
or other tax consequences of approval of the reincorporation merger.
The reincorporation merger is intended to qualify as a reorganization under
Section 368(a)(1)(F) of the Internal Revenue Code. Accordingly, stockholders
will not recognize gain or loss with respect to the receipt of Pennaco Delaware
common stock in exchange for Pennaco common stock pursuant to the
reincorporation merger. Each stockholder will have an aggregate tax basis in
the Pennaco Delaware common stock received equal to his aggregate tax basis in
the Pennaco common stock surrendered pursuant to the reincorporation merger.
The holding period of the Pennaco Delaware common stock received by a
stockholder as a result of the reincorporation merger will include the holding
period of the Pennaco common stock surrendered in exchange therefor, provided
that the Pennaco common stock was held as a capital asset by the stockholder.
A stockholder who exercises dissenters rights with respect to his Pennaco
common stock and receives payment for those shares in cash ordinarily will
recognize capital gain or loss on the disposition of the Pennaco common stock
measured by the difference between the amount of cash received for the
dissenting shares and the stockholder's tax basis in the dissenting shares.
That capital gain or loss will be long-term or short-term depending on the
stockholder's holding period for the shares. However, different tax
consequences, including treatment of the payment as ordinary income and the
equivalent of a dividend distribution, could apply depending on the
stockholder's particular circumstances, including whether he is deemed under any
applicable attribution rules to own Pennaco common stock held by related
parties. Accordingly, stockholders should consult their own tax advisors as to
the income tax consequences of exercising dissenters rights under their
particular circumstances.
Differences Between the Charters of Pennaco Nevada and Pennaco Delaware
Except for changes conforming to applicable Delaware law, the provisions of
the Delaware Certificate and the Delaware Bylaws will be substantially similar
to the provisions of the Nevada Articles and the Nevada Bylaws. The
indemnification provisions of the Nevada Articles have been changed in the
Delaware Certificate to allow Pennaco Delaware to indemnify its officers and
directors to the fullest extent permitted by the Delaware GCL. A copy of the
Certificate of Incorporation is attached hereto as Annex B.
Material Differences Between the Corporation Laws of Delaware and Nevada
In many respects, Nevada corporate law is substantially similar to Delaware
corporate law. Although it is impractical to note all of the differences between
the corporation statutes of Delaware and Nevada, the most significant
differences, in the judgment of our management, are summarized below. The
summary is not intended to be complete and reference should made to the Delaware
GCL and the Nevada GCL.
Indemnification of Officers and Directors and Advancement of Expenses.
Delaware and Nevada have substantially similar provisions permitting a
corporation to indemnify its officers, directors, employees and agents, except
that Nevada permits broader indemnification in connection with stockholder
derivative lawsuits.
The Delaware GCL and Nevada GCL both provide that expenses incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of the action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director
-18-
<PAGE>
or officer to repay the amount if it is ultimately determined that he is not
entitled to be indemnified by the corporation. The Delaware GCL and Nevada GCL
also provide that the right to indemnification provided by the respective
statutory provisions are not exclusive of other rights under other agreements to
indemnification or advancement of expenses, provided that applicable standards
of the statutes are met.
The Nevada Articles provide that Pennaco Nevada must indemnify the
directors and officers of Pennaco Nevada to the extent permitted under Nevada
GCL. Thus, upon satisfaction of the applicable standard, Pennaco Nevada has no
discretion to decide whether or not to indemnify a director or officer. In
addition, the Nevada Articles provide that expenses must be advanced upon
receipt of an undertaking in appropriate circumstance and, similarly, upon
receiving an appropriate undertaking, Pennaco has no discretion to decide
whether or not to advance expenses. The indemnification provisions of the
Nevada Articles have been changed in the Delaware Certificate to allow Pennaco
Delaware to indemnify its officers and directors to the extent permitted by
Delaware corporate law.
Limitation on Personal Liability of Directors and Officers. Delaware
corporations are permitted to adopt provisions in their Certificate of
Incorporation that eliminate the liability of a director to a corporation and
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that the liability does not arise from certain
proscribed conduct, including breach of the duty of loyalty, acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law or liability to the corporation based on unlawful dividends or
distributions or improper personal benefit. Nevada GCL has a similar provision.
However, the Nevada provision applies to both directors and officers and, while
the Delaware provision excepts from limitation on liability a breach of the duty
of loyalty, the Nevada counterpart does not. Thus, the Nevada provision permits
a corporation to limit the personal liability of directors and officers arising
from a breach of the duty of loyalty, except where such a breach would also be a
breach of a standard for which liability may not be limited.
The Delaware Certificate, like the Nevada Articles, contains a provision
limiting the personal liability of directors. However, unlike the Delaware
Certificate, the Nevada Articles also limit the liability of officers. Under
the laws of either state, the charter provision will not have any effect on the
availability of equitable remedies such as an injunction or recission based upon
a breach of the duty of care, or on liabilities which arise under certain
federal statutes such as the securities laws.
Dividends. The Company is prohibited from paying dividends under the
Company's credit agreement with US Bank, and neither Pennaco Nevada nor Pennaco
Delaware currently intends to pay dividends or make any other distributions on
its capital stock. Nevertheless, the difference between the Delaware GCL and
the Nevada GCL with respect to amounts available for dividends or other
distributions could affect future dividends or other distributions, if any are
declared. Under Delaware corporate law, unless otherwise provided in the
certificate of incorporation, a corporation may declare and pay dividends out of
surplus or, if no surplus exists, out of net profits for the fiscal year in
which the dividend is declared and/or the preceding fiscal year (provided that
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets). In addition, Delaware corporate law provides, with
limited exceptions, that a corporation may redeem or repurchase its shares only
out of surplus. The Nevada GCL provides that no distribution (including
dividends on, or redemption or repurchases of, shares of capital stock) may be
made if after giving effect to such distribution, the corporation would not be
able to pay its debts as they become due in the usual course of business, or the
corporation's total assets would be less than the sum of its total liabilities
plus the amount that would be needed at the time of a liquidation to satisfy the
preferential rights of preferred stockholders.
Restrictions on Business Combinations/Corporation Control. Both the
Delaware GCL and the Nevada GCL contain provisions restricting the ability of a
corporation to engage in business combinations with an interested stockholder.
On the effective date, Pennaco Delaware will be subject to the provisions of
Section 203 of the Delaware corporate law. In general, Section 203 provides
that a Delaware corporation may not for a period of three years after a person
becomes an "interested stockholder" (defined generally as a person who, together
with affiliates and associates,
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<PAGE>
owns (or within three years, did own) 15% or more of a corporation's outstanding
voting stock) engage in any of a broad range of business combinations with a
person of affiliate or associate of such person who is such "interested
stockholder" unless: (a) the transaction resulting in a person's becoming an
interested stockholder, or the business combination, is approved by the board of
directors of the corporation before the person becomes an interested
stockholder, (b) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation in the same transaction that makes
it an interested stockholder or (c) on or after the date the person becomes an
interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66-2/3% of the
corporation's outstanding voting stock at an annual or special meeting of
stockholders, excluding shares owned by the interested stockholder. "Business
combination" as defined in Section 203, may include the issuance by a
corporation of its capital stock. Pennaco has no current intention of effecting
any transaction that would be subject to Section 203.
Under the provisions of the Nevada GCL, except under certain circumstances,
business combinations with interested stockholders are not permitted for a
period of three years following the date the stockholder became an interested
stockholder and thereafter only if certain conditions are met. Restrictions
also apply with respect to business combinations after the three-year period.
The Nevada GCL defines an interested stockholder, generally, as a person who
owns 10% or more of the outstanding shares of the corporation's voting stock.
Additionally, the Nevada GCL law provides that if a corporation has more
than 100 stockholders of record in Nevada, which Pennaco currently does not,
the exercise of voting rights with respect to "control shares" of an "issuing
corporation" held by an "acquiring person" is generally disallowed unless voting
rights are conferred by a majority vote of the disinterested stockholders.
"Control shares" are the voting shares of an issuing corporation acquired in
connection with the acquisition of a "controlling interest." "Controlling
interest" is defined in terms of threshold levels of voting share ownership,
which thresholds, whenever each may be crossed, trigger applications of the
voting bar with respect to the shares newly acquired.
Nevada corporate law, unlike Delaware corporate law, also expressly permits
directors to consider interests other than those of the stockholders of the
corporation, including the interests of employees, suppliers, creditors,
customers, the national and state economies, and the interests of the community
to resist a change or potential change in control of the corporation.
Conversion of Securities in the Reincorporation Merger
Each share of common stock outstanding immediately prior to the
reincorporation merger will be converted, pursuant to the merger agreement and
without any action by the holder thereof, into the right to receive one share of
common stock. The relative powers, designations, preferences, rights and
qualifications of the common stock, as in effect immediately prior to the
reincorporation merger, will be substantially equivalent in all material
respects to the common stock so converted.
Exchange of Stock Certificates
If the reincorporation merger is consummated, it will not be necessary for
holders of common stock of Pennaco Nevada to exchange their existing stock
certificates for stock certificates of Pennaco Delaware. The Company's present
common stock certificates will automatically represent the same number of shares
of common stock of Pennaco Delaware.
After the merger, new certificates representing shares of Pennaco Delaware
common stock will be issued as presently outstanding shares of common stock are
presented for transfer. New certificates for Pennaco Delaware will also be
issued upon the written request of any stockholder addressed to the Company's
transfer agent.
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<PAGE>
Conditions to Consummation of the Reincorporation Merger
Consummation of the reincorporation merger is subject to stockholder
approval and receipt of all material orders, consents or approvals, governmental
or otherwise, that may be required or advisable. Pennaco Nevada and Pennaco
Delaware believe that no material federal or state regulatory approvals are
necessary other than registrations in connection with securities laws.
Consummation is also conditioned upon the right to dissent being asserted with
respect to no more than 1% of the common stock. The merger agreement provides
that Pennaco Nevada and Pennaco Delaware may, in their discretion, waive any
conditions without further stockholder approval.
REQUIRED VOTE
In order to be adopted, this proposal must receive the affirmative vote of
holders of a majority of the shares of stock eligible to vote at the annual
meeting. If a majority of the shares of stock eligible to vote at the annual
meeting vote in favor of the reincorporation proposal, then the reincorporation
merger and the amendments to the Articles of Incorporation will be approved that
are necessary to conform to Delaware law.
The Board of Directors Recommends a Vote for Proposal 2
-------------------------------------------------------
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<PAGE>
PROPOSAL 3
APPROVAL OF AMENDMENT TO THE 1998 STOCK OPTION AND INCENTIVE PLAN
We use stock options as an important part of the overall compensation
structure for our employees. As explained in "Report of the Compensation
Committee" above, the Board of Directors and the Compensation Committee believe
that it is desirable to use equity-based incentives to retain, motivate and
attract quality personnel. We currently have 269,272 shares of common stock
available for issuance under the Stock Option Plan. The Board of Directors
believes that the remaining shares available under the Stock Option Plan are
insufficient to fully serve our long-term compensation requirements in the year
2000 and beyond. Accordingly, the Board of Directors has voted, subject to
stockholder approval, to amend the Stock Option Plan to permit the grant of
options to purchase up to 1,000,000 additional shares of common stock. On March
17, 2000, outstanding and unexercised options equaled 16.1% of total outstanding
shares of common stock on an as-converted basis. Pursuant to the proposed
amendment, the sum of options outstanding and those available for future grant
under the Amended Option Plan will equal approximately 20.5% of the total
outstanding shares of Common Stock on an as-converted basis. Excluding options
granted to a former director, outstanding and unexercised options equaled 14.6%
of the total outstanding shares of common stock, and the sum of options
outstanding and those available for future grant under the Amended Option Plan
will equal 19.2% of the total outstanding shares of Common Stock, both on an as-
converted basis.
Summary of the Plan
On March 24, 1998, our Board of Directors adopted the 1998 Stock Option and
Incentive Plan which was subsequently approved by our stockholders. Our
stockholders approved an amendment to the plan on June 29, 1998. The plan is
intended to provide incentive to key employees and directors. The goals of the
plan are to:
1. encourage proprietary interest in Pennaco by aligning our employee's
goals with those of our stockholders;
2. encourage our key employees to remain in our employ; and
3. attract new employees with outstanding qualifications.
The plan is administered by the Compensation Committee of our Board of
Directors, which is constituted to permit the plan to comply with Rule 16b-3 of
the Securities Exchange Act of 1934. The Board of Directors, or Compensation
Committee, at its discretion, can select the eligible employees and consultants
to be granted awards, determine the number of shares to be applicable to such
award, and designate any options as incentive stock options or nonstatutory
stock options, except that no incentive stock option may be granted to a non-
employee director or a non-employee consultant. The stock subject to awards
granted under the plan are shares of our authorized but unissued or reacquired
common stock. The aggregate number of shares which may be issued as awards or
upon exercise of awards under the plan is 4,500,000 shares. As of March 17,
2000, stock options to purchase 4,230,728 shares have been granted to both
current and former key employees and directors for exercise prices ranging from
$1.25 to $11.13 per share pursuant to the vesting schedules of the respective
agreements. As of March 17, 2000, 565,846 of these options have been exercised.
Unexercised options in the amount of 1,188,882 are vested as of March 17, 2000,
while 2,476,000 of the options either vest over the next four years or are tied
to certain benchmarks being achieved with regards to the drilling of wells. The
shares that may be issued pursuant to the exercise of an option awarded by the
plan have been registered under the Securities Act of 1933.
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<PAGE>
REQUIRED VOTE
In order to be adopted, this proposal must receive the affirmative vote of
holders of a majority of the shares of stock eligible to vote at the Annual
Meeting.
The Board of Directors Recommends a Vote for Proposal 3
-------------------------------------------------------
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<PAGE>
PROPOSAL 4
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of KPMG LLP, which served as
independent auditors during fiscal 1999, to conduct an audit, in accordance with
generally accepted auditing standards, of the Company's financial statements
for the year ending December 31, 2000. The Company expects representatives of
that firm to be present at the Annual Meeting to respond to appropriate
questions and to make a statement, if they so desire. This selection is being
submitted for ratification at the meeting.
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or represented by proxy at the meeting and entitled to
vote is required for such ratification. If not ratified, the Board will
reconsider the selection upon recommendation of the Audit Committee, although
the Board of Directors will not be required to select different independent
auditors for the Company.
REQUIRED VOTE
In order to be ratified, this proposal must receive the affirmative vote of
holders of a majority of the shares of stock eligible to vote at the Annual
Meeting.
The Board of Directors recommends that stockholders
---------------------------------------------------
vote for ratification of KPMG LLP as our independent auditors.
-------------------------------------------------------------
OTHER MATTERS
The Board of Directors is not presently aware of any matters to be
presented at the annual meeting other than the election of directors, the
reincorporation proposal, the amendment of the Stock Option Plan and the
ratification of KPMG LLP as the Company's independent auditors. If, however,
other matters are properly brought before the Annual Meeting, the enclosed
proxy gives discretionary authority to the persons named therein to act in
accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Stockholder proposals to be presented at the fiscal year 2001 annual
meeting of stockholders must be received by Pennaco no later than 120 days
before the date of the 2001 annual meeting of stockholders. If such timely
notice of a stockholder proposal is not given, the proposal may not be brought
before the 2001 annual meeting of stockholders. If such timely notice is given
but is not accompanied by a written statement to the extent required by
applicable securities laws, we may exercise discretionary voting authority over
proxies with respect to such proposal if presented at Pennaco's 2001 annual
meeting.
Under applicable securities laws, stockholder proposals must be received
by the Company no later than 120 days prior to April 6, 2001 (the anniversary
date of this proxy statement) to be considered for inclusion in Pennaco's proxy
statement relating to the 2001 Annual Meeting or, if we change the date of the
2001 annual meeting by more than 30 days from the date of the 2000 annual
meeting, then stockholder proposals must be received a reasonable time before
we begin to print and mail the proxy statement for the 2001 annual meeting.
Stockholder proposals must be mailed to Pennaco Energy, Inc., to the
attention of the Secretary, 1050 17th Street, Suite 700, Denver, Colorado 80265.
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<PAGE>
ANNUAL REPORT
The Company's Annual Report to Stockholders containing audited financial
statements for fiscal 1999, is being mailed with this Proxy Statement to all
stockholders of record.
By order of the Board of Directors,
Gregory V. Gibson
Vice President-Legal and Secretary
Denver, Colorado
April 12, 2000
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<PAGE>
PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
of
PENNACO ENERGY, INC., A NEVADA CORPORATION
and PENNACO ENERGY, INC., A DELAWARE CORPORATION
THIS IS AN AGREEMENT AND PLAN OF MERGER (this "Agreement") by and
between Pennaco Energy, Inc., a Nevada corporation ("Pennaco Nevada"), and
Pennaco Energy, Inc., a Delaware corporation ("Pennaco Delaware"). Pennaco
Nevada and Pennaco Delaware are hereinafter collectively referred to as the
"Constituent Corporations."
RECITALS
WHEREAS, Pennaco Nevada is a corporation organized and existing under
the laws of the State of Nevada, having been incorporated on January 26, 1998,
and having authorized capital stock consisting of (i) 10,000,000 shares of
common stock, par value $.001 per share ("Pennaco Nevada Common Stock") and (ii)
50,000,000 shares of preferred stock, par value $.001 per share ("Pennaco Nevada
Preferred Stock"), 19,086,440 of which shares of Pennaco Nevada Common Stock are
issued and outstanding and none of which shares of Pennaco Nevada Preferred
Stock are issued and outstanding; and the outstanding shares of Pennaco Nevada
Common Stock are entitled to vote on the Merger (as described below); and
WHEREAS, the Board of Directors of Pennaco Nevada has determined that
it is the best interests of Pennaco Nevada and its stockholders to change the
corporation's domicile from Nevada to Delaware, and Pennaco Nevada has formed
Pennaco Delaware as a wholly-owned subsidiary for the express purpose of
effecting the reincorporation of Pennaco Nevada in the State of Delaware; and
WHEREAS, Pennaco Delaware is a corporation organized and existing
under the laws of the State of Delaware, having been incorporated on
___________, 2000, and having authorized capital stock consisting of (i)
50,000,000 shares of common stock, par value $.001 per share (the "Pennaco
Delaware Common Stock") and (ii) 10,000,000 shares of preferred stock, par value
$.001 per share (the "Pennaco Delaware Preferred Stock"), 1,000 of which shares
of Pennaco Delaware Common Stock are issued and outstanding, all of which
outstanding shares of Pennaco Delaware Common Stock are owned by Pennaco Nevada,
and none of which shares of Pennaco Delaware Preferred Stock are outstanding;
and
WHEREAS, the respective Boards of Directors of the Constituent
Corporations have determined that it is in the best interests of such
corporations and the stockholders of Pennaco Nevada and the sole shareholder of
Pennaco Delaware, respectively, to merge Pennaco Nevada with and into Pennaco
Delaware, with Pennaco Delaware to be the surviving corporation (such merger
being hereinafter referred to as the "Merger"), and each of such Boards of
Directors have authorized, approved and adopted this Agreement and has directed
that it be submitted to the stockholders of Pennaco Nevada and the sole
shareholder of Pennaco Delaware, respectively, for approval.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I: THE MERGER
Section 1.1. The Merger and Surviving Corporation. At the Effective
------------------------------------
Time of the Merger (as hereinafter defined), Pennaco Nevada shall be merged
with and into Pennaco Delaware, the separate existence
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of Pennaco Nevada shall cease and Pennaco Delaware (hereinafter sometimes
referred to as the "Surviving Corporation") shall be the surviving
corporation of the Merger and shall continue to exist by virtue of, and
shall be governed by, the laws of the State of Delaware. The name of the
Surviving Corporation shall be "Pennaco Energy, Inc." as provided in the
Amendment to the Articles of Incorporation of the Surviving Corporation set
forth in Section 3.1 below.
Section 1.2. Effective Time of the Merger. The Merger shall be
----------------------------
effective upon the later of the filing of a Certificate of Merger with the
Secretary of State of the State of Delaware and Articles of Merger with the
Secretary of State of the State of Nevada (the "Effective Time").
Section 1.3. Effect of Merger. At the Effective Time, Pennaco
----------------
Nevada shall merge with and into Pennaco Delaware, and the separate
existence of Pennaco Nevada shall cease. Without limiting any provisions of
applicable law of the State of Delaware or the State of Nevada, at the
Effective Time: (i) the Surviving Corporation shall succeed, without other
transfer, to all the assets, rights, powers and property of the Constituent
Corporations, and title to all real estate and other property owned by each
of the Constituent Corporations shall be vested in the Surviving
Corporation without reversion or impairment; (ii) the Surviving Corporation
shall succeed, without other transfer, to all of the debts, liabilities and
obligations of the Constituent Corporations as if it had incurred them
itself; (iii) any proceeding pending against either of the Constituent
Corporations may be continued as if the Merger did not occur or the
Surviving Corporation may be substituted in the proceeding for Pennaco
Nevada; (iv) the Surviving Corporation shall be subject to all actions
previously taken by the Boards of Directors of the Constituent
Corporations, and shall assume all obligations of Pennaco Nevada relating
to the indemnification of its officers and directors; (v) the Surviving
Corporation shall assume, without any further action, all employee benefit
plans of Pennaco Nevada, including, but not limited to, all stock option,
stock purchase, stock repurchase, deferred compensation, welfare and
savings plans, as well all employment and severance agreements, subject, in
each case, to the terms and conditions of such plans and agreements. and
(vi) the shares of Pennaco Nevada Common Stock that are to be converted
into shares of common stock, par value $.001 per share, of the Surviving
Corporation ("Surviving Corporation Common Stock") shall be so converted.
SECTION II: CONVERSION OF STOCK
Section 2.1. Conversion Shares of Pennaco Nevada Common Stock. At
------------------------------------------------
the Effective Time, by virtue of the Merger and without any action by the
parties hereto or any other person, (i) each share of Pennaco Nevada
Common Stock issued and outstanding immediately prior thereto shall be
converted into and exchanged for one fully paid and nonassessable share of
Surviving Corporation Common Stock and (ii) each option or right to
purchase a share of Pennaco Nevada Common Stock issued and outstanding
immediately prior thereto shall be converted into and exchanged for one
option or right, as the case may be, to purchase a share of Surviving
Corporation Common Stock, upon the same terms and subject to the same
conditions.
Section 2.2. Cancellation of Pennaco Delaware Common Stock. At the
----------------------------------------------
Effective Time of the Merger, each share of Pennaco Delaware Common Stock
issued and outstanding immediately prior thereto shall, by virtue of the
Merger and without any action by Pennaco Delaware, the holder of such
shares or any other person, be canceled and returned to the status of
authorized but unissued shares.
Section 2.3. Exchange of Share Certificates. (a) After the
------------------------------
Effective Time, the holder of an outstanding certificate representing
shares of Pennaco Nevada Common Stock may, at such stockholder's option,
surrender the same for cancellation to the Surviving Corporation and such
holder shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of shares of Surviving Corporation
Common Stock into which the surrendered shares were converted as herein
provided. Until so surrendered, each outstanding certificate theretofore
representing shares of Pennaco Nevada Common Stock shall be deemed for all
purposes to represent the number of shares of Surviving Corporation Common
Stock
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<PAGE>
into which such shares of Pennaco Nevada Common Stock were converted in the
Merger.
(b) The registered owner on the books and records of the Surviving
Corporation of any such outstanding certificate shall, until such certificate
shall have been surrendered for transfer or conversion or otherwise accounted
for to the Surviving Corporation, have and be entitled to exercise any voting
and other rights with respect to and to receive dividends and other
distributions upon the shares of Common Stock of the Surviving Corporation
represented by such outstanding certificate as provided above.
ARTICLE III: CHARTER DOCUMENTS; DIRECTORS AND OFFICERS
Section 3.1. Articles of Incorporation. The Articles of
-------------------------
Incorporation of Pennaco Delaware shall be the Articles of Incorporation
of the Surviving Corporation.
Section 3.2. Bylaws. The Bylaws of Pennaco Delaware as in effect at
------
the Effective Time shall continue to be the Bylaws of the Surviving
Corporation until amended as provided in said Bylaws.
Section 3.3. Directors. The persons who are serving as the directors
---------
of Pennaco Nevada as of the Effective Time shall be the directors of the
Surviving Corporation until changed in accordance with the Bylaws of the
Surviving Corporation and applicable law. Directors of the Surviving
Corporation shall serve on the committees on which they served as directors
of Pennaco Nevada. The persons who are serving as the directors of Pennaco
Delaware as of the Effective Time shall hold no such position with the
Surviving Corporation, except insofar as such directors hold such position
with Pennaco Nevada.
Section 3.4. Officers. The persons who are serving as the directors
--------
of Pennaco Delaware as of the Effective Time shall be the directors of
the Surviving Corporation until changed in accordance with the Bylaws of
the Surviving Corporation and applicable law. The persons who are serving
as the officers of Pennaco Nevada as of the Effective Time shall hold no
such office with the Surviving Corporation, except insofar as such officers
hold such office with Pennaco Delaware.
ARTICLE IV: CONDITIONS TO CLOSING
Section 4.1 Conditions to Closing. The respective obligations of the
---------------------
Constituent Corporation to consummate the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions:
(a) This Agreement and the Merger shall have been authorized and
approved by a majority of the stockholders of Pennaco Nevada entitled to vote
and present, in person or by proxy, at the Annual Meeting of Stockholders of
Pennaco Nevada to be held expressly for such purpose, and by Pennaco Nevada, the
sole stockholder of Pennaco Delaware, in accordance with the relevant provisions
of the Nevada General Corporation Law (the "NGCL"), the Certificate of
Incorporation of Pennaco Nevada, the Bylaws of Pennaco Nevada, the Delaware
General Corporation Law, the Articles of Incorporation of Pennaco Delaware and
the Bylaws of Pennaco Delaware, as applicable. After the such approval and
adoption of this Agreement, and the satisfaction of the other conditions set
forth herein, all required documents shall be executed, verified, filed, and
recorded and all required acts shall be done under the provisions of the
applicable statutes of the States of Delaware and Nevada in order to accomplish
the Merger;
(b) As of the Effective Time, no action, suit or proceeding shall
have been instituted or, to the knowledge of the Constituent Corporations,
be pending or threatened before any court or other governmental body by any
public agency or governmental authority seeking to restrain, enjoin or
prohibit the consummation of the transactions contemplated hereby or to
seek damages or other relief in connection therewith against any officer or
director of either of the Constituent Corporations.
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<PAGE>
ARTICLE V: AMENDMENT AND TERMINATION
Section 5.1. Amendment. This Agreement may be supplemented or
---------
amended in any manner at any time and from time to time prior to the
Effective Time by the mutual consent of Pennaco Nevada and Pennaco Delaware
without any action by the stockholders of Pennaco Nevada or the sole
shareholder of Pennaco Delaware; provided, that any amendment, modification
or supplement to this Agreement after its approval by the stockholders of
Pennaco Nevada but prior to the Effective Time shall require the approval
of the stockholders of Pennaco Nevada unless the amendment, modification or
supplement to this Agreement (i) does not alter (a) the amount or kind of
shares to be received thereunder in exchange for shares of Pennaco Nevada
Common Stock, or (b) any term of the Articles of Incorporation of the
Surviving Corporation as provided for in this Agreement, and (ii) does not
alter any of the terms and conditions of this Agreement in a manner that
would adversely affect the holders of Pennaco Nevada Common Stock.
Section 5.2. Termination. This Agreement may be terminated and the
-----------
Merger abandoned at any time prior to the Effective Time by action taken by the
Board of Directors of either Constituent Corporation for any reason whatsoever,
notwithstanding the approval of this Agreement and the Merger by the
stockholders of Pennaco Nevada or the sole shareholder of Pennaco Delaware, or
by both.
ARTICLE VI: FURTHER ASSURANCES
Section 6.1. Further Assurances. If at any time the Surviving
------------------
Corporation shall consider or be advised that any further assignments or
assurances or any other things are necessary or desirable to vest in the
Surviving Corporation, in accordance with the terms of this Agreement, the
title of any property or rights of Pennaco Nevada, or otherwise to carry
out this Agreement or the Merger, the last acting officers and directors of
Pennaco Nevada or the corresponding officers and directors of the Surviving
Corporation shall and will execute and make all such proper assignments and
assurances and do all things necessary or proper to vest title in such
property or rights in the Surviving Corporation, or otherwise to carry out
this Agreement or the Merger.
ARTICLE VII: GENERAL
Section 7.1. Registered Office. The address of the registered
-----------------
office of the Surviving Corporation of the Merger in the State of Delaware shall
be 1209 Orange Street, Wilmington, Delaware 19801, and The Corporation Trust
Company shall be the registered agent of the Surviving Corporation at such
address.
Section 7.2. Governing Law. This Agreement shall in all respects be
-------------
construed, interpreted and enforced in accordance with and governed by the laws
of the State of Delaware and, so far as applicable, the merger provisions of the
NGCL.
Section 7.3. Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement or its terms to produce
or account for more than one of such counterparts.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Constituent Corporations have caused this
Agreement to be executed by their respective officers whose signatures are set
forth below, all as of the _____ day of _____________, 2000.
ATTEST: PENNACO ENERGY, INC.
a Nevada corporation
By:________________________________ By:________________________________
Glen C. Warren, Jr. Paul M. Rady
Chief Financial Officer, Chairman of the Board, President and
Executive Vice President Chief Executive Officer
ATTEST: PENNACO ENERGY, INC.
a Delaware corporation
By:________________________________ By:________________________________
Glen C. Warren, Jr. Paul M. Rady
Chief Financial Officer, Chairman of the Board, President and
Executive Vice President Chief Executive Officer
A-5
<PAGE>
ANNEX B
CERTIFICATE OF INCORPORATION
of
PENNACO ENERGY, INC.
The undersigned person, acting as sole incorporator of the corporation
pursuant to the General Corporation Law of the State of Delaware, does hereby
make this Certificate of Incorporation ("Certificate of Incorporation") for such
corporation, declaring and certifying that this is my act and deed and that the
facts herein stated are true:
ARTICLE I
NAME
The name of the corporation is Pennaco Energy, Inc. (hereinafter, the
"Corporation").
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, Wilmington, County of New Castle, 19801. The
name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
PURPOSES
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
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<PAGE>
ARTICLE IV
CAPITAL STOCK
Section 1. Authorized Shares. The total number of shares of stock
-----------------
which the Corporation shall have authority to issue is Sixty Million
(60,000,000) shares consisting of Fifty Million (50,000,000) shares of common
stock, par value $.001 per share, and Ten Million (10,000,000) shares of
preferred stock, par value $.001 per share.
Section 2. Voting Rights of Stockholders. Each holder of the Common
-----------------------------
Stock shall be entitled to one vote for each share of stock standing in his name
on the books of the Corporation.
Section 3. Consideration for Shares. The Common Stock shall be
------------------------
issued for such consideration, as shall be fixed from time to time by the Board
of Directors. In the absence of fraud, the judgment of the directors as to the
value of any property for shares shall be conclusive. When shares are issued
upon payment of the consideration fixed by the Board of Directors, such shares
shall be taken to be fully paid stock and shall be non-assessable. The
Certificate of Incorporation shall not be amended in this particular.
Section 4. Pre-emptive Rights. Except as may otherwise be provided
------------------
by the Board of Directors, no holder of any shares of the stock of the
Corporation shall have any preemptive right to purchase, subscribe for, or
otherwise acquire any shares of stock of the Corporation of any class now or
hereafter authorized, or any securities exchangeable for or convertible into
such shares, or any warrants or other instruments evidencing rights or options
to subscribe for, purchase, or otherwise acquire such shares.
Section 5. Stock Rights and Options. The Corporation shall have the
------------------------
power to create and issue rights, warrants, or options entitling the holders
thereof to purchase from the Corporation any shares of its capital stock of any
class or classes, upon such terms and conditions and at such times and prices as
the Board of Directors may provide, which terms and conditions shall be
incorporated in an instrument or instruments evidencing such rights. In the
absence of fraud, the judgment of the directors as to the adequacy of
consideration for the issuance of such rights or options and the sufficiency
thereof shall be conclusive.
Section 6. Preferred Stock. The Corporation shall have authority to
---------- ---------------
issue a total of ten million (10,000,000) shares of Preferred Stock. The
Preferred Stock may be issued from time to time as herein provided in one or
more series. The designations, relative rights, preferences and limitations of
the Preferred Stock, and particularly of the shares of each series thereof, may,
to the extent permitted by law, be similar to or differ from
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<PAGE>
those of any other series. The Board of Directors of the Corporation or a duly
authorized committee thereof is hereby expressly granted authority, subject to
the provisions of this Article IV, to fix by resolution from time to time before
issuance thereof the number of shares in each series of such class and all
designations, preferences, relative participating, optional or other special
rights and qualifications, limitations and restrictions of the shares in each
such series, including, but without limiting the generality of the foregoing,
the following:
(a) the designation of the series and the number of shares to
constitute such series (which number may be increased or decreased from time to
time unless otherwise provided by the Board of Directors);
(b) the dividend rate (or method of determining such rate), any
conditions on which and times at which dividends are payable, the preference or
relation which such dividends shall bear to the dividends payable on any other
class or classes or of any other series of capital stock including the Preferred
Stock, and whether such dividends shall be cumulative or noncumulative;
(c) whether the series will be redeemable (at the option of the
Corporation or the holders of such shares or both, or upon the happening of a
specified event) and, if so, the redemption prices and the conditions and times
upon which redemption may take place and whether for cash, property or rights,
including securities of the company or another corporation;
(d) the terms and amount of any sinking, retirement or purchase fund;
(e) the conversion or exchange rights (at the option of the
Corporation or the holders of such shares or both, or upon the happening of a
specified event), if any, including the conversion or exchange times, prices,
rates, adjustments and other terms of conversion or exchange;
(f) the voting rights, if any (other than any voting rights that the
Preferred Stock may have as a matter of law);
(g) any restrictions on the issue or reissue or sale of additional
Preferred Stock;
(h) the rights of the holders upon voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation
(including preferences over the Common Stock or other class or classes or series
of capital stock including the Preferred Stock);
B-3
<PAGE>
(i) the preemptive rights, if any, to subscribe to additional issues
of stock or securities of the Corporation; and
(j) such other special rights and privileges, if any, for the benefit
of the holders of the Preferred Stock, as shall not be inconsistent with the
provisions of these Certificate of Incorporation, as amended, or applicable law.
All shares of Preferred Stock of the same series shall be identical in
all respects, except that shares of any one series issued at different times may
differ as to dates, if any, from which dividends thereon may accumulate. All
shares of Preferred Stock redeemed, purchased or otherwise acquired by the
Corporation (including shares surrendered for conversion) shall be canceled and
thereupon restored to the status of authorized but unissued shares of Preferred
Stock undesignated as to series.
Except as otherwise may be required by law, and except as otherwise
may be provided in this Certificate of Incorporation, as amended, or in the
resolution of the Board of Directors of the Corporation creating any series of
Preferred Stock, the Common Stock shall have the exclusive right to vote for the
election of directors and for all other purposes, each holder of the Common
Stock being entitled to one vote for each share thereof held.
Except as may be stated and expressed in any resolution or resolutions
of the Board of Directors providing for the issue of any series of Preferred
Stock, (i) any amendment to this Certificate of Incorporation which shall
increase or decrease the number of shares of any class or classes of authorized
capital stock of the Corporation (but not below the number of shares thereof
then outstanding) may be adopted by the affirmative vote of the holders of a
majority of the outstanding shares of the voting stock of the Corporation, and
(ii) no holder of capital stock shall be entitled as a matter of right to
subscribe for or purchase, or have any preemptive right with respect to, any
part of any new or additional issue of stock of any class whatsoever, or of
securities convertible into any stock of any class whatsoever, whether now or
hereafter authorized and whether issued for cash or other consideration or by
way of dividend.
B-4
<PAGE>
ARTICLE V
INCORPORATOR
The name and mailing address of the incorporator are:
Paul M. Rady
1050 17/th/ Street., Suite 700
Denver, Colorado 80265
ARTICLE VI
DIRECTORS
The powers of the incorporator shall terminate upon the filing of the
Certificate of Incorporation. The name and mailing address of the person who is
to serve as the director of the Corporation until the first annual meeting of
stockholders or until his successor is elected and qualified are:
Name Address
Paul M. Rady 1050 17/th/ Street., Suite 700
Denver, Colorado 80265
For the management of the business and for the conduct of the affairs
of the Corporation, and for the future definition, limitation, and regulation of
the powers of the Corporation and its directors and stockholders, it is further
provided:
Section 1. Classification of Board. The Board of Directors shall be
-----------------------
divided into three classes, designated Class I, Class II and Class III, as
nearly equal in number as possible, and the term of office of directors of one
class shall expire at each annual meeting of stockholders, and in all cases as
to each director until his successor shall be elected and shall qualify or until
his earlier resignation, removal from office, death or incapacity. Additional
directorships resulting from an increase in number of directors shall be
apportioned among the classes as equally as possible. The initial term of
office of directors of Class I shall expire at the annual meeting of
stockholders in 2000; that of Class II shall expire at the annual meeting in
2001; and that of Class III shall expire at the annual meeting in 2002; and in
all cases as to each director until his successor shall be elected and shall
qualify or until his earlier resignation, removal from office, death or
incapacity. At each annual meeting of stockholders the number of directors
equal to the number of directors of the class whose term expires at the time of
such meeting (or, if less, the number of directors properly nominated and
qualified for election) shall be elected to hold office until the third
succeeding annual meeting of stockholders after their election.
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Section 2. Size of Board. The members of the governing board of the
-------------
Corporation shall be styled directors. The number of directors of the
Corporation, their qualifications, manner of election, time and place of
meeting, and powers and duties shall be such as are prescribed by this
Certificate of Incorporation, by statute and in the Bylaws of the Corporation.
Section 3. Powers of Board of Directors. In furtherance and not in
----------------------------
limitation of the powers conferred by the laws of the State of Delaware, the
Board of Directors is expressly authorized and empowered:
(a) To make, alter, amend, and repeal the Bylaws subject to the power
of the stockholders to alter or repeal the Bylaws made by the Board of
Directors.
(b) Subject to the applicable provisions of the Bylaws then in effect,
to determine, from time to time, whether and to what extent, and at what times
and places, and under what conditions and regulations, the accounts and books of
the Corporation, or any of them, shall be open to stockholder inspection. No
stockholder shall have any right to inspect any of the accounts, books or
documents of the Corporation, except as permitted by law, unless and until
authorized to do so by resolution of the Board of Directors or of the
stockholders of the Corporation.
(c) To issue stock of the Corporation for money, property, services
rendered, labor performed, cash advanced, acquisitions for other corporations or
for any other assets of value in accordance with the action of the Board of
Directors without vote or consent of the stockholders and the judgment of the
Board of Directors as to value received and in return therefore shall be
conclusive and said stock, when issued, shall be fully-paid and non-assessable.
(d) To authorize and issue, without stockholder consent, obligations
of the Corporation, secured and unsecured, under such terms and conditions as
the Board of Directors, in its sole discretion, may determine, and to pledge or
mortgage, as security therefore, any real or personal property of the
Corporation, including after-acquired property.
(e) To determine whether any and, if so, what part, of the earned
surplus of the Corporation shall be paid in dividends to the stockholders, and
to direct and determine other use and disposition of any such earned surplus.
(f) To fix, from time to time, the amount of the profits of the
Corporation to be reserved as working capital or for any other lawful purpose.
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(g) To establish bonus, profit-sharing, stock option, or other types
of incentive compensation plans for the employees, including officers and
directors, of the Corporation, and to fix the amount of profits to be shared or
distributed, and to determine the persons to participate in any such plans an
the amount of their respective participations.
(h) To designate, by resolution or resolutions passed by a majority of
the whole Board of Directors, one or more committees, which, to the extent
permitted by law and authorized by the resolution or the Bylaws, shall have and
may exercise the powers of the Board of Directors.
(i) To provide for the reasonable compensation of its own members by
Bylaw, and to fix the terms and conditions upon which such compensation will be
paid.
(j) In addition to the powers and authority herein before, or by
statute, expressly conferred upon it, the Board of Directors may exercise all
such powers and do all such acts and things as may be exercised or done by the
Corporation, subject nevertheless, to the provisions of the laws of the State of
Delaware, of this Certificate of Incorporation, and of the Bylaws of the
Corporation.
Section 4. Interested Directors. No contract or transaction between
--------------------
this Corporation and any of its directors, or between this Corporation and any
other corporation, firm, association, or other legal entity shall be invalidated
by reason of the fact that the director of the Corporation has a direct or
indirect interest, pecuniary or otherwise, in such corporation, firm,
association, or legal entity, or because the interested director was present at
the meeting of the Board of Directors which acted upon or in reference to such
contract or transaction, or because he participated in such action, provided
that (1) the interest of each such director shall have been disclosed to or
known by the Board of Directors and a disinterested majority of the Board of
Directors shall have nonetheless ratified and approved such contract or
transaction (such interested director or directors may be counted in determining
whether a quorum is present for the meeting at which such ratification or
approval is given); or (2) the conditions of Section 144 of the Delaware General
Corporation Law are met.
ARTICLE VII
NO STOCKHOLDER ACTION WITHOUT MEETING
No action required or permitted to be taken at any annual meeting or
special meeting of the stockholders may be taken without a meeting and the power
of stockholders to consent in writing, without a meeting, to the taking of any
action is specifically denied. Special meetings of the stockholders of the
Corporation may be called only by the Chairman of the Board or the President of
the Corporation or by resolution adopted by the affirmative vote of the Board of
Directors.
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ARTICLE VIII
LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for 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, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or modification of this paragraph by the stockholders of
the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
ARTICLE IX
INDEMNIFICATION
The Corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Delaware (including, without limitation, Section
145 thereof), as amended from time to time, indemnify any officer or director
whom it shall have power to indemnify from and against any and all of the
expenses, liabilities or other losses of any nature. The indemnification
provided in this Article X shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity, while holding
such office, and shall continue as to a person who has ceased to be a officer or
director and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE X
PLACE OF MEETING; CORPORATE BOOKS
Subject to the laws of the State of Delaware, the stockholders and the
directors shall have power to hold their meetings, and the directors shall have
power to have an office or offices and to maintain the books of the Corporation
outside the State of Delaware, at such place or places as may from time to time
be designated in the Bylaws or by appropriate resolution.
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ARTICLE XI
AMENDMENT OF CERTIFICATION OF INCORPORATION
Notwithstanding any other provision of this Certificate of
Incorporation, the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the voting power of all of the then outstanding
shares of the stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
amend in any respect or repeal this Article XII, or Articles IV, VIII, IX and
XIII. All rights herein conferred on the directors, officers and stockholders
are granted subject to this reservation.
ARTICLE XII
AMENDMENT OF BYLAWS
The Board of Directors is expressly empowered to adopt, amend or
repeal Bylaws of the Corporation, provided, however, that any adoption,
amendment or repeal of Bylaws of the Corporation by the Board of Directors shall
require the approval of at least sixty-six and two-thirds percent (66 2/3%) of
the total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any resolution
providing for adoption, amendment or repeal is presented to the Board of
Directors). The stockholders shall also have power to adopt, amend or repeal
Bylaws of the Corporation, provided, however, that in addition to any vote of
the holders of any class or series of stock of this Corporation required by this
Certificate of Incorporation the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the
then outstanding shares of the stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required for such adoption, amendment or repeal by the stockholders of any
provisions of the Bylaws of the Corporation.
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I, THE UNDERSIGNED, hereunto set my hand this ____ day of
____________, 2000.
___________________________________
Paul M. Rady
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ANNEX C
B Y L A W S
OF
PENNACO ENERGY, INC.
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I N D E X
Page
ARTICLE I OFFICES
Section 1.1 Principal Office........................................ 1
Section 1.2 Registered Office....................................... 1
Section 1.3 Other Offices........................................... 1
ARTICLE II STOCKHOLDERS' MEETINGS
Section 2.1 Annual Meeting.......................................... 1
Section 2.2 Special Meetings........................................ 2
Section 2.3 Notice of Meetings and Adjourned Meetings............... 2
Section 2.4 Voting Lists............................................ 2
Section 2.5 Quorum.................................................. 3
Section 2.6 Organization............................................ 3
Section 2.7 Voting.................................................. 3
Section 2.8 Stockholders Entitled to Vote........................... 4
Section 2.9 Order of Business....................................... 4
Section 2.10 Authorization of Proxies................................ 5
Section 2.11 Inspection of Voting Procedures......................... 5
ARTICLE III DIRECTORS
Section 3.1 Management.............................................. 6
Section 3.2 Number and Term......................................... 6
Section 3.3 Quorum and Manner of Action............................. 7
Section 3.4 Vacancies............................................... 7
Section 3.5 Resignations............................................ 7
Section 3.6 Removals................................................ 8
Section 3.7 Annual Meetings......................................... 8
Section 3.8 Regular Meetings........................................ 8
Section 3.9 Special Meetings........................................ 8
Section 3.10 Organization of Meeting................................. 8
Section 3.11 Place of Meetings....................................... 9
Section 3.12 Compensation of Directors............................... 9
Section 3.13 Action by Unanimous Written Consent..................... 9
Section 3.14 Participation in Meetings by Telephone.................. 9
ARTICLE IV COMMITTEES OF THE BOARD
Section 4.1 Membership and Authorities.............................. 10
Section 4.2 Minutes................................................. 10
Section 4.3 Vacancies............................................... 10
Section 4.4 Telephone Meetings...................................... 10
Section 4.5 Action Without Meeting.................................. 11
ARTICLE V OFFICERS
Section 5.1 Number and Title........................................ 11
Section 5.2 Term of Office; Vacancies............................... 11
Section 5.3 Removal of Elected Officers............................. 11
Section 5.4 Resignations............................................ 11
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Section 5.5 The Chairman of the Board............................... 12
Section 5.6 President............................................... 12
Section 5.7 Vice Presidents......................................... 12
Section 5.8 Secretary............................................... 12
Section 5.9 Assistant Secretaries................................... 13
Section 5.10 Chief Financial Officer or Treasurer.................... 13
Section 5.11 Assistant Treasurers.................................... 13
Section 5.12 Subordinate Officers.................................... 14
Section 5.13 Salaries and Compensation............................... 14
ARTICLE VI INDEMNIFICATION OF DIRECTORS AND OFFICERS............... 14
ARTICLE VII CAPITAL STOCK
Section 7.1 Certificates of Stock................................... 15
Section 7.2 Lost Certificates....................................... 16
Section 7.3 Fixing Date for Determination of Stockholders of Record
for Certain Purposes.................................... 16
Section 7.4 Dividends............................................... 17
Section 7.5 Registered Stockholders................................. 17
Section 7.6 Transfer of Stock....................................... 17
ARTICLE VIII MISCELLANEOUS PROVISIONS
Section 8.1 Corporate Seal.......................................... 18
Section 8.2 Fiscal Year............................................. 18
Section 8.3 Checks, Drafts, Notes................................... 18
Section 8.4 Notice and Waiver of Notice............................. 18
Section 8.5 Examination of Books and Records........................ 19
Section 8.6 Voting Upon Shares Held by the Corporation.............. 19
ARTICLE IX AMENDMENTS
Section 9.1 Amendment............................................... 19
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PENNACO ENERGY, INC.
B Y L A W S
ARTICLE I
Offices
Section 1.1 Principal Office. The principal office of the Corporation
shall be in Denver, Colorado.
Section 1.2 Registered Office. The registered office of the
Corporation required to be maintained in the State of Delaware by the General
Corporation Laws of the State of Delaware, may be, but need not be, identical
with the Corporation's principal office, and the address of the registered
office may be changed from time to time by the Board of Directors.
Section 1.3 Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Stockholders' Meetings
Section 2.1 Annual Meeting. The annual meeting of the holders of
shares of each class or series of stock as are entitled to notice thereof and to
vote thereat pursuant to applicable law and the Corporation's Certificate of
Incorporation for the purpose of electing directors and transacting such other
proper business as may come before it shall be held in each year, at such time,
on such day and at such place, within or without the State of Delaware, as may
be designated by the Board of Directors.
Section 2.2 Special Meetings. In addition to such special meetings as
are provided by law or the Corporation's Certificate of Incorporation, special
meetings of the holders of any class or series or of all classes or
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series of the Corporation's stock for any purpose or purposes, may be called at
any time by the Board of Directors and may be held on such day, at such time and
at such place, within or without the State of Delaware, as shall be designated
by the Board of Directors.
Section 2.3 Notice of Meetings and Adjourned Meetings. Except as
otherwise provided by law, written notice of any meeting of Stockholders (i)
shall be given either by personal delivery or by mail to each Stockholder of
record entitled to vote thereat, (ii) shall be in such form as is approved by
the Board of Directors, and (iii) shall state the date, place and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, such written
notice shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting. Except when a Stockholder attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened, presence in person or by proxy of a Stockholder shall
constitute a waiver of notice of such meeting. Further, a written waiver of any
notice required by law or by these Bylaws, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Except as otherwise provided by law, the business that may
be transacted at any such meeting shall be limited to and consist of the purpose
or purposes stated in such notice. If a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the adjournment is for more than thirty (30) days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each Stockholder of
record entitled to vote at the meeting.
Section 2.4 Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall keep a complete list of
Stockholders entitled to vote at meetings or any adjournments thereof, arranged
in alphabetical order, in accordance with applicable law and shall make same
available prior to and during each Stockholders' meeting for inspection by the
Corporation's Stockholders as required by law. The Corporation's original stock
transfer books shall be prima facie evidence as to who are the Stockholders
entitled to examine such list or transfer books or to vote at any meeting of
Stockholders.
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Section 2.5 Quorum. Except as otherwise provided by law or by the
Corporation's Certificate of Incorporation, the holders of a majority of the
Corporation's stock issued and outstanding and entitled to vote at a meeting,
present in person or represented by proxy, without regard to class or series,
shall constitute a quorum at all meetings of the Stockholders for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the Stockholders, the holders of a majority of
such shares of stock, present in person or represented by proxy, may adjourn any
meeting from time to time without notice other than announcement at the meeting,
except as otherwise required by these Bylaws, until a quorum shall be present or
represented. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally called.
Section 2.6 Organization. Meetings of the Stockholders shall be
presided over by the Chairman of the Board of Directors, if one shall be
elected, or in his absence, by the President or by any Vice President, or, in
the absence of any of such officers, by a chairman to be chosen by a majority of
the Stockholders entitled to vote at the meeting who are present in person or by
proxy. The Secretary, or, in his absence, any Assistant Secretary or any person
appointed by the individual presiding over the meeting, shall act as secretary
at meetings of the Stockholders.
Section 2.7 Voting. Each Stockholder of record, as determined pursuant
to Section 2.8, who is entitled to vote in accordance with the terms of the
Corporation's Certificate of Incorporation and in accordance with the provisions
of these Bylaws, shall be entitled to one vote, in person or by proxy, for each
share of stock registered in his name on the books of the Corporation. Every
Stockholder entitled to vote at any Stockholders' meeting may authorize another
person or persons to act for him by proxy pursuant to Section 2.11(c), provided
that no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only so long as, it
is coupled with an interest sufficient in law to support an irrevocable power.
A Stockholder's attendance at any meeting shall not have the effect of revoking
a previously granted proxy unless such Stockholder shall in writing so notify
the Secretary of the meeting prior to the voting of the proxy. Unless
otherwise provided by law, no vote on the election of directors or any question
brought before the meeting need be by ballot unless the chairman of the meeting
shall determine that
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it shall be by ballot or the holders of a majority of the shares of stock
present in person or by proxy and entitled to participate in such vote shall so
demand. In a vote by ballot, each ballot shall state the number of shares voted
and the name of the Stockholder or proxy voting. Except as otherwise provided by
law, by the Corporation's Certificate of Incorporation or these Bylaws, all
elections of directors and all other matters before the Stockholders shall be
decided by the vote of the holders of a majority of the shares of stock present
in person or by proxy at the meeting and entitled to vote in the election or on
the question. In the election of directors, votes may not be cumulated.
Section 2.8 Stockholders Entitled to Vote. The Board of Directors may
fix a date not more than sixty (60) days nor less than ten (10) days prior to
the date of any meeting of Stockholders, as a record date for the determination
of the Stockholders entitled to notice of and to vote at such meeting and any
adjournment thereof, and such Stockholders and only such Stockholders as shall
be Stockholders of record on the date so fixed shall be entitled to notice of
and to vote at such meeting and any adjournment thereof, notwithstanding any
transfer of any stock on the books of the Corporation after such record date
fixed as aforesaid.
Section 2.9 Order of Business. The order of business at all meetings
of Stockholders shall be as determined by the chairman of the meeting.
Section 2.10 Authorization of Proxies. Without limiting the manner in
which a Stockholder may authorize another person or persons to act for him as
proxy, the following are valid means of granting such authority. A Stockholder
may execute a writing authorizing another person or persons to act for him as
proxy. Execution may be accomplished by the Stockholder or his authorized
officer, director, employee or agent signing such writing or causing his or her
signature to be affixed to such writing by any reasonable means including, but
not limited to, by electronic or facsimile signature. A Stockholder may also
authorize another person or persons to act for him as proxy by transmitting or
authorizing the transmission of a telegram, cablegram, or other means of
electronic transmission to the person who will be the holder of the proxy or to
a proxy solicitation firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to receive such
transmission, provided that any such telegram, cablegram or other means of
electronic transmission must either set forth or be submitted with information
from which it can be determined that the telegram, cablegram or other electronic
transmission was
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authorized by the Stockholder. If it is determined that such telegrams,
cablegrams or other electronic transmissions are valid, the inspectors or, if
there are no inspectors, such other persons making that determination shall
specify the information upon which they relied. Any copy, facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this section may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the writing
or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
Section 2.11 Inspectors and Voting Procedures.
(a) The Corporation shall, in advance of any meeting of Stockholders,
appoint one or more inspectors to act at the meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of Stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the shares represented
at a meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares represented at the
meeting, and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors.
(c) The date and time of the opening and closing of the polls for each
matter upon which the Stockholders will vote at a meeting shall be announced at
the meeting. No ballot, proxies or votes, nor any revocations thereof or
changes thereto, shall be accepted by the inspectors after the closing of the
polls unless the Court of Chancery upon application by a Stockholder shall
determine otherwise.
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(d) In determining the validity and counting of proxies and ballots,
the inspectors may examine and consider such records or factors as allowed by
the General Corporation Laws of the State of Delaware.
ARTICLE III
Directors
Section 3.1 Management. The property, affairs and business of the
Corporation shall be managed by or under the direction of the Board of Directors
which may exercise all powers of the Corporation and do all lawful acts and
things as are not by law, by the Corporation's Certificate of Incorporation or
by these Bylaws directed or required to be exercised or done by the
Stockholders.
Section 3.2 Number and Term. The number of directors may be fixed from
time to time by resolution of the Board of Directors adopted by the affirmative
vote of a majority of the members of the entire Board of Directors, but shall
consist of not less than one (1) member who shall be elected in accordance with
the Certificate of Incorporation, except as provided in Section 3.4. Directors
need not be Stockholders. No decrease in the number of directors shall have the
effect of shortening the term of office of any incumbent director.
Section 3.3 Quorum and Manner of Action. At all meetings of the Board
of Directors a majority of the total number of directors holding office shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
law, by the Corporation's Certificate of Incorporation or these Bylaws. When
the Board of Directors consists of one director, the one director shall
constitute a majority and a quorum. If at any meeting of the Board of Directors
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum is obtained, and no further
notice thereof need be given other than by announcement at such adjourned
meeting. Attendance by a director at a meeting shall constitute a waiver of
notice of such meeting except where a director attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
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Section 3.4 Vacancies. Except as otherwise provided by law or the
Corporation's Certificate of Incorporation, in the case of any increase in the
authorized number of directors or of any vacancy in the Board of Directors,
however created, the additional director or directors may be elected, or, as the
case may be, the vacancy or vacancies may be filled by majority vote of the
directors remaining on the whole Board of Directors although less than a quorum,
or by a sole remaining director. In the event one or more directors shall
resign, effective at a future date, such vacancy or vacancies shall be filled by
a majority of the directors who will remain on the whole Board of Directors,
although less than a quorum, or by a sole remaining director. Any director
elected or chosen as provided herein shall serve until the sooner of: (i) the
unexpired term of the directorship to which he is appointed; (ii) until his
successor is elected and qualified; or (iii) until his earlier resignation or
removal.
Section 3.5 Resignations. A director may resign at any time upon
written notice of resignation to the Corporation. Any resignation shall be
effective immediately unless a certain effective date is specified therein, in
which event it will be effective upon such date and acceptance of any
resignation shall not be necessary to make it effective.
Section 3.6 Removals. A director may only be removed for cause.
Another person may be elected to serve for the remainder of his term by the
holders of a majority of the shares of the Corporation entitled to vote in the
election of directors. In case any vacancy so created shall not be filled by
the Stockholders at such meeting, such vacancy may be filled by the directors as
provided in Section 3.4.
Section 3.7 Annual Meetings. The annual meeting of the Board of
Directors shall be held, if a quorum be present, immediately following each
annual meeting of the Stockholders at the place such meeting of Stockholders
took place, for the purpose of organization and transaction of any other
business that might be transacted at a regular meeting thereof, and no notice of
such meeting shall be necessary. If a quorum is not present, such annual
meeting may be held at any other time or place that may be specified in a notice
given in the manner provided in Section 3.9 for special meetings of the Board of
Directors or in a waiver of notice thereof.
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Section 3.8 Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such places and times as shall be
determined from time to time by resolution of the Board of Directors. Except as
otherwise provided by law, any business may be transacted at any regular meeting
of the Board of Directors.
Section 3.9 Special Meetings. Special meetings of the Board of
Directors may be called by the President, or by the Secretary on the written
request of one-third (1/3) of the members of the whole Board of Directors
stating the purpose or purposes of such meeting. Notices of special meetings,
if mailed, shall be mailed to each director not later than two (2) days before
the day the meeting is to be held or if otherwise given in the manner permitted
by these Bylaws, not later than the day before such meeting. Neither the
business to be transacted at, nor the purpose of, any special meeting need be
specified in any notice or written waiver of notice unless so required by the
Corporation's Certificate of Incorporation or by these Bylaws. Any and all
business may be transacted at a special meeting, unless limited by law, the
Corporation's Certificate of Incorporation or by these Bylaws.
Section 3.10 Organization of Meetings. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as such Board
of Directors may from time to time determine, and all matters shall be
determined by the vote of a majority of the directors present at any meeting at
which there is a quorum, except as otherwise provided by these Bylaws or
required by law.
Section 3.11 Place of Meetings. The Board of Directors may hold their
meetings and have one or more offices, and keep the books of the Corporation,
outside the State of Delaware, at any office or offices of the Corporation, or
at any other place as they may from time to time by resolution determine.
Section 3.12 Compensation of Directors. The Board of Directors shall
have the authority to fix the compensation of directors and to provide for the
payment or repayment of fees and expenses incurred by a director in the
performance of his duties. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed compensation for attending such committee meetings.
Section 3.13 Action by Unanimous Written Consent. Unless otherwise
restricted by law, the Corporation's Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting
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of the Board of Directors or of any committee thereof may be taken without a
meeting if all members of the Board of Directors or of such committee, as the
case may be, consent thereto in writing and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or the committee.
Section 3.14 Participation in Meetings by Telephone. Unless otherwise
restricted by the Corporation's Certificate of Incorporation or these Bylaws,
members of the Board of Directors or of any committee thereof may participate in
a meeting of such Board of Directors or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting in
such manner shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the grounds that
the meeting is not lawfully called or convened.
ARTICLE IV
Committees of the Board
Section 4.1 Membership and Authorities. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors,
designate one (1) or more Directors to constitute an Executive Committee and
such other committees as the Board of Directors may determine, each of which
committees to the extent provided in said resolution or resolutions or in these
Bylaws, shall have and may exercise all the powers of the Board of Directors in
the management of the business and affairs of the Corporation, except in those
cases where the authority of the Board of Directors is specifically denied to
the Executive Committee or such other committee or committees by law, the
Corporation's Certificate of Incorporation or these Bylaws, and may authorize
the seal of the Corporation to be affixed to all papers that may require it.
The designation of an Executive Committee or other committee and the delegation
thereto of authority shall not operate to relieve the Board of Directors, or any
member thereof, of any responsibility imposed upon it or him by law.
Section 4.2 Minutes. Each committee designated by the Board of
Directors shall keep regular minutes of its proceedings and report the same to
the Board of Directors when required.
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Section 4.3 Vacancies. The Board of Directors may designate one (1) or
more of its members as alternate members of any committee who may replace any
absent or disqualified member at any meeting of such committee. If no alternate
members have been appointed, the committee member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member. The Board of Directors shall have the power at any time to fill
vacancies in, to change the membership of, and to dissolve, any committee.
Section 4.4 Telephone Meetings. Members of any committee designated by
the Board of Directors may participate in or hold a meeting by use of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this Section 4.4 shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
Section 4.5 Action Without Meeting. Any action required or permitted
to be taken at a meeting of any committee designated by the Board of Directors
may be taken without a meeting if a consent in writing, setting forth the action
so taken, is signed by all the members of the committee and filed with the
minutes of the committee proceedings. Such consent shall have the same force and
effect as a unanimous vote at a meeting.
ARTICLE V
Officers
Section 5.1 Number and Title. The elected officers of the Corporation
shall be chosen by the Board of Directors and shall consist of a president, one
or more vice presidents, a secretary and a chief financial officer or treasurer.
The Board of Directors may also choose a Chairman of the Board, who must be a
Board member of the Board of Directors, and additional Vice Presidents,
Assistant Secretaries and/or Assistant Treasurers. One person may
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hold any two or more of these offices and any one or more of the Vice Presidents
may be designated as an Executive Vice President or Senior Vice President.
Section 5.2 Term of Office; Vacancies. So far as is practicable, all
elected officers shall be elected by the Board of Directors at the annual
meeting of the Board of Directors in each year, and except as otherwise provided
in this Article V, shall hold office until the next such meeting of the Board of
Directors in the subsequent year and until their respective successors are
elected and qualified or until their earlier resignation or removal. All
appointed officers shall hold office at the pleasure of the Board of Directors.
If any vacancy shall occur in any office, the Board of Directors may elect or
appoint a successor to fill such vacancy for the remainder of the term.
Section 5.3 Removal of Elected Officers. Any elected officer may be
removed at any time, with or without cause, by affirmative vote of a majority of
the whole Board of Directors, at any regular meeting or at any special meeting
called for such purpose.
Section 5.4 Resignations. Any officer may resign at any time upon
written notice of resignation to the President, Secretary or Board of Directors
of the Corporation. Any resignation shall be effective immediately unless a
date certain is specified for it to take effect, in which event it shall be
effective upon such date, and acceptance of any resignation shall not be
necessary to make it effective, irrespective of whether the resignation is
tendered subject to such acceptance.
Section 5.5 The Chairman of the Board. The Chairman of the Board, if
one shall be elected, shall preside at all meetings of the Stockholders and
Board of Directors. In addition, the Chairman of the Board shall perform
whatever duties and shall exercise all powers that are given to him by the Board
of Directors.
Section 5.6 President. The President shall be the chief executive
officer of the Corporation; shall (in the absence of the Chairman of the Board,
if one be elected) preside at meetings of the Stockholders and Board of
Directors; shall be ex officio a member of all standing committees; shall have
general and active management of business of the corporation; shall implement
the general directives, plans and policies formulated by the Board of Directors;
and shall further have such duties, responsibilities and authorities as may be
assigned to him by the Board of Directors. He may sign, with any other proper
officer, certificates for shares of the Corporation and any deeds,
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bonds, mortgages, contracts and other documents which the Board of Directors has
authorized to be executed, except where required by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors or these Bylaws, to some other
officer or agent of the Corporation. In the absence of the President, his duties
shall be performed and his authority may be exercised by a Vice President of the
Corporation as may have been designated by the President with the right reserved
to the Board of Directors to designate or supersede any designation so made.
Section 5.7 Vice Presidents. The several Vice Presidents shall have
such powers and duties as may be assigned to them by these Bylaws and as may
from time to time be assigned to them by the Board of Directors and may sign,
with any other proper officer, certificates for shares of the Corporation.
Section 5.8 Secretary. The Secretary, if available, shall attend all
meetings of the Board of Directors and all meetings of the Stockholders and
record the proceedings of the meetings in a book to be kept for that purpose and
shall perform like duties for any committee of the Board of Directors as shall
designate him to serve. He shall give, or cause to be given, notice of all
meetings of the Stockholders and meetings of the Board of Directors and
committees thereof and shall perform such other duties incident to the office of
secretary or as may be prescribed by the Board of Directors or the President,
under whose supervision he shall be. He shall have custody of the corporate
seal of the Corporation and he, or any Assistant Secretary, or any other person
whom the Board of Directors may designate, shall have authority to affix the
same to any instrument requiring it, and when so affixed it may be attested by
his signature or by the signature of any Assistant Secretary or by the signature
of such other person so affixing such seal.
Section 5.9 Assistant Secretaries. Each Assistant Secretary shall have
the usual powers and duties pertaining to his office, together with such other
powers and duties as may be assigned to him by the Board of Directors, the
President or the Secretary. The Assistant Secretary or such other person as may
be designated by the President shall exercise the powers of the Secretary during
that officer's absence or inability to act.
Section 5.10 Chief Financial Officer or Treasurer. The Chief Financial
Officer or Treasurer shall have the custody of and be responsible for the
corporate funds and securities, shall keep full and accurate accounts
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of receipts and disbursements in the books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. He shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Chief Financial Officer or Treasurer and of the financial
condition of the Corporation and he shall perform all other duties incident to
the position of Chief Financial Officer or Treasurer, or as may be prescribed by
the Board of Directors or the President. If required by the Board of Directors,
he shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 5.11 Assistant Treasurers. Each Assistant Treasurer shall have
the usual powers and duties pertaining to his office, together with such other
powers and duties as may be assigned to him by the Board of Directors, the
President or the Treasurer. The Assistant Treasurer or such other person
designated by the President shall exercise the power of the Treasurer during
that officer's absence or inability to act.
Section 5.12 Subordinate Officers. The Board of Directors may (i)
appoint such other subordinate officers and agents as it shall deem necessary
who shall hold their offices for such terms, have such authority and perform
such duties as the Board of Directors may from time to time determine, or (ii)
delegate to any committee or officer the power to appoint any such subordinate
officers or agents.
Section 5.13 Salaries and Compensation. The salary or other
compensation of officers shall be fixed from time to time by the Board of
Directors. The Board of Directors may delegate to any committee or officer the
power to fix from time to time the salary or other compensation of subordinate
officers and agents appointed in accordance with the provisions of Section 5.12.
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ARTICLE VI
Indemnification of Directors and Officers
(a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was, at any time
prior to or during which this Article VI is in effect, a director, officer,
employee or agent of the Corporation, or is or was, at any time prior to or
during which this Article VI is in effect, serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against reasonable expenses (including attorneys' fees), judgments, fines,
penalties, amounts paid in settlement and other liabilities actually and
reasonably incurred by such person in connection with such action, suit or
proceeding to the full extent permitted by the General Corporation Laws of the
State of Delaware, upon such determination having been made as to such person's
good faith and conduct.
(b) Expenses (including attorneys' fees) incurred by a person who is
or was a director or officer of the Corporation in appearing at, participating
in or defending any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, shall be paid by the
Corporation at reasonable intervals in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized by
this Article VI.
(c) It is the intention of the Corporation to indemnify the persons
referred to in this Article VI to the fullest extent permitted by law and with
respect to any action, suit or proceeding arising from events which occur at any
time prior to or during which this Article VI is in effect. The indemnification
and advancement of expenses provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be or become entitled under any law, the
Corporation's Certificate of Incorporation, these Bylaws, agreement, the vote of
Stockholders or disinterested directors or otherwise, or under any policy or
policies of insurance purchased and maintained by the Corporation on behalf of
any such person, both as to action in
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his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
(d) The indemnification provided by this Article VI shall be subject
to all valid and applicable laws, and, in the event this Article VI or any of
the provisions hereof or the indemnification contemplated hereby are found to be
inconsistent with or contrary to any such valid laws, the latter shall be deemed
to control and this Article VI shall be regarded as modified accordingly, and,
as so modified, to continue in full force and effect.
ARTICLE VII
Capital Stock
Section 7.1 Certificates of Stock. Certificates of stock shall be
issued to each Stockholder certifying the number of shares owned by him in the
Corporation and shall be in a form not inconsistent with the Certificate of
Incorporation and as approved by the Board of Directors. The certificates shall
be signed by the Chairman of the Board, the President or a Vice President and by
the Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer and may be sealed with the seal of the Corporation or a facsimile
thereof. Any or all of the signatures on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
If the Corporation shall be authorized to issue more than one (1) class
of stock or more than one (1) series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided by statute, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate which the Corporation shall
issue
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to represent such class or series of stock, a statement that the Corporation
will furnish without charge to each Stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 7.2 Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the owner of such certificate, or his legal
representative. When authorizing the issuance of a new certificate, the Board of
Directors may in its discretion, as a condition precedent to the issuance
thereof, require the owner, or his legal representative, to give a bond in such
form and substance with such surety as it may direct, to indemnify the
Corporation against any claim that may be made on account of the alleged loss,
theft or destruction of such certificate or the issuance of such new
certificate.
Section 7.3 Fixing Date for Determination of Stockholders of Record for
Certain Purposes. (a) In order that the Corporation may determine the
Stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of capital stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty (60) days prior to the date of payment of such
dividend or other distribution or allotment of such rights or the date when any
such rights in respect of any change, conversion or exchange of stock may be
exercised or the date of such other action. In such a case, only Stockholders
of record on the date so fixed shall be entitled to receive any such dividend or
other distribution or allotment of rights or to exercise such rights or for any
other purpose, as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation after any such record date fixed as aforesaid.
(b) If no record date is fixed, the record date for determining
Stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 7.4 Dividends. Subject to the provisions of the Corporation's
Certificate of Incorporation, if any, and except as otherwise provided by law,
the directors may declare dividends upon the capital stock of the
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Corporation as and when they deem it to be expedient. Such dividends may be paid
in cash, in property or in shares of the Corporation's capital stock. Before
declaring any dividend there may be set apart out of the funds of the
Corporation available for dividends, such sum or sums as the directors from time
to time in their discretion think proper for working capital or as a reserve
fund to meet contingencies or for equalizing dividends, or for such other
purposes as the directors shall think conducive to the interests of the
Corporation and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 7.5 Registered Stockholders. Except as expressly provided by
law, the Corporation's Certificate of Incorporation or these Bylaws, the
Corporation shall be entitled to treat registered Stockholders as the only
holders and owners in fact of the shares standing in their respective names and
the Corporation shall not be bound to recognize any equitable or other claim to
or interest in such shares on the part of any other person, regardless of
whether it shall have express or other notice thereof.
Section 7.6 Transfer of Stock. Transfers of shares of the capital
stock of the Corporation shall be made only on the books of the Corporation by
the registered owners thereof, or by their legal representatives or their duly
authorized attorneys. Upon any such transfers the old certificates shall be
surrendered to the Corporation by the delivery thereof to the person in charge
of the stock transfer books and ledgers, by whom they shall be cancelled and new
certificates shall thereupon be issued.
ARTICLE VIII
Miscellaneous Provisions
Section 8.1 Corporate Seal. If one be adopted, the corporate seal
shall have inscribed thereon the name of the Corporation and shall be in such
form as may be approved by the Board of Directors. Said seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
Section 8.2 Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
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Section 8.3 Checks, Drafts, Notes. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation, and in such manner as shall from time to time be
determined by resolution (whether general or special) of the Board of Directors
or may be prescribed by any officer or officers, or any officer and agent
jointly, thereunto duly authorized by the Board of Directors.
Section 8.4 Notice and Waiver of Notice. Whenever notice is required
to be given to any director or Stockholder under the provisions of applicable
law, the Corporation's Certificate of Incorporation or these Bylaws, such notice
shall be in writing and delivered either (i) personally, or (ii) by registered
or certified mail, or (iii) by telegram, telecopy, or similar facsimile means
(delivered during the recipient's regular business hours). Such notice shall be
sent to such director or Stockholder at the address or telecopy number as it
appears on the records of the Corporation, unless prior to the sending of such
notice he has designated, in a written request to the Secretary of the
Corporation, another address or telecopy number to which notices are to be sent.
Notices shall be deemed given when received, if sent by telegram, telex,
telecopy or similar facsimile means (confirmation of such receipt by confirmed
facsimile transmission being deemed receipt of communications sent by telex,
telecopy or other facsimile means); and when delivered and receipted for (or
upon the date of attempted delivery where delivery is refused), if hand-
delivered, sent by express courier or delivery service, or sent by certified or
registered mail. Whenever notice is required to be given under any provision of
law, the Corporation's Certificate of Incorporation or these Bylaws, a waiver
thereof in writing, by telegraph, cable or other form of recorded communication,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
Stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the
Corporation's Certificate of Incorporation or these Bylaws.
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Section 8.5 Examination of Books and Records. The Board of
Directors shall determine from time to time whether, and if allowed, when and
under what conditions and regulations the accounts and books of the Corporation
(except such as may by statute be specifically opened to inspection) or any of
them shall be open to inspection by the Stockholders, and the Stockholders'
rights in this respect are and shall be restricted and limited accordingly.
Section 8.6 Voting Upon Shares Held by the Corporation. Unless
otherwise provided by law or by the Board of Directors, the Chairman of the
Board of Directors, if one shall be elected, or the President, if a Chairman of
the Board of Directors shall not be elected, acting on behalf of the
Corporation, shall have full power and authority to attend and to act and to
vote at any meeting of Stockholders of any corporation in which the Corporation
may hold stock and, at any such meeting, shall possess and may exercise any and
all of the rights and powers incident to the ownership of such stock which, as
the owner thereof, the Corporation might have possessed and exercised, if
present. The Board of Directors by resolution from time to time may confer like
powers upon any person or persons.
ARTICLE IX
Amendments
Section 9.1 Amendment. Except as otherwise expressly provided in the
Corporation's Certificate of Incorporation, the directors, by the affirmative
vote of sixty-six and two-thirds percent (66 2/3%) of the entire Board of
Directors and without the assent or vote of the Stockholders, may at any meeting
make, repeal, alter, amend or rescind any of these Bylaws. The Stockholders
shall not make, repeal, alter, amend or rescind any of the provisions of these
Bylaws except by the holders of not less than a sixty-six and two-thirds percent
(66 2/3%) of the total voting power of all shares of stock of the Corporation
entitled to vote in the election of directors, considered for purposes of this
Article IX as one class.
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PROXY PROXY
Pennaco Energy, Inc.
Annual Meeting of Stockholders
Solicited by the Board of Directors of Pennaco Energy, Inc.
The undersigned hereby appoints Glen C. Warren, Jr. and Gregory V. Gibson, and
each of them individually, as proxies with full power of substitution, to vote
all shares of Common Stock of Pennaco Energy, Inc. that the undersigned is
entitled to vote at the Annual Meeting of Stockholders thereof to be held on
May 16, 2000, or at any adjournment or postponement thereof, as follows:
Any executed proxy which does not designate a vote shall be deemed to grant
authority for any item not designated.
PLEASE COMPLETE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
PENNACO ENERGY, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
1. Election of Directors
Nominee: Kurt M. Petersen to hold office until his successor is elected and
qualified.
INSTRUCTION: to withhold authority to vote for any individual nominee or
nominees, write the appropriate name or names in the space provided here.
For Withhold For All
All All Except
[_] [_] [_]
2. Change Pennaco's state of incorporation from Nevada to Delaware through a
merger of Pennaco Nevada into its wholly-owned subsidiary, Pennaco Delaware
and certain amendments to the Articles of Incorporation necessary to conform
to Delaware law.
For Against Abstain
[_] [_] [_]
__________________
Nominee Exception
3. Amendment to the 1998 Stock Option and Incentive Plan to increase the number
of shares of common stock reserved for issuance thereunder from 4,500,000
shares to 5,500,000 shares.
For Against Abstain
[_] [_] [_]
4. Appointment of KPMG LLP as Independent Certified Public Accountants for the
Company.
For Against Abstain
[_] [_] [_]
Please check the following box if you plan to attend the Annual Meeting of
Stockholders in person.
[_]
All shares will be voted as directed herein and, unless otherwise directed,
will be voted "FOR" Propos al 1, "FOR" Proposal 2, "FOR" Proposal 3 and "FOR"
Proposal 4.
You may revoke this Proxy at any time prior to a vote thereon.
Dated: __________________________________________ , 2000
-----------------------------------------------------------------
Signature
Please sign exactly as name appears on this card. Joint owners
should each sign. Executors, administrators, trustees, etc.,
should give their full titles.
................................................................................
FOLD AND DETACH HERE
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY
USING THE ENCLOSED ENVELOPE.
