SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
|X| Definitive Proxy Statement the Commission Only (as
|_| Definitive Additional Materials permitted by Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
CHAPARRAL RESOURCES, INC.
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(Name of Registrant as Specified in Its Charter)
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(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 Rule 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| 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:
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(2) Form, Schedule or Registration no.:
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(3) Filing Party:
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(4) Date Filed:
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CHAPARRAL RESOURCES, INC.
2211 Norfolk Street, Suite 1150
Houston, Texas 77098-4096
(713) 807-7100
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held April 21, 1999
A Special Meeting of Shareholders ("Special Meeting") of Chaparral
Resources, Inc. (the "Company") will be held at the offices of Allen & Company
Incorporated located at 711 Fifth Avenue, 9th Floor, New York, New York, 10022
on Wednesday, April 21, 1999 at 10:00 a.m., Eastern Standard Time, for the
following purposes, all of which are more completely described in the
accompanying Proxy Statement:
* to consider and act upon a proposal to amend Article Fourth of the
Company's Amended and Restated Articles of Incorporation to effect a
reverse stock split in which one new share of common stock, par value
$0.10 per share, of the Company will be exchanged for every 60 shares
of common stock, par value $0.10 per share, of the Company presently
authorized, issued, and outstanding;
* to vote on a proposal to reincorporate the Company by changing the
state of incorporation from Colorado to Delaware by the adoption of a
Plan and Agreement of Merger pursuant to which the Company will be
merged with and into Chaparral Resources Delaware, Inc., a Delaware
corporation, which is a wholly-owned subsidiary of the Company formed
specifically for the purpose of the reincorporation and which will be
the surviving corporation;
* to vote on a proposal to approve an adjournment of the Special Meeting
to another date and/or place for the purpose of soliciting additional
proxies if there are not sufficient votes at the time of the Special
Meeting to approve the foregoing proposals; and
* to transact such other business as may properly come before the
Special Meeting or any postponements or adjournment thereof;
management is not aware of any other such business.
The Board of Directors has fixed April 7, 1999 as the voting record date
for the determination of shareholders entitled to notice of and to vote at the
Special Meeting and at any adjournment or postponement thereof. Only those
shareholders of record as of the close of business on that date will be entitled
to vote at the Special Meeting or at any such adjournment.
You are cordially invited to attend the Special Meeting. It is important
that your shares be represented regardless of the number you own. Even if you
plan to be present, you are urged to complete, sign, date and promptly return
the enclosed proxy in the envelope provided. If you attend the Special Meeting,
you may vote either in person or by proxy. Any proxy given may be revoked by
you, in writing or in person, at any time prior to the exercise thereof.
By Order of the Board of Directors
/s/ Dr. Jack A. Krug
Dr. Jack A. Krug
President and Chief Operating Officer
Houston, Texas
April 8, 1999
<PAGE>
CHAPARRAL RESOURCES, INC.
2211 Norfolk Street, Suite 1150
Houston, Texas 77098-4096
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
April 21, 1999
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board of Directors") of Chaparral Resources, Inc.,
a Colorado corporation (the "Company"), of proxies from the holders (the
"Shareholders") of the Company's authorized, issued and outstanding shares of
common stock, par value $0.10 per share (the "Common Stock") and Series A
Preferred Stock, no par value (the "Series A Preferred Stock"), to be exercised
at a Special Meeting of Shareholders to be held on Wednesday, April 21, 1999, at
the offices of Allen & Company Incorporated located at 711 Fifth Avenue, 9th
Floor, New York, New York, 10022, at 10:00 a.m., Eastern Standard Time, and at
any adjournment(s) or postponement(s) of such meeting (the "Special Meeting"),
for the following purposes:
* to consider and approve a proposal to amend Article Fourth of the
Company's Amended and Restated Articles of Incorporation (the
"Articles of Incorporation") to effect a reverse stock split (the
"Reverse Stock Split") in which one new share of common stock, par
value $0.10 per share ("New Common Stock"), of the Company would be
exchanged for every 60 shares of Common Stock presently authorized,
issued, and outstanding ("Outstanding Common Stock") (the "Reverse
Stock Split Proposal");
* to vote on a proposal to reincorporate (the "Reincorporation") the
Company by changing the state of incorporation from Colorado to
Delaware by the adoption of a Plan and Agreement of Merger pursuant to
which the Company will be merged with and into Chaparral Resources
Delaware, Inc., a Delaware corporation ("Chaparral Delaware"), which
is a wholly-owned subsidiary of the Company formed specifically for
the purpose of the Reincorporation and which will be the surviving
corporation (the "Reincorporation Proposal");
* to vote on a proposal to approve an adjournment of the Special Meeting
to another date and/or place for the purpose of soliciting additional
proxies if there are not sufficient votes at the time of the Special
Meeting to approve the foregoing proposals; and
* to transact such other business as may be properly brought before the
Special Meeting and any postponements or adjournments thereof;
management is not aware of any other such business.
Shareholders are urged to carefully read this Proxy Statement in its
entirety before voting on the proposals. This Proxy Statement and the enclosed
proxy card are being mailed to the Shareholders on or about April 8, 1999.
Shares Outstanding, Recordholders and Record Date. Only the holders of
record of the shares of Common Stock and Series A Preferred Stock at the close
of business on April 7, 1999 (the "Record Date"), are entitled to notice of and
to vote at the Special Meeting and at any adjournment or postponement thereof.
There were 2,022 recordholders of the Common Stock and one recordholder of the
Series A Preferred Stock as of the Record Date. The Reverse Stock Split
Proposal, if adopted, is not expected to cause a significant change in the
number of Shareholders. At the close of business on the Record Date, 58,378,790
shares of Common Stock were outstanding, each of which is entitled to cast one
vote and 50,000 shares of Series A Preferred Stock were outstanding, each of
which is entitled to cast approximately 46.7 votes.
<PAGE>
Voting Rights and Quorum. The presence at the Special Meeting of
Shareholders, in person or by proxy, entitled to cast a one-third of all the
votes entitled to be cast at the Special Meeting will constitute a quorum for
the transaction of business at the Special Meeting. Holders of Common Stock and
Series A Preferred Stock will vote as a single class on all the proposals. To
approve the Reverse Stock Split Proposal, the votes cast, in person or by proxy,
at the Special Meeting in favor of the Reverse Stock Split Proposal must exceed
the votes cast in opposition of the Reverse Stock Split Proposal. Approval of
the Reincorporation Proposal will require the affirmative vote of the holders of
a majority of the Company's outstanding Common Stock and Series A Preferred
Stock. The effect of an abstention or a broker non-vote is the same as that of a
vote against the Reincorporation Proposal. Abstentions and broker non-votes will
not, however, have the effect of a vote against the other proposals.
Granting of Proxies. Shares of Common Stock and Series A Preferred Stock,
as the case may be, represented by properly executed proxies, if such proxies
are timely received and not revoked, will be voted in accordance with the
instructions indicated on the proxies. If no instructions are indicated, such
proxies will be voted (i) "FOR" the Reverse Stock Split Proposal, (ii) "FOR" the
Reincorporation Proposal, (iii) "FOR" the approval of any adjournment and (iv)
in the discretion of the proxy holder as to any other matter which may properly
come before the Special Meeting. Any holder of Common Stock or Series A
Preferred Stock who returns a signed proxy but fails to provide instructions as
to the manner in which such shares are to be voted will be deemed to have voted
in favor of the matters set forth in the preceding sentence. A Shareholder who
has given a proxy may revoke it at any time prior to its exercise at the Special
Meeting by (i) giving written notice of revocation to the Secretary of the
Company, (ii) properly submitting to the Company a duly-executed proxy bearing a
later date, or (iii) attending the Special Meeting and voting in person. All
written notices of revocation and other communications with respect to
revocation of proxies should be addressed as follows: Chaparral Resources, Inc.,
2211 Norfolk Street, Suite 1150, Houston, Texas 77098-4096, Attention:
Secretary.
Proxy Solicitation. The Company may solicit proxies by mail, advertisement,
telephone, facsimile, telegraph and personal solicitation. Directors and
executive officers of the Company may solicit proxies personally or by telephone
without additional compensation. The Company will reimburse banks, brokerage
firms and other custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy solicitation materials to the beneficial
owners of the Common Stock and Series A Preferred Stock.
Appraisal Rights. Under the Colorado Business Corporation Act ("CBCA"),
Shareholders will not be entitled to dissenters' rights of appraisal with
respect to any of the proposals.
Other Matters. At March 1, 1999, directors and executive officers of the
Company and their affiliates beneficially owned 8,849,292 shares of Common
Stock, or 14.72% of the total shares outstanding on such date, and no shares of
Series A Preferred Stock. It is anticipated that all of such shares will be
voted in favor of the proposals of the Board of Directors described in this
Proxy Statement. Under the CBCA, only the purposes specified in the Notice of
Special Meeting of Shareholders may be considered at the Special Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of March 1, 1999, with
respect to directors, named executive officers of the Company and each person
who is known by the Company to own beneficially more than 5% of the Common
Stock, and with respect to shares owned beneficially by all directors and
executive officers of the Company as a group. The following information does not
reflect the Reverse Stock Split Proposal. The address for all directors and
executive officers of the Company is 2211 Norfolk Street, Suite 1150, Houston,
Texas 77098-4096.
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<TABLE>
<CAPTION>
Amount and Nature of Percent of
Beneficial Common
Name of Beneficial Owner Position Ownership (1) Stock (1)
------------------------ -------- ------------- ---------
<S> <C> <C> <C>
Allen & Company Incorporated -- 11,177,107 (2) 18.31%
711 Fifth Avenue
New York, New York 10022
Cascade Investment, LLC -- 3,333,333 5.71%
2365 Carillon Point
Kirkland, WA 98033
Drake and Company -- 1,415,000 2.42%
Citibank Performance Portfolio A.A
C/o Citibank, N.A.
153 E. 53rd Street, 21st Floor
New York, New York 10043
Whittier Ventures, LLC -- 3,233,556 (3) 5.51%
1600 Huntington Drive
South Pasadena, California 91030
Jack A. Krug President and Chief Operating 200,000(4) *
Officer
John G. McMillian Chairman of the Board, 250,000(5) *
Director, and Chief Executive
Officer
David A. Dahl Director 5,549,803(6) 9.36%
Ted Collins, Jr. Director 60,000 *
James Jeffs Director 2,568,247 (7) 4.36%
Arlo G. Sorensen Director 96,242 (8) *
Richard L. Grant Director -0- *
Howard Karren Former President and Chief 1,195,000 (9) *
Executive Officer
All Current Directors and Executive 8,849,292 (10) 14.72%
Officers as a Group (nine persons)
- ----------
</TABLE>
* Represents less than 1% of the shares of the Common Stock outstanding.
(1) Beneficial ownership of the Common Stock has been determined for this
purpose in accordance with Rule 13d-3 under the Securities Exchange Act of
1934, as amended ("Exchange Act"), under which a person is deemed to be
the beneficial owner of securities if he or she has or shares voting power
or investment power with respect to such securities or has the right to
acquire beneficial ownership within 60 days.
(2) Includes 2,651,7200 shares underlying warrants to purchase shares of Common
Stock. The number of warrants reflected includes 225,000 warrants that
Allen & Company Incorporated ("ACI") acquired and holds for the benefit of
certain of its officers, directors and employees. ACI is a wholly owned
subsidiary of Allen Holding Inc. ("AHI"), and, consequently, AHI may be
deemed to beneficially own the shares beneficially owned by ACI. Does not
include certain shares owned directly by certain officers and stockholders
of AHI and ACI with respect to which AHI and ACI disclaim beneficial
ownership. Certain officers and stockholders of AHI and ACI may be deemed
to beneficially own certain shares of the Common Stock reported to be
beneficially owned directly by AHI and ACI.
(3) Includes 282,500 shares underlying currently exercisable warrants.
(4) Does not include 800,000 shares that will vest annually at a rate of
200,000 shares on January 15th of each year. If Dr. Krug's employment
terminates, the stock award will be prorated as to that year.
(5) Includes 25,000 shares underlying a currently exercisable option and 25,000
shares underlying a currently exercisable warrant.
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<PAGE>
(6) Includes 75,000 shares underlying currently exercisable options owned by
Mr. Dahl, 3,233,556 shares beneficially owned by Whittier Ventures LLC,
349,185 shares owned by Whittier Energy Company, 87,500 shares underlying
currently exercisable warrants owned by Whittier Energy Company, 1,285,192
shares beneficially owned by Whittier Trust Company, 9,370 shares owned by
Whittier Opportunity Fund and 500,000 shares underlying currently
exercisable options owned by Whittier Opportunity Fund. Although, Mr. Dahl
has no pecuniary interest in the shares beneficially owned by Whittier
Ventures LLC, Whittier Energy Company, Whittier Trust Company, or Whittier
Opportunity Fund but, as the President of Whittier Ventures LLC and
Whittier Energy Company, as the Vice President of Whittier Trust Company
and as a Manager of Whittier Opportunity Fund, Mr. Dahl has voting power
and investment power over such shares and, thus, may be deemed to
beneficially own such shares.
(7) Includes 349,185 shares owned by Whittier Energy Company, 87,500 shares
underlying currently exercisable options owned by Whittier Energy Company,
1,285,192 shares beneficially owned by the Whittier Trust Company, 9,370
shares owned by Whittier Opportunity Fund and 500,000 shares underlying
currently exercisable options owned by Whittier Opportunity Fund. Although
Mr. Jeffs has no pecuniary interest in the shares beneficially owned by the
Whittier Energy Company, Whittier Trust Company and the Whittier
Opportunity Fund, as Vice President of the Whittier Energy Company, Vice
President of the Whittier Trust Company and Manager of the Whittier
Opportunity Fund, Mr. Jeffs has voting power and investment power over such
shares and, thus, may be deemed to beneficially own such shares. Does not
include 235,000 shares subject to an escrow agreement which provides that
such shares will be released to Mr. Jeffs if the Company's oil and gas
interests attain specified performance levels.
(8) Includes 75,000 shares underlying currently exercisable options and 11,242
shares owned by Whittier 1982 Oil Trust for which Mr. Sorensen is the
trustee and has voting and investment power over such shares. Mr. Sorensen
is a director of Whittier Ventures LLC and Whittier Energy Company. Mr.
Sorensen disclaims beneficial ownership of the shares that are owned by
Whittier Ventures LLC and Whittier Energy Company.
(9) Includes 1,025,000 shares underlying currently exercisable options. Mr.
Karren is no longer employed by the Company.
(10) Includes the shares as described in notes (4) through (8) above. Also
includes (i) 20,000 shares owned by Mr. Young, the Treasurer and Controller
of the Company, (ii) 70,000 shares underlying a presently exercisable
options owned by Mr. Young, (iii) 10,000 shares owned by Mr. Berlin, the
Secretary of the Company, and (iv) 25,000 shares underlying a presently
exercisable option owned by Mr. Berlin. Does not include a grant for 20,000
shares that will vest with respect to 10,000 shares on each of January 30,
2000 and 2001, if Mr. Young is still employed by the Company on those
dates. The shares will vest earlier if Mr. Young is terminated without due
cause or if the Company is acquired or merges with another entity.
REVERSE STOCK SPLIT PROPOSAL
Amendment of the Articles of Incorporation. The Board of Directors has
approved, subject to the Shareholder approval solicited hereby, the Reverse
Stock Split in which one share of New Common Stock would be exchanged for every
60 shares of Outstanding Common Stock. The number of authorized shares of Common
Stock and preferred stock, no par value, as a result of the Articles of
Amendment (as herein defined) would remain unchanged at 100,000,000 and
1,000,000, respectively. Additionally, the number of authorized shares of each
series of preferred stock consisting of the Series A Preferred Stock, Series B
Preferred Stock, no par value (the "Series B Preferred Stock"), and Series C
Preferred Stock, no par value (the "Series C Preferred Stock") would likewise
remain unchanged at 75,000, 75,000 and 75,000, respectively. The full text of
the Articles of Amendment to the Restated Articles of Incorporation + Amendments
(the "Articles of Amendment") is set forth in Annex I attached hereto. However,
if the Reincorporation Proposal is approved by the shareholders, the Series B
Preferred Stock and the Series C Preferred Stock will be eliminated. See
"Reincorporation Proposal."
Reasons for the Reverse Stock Split Proposal. The primary objective of the
Reverse Stock Split Proposal is to increase the market price per share of the
Common Stock. The Common Stock is currently listed on The Nasdaq SmallCap Market
under the symbol "CHAR." Under Marketplace Rules of The Nasdaq Stock Market,
Inc. ("Nasdaq") governing qualitative and quantitative standards for listing, a
minimum bid price of $1.00 per share is required. On December 7, 1998, the
Company received a letter from Nasdaq, in which the Company was notified that it
had failed to comply with the continued listing requirement with respect to the
minimum bid requirement of its Common Stock, as set forth in Nasdaq Marketplace
Rule 4310(c)(4).
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<PAGE>
The Company was and has been unable to comply with the minimum bid
requirement since receiving the December 7, 1998 letter from Nasdaq. By letter
dated March 12, 1999, Nasdaq notified the Company that its delisting will be
stayed pending a hearing on April 30, 1999, at which time the Company must
demonstrate its ability to comply with all listing requirements, including the
minimum bid price for the Common Stock. At this hearing, the Company will
explain the Reverse Stock Split Proposal, describe its efforts to raise
additional equity capital, and, if necessary, request an extension of the
deadline to comply with the minimum bid price requirement of Nasdaq. There can
be no assurance, however, that the Company will be successful at such hearing
and the failure to do so may result in the immediate delisting of the Common
Stock. Such delisting will have an adverse impact on the liquidity of the Common
Stock and the Series A Preferred Stock. The possible consequences of such
delisting could include litigation. Such delisting could make it more difficult
for the Company to raise additional capital in the manner in which it has done
so in the past, such as the issuance of convertible preferred stock. The Company
is currently having severe cash flow problems and is attempting to raise
additional equity capital in the private equity markets in the first half of
1999. Failure by the Company to raise additional equity capital in the first
half of 1999 will have a material adverse effect on the Company, including the
possibility that the Company may have to file a voluntary petition in bankruptcy
under Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy Code").
If the Common Stock is delisted from Nasdaq, trading therein, if any, may
then be conducted on the OTC Bulletin Board or the over-the-counter market.
Because spreads between the "bid" and "asked" prices of the Common Stock quoted
by market makers on the OTC Bulletin Board and the over-the-counter market will
likely be greater than it is at present, Shareholders will likely experience a
greater degree of difficulty in trading the Common Stock. In addition, there are
significant restrictions imposed by most brokerage houses on the ability of
their brokers to solicit orders or recommend the purchase of stocks that trade
on the OTC Bulletin Board. In the majority of cases, the purchase of stock is
limited to unsolicited offers from private investors, who have to comply with
policies and practices involving the completion of time-consuming forms that can
make the handling of lower-priced stocks economically unattractive. Moreover,
most brokerage houses do not permit lower-priced stocks to be used as collateral
for margin accounts or to be purchased on margin. Consequently, the Board of
Directors believes that the current per share price of the Common Stock may
limit the effective marketability of the Common Stock because of the reluctance
of many brokerage firms and institutional investors to recommend lower-priced
stocks to their clients or to hold them in their own portfolios. The brokerage
commission on the purchase or sale of a lower-priced stock may also represent a
higher percentage of the price than the brokerage commission on a higher-priced
issue.
The Common Stock is currently subject to the rules and regulations of the
Securities and Exchange Commission (the "SEC") concerning "penny stocks." The
SEC's rules and regulations generally define a penny stock to be an equity
security that is not listed on Nasdaq or a national securities exchange and that
has a market price of less than $5.00 per share, subject to certain exceptions.
The SEC's rules and regulations require broker-dealers to deliver to a purchaser
of penny stock a disclosure schedule explaining the penny stock market and the
risks associated with it. Various sales practice requirements are also imposed
on broker-dealers who sell penny stocks to persons other than established
customers and accredited investors (generally institutions). In addition,
broker-dealers must provide the customer with current bid and offer quotations
for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction and monthly account statements showing the market value of
each penny stock held in the customer's account. If the Common Stock is traded
on the OTC Bulletin Board or the over-the-counter market and remains subject to
the regulations applicable to penny stocks, investors may find it more difficult
to obtain timely and accurate quotes and execute trades of the Common Stock.
The Company anticipates that the Reverse Stock Split Proposal, if approved
by the Shareholders, will have the effect of increasing the minimum bid price of
the Common Stock sufficient to satisfy Nasdaq's minimum bid price criteria.
However, there can be no assurance that the minimum bid price will increase, or
if it increases, that it will be maintained for any period of time, that the
SEC's rules and regulations concerning penny stock will not apply to the Common
Stock, or that the Company will be successful in maintaining its listing on The
Nasdaq SmallCap Market subsequent thereto or at any time in the future.
The Board of Directors believes that the proposed Reverse Stock Split will
stimulate additional interest in the Common Stock. There can be no assurance,
however, that there will be any increase in the market price of the Common
Stock, particularly since the Reverse Stock Split will significantly decrease
the number of outstanding shares of Common Stock, possibly resulting in lesser
market liquidity than before the Reverse Stock Split. A decrease in liquidity
could limit the ability of the Company to raise equity capital in the manner in
which it has done in the past. Failure by the Company to raise additional equity
capital in the first and second quarters of 1999 may have a material adverse
effect on the Company, including the possibility that the Company may have to
file a voluntary petition in bankruptcy under Chapter 11 of the Bankruptcy Code.
5
<PAGE>
Principal Effects of The Reverse Stock Split. If the Reverse Stock Split
Proposal is approved, on the date the Reverse Stock Split becomes effective, the
total number of shares of Common Stock held by each Shareholder would be
converted automatically into a right to receive an amount of whole shares of New
Common Stock equal to the number of shares owned immediately prior to the
Reverse Stock Split divided by 60 and the conversion price of the Series A
Preferred Stock would be multiplied by 60.
If the Reverse Stock Split becomes effective, the Company's management
believes that the quoted market price of the Common Stock should increase
without altering any Shareholder's aggregate economic interest in the Company
represented by such shares. The Board of Directors believes that the increased
market price would be a more appropriate trading price for a company that is
traded on The Nasdaq SmallCap Market. There can be no assurance, however, that
the Reverse Stock Split will increase the market price of the Common Stock, that
any such increase would be in proportion to the one-for-sixty Reverse Stock
Split ratio, or that the per share market price of the Common Stock immediately
after the proposed Reverse Stock Split can be maintained for any period of time.
As of the Record Date, there were outstanding options to purchase an
aggregate of 3,451,000 shares of Common Stock under the Company's 1998 Incentive
and Nonstatutory Stock Option Plan and 1997 Incentive Stock Plan (collectively,
the "Plans") as well as under grants not made pursuant to the Plans. In
addition, an aggregate of 3,000,000 shares of Common Stock remain available for
grant under the Plans. The Plans provide for automatic adjustment of the number
and per share price of shares subject to outstanding options and available for
future grant in the event of a change in capitalization, such as a reverse stock
split. If the Reverse Stock Split is enacted, the number of shares of New Common
Stock issuable upon exercise of outstanding options will be reduced to 57,517
and the exercise prices will be 60 times the present exercise prices. The number
of shares of New Common Stock available for grant under the Plan will be reduced
to 50,000.
As of the Record Date, there were outstanding warrants to purchase an
aggregate of 4,554,500 shares of Common Stock pursuant to various warrant
agreements (collectively, the "Warrants"). The Warrants and the Series A
Preferred Stock provide for automatic adjustment of the number and per share
price of shares subject to the Warrants in the event of a change in
capitalization, such as a reverse stock split. If the Reverse Stock Split
Proposal is approved and effected, the conversion price of the Series A
Preferred Stock and the exercise price of the Warrants would be adjusted
proportionately so that after the Reverse Stock Split, a holder of Series A
Preferred Stock and a holder of a warrant would receive approximately 1.67% of
the Common Stock the holder would have received had the holder converted or
exercised prior to the split. The Reverse Stock Split, if approved, will have no
affect on the aggregate economic interest in the Company of the holders of
Series A Preferred Stock or Warrant.
Approval of the Reverse Stock Split Proposal would not adversely affect any
Shareholder's percentage ownership interest in the Company or proportional
voting power, except for nominal increases due to the rounding up of fractional
shares. The rights and privileges of the holders of Common Stock would not be
affected substantially by adoption of the Reverse Stock Split Proposal. The
Reverse Stock Split, however, may result in some Shareholders owning "odd-lots"
of less than 100 shares of new Common Stock. Brokerage commissions and other
costs, of transactions in odd-lots are generally higher than the cost of
transactions in even multiples of 100 shares; however, the Company believes that
potential advantages of continued listing on The Nasdaq SmallCap Market will
outweigh this disadvantage.
Effective Date of Reverse Stock Split. If the Reverse Stock Split Proposal
is approved by the Shareholders at the Special Meeting, the Articles of
Amendment would be filed with the Secretary of State of Colorado and the Reverse
Stock Split will become effective as of 5:00 p.m., Mountain Time, on the date of
such filing ("Effective Date"). It is expected that such filing would take place
on April 21, 1999, or shortly thereafter. Without any further action on the part
of the Company or the Shareholders, the shares of Outstanding Common Stock held
by Shareholders of record will be converted at 5:00 p.m., Mountain Time, on the
Effective Date into the right to receive an amount of whole shares of New Common
Stock equal to the number of their Outstanding Common Stock divided by 60, with
any fractional shares rounded up to the nearest whole share, and the conversion
price of the Series A Preferred Stock will be multiplied by 60.
Fractional Shares And Exchange of Stock Certificates. No scrip or
fractional shares certificates will be issued in connection with the Reverse
Stock Split. Fractional shares resulting from the Reverse Stock Split will be
rounded upward to the nearest whole share so that no Shareholder will be
deprived of any shares.
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<PAGE>
As soon as practicable after the Effective Date the Company will send a
letter of transmittal to each Shareholder of record on the Effective Date for
use in transmitting certificates representing shares of Outstanding Common Stock
("Old Certificates") to American Securities Transfer & Trust, Inc., Denver,
Colorado, which will act as the exchange agent ("Exchange Agent") for the
Company. The letter of transmittal will contain instructions for the surrender
of Old Certificates to the Exchange Agent in exchange for new certificates
representing the number of whole shares of New Common Stock ("New
Certificates"). No New Certificates will be issued to a Shareholder until the
Shareholder has surrendered all Old Certificates together with a properly
completed and executed letter of transmittal to the Exchange Agent.
Upon proper completion and execution of the letter of transmittal and
return thereof to the Exchange Agent, together with all Old Certificates, a
Shareholder will receive New Certificates representing the number of whole
shares of New Common Stock into which their shares of Outstanding Common Stock
have been converted as a result of the Reverse Stock Split.
Until surrendered, on and after the Effective Date, outstanding Old
Certificates held by a Shareholder will be deemed for all purposes to represent
the number of whole shares of New Common Stock to which the Shareholder is
entitled as a result of the Reverse Stock Split. If the Reincorporation Proposal
is approved by the Shareholders at the Special Meeting and effected, the New
Certificates will be issued by Chaparral Delaware rather than by the Company.
See "Reincorporation Proposal."
Stockholders should not forward their Old Certificates to the Exchange
Agent until the letter of transmittal is received and should surrender their Old
Certificates only with such letter of transmittal.
Certain Federal Income Tax Consequences. The following is a summary of the
material anticipated federal income tax consequences of the Reverse Stock Split
to Shareholders. This summary is based on the federal income tax laws as now in
effect and as currently interpreted. This summary does not take into account
possible changes in tax laws or interpretations thereof, after the date hereof,
including amendments to applicable statutes, regulations and proposed
regulations or changes in judicial or administrative rulings, some of which may
have a retroactive effect. This summary does not purport to address all aspects
of the possible federal income tax consequences of the Reverse Stock Split and
is not intended as tax advice to any person. In particular, and without limiting
the foregoing, this summary does not consider the federal income tax
consequences to Shareholders in light of their individual investment
circumstances or to holders subject to special treatment under the federal
income tax laws (for example, life insurance companies, financial institutions,
tax-exempt organizations, regulated investment companies and foreign taxpayers).
The summary does not address any consequence of the Reverse Stock Split under
any state, local or foreign income and other tax laws.
No ruling will be obtained from the Internal Revenue Service regarding the
federal income tax consequences to the Company or to the Shareholders as a
result of the Reverse Stock Split.
Approval of the Reverse Stock Split Proposal will require Shareholders to
exchange their Outstanding Common Stock for an amount of whole shares of New
Common Stock equal to the number of shares of Outstanding Common Stock owned
immediately prior to the Reverse Stock Split divided by 60. No fractional shares
of New Common Stock will be issued. Any fraction of a share that any Shareholder
would otherwise be entitled to receive will be rounded up to the nearest whole
share.
If approved by the Shareholders and effected, the Reverse Stock Split will
qualify as a "recapitalization", as described in Section 368(a)(1)(E) of the
Internal Revenue Code (the "Code"). Consequently, no gain or loss will be
recognized by the Company. Except as discussed below, no gain or loss will be
recognized by Shareholders who exchange their Outstanding Common Stock in
connection with the Reverse Stock Split. The aggregate basis of New Common Stock
received will be the same as the aggregate basis of Outstanding Common Stock
surrendered in exchange therefor. Similarly, the holding period for New Common
Stock received as a result of the Reverse Stock Split will include the holding
period of the shares of Outstanding Common Stock surrendered in exchange
thereof.
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The results described above should apply to a Shareholder who receives
additional New Common Stock as a result of the rounding up of a fractional share
to a whole share; however, it is possible that the receipt of additional New
Common Stock due to such rounding could be, wholly or partly, taxable. In the
event that such additional New Common Stock is deemed to be fully taxable upon
receipt, such tax will be based upon the fair market value of the additional
fractional share as of the date received. Accordingly, any such tax associated
with such fractional share would be de minimis.
Each Shareholder is encouraged to consult his or her tax advisor regarding
the specific tax consequences of the Reverse Stock Split Proposal to such
Shareholder, including the application and effect of state, local, and foreign
income and other tax laws.
Vote Required; Recommendation of the Board of Directors. In order to effect
the Reverse Stock Split Proposal, the Articles of Incorporation must be amended.
An amendment to the Articles of Incorporation requires, under Section 7-107-206
of the CBCA and the Articles of Incorporation, that a quorum exists and that the
votes cast, in person or by proxy, at the Special Meeting in favor of the
Reverse Stock Split Proposal exceed the votes cast in opposition of the Reverse
Stock Split Proposal. If approved, the Articles of Amendment will become
effective upon the filing thereof with the Secretary of State of Colorado.
The Board of Directors recommends that you vote "FOR" the Reverse Stock
Split Proposal. In the absence of instructions to the contrary, proxies
solicited in connection with this proxy statement will be so voted.
REINCORPORATION PROPOSAL
The Board of Directors believes that the best interests of the Company and
the Shareholders will be served by changing the Company's state of incorporation
from Colorado to Delaware. As discussed below, the principal reasons for
Reincorporation are the greater flexibility of Delaware corporate law, the
substantial body of case law interpreting that law, and the increased ability of
the Company to attract and retain qualified Directors. The Company believes that
its Shareholders will benefit from the well-established principles of corporate
governance that Delaware law affords. Although Delaware law provides the
opportunity for the Board of Directors to adopt various mechanisms which may
enhance the Board's ability to negotiate favorable terms for the Shareholders in
the event of an unsolicited takeover attempt, the proposed Certificate of
Incorporation (the "Delaware Certificate of Incorporation") and Bylaws for
Chaparral Delaware are substantially similar to the Company's current Articles
of Incorporation and Bylaws, with the exception that the Delaware Certificate of
Incorporation reduces the par value of the common stock to $0.0001 from $0.10,
eliminates the Series B Preferred Stock and the Series C Preferred Stock,
increases the number of shares that constitutes a quorum, and certain other
alterations due to differences in Delaware and Colorado law. The Reincorporation
Proposal is not being proposed in order to prevent an unsolicited takeover
attempt, nor is it in response to any present attempt known to the Board of
Directors to acquire control of the Company, obtain representation on the Board
of Directors or take significant action that affects the Company.
The Reincorporation will be effected by merging the Company with and into
Chaparral Delaware. Upon completion of the Reincorporation, the Company will
cease to exist in accordance with the CBCA and Chaparral Delaware will operate
the business of the Company under the existing Company name, Chaparral
Resources, Inc. Pursuant to the Plan and Agreement of Merger between the Company
and Chaparral Delaware (the "Merger Agreement"), each outstanding share of
Common Stock and Series A Preferred Stock will automatically be converted into
one share of Chaparral Delaware common stock, par value $0.0001 per share, or
preferred stock, no par value, as appropriate. Since there are no shares of the
Series B Preferred Stock and the Series C Preferred Stock issued or outstanding,
there will be no conversion thereof and the Series B Preferred Stock and Series
C Preferred Stock will cease to exist. It is expected that the Reincorporation
will be effective as of 5:01 p.m., Mountain Time, on the Effective Date.
Chaparral Delaware will assume and continue the outstanding stock options
and all other employee benefit plans of the Company. Each outstanding and
unexercised option or other right to purchase shares of Common Stock will become
an option or right to purchase the same number of shares of Chaparral Delaware
Common Stock, subject to adjustment for the Reverse Stock Split, on the same
terms and conditions and at the same exercise price applicable to any such
option or stock purchase right as of the Effective Date. It is expected that, if
the Reverse Stock Split Proposal is approved and the Company prevails at the
Nasdaq hearing on April 30, 1999, the common stock of Chaparral Delaware will be
listed on The Nasdaq SmallCap Market and that it will trade under the symbol
"CHAR".
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Shareholders will have no dissenters' rights of appraisal with respect to
the Reincorporation Proposal. See "Significant Differences Between the
Corporation Laws of Colorado and Delaware--Appraisal Rights." The discussion set
forth below is qualified in its entirety by reference to the Merger Agreement,
the Delaware Certificate of Incorporation and the Bylaws of Chaparral Delaware,
copies of which are attached hereto as Annexes II, III, and IV, respectively.
Principal Reasons for the Reincorporation. As the Company plans for the
future, the Board of Directors and management believe that it is essential to be
able to draw upon well-established principles of corporate governance in making
legal and business decisions. The prominence and predictability of Delaware
corporate law provide a reliable foundation on which the Company's governance
decisions can be based and the Board of Directors believes that Shareholders
will benefit from the responsiveness of the Delaware General Corporation Law
(the "DGCL").
For many years Delaware has followed a policy of encouraging incorporation
in that state and, in furtherance of that policy, has been a leader in adopting,
construing and implementing comprehensive, flexible corporate laws responsive to
the legal and business needs of corporations organized under its laws. Many
corporations have chosen Delaware initially as a state of incorporation or have
subsequently changed corporate domicile to Delaware in a manner similar to that
proposed by the Company. Because of Delaware's prominence as the state of
incorporation for many major corporations, both the legislature and courts in
Delaware have demonstrated an ability and a willingness to act quickly and
effectively to meet changing business needs. The Delaware courts have developed
considerable expertise in dealing with corporate issues and a substantial body
of case law has developed construing Delaware law and establishing public
policies with respect to corporate legal affairs.
Both the CBCA and the DGCL permit a corporation to include a provision in
its articles of incorporation or certificate of incorporation, as the case may
be, which reduces or limits the monetary liability of directors for breaches of
fiduciary duty in certain circumstances. The increasing frequency of claims and
litigation directed against directors and officers has greatly expanded the
risks facing directors and officers of corporations in exercising their
respective duties. The amount of time and money required to respond to such
claims and to defend such litigation can be substantial. It is the Company's
desire to reduce these risks to its directors and officers and to limit
situations in which monetary damages can be recovered against directors so that
the Company may continue to attract and retain qualified directors who otherwise
might be unwilling to serve because of the risks involved. The Company believes
that, in general, the DGCL provides greater protection to directors than the
CBCA and that Delaware case law regarding a corporation's ability to limit
director liability is more developed and provides more guidance than Colorado
case law.
There is substantial judicial precedent in the Delaware courts as to the
legal principles applicable to measures that may be taken by a corporation and
as to the conduct of the board of directors under the business judgment rule.
The Company believes that the Shareholders will benefit from the
well-established principles of corporate governance that the DGCL affords.
No Change in the Name, Board Members, Business, Management, Employee
Benefit Plans or Location of Principal Facilities of the Company. The
Reincorporation Proposal will effect a change in the legal domicile of the
Company, but not its physical location. The Reincorporation will not result in
any change in the name, business, management, fiscal year, assets or liabilities
(except to the extent of legal and other costs of effecting the reincorporation)
or location of the principal facilities of the Company. The Directors of the
Company will become the Directors of Chaparral Delaware. Chaparral Delaware will
assume all of the Company's employee benefit plans. All stock options, warrants
or other rights to acquire Common Stock will automatically be converted into an
option or right to purchase the same number of shares of Chaparral Delaware
common stock at the same price per share, upon the same terms, and subject to
the same conditions. The Company's other employee benefit arrangements will also
be continued by Chaparral Delaware upon the terms and subject to the conditions
currently in effect.
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Anti-takeover Implications. Delaware, like many other states, permits a
corporation to adopt a number of measures through amendment of its certificate
of incorporation or bylaws or otherwise, which measures are designed to reduce
the corporation's vulnerability to unsolicited takeover attempts. The
Reincorporation Proposal is not being proposed in order to prevent an
unsolicited takeover attempt, nor is it in response to any present attempt known
to the Board of Directors to acquire control of the Company, obtain
representation on the Board of Directors or take significant action that affects
the Company.
Nevertheless, certain effects of the Reincorporation Proposal may be
considered to have anti-takeover implications. Section 203 of the DGCL, from
which Chaparral Delaware will not opt out, restricts certain "business
combinations" with "interested stockholders" for three years following the date
that a person or entity becomes an interested stockholder, unless the Board of
Directors approves the business combination and/or other requirements are met.
See "Significant Differences Between the Corporation Laws of Colorado and
Delaware--Shareholder Approval of Certain Business Combinations." Certain
measures permitted under the DGCL, which the Company does not presently intend
to implement, include the ability to establish a staggered Board of Directors
and to eliminate the right of stockholders controlling at least 10% of the
voting shares to call a special meeting of stockholders. The elimination of
cumulative voting and the establishment of a classified board of directors can
also be undertaken under the CBCA in certain circumstances. For a detailed
discussion of certain of the changes that will be implemented as part of the
Reincorporation Proposal, see "Significant Differences Between the Articles of
Incorporation and the Delaware Certificate of Incorporation." For a more
complete discussion of differences between the corporate laws of Colorado and
Delaware, see "Significant Differences Between the CBCA and the DGCL."
In addition, while both the CBCA and the DGCL permit a corporation to adopt
such measures as stockholder rights plans, designed to reduce a corporation's
vulnerability to unsolicited takeover attempts, there is substantial judicial
precedent in the Delaware courts as to the legal principles applicable to such
defensive measures and as to the conduct of a board of directors under the
business judgment rule with respect to unsolicited takeover attempts. The Board
of Directors has no present intention following the Reincorporation to amend the
Delaware Certificate of Incorporation or Bylaws to include provisions, which
might deter an unsolicited takeover attempt; however, in the discharge of its
fiduciary obligations to the Shareholders, the Board of Directors will continue
to evaluate the Company's vulnerability to potential unsolicited bids to acquire
the Company on unfavorable terms and to consider strategies to enhance the Board
of Directors' ability to negotiate with an unsolicited bidder.
Significant Differences Between the Articles of Incorporation and the
Delaware Certificate of Incorporation. The Board of Directors believes that the
following summary of the significant differences between the Company's Articles
of Incorporation and the Delaware Certificate of Incorporation is a fair one, it
should be understood that it is merely a summary, does not purport to be
complete and is qualified in its entirety by reference to the Company's Articles
of Incorporation and the Delaware Certificate of Incorporation:
Change in Par Value. The Articles of Incorporation currently authorize the
Company to issue up to 100,000,000 shares of Common Stock, par value $0.10 per
share, and 1,000,000 shares of Preferred Stock, no par value. The Delaware
Certificate of Incorporation provides that Chaparral Delaware will have
100,000,000 authorized shares of common stock, par value $0.0001 per share, and
1,000,000 shares of preferred stock, no par value per share.
Preferred Stock. Like the Articles of Incorporation, the Delaware
Certificate of Incorporation provides that the Board of Directors is entitled to
determine the powers, preferences and rights, and the qualifications,
limitations or restrictions, of the authorized and unissued preferred stock.
Thus, although it has no present intention of doing so, the Board of Directors,
without Shareholder approval, could authorize the issuance of preferred stock
upon terms which could have the effect of delaying or preventing a change in
control of the Company or modifying the rights of holders of the Common Stock
under either Colorado or Delaware law. The Board of Directors could also utilize
such shares for further financings, possible acquisitions and other uses.
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The Articles of Incorporation authorize the Company to issue up to 75,000
shares of Series B Preferred Stock and 75,000 shares of Series C Preferred
Stock. Since there are no shares of Series B Preferred Stock or Series C
Preferred Stock issued or outstanding, the Delaware Certificate of Incorporation
eliminates the Series B Preferred Stock and Series C Preferred Stock. The
powers, preferences, rights, qualifications, limitations and restrictions of the
Series A Preferred Stock are identical under the Articles of Incorporation and
the Delaware Certificate of Incorporation.
Quorum. The Articles of Incorporation provide that one-third of the shares
entitled to vote, or as provided in the Bylaws, at any meeting shall constitute
a quorum. The Delaware Certificate of Incorporation provides that a majority of
the shares entitled to vote will constitute a quorum.
Monetary Liability of Directors. The Articles of Incorporation and the
Delaware Certificate of Incorporation both provide for the elimination of
personal monetary liability of directors under certain circumstances. The
provision eliminating monetary liability of directors set forth in the Delaware
Certificate of Incorporation is potentially more expansive than the
corresponding provision in the Articles of Incorporation, in that the former
incorporates future amendments to Delaware law with respect to the elimination
of such liability, and the latter limits indemnification where the indemnified
party is adjudged liable for his or her own negligence or misconduct in the
performance of his or her duty. For a more detailed explanation of the
foregoing, see "Significant Differences Between the CBCA and
DGCL--Indemnification and Limitation of Liability."
Size of the Board of Directors. The Articles of Incorporation provide for a
Board of Directors consisting of three to nine directors as set by the Bylaws
which establishs the number of directors at six. The Delaware Certificate of
Incorporation provides that the Bylaws will establish the number of directors,
which is likewise set at six. Under the CBCA, although changes in the number of
directors, in general, must be approved by a majority of the outstanding shares,
the board of directors may fix the exact number of directors within a stated
range set forth in the articles of incorporation or bylaws, if the stated ranges
have been approved by the shareholders. Delaware law permits the board of
directors, acting alone, to change the authorized number of directors by
amendment to the bylaws, unless the directors are not authorized to amend the
bylaws or the number of directors is fixed in the certificate of incorporation
(in which case a change in the number of directors may be made only by amendment
to the certificate of incorporation following approval of such change by the
stockholders). The Delaware Certificate of Incorporation provides that the
number of directors will be as specified in the Bylaws and authorizes the Board
of Directors to adopt, alter, or repeal the Bylaws. Following the
Reincorporation, the Board of Directors could amend the Bylaws to change the
size of the Board of Directors from six Directors without further stockholder
approval.
Power to Call Special Stockholders' Meetings. Under the CBCA, a special
meeting of Stockholders may be called by the board of directors, the holders of
shares entitled to cast not less than 10% of the votes at such meeting and such
additional persons as are authorized by the Bylaws of the Company, or by
resolution. The Bylaws of the Company, however, do not specifically allow for
10% shareholders to call a special meeting. Under the DGCL, a special meeting of
stockholders may be called by the board of directors or by any other person
authorized to do so in the certificate of incorporation or the bylaws. The
Bylaws of Chaparral Delaware authorize the chairman of the board or president or
by the president or secretary at the written request of the holders of not less
than 10% of the shares entitled to vote to call a special meeting of
stockholders. Therefore, no substantive change is contemplated in this
provision, although the Board of Directors could in the future amend the Bylaws
of Chaparral Delaware without stockholder approval.
Filling Vacancies on the Board of Directors. Under the CBCA, any vacancy on
the board of directors other than one created by removal of a director elected
by a voting group of shareholders may be filled by the board or the
shareholders. If the number of directors is less than a quorum, a vacancy may be
filled by the unanimous written consent of the directors then in office, by the
affirmative vote of a majority of the directors at a meeting held pursuant to
notice or waivers of notice or by a sole remaining director. A vacancy created
by removal of a director elected by a voting group of shareholders may be filled
by the board or by the affirmative vote of a majority of the remaining directors
elected by such voting group of shareholders, unless the articles of
incorporation provide otherwise. Subject to any contrary provision in the
articles of incorporation, such vacancy may also be filled by the affirmative
vote of stockholders belonging to such voting group. There is no contrary
provision in the Articles of Incorporation. Under the DGCL, vacancies and newly
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created directorships may be filled by a majority of the directors then in
office (even though less than a quorum) or by a sole remaining director, unless
otherwise provided in the certificate of incorporation or bylaws (or unless the
certificate of incorporation directs that a particular class of stock is to
elect such director(s), in which case a majority of the directors elected by
such class, or a sole remaining director so elected, shall fill such vacancy or
newly created directorship). The Bylaws of Chaparral Delaware provide that any
vacancy may be filled by majority of the directors then in office, though less
than a quorum, or a sole remaining director.
Loans to Officers and Employees. Under the CBCA, any loan or guaranty to or
for the benefit of a director of the corporation as a "conflicting interest
transaction" requires either: (i) approval of the majority of disinterested
directors after disclosure of material facts, (ii) approval of the shareholders
after disclosure of material facts, or (iii) that it be fair as to the
corporation. Pursuant to the Bylaws of Chaparral Delaware and in accordance with
the DGCL, Chaparral Delaware may make loans to, guarantee the obligations of or
otherwise assist its officers or other employees and those of its subsidiaries
(including directors who are also officers or employees) when such action, in
the judgment of the directors, may reasonably be expected to benefit the
corporation.
Voting by Ballot. The Bylaws of the Company provide, consistent with the
CBCA, that the election of Directors at a shareholders' meeting shall be by
ballot. Under the Bylaws of Chaparral Delaware, the right to vote by written
ballot may be restricted if so provided in the certificate of incorporation. The
Delaware Certificate of Incorporation provides that elections of directors need
not be by ballot. As a result, the Delaware Certificate of Incorporation does
not require election of directors by ballot unlike the current Bylaws of the
Company.
Compliance with the DGCL and the CBCA. Following the Special Meeting, if
the Reincorporation Proposal is approved by the Shareholders, the Company will
submit the Articles of Merger to the office of the Secretary of State of the
State of Colorado and the Certificate of Merger to the office of the Secretary
of State of the State of Delaware for filing.
Significant Differences Between the CBCA and the DGCL. The CBCA and the
DGCL differ in many respects. Although all the differences are not set forth in
this Proxy Statement, certain provisions, which may materially affect the rights
of the Shareholders, are as follows:
Stockholder Approval of Certain Business Combinations. In recent years, a
number of states have adopted special laws designed to make certain kinds of
"unfriendly" corporate takeovers, or other transactions involving a corporation
and one or more of its significant Shareholders, more difficult. Under Section
203 of the DGCL certain "business combinations" with "interested Stockholders"
of Delaware corporations are subject to a three-year moratorium unless specified
conditions are met. Section 203 prohibits a Delaware corporation from engaging
in a "business combination" with an "interested stockholder" for three years
following the date that such person or entity becomes an interested stockholder.
With certain exceptions, an interested stockholder is a person or entity who or
which owns, individually or with or through certain other persons or entities,
15% or more of the corporation's outstanding voting stock (including any rights
to acquire stock pursuant to an option, warrant, agreement, arrangement or
understanding, or upon the exercise of conversion or exchange rights, and stock
with respect to which the person has voting rights only), or is an affiliate or
associate of the corporation and was the owner, individually or with or through
certain other persons or entities, of 15% or more of such voting stock at any
time within the previous three years, or is an affiliate or associate of any of
the foregoing. For purposes of Section 203, the term "business combination" is
defined broadly to include mergers with or caused by the interested stockholder;
sales or other dispositions to the interested stockholder (except
proportionately with the corporation's other stockholders) of assets of the
corporation or a direct or indirect majority-owned subsidiary equal in aggregate
market value to 10% or more of the aggregate market value of either the
corporation's consolidated assets or all of its outstanding stock; the issuance
or transfer by the corporation or a direct or indirect majority-owned subsidiary
of stock of the corporation or such subsidiary to the interested stockholder
(except for certain transfers in a conversion or exchange or a pro rata
distribution or certain other transactions, none of which increase the
interested stockholder's proportionate ownership of any class or series of the
corporation's or such subsidiary's stock or of the corporation's voting stock);
or receipt by the interested stockholder (except proportionately as a
stockholder), directly or indirectly, of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation or a
subsidiary.
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The three-year moratorium imposed on business combinations by Section 203
does not apply if (i) prior to the date on which such stockholder becomes an
interested stockholder, the board of directors approves either the business
combination or the transaction that resulted in the person or entity becoming an
interested stockholder, (ii) upon consummation of the transaction that made him
or her an interested stockholder, the interested stockholder owns at least 85%
of the corporation's voting stock outstanding at the time the transaction
commenced (excluding from the 85% calculation shares owned by directors who are
also officers of the target corporation and shares held by employee stock plans
that do not give employee participants the right to decide confidentially
whether to accept a tender or exchange offer), or (iii) on or after the date
such person or entity becomes an interested stockholder, the board approves the
business combination and it is also approved at a stockholder meeting by 662/3%
of the outstanding voting stock not owned by the interested stockholder.
Section 203 only applies to corporations that have a class of voting stock
that is (i) listed on a national securities exchange, (ii) authorized for
quotation on Nasdaq or (iii) held of record by more than 2,000 stockholders.
Although a Delaware corporation to which Section 203 applies may elect not to be
governed by Section 203, Chaparral Delaware will not so elect. Section 203 will
encourage any potential acquirer to negotiate with the Board of Directors.
Section 203 also might have the effect of limiting the ability of a potential
acquirer to make a two-tiered bid for Chaparral Delaware in which all
stockholders would not be treated equally. Shareholders should note, however,
that the application of Section 203 to Chaparral Delaware will confer upon the
Board of Directors the power to reject a proposed business combination in
certain circumstances, even though a potential acquirer may be offering a
substantial premium for Chaparral Delaware's securities over the then-current
market price. Section 203 would also discourage certain potential acquirers
unwilling to comply with its provisions. See "Stockholder Voting" herein.
Removal of Directors. Under the CBCA, unless the articles of incorporation
of a corporation provide otherwise, any director or the entire board of
directors may be removed, with or without cause, with the approval of a majority
of the outstanding shares entitled to vote; however, if cumulative voting is in
effect, no individual director may be removed if the number of votes cast
against such removal would be sufficient to elect the director under cumulative
voting, and any director elected by a voting group can only be removed by that
voting group. Under the DGCL, a director of a corporation that does not have a
classified board of directors or cumulative voting may be removed with or
without cause with the approval of a majority of the outstanding shares entitled
to vote at an election of directors. In the case of a Delaware corporation
having cumulative voting, if less than the entire board is to be removed, a
director may not be removed without cause if the number of shares voted against
such removal would be sufficient to elect the director under cumulative voting.
A director of a corporation with a classified board of directors may be removed
only for cause, unless the corporation's certificate of incorporation otherwise
provides. The Delaware Certificate of Incorporation and Bylaws of Chaparral
Delaware do not provide for a classified Board of Directors or for cumulative
voting.
Staggered Board of Directors. A staggered or classified board is one on
which a certain number, but not all, of the directors are elected on a rotating
basis each year. This method of electing directors makes changes in the
composition of the board of directors more difficult, and thus a potential
change in control of a corporation a lengthier and more difficult process. The
CBCA permits a corporation to provide for a staggered board of directors by
allowing for either all, or one-half or one-third of the board to be elected
annually. Although the Company qualifies to adopt a classified board of
directors, the Board of Directors has no present intention of doing so. The DGCL
permits, but does not require, a classified board of directors, pursuant to
which the directors can be divided into as many as three classes with staggered
terms of office, with only one class of directors standing for election each
year. The Delaware Certificate of Incorporation and Bylaws of Chaparral Delaware
do not provide for a classified board of directors and Chaparral Delaware does
not intend to propose establishment of a classified board of directors. The
establishment of a classified board of directors following the Reincorporation
would require the approval of the stockholders of Chaparral Delaware.
Indemnification and Limitation of Liability. Both the CBCA and the DGCL
have similar provisions respecting indemnification by a corporation of its
officers, directors, employees and other agents. The laws of both states also
permit, with certain exceptions, a corporation to adopt a provision in its
articles of incorporation or certificate of incorporation, as the case may be,
eliminating the liability of a director to the corporation or its stockholders
for monetary damages for breach of the director's fiduciary duty. There are
nonetheless certain differences between the laws of the two states respecting
indemnification and limitation of liability.
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The Articles of Incorporation eliminate the liability of the Board of
Directors to the fullest extent permissible under the CBCA. The CBCA does not
permit the elimination of monetary liability for breach of fiduciary duty as a
director where such liability is based on (i) breach of the director's duty of
loyalty to the corporation or its shareholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of the
law, (iii) unlawful distributions, (iv) any transaction from which the director
directly or indirectly derived an improper personal benefit, or (v) any act or
omission occurring before the provision eliminating liability became effective.
The Delaware Certificate of Incorporation also eliminates the liability of
Directors to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a Director to the fullest extent permissible under the
DGCL, as such law exists currently or as it may be amended in the future. The
limitations imposed on such a provision under the DGCL are substantially similar
to the limitations imposed by the CBCA.
The CBCA permits indemnification of a person made party to a proceeding
because the person is or was a director against liability incurred in the
proceeding if (i) the person conducted himself or herself in good faith and (ii)
the person reasonably believed, in the case of conduct in an official capacity
with the corporation, that his or her conduct was in the corporation's best
interests, and in the all other cases, that his or her conduct was at least not
opposed to the corporation's best interests. Additionally, in the case of any
criminal proceeding, the person must have had no reasonable cause to believe his
or her conduct was unlawful. Notwithstanding the foregoing, under the CBCA, a
corporation may not indemnify a director in connection with a derivative action
in which the director was adjudged liable to the corporation, or in connection
with any other proceeding charging that the director derived an improper
personal benefit, and in which proceeding the director was adjudged liable on
the basis that he or she in fact derived such improper personal benefit. Also,
in a derivative action, indemnification is expressly limited to the reasonable
expenses incurred in connection with the proceeding.
Under the DGCL, a corporation may indemnify a director against all
liability (including expenses) in an action other than a derivative action if
the person conducted himself or herself in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interest of the
corporation (without a distinction made, as in the CBCA, for actions taken in
"official capacity"), and with respect to criminal actions, he or she had no
reasonable cause to believe that his or her conduct was unlawful. In derivative
actions, as under the CBCA, indemnification is limited to reasonable expenses
incurred (and is subject to the same standard of conduct for non-derivative
actions), with the additional restriction that if the director is adjudged
liable to the corporation, the court deciding the proceeding must make the
special determination that the director is entitled to indemnification of
expenses notwithstanding such adverse adjudication because such person is fairly
and reasonable so entitled in view of all the circumstances. By comparison,
under the CBCA, if a corporation elects not to indemnify a director against
expenses incurred in connection with a derivative action because the director
was found not to have acted within the requisite standard of conduct, a court
may nevertheless award expenses if the court determines the director is fairly
and reasonably entitled to indemnification in light of all of the circumstances.
Under both the CBCA and the DGCL, officers, employees and agents (as well
as fiduciaries, under the CBCA) may be indemnified to the same extent as
directors.
Under both the CBCA and the DGCL, a corporation must indemnify the person
made party to a proceeding because such person was a director against expenses
(including attorney's fees) where such person is successful on the merits or
otherwise in defense of such proceeding. Though, under the CBCA, this mandatory
indemnification may be limited by the articles of incorporation, the Articles of
Incorporation contain no such limitation. Also, under the DGCL, this mandatory
indemnification is extended to persons made party to a proceeding because such
person was an officer, employee or agent of the corporation; under the CBCA, the
mandatory indemnification of expenses, as may be further limited by the articles
of incorporation, is only extended to officers of the corporation.
Under the DGCL, the corporation may advance the expenses incurred by a
director in connection with proceedings prior to a final adjudication if the
director executes an undertaking to repay such amounts if it is ultimately
determined that the director is not entitled to indemnification. The board of
directors may set other terms and conditions for the advance of expenses on
behalf of employees and agents. Chaparral Delaware has no present intention to
limit such advances. Under the CBCA, in addition to the undertaking referred to
above (which must be an unlimited general obligation of the director, but need
not be secured), the director must furnish a written affirmation of the
director's good faith belief that he or she has met the requisite standard of
conduct heretofore described.
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Under both the DGCL and the CBCA, a "determination" must be made, based on
the facts then known to those making the determination, that indemnification
would not be precluded under applicable law. The "determination" is made by the
affirmative vote a majority of directors not party to the subject proceeding, by
independent legal counsel, or by the shareholders. The CBCA allows for a
determination by a committee where no quorum of non-party directors can be
reached; the DGCL does not require a quorum of non-party directors. Under the
CBCA, the determination is made by stockholders only if the board directs, or
cannot approve because of a lack of non-party directors; there is no such
limitation on stockholder approval under the DGCL. The "determination" must be
made in advance of indemnification and advancement of expenses under the CBCA;
however, no prior determination is required for the advancement of expenses
under the DGCL.
The DGCL and CBCA both authorize a corporation's purchase of insurance on
behalf of directors, officers, employees and agents, regardless of the
corporation's statutory authority to indemnify such person directly. The CBCA
specifically allows such insurance to be purchased from a company in which the
corporation has equity or other interests.
Under the CBCA, a corporation can indemnify officers, employees,
fiduciaries and agents (but not directors) to a greater extent than provided in
the CBCA, subject to public policy concerns, if such rights are set forth in the
articles of incorporation, bylaws, or board of director or stockholder
resolution, or by contract, though the Company does not provide such greater
indemnification. The CBCA does not provide for extended indemnification of
directors. By contrast, under the DGCL, a director's rights to indemnification
are not limited to those set forth in the DGCL, and may be expanded by bylaw,
agreement, common law, or otherwise, though limitations could be imposed by a
court on grounds of public policy.
Reduction of Capital. The DGCL provides that a corporation may reduce its
capital in a variety of specified methods, including: by reducing or eliminating
the capital represented by shares of capital stock which had been retired; by
applying to an otherwise authorized purchase or redemption of outstanding shares
of its capital stock, some or all of the capital represented by the shares being
purchased or redeemed or any capital that has not been allocated to any
particular class of its capital stock; by applying to an otherwise authorized
conversion or exchange of outstanding shares of its capital stock, some or all
of the capital represented by the shares being converted or exchanged, or some
or all of any that has not been allocated to any particular class of its capital
stock, or both, to the extent that such capital in the aggregate exceeds the
total aggregate par value or the stated capital of any previously unissued
shares issuable upon such conversion or exchange; or by transferring to surplus
(i) some or all of the capital not represented by any particular class of its
capital stock, (ii) some or all of the capital represented by issued shares of
its par value capital stock, which capital is in excess of the aggregate par
value of such shares, or (iii) some of the capital represented by the issued
shares of its capital stock without par value.
The foregoing may be conducted without the approval of the corporation's
stockholders, provided that the assets remaining after the reduction are
sufficient to pay any debts not otherwise provided for. The CBCA, contains no
directly corresponding provision. The statutory scheme for capitalization of
Colorado corporations differs from the DGCL statute in that concepts such as
"capital" and "surplus" are not addressed under the CBCA statute. The effect of
this difference is not material to the rights of the Shareholders.
Dividends and Repurchases of Shares. The CBCA dispenses with the concepts
of par value of shares as well as statutory definitions of capital, surplus and
the like. The concepts of par value, capital and surplus are retained under the
DGCL.
Under the CBCA, a corporation may not make any distribution (including
dividends, or repurchases and redemptions of shares) if, after giving effect to
the distribution, (i) the corporation would not be able to pay its debts as they
become due in the usual course of business, or (ii) the corporation's total
assets would be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, it
the corporation were to be dissolved at the time of the distribution, to satisfy
the preferential liquidation rights of stockholders not receiving the
distribution.
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The DGCL permits a corporation to declare and pay dividends out of surplus
or, if there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or for the preceding fiscal year as long as 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, the DGCL generally provides that a
corporation may redeem or repurchase its shares only if the capital of the
corporation is not impaired and such redemption or repurchase would not impair
the capital of the corporation.
Stockholder Voting. Under the DGCL and pursuant to the Articles of
Incorporation, as permitted by the CBCA, a majority of the stockholders of both
acquiring and target corporations must approve any statutory merger, except in
certain circumstances substantially similar under both the CBCA and the DGCL.
Also, under the DGCL and pursuant to the Articles of Incorporation, as
permitted by the CBCA, a sale of all or substantially all of the assets of a
corporation must be approved by a majority of the outstanding voting shares of
the corporation transferring such assets. With certain exceptions, the CBCA also
requires that mergers, share exchanges, certain sales of assets and similar
transactions be approved by a majority vote of each voting group of shares
outstanding. In contrast, the DGCL generally does not require class voting,
except in certain transactions involving an amendment to a corporation's
certificate of incorporation that adversely affects a specific class of shares.
As a result, stockholder approval of such transactions may be easier to obtain
under the DGCL for companies, which have more than one class of shares
outstanding.
Interested Director Transactions. Under both the CBCA and the DGCL, certain
contracts or transactions in which one or more of a corporation's directors has
an interest are not void or voidable because of such interest provided that
certain conditions, such as obtaining the required approval and fulfilling the
requirements of good faith and full disclosure, are met. With certain
exceptions, the conditions are similar under the CBCA and the DGCL. The most
significant difference between the DGCL and the CBCA is that under the CBCA, a
corporation cannot rely on ratification or authorization of a disinterested
board of directors regarding a loan or guaranty benefiting a director unless the
stockholders have been given at least ten days written notice. The Company is
not aware of any plans of the Board of Directors to propose, authorize, or
ratify any such transaction for which notice would be required under the CBCA,
but not under the DGCL.
Stockholder Derivative Suits. The CBCA provides that the corporation or the
defendant in a derivative suit may require the plaintiff shareholder to furnish
a security bond if the shareholder holds less than 5% of the outstanding shares
of any class and such shares have a market value of less than $25,000. The DGCL
does not have a similar bonding requirement.
Appraisal Rights. Under both the CBCA and the DGCL, a stockholder of a
corporation participating in certain major corporate transactions may, under
varying circumstances, be entitled to appraisal rights pursuant to which such
stockholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in the
transaction. Appraisal rights are available in response to similar transactions
under both the CBCA and the DGCL, except that under the CBCA, appraisal rights
are also available to a shareholder in the event of (i) a share exchange to
which the corporation is a party as the corporation whose shares will be
acquired (a transaction not specifically authorized by the DGCL), (ii) a sale,
lease, exchange or other disposition of all or substantially all of the assets
of a corporation or an entity which the corporation controls if a vote of the
shareholders is otherwise require, and (iii) a reverse stock split if the split
reduces the number of shares owned by the shareholder to a fraction of a share
or to scrip and such fraction or scrip is to be acquired for cash or voided
pursuant to the statutory procedure available under the CBCA.
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In addition, there are differences in the timing of payments made to
dissenting shareholders, the ability of a court to award attorneys' fees, and
the manner of determining "fair value" which may make the CBCA more favorable
from a shareholder's point of view.
Under both the DGCL and the CBCA, stockholders (i) receive prior notice of
their rights to dissent, (ii) must deliver their notice of dissent prior to the
corporate action given rise to dissenter's rights, and (iii) will receive notice
from the corporation of the effectiveness of the corporate action within ten
days. Other procedural differences between the CBCA and the DGCL may be viewed
as more favorable to a dissenting stockholder.
Under the DGCL, a dissenting stockholder has 120 days to obtain from the
corporation a settlement of the fair value of his or her shares. If no
settlement is reached at that time, the stockholder may petition the Delaware
Court of Chancery to determine the fair value of the shares, after which the
corporation will be instructed to pay to the dissenting stockholder the fair
value, as determined. The court costs will be allocated among the corporation
and dissenting stockholders, as equitable, and the legal fees for dissenting
stockholders who prosecute their claims may be spread among the dissenting
stockholders as a group. Finally, in determining "fair value" the Delaware Court
of Chancery is required to consider all relevant factors, and to include
interest, but is statutorily prohibited from including "any element of value
arising from the accomplishment or expectation" of the transaction giving rise
to appraisal rights.
In contrast, under the CBCA, a dissenting shareholder may make a demand no
later than 30 days following the notice from the corporation of the maturity of
his or her appraisal rights. Upon receipt of such demand (or the effective date
of the transaction, whichever is later), the corporation must pay each dissenter
who has properly followed the procedure set forth in the CBCA an amount which
the corporation estimates to be the fair value of the dissenter's shares, plus
interest. In addition, the corporation must also deliver, among other things,
financial statements, a statement of the estimate of fair value, and an
explanation of how interest was calculated. If the dissenting shareholder is
dissatisfied with this offer, such dissenting stockholder may then, within 30
days, keep the payment, but reject the corporation's calculation of fair value
and present a counter-offer. If the corporation does not agree with the
dissenting shareholder's counter-offer, the corporation is forced to commence an
appraisal proceeding. A court will then determine the fair value of the
dissenter's shares, taking into consideration all relevant factors. The court
can also assess legal fees not only among the class of dissenters as under the
DGCL law, but against the corporation if it is determined that it is equitable
to do so and that the corporation did not substantially comply with the
procedures set forth in the CBCA. Legal fees and expenses may also be awarded to
any party if the opposing party is found to have acted arbitrarily, vexatiously
or not in good faith. Unlike the DGCL, the CBCA does not specifically prohibit
the court from taking into effect any appreciation in the fair value of the
shares attributable to the "accomplishment or expectation" of the transaction
giving rise to dissenter's rights. In addition, the CBCA is not well developed
in the context of valuing dissenter's shares. Thus, the fair value of
dissenter's shares assigned by a court interpreting the CBCA could differ
significantly (and could be significantly lower) from the value assigned by a
Delaware court. The procedure under the CBCA will likely ensure that dissenters
receive at least some value from the corporation for their shares at an earlier
date.
The Company believes that transactions in which the Company most likely
would be involved would involve other public companies, in which case
dissenter's rights would not be applicable under either the CBCA or the DGCL.
The Company does not presently intend to take any action, which would give rise
to dissenter's rights. However, should such a transaction occur, the provisions
under the CBCA may be viewed more favorable to a shareholder than the provisions
under the DGCL.
Dissolution. Under the CBCA, dissolution may be authorized by the adoption
of a plan of dissolution by the board of directors, followed by the
recommendation of the proposal to the shareholders (unless because of a conflict
of interest or other circumstances the board determines it cannot make any
recommendation), then followed by the approval of shareholders entitled to vote
thereon. The CBCA provides for the approval by a majority of each voting group
entitled to vote thereon. The CBCA also provides for judicial dissolution of a
corporation in an action by a shareholder upon a showing that (i) the directors
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are deadlocked in management, the shareholders are unable to break the deadlock,
and irreparable injury to the corporation is threatened or being suffered, or
the business and affairs of the corporation can no longer be conducted to the
advantage of the stockholders generally, because of the deadlock, (ii) the
directors or those in control of the corporation are acting or will act in a
manner which is illegal, oppressive, or fraudulent, (iii) the shareholder have
been deadlocked over two annual meetings in the election of directors, or (iv)
the corporate assets are being misapplied or wasted. A Colorado corporation can
also be dissolved judicially upon other grounds in a proceeding by the attorney
general, or in a proceeding by creditors, as well as by the secretary of state.
Under the DGCL, unless the board of directors approves the proposal to dissolve,
the dissolution must be approved by all the stockholders entitled to vote
thereon. Only if the dissolution is initially approved by the board of directors
may it be approved by a simple majority of the outstanding shares of the
corporation's stock entitled to vote. In the event of such a board-initiated
dissolution, the DGCL allows a Delaware corporation to include in its
certificate of incorporation a supermajority (greater than a simple majority)
voting requirement in connection with dissolutions. The Delaware Certificate of
Incorporation contains no such supermajority voting requirement; however, and a
majority of the outstanding shares entitled to vote, voting at a meeting at
which a quorum is present, would be sufficient to approve a dissolution of
Chaparral Delaware that had previously been approved by its Board of Directors.
The DGCL provides for dissolution by operation of law for abuse, misuse or
nonuse of its corporate powers, privileges or franchises.
Action by Consent. Under the CBCA, unless the articles of incorporation
require that a particular action is taken at a meeting of shareholders, any
action to be taken by shareholders may be taken instead by the unanimous written
consent of all shareholders entitled to vote thereon. Under the DGCL, action in
lieu of a meeting is also allowed. However, under the DGCL law, the action may
be taken by the written consent of only those stockholders required to vote in
favor of the action. Those stockholders not executing written consents (and who
would otherwise be entitled to notice of a meeting at which such action would
have otherwise taken place) must receive prompt written notice of the action
taken.
Special Meetings. The DGCL provides that a special meeting of the
stockholders may be called by the holders of shares entitled to cast not less
than 10% of the votes to be cast at the meeting. Stockholders, under the DGCL,
do not have a right to call a special meeting unless it is conferred in the
corporation's certificate of incorporation or bylaws. The Bylaws of Chaparral
Delaware allow special meetings to be called by the holders of shares entitled
to cast not less than 10% of the votes to be cast at the meeting.
Other. The foregoing is an attempt to summarize the more important
differences in the corporation laws of the two states and does not purport to be
a complete listing of differences in the rights and remedies of holders of
shares of Colorado, as opposed to Delaware, corporations. Such differences can
be determined in full by reference to the CBCA and the DGCL. In addition, both
the CBCA and the DGCL provide that some of the statutory provisions as they
affect various rights of holders of shares may be modified by provisions in the
articles of incorporation or bylaws of a corporation. The Articles of
Incorporation and Bylaws of the Company and the Delaware Certificate of
Incorporation and Bylaws of Chaparral Delaware materially modify the rights of
shareholders which are generally provided under the CBCA and the DGCL in the
areas of cumulative voting and preemptive rights of shareholders, required
shareholder vote on certain matters and indemnification obligations of a
corporation to its directors, officers and agents, and the material differences
in that regard between them have been described above. See "Significant
Differences Between the Articles of Incorporation and the Delaware Certificate
of Incorporation."
Conditions to Effectiveness of the Reincorporation. The effectiveness of
the Reincorporation is subject to (i) receipt of the consents of lenders,
lessors and other persons deemed necessary by the officers of the Company to
permit the Reincorporation, and (ii) approval of the Reincorporation Proposal by
the requisite number of the Shareholders.
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Certain Federal Income Tax Consequences. The following is a summary of the
material anticipated federal income tax consequences of the Reincorporation to
Shareholders. This summary is based on the federal income tax laws as now in
effect and as currently interpreted. This summary does not take into account
possible changes in tax laws or interpretations thereof, after the date hereof,
including amendments to applicable statutes, regulations and proposed
regulations or changes in judicial or administrative rulings, some of which may
have a retroactive effect. This summary does not purport to address all aspects
of the possible federal income tax consequences of the Reincorporation and is
not intended as tax advice to any person. In particular, and without limiting
the foregoing, this summary does not consider the federal income tax
consequences to Shareholders in light of their individual investment
circumstances or to holders subject to special treatment under the federal
income tax laws (for example, life insurance companies, financial institutions,
tax-exempt organizations regulated investment companies and foreign taxpayers).
The summary does not address any consequence of the Reincorporation under any
state, local, or foreign income and other tax laws.
No ruling will be obtained from Internal Revenue Service regarding the
federal income tax consequences to the Company or the Shareholders as a result
of the Reincorporation.
If approved by the Shareholders and effected, the Reincorporation will
qualify as a "recapitalization," as described in Section 368(a)(1)(F) of the
Code and the following consequences should generally result:
* no gain or loss should be recognized by the Shareholders, the Company
or Chaparral Delaware as a result of the Reincorporation;
* the aggregate tax basis of the Chaparral Delaware common stock
received by each Shareholder in the Reincorporation should be equal to
the aggregate tax basis of the Common Stock surrendered by such
Shareholder in exchange therefor; and
* the holding period of the Chaparral Delaware common stock received by
each Shareholder should include the period for which such Shareholder
held the Common Stock surrendered in exchange therefor, provided that
such Common Stock was held by such Shareholder as a capital asset as
of the effective date of the Reincorporation.
Each Shareholder is encouraged to consult its own tax advisor regarding the
specific tax consequences of the Reincorporation to such Shareholder, including
the application and effect of federal, state, local and foreign income, and
other tax laws.
Vote Required; Recommendation of the Board of Directors. In order to effect
the Reincorporation Proposal, the requisite number of Shareholders must approve
the Merger Agreement. The approval of the Merger Agreement requires, under
Section 7-111-103 of the CBCA, and the Articles of Incorporation, that a quorum
exist and that a majority of the Company's outstanding Common Stock and
Preferred Stock vote in favor of the Reincorporation Proposal.
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The Board of Directors recommends that you vote "FOR" the Reincorporation
Proposal. In the absence of instructions to the contrary, proxies solicited in
connection with this proxy statement will be so voted.
APPROVAL OF ADJOURNMENT
Each proxy solicited hereby by the Company requests authority to vote for
an adjournment of the Special Meeting if an adjournment of such meeting is
deemed to be necessary. The Company may seek an adjournment of the Special
Meeting for not more than 120 days in order to enable it to solicit additional
votes in favor of the Reverse Stock Split Proposal or the Reincorporation
Proposal in the event that such proposals have not received the requisite vote
of Shareholders at the Special Meeting. If the Company desires to adjourn the
Special Meeting with respect to any of the foregoing proposals, it will request
a motion that the Special Meeting be adjourned for up to 120 days with respect
to any proposal, and no vote will be taken on such proposal at the originally
scheduled meeting. Each proxy solicited hereby, if properly signed and returned
to the Company and not revoked prior to its use, will be voted on any such
motion for adjournment in accordance with the instructions contained therein. If
no contrary instructions are given, each proxy received will be voted in favor
of any motion by the Company to adjourn the Special Meeting. Unless revoked
prior to its use, any proxy solicited for the Special Meeting will continue to
be valid for any adjournment of such meeting, and will be voted in accordance
with the instructions contained therein, and if no contrary instructions are
given, for the Reverse Stock Split Proposal and the Reincorporation Proposal.
Any adjournment will permit the Company to solicit additional proxies and
will permit a greater expression of the Shareholders' views with respect to such
proposal. Such an adjournment would be disadvantageous to Shareholders who are
against the Reverse Stock Split Proposal or the Reincorporation Proposal,
because an adjournment will give the Company additional time to solicit
favorable votes and thus increase the chances of approving either or both
proposals.
If a quorum is not present at the Special Meeting, no proposal will be
acted upon and the Company will adjourn the Special Meeting to an alternative
date in order to solicit additional proxies on each of the proposals being
submitted to Shareholders.
An adjournment for up to 120 days will not require either the setting of a
new record date or notice of the adjourned meeting as in the case of an original
meeting. The Company does not have any reason to believe that an adjournment of
the Special Meeting will be necessary at this time.
Because the Board of Directors recommends that you vote "FOR" the Reverse
Stock Split Proposal and the Reincorporation Proposal, the Board of Directors
recommends that you vote "FOR" the possible adjournment of the Special Meeting
on such proposals.
STOCKHOLDER PROPOSALS
Proposals of Shareholders intended to be included in the proxy materials
and presented at the Annual Meeting of Shareholders to be held in 1999 must have
been received by the Secretary of the Company, at 2211 Norfolk Street, Suite
1150, Houston, Texas 77098-4096, by January 28, 1999. If such proposal was in
compliance with all of the requirements of Rule 14a-8 promulgated under the
Exchange Act, it will be included in the Proxy Statement and set forth on the
form of proxy.
Proposals not submitted for inclusion in the proxy statement, and therefore
not included in such, may be properly brought before an Annual Meeting by a
Shareholder who has submitted such proposals on a timely basis and in the form
and manner consistent with that specified under the Articles of Incorporation.
For such notice to have been timely for the 1999 Annual Meeting, it must have
been received by the Secretary of the Company, at 2211 Norfolk Street, Suite
1150, Houston, Texas 77098-4096, by January 28, 1999.
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OTHER MATTERS
Management is not aware of any business to come before the Special Meeting
other than those matters described in this Proxy Statement; however, if any
other matters should properly come before the Special Meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the person or persons authorized to
vote the proxies.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Dr. Jack A. Krug
Dr. Jack A. Krug
President and Chief Operating Officer
April 8, 1999
Houston, Texas
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ANNEX I
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION AND AMENDMENTS
OF
CHAPARRAL RESOURCES, INC.
Pursuant to the provisions of the Colorado Business Corporation Act (the
"CBCA"), Chaparral Resources, Inc. (the "Corporation") hereby adopts the
following Articles of Amendment to its Restated Articles of Incorporation +
Amendments:
FIRST: That the name of the Corporation is Chaparral Resources, Inc.
SECOND: The following amendment to the Restated Articles of Incorporation +
Amendments was adopted by the shareholders of the Corporation on April 21, 1999,
in the manner prescribed by the CBCA:
Paragraph 1 of Article FOURTH shall be deleted in its entirety and replaced
with the following:
"FOURTH. The aggregate number of shares of stock
which the corporation shall have the authority to issue is
101,000,000 shares, of which 100,000,000 shall be Common
Stock, par value $0.10 per share and 1,000,000 shall be
Preferred Stock, no par value per share."
THIRD: That the number of votes cast for the amendment by the holders of
the shares entitled to vote on the amendment was sufficient for approval of the
amendment.
FOURTH: That these Articles of Amendment to the Restated Articles of
Incorporation + Amendments of the Corporation shall be effective upon filing
with the Secretary of State of the State of Colorado.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Dr. Jack A. Krug, President and Chief Operating Officer of the
Corporation, this 21st day of April 1999.
CHAPARRAL RESOURCES, INC.
Dr. Jack A. Krug
President and Chief Operating Officer
I-2
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ANNEX II
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "Merger Agreement") is made as of
April 21, 1999, by and between Chaparral Resources, Inc., a Colorado corporation
("Chaparral") and Chaparral Resources Delaware, Inc., a Delaware corporation
("Chaparral Delaware" and, together with Chaparral, the "Constituent
Corporations").
WHEREAS, the authorized capital stock of Chaparral consists of 100,000,000
shares of Common Stock, par value $0.10 per share, and 1,000,000 shares of
Preferred Stock, no par value per share;
WHEREAS, the authorized capital stock of Chaparral Delaware consists of
100,000,000 shares of Common Stock, par value $0.0001 per share, and 1,000,000
shares of Preferred Stock, no par value per share; and
WHEREAS, the directors of the Constituent Corporations deem it advisable
and to the advantage of the Constituent Corporations that Chaparral merge with
and into Chaparral Delaware upon the terms and conditions provided herein.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Chaparral shall
merge with and into Chaparral Delaware on the following terms, conditions and
other provisions:
1. TERMS AND CONDITIONS.
1.1 Merger. Chaparral shall be merged with and into Chaparral Delaware (the
"Merger"), effective at 5:01 p.m., Mountain Standard Time, April 21, 1999 (the
"Effective Date") and Chaparral Delaware shall be the surviving corporation (the
"Surviving Corporation").
1.2 Name Change. On the Effective Date, the name of Chaparral Delaware will
be Chaparral Resources, Inc.
1.3 Succession. On the Effective Date, Chaparral Delaware will continue its
separate corporate existence under the laws of the State of Delaware, and the
separate existence and corporate organization of Chaparral, except insofar as it
may be continued by operation of law, shall be terminated and cease.
1.4 Transfer of Assets and Liabilities. On the Effective Date, the rights,
privileges, and powers, both of a public and a private nature, of each of the
Constituent Corporations shall be vested in and possessed by the Surviving
Corporation, subject to all of the disabilities, duties and restrictions of or
upon each of the Constituent Corporations; and all rights, privileges, and
powers of each of the Constituent Corporations, and all property, real, personal
and mixed, of each of the Constituent Corporations, and all debts due to each of
the Constituent Corporations on whatever account, and all things in action or
belonging to each of the Constituent Corporations shall be transferred to and
vested in the Surviving Corporation; and all property, rights, privileges and
powers, and all and every other interest, thereafter shall be the property of
the Surviving Corporation as they were of the Constituent Corporations, and the
title to any real estate vested by deed or otherwise in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger; provided, however, that the liabilities of the Constituent
Corporations and of their respective stockholders, directors and officers shall
not be affected and all rights of creditors and all liens upon any property of
either of the Constituent Corporations shall be preserved unimpaired, and any
claim existing or action or proceeding pending by or against either of the
Constituent Corporations may be prosecuted to judgment as if the Merger had not
been consummated, except as they may be modified with the consent of such
creditors, and all debts, liabilities and duties of or upon each of the
Constituent Corporations shall attach to the Surviving Corporation, and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it.
1.5 Common Stock and Preferred Stock of Chaparral and Chaparral Delaware.
On the Effective Date, by virtue of the Merger and without any further action on
the part of the Constituent Corporation or their respective stockholders, (i)
each share of Common Stock of Chaparral issued and outstanding immediately prior
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thereto shall be combined, changed and converted into one (1) share of Common
Stock of Chaparral Delaware,in each case fully paid and nonassessable, (ii) each
share of Preferred Stock of Chaparral issued and outstanding immediately prior
thereto shall be combined, changed and converted into one (1) share of Preferred
Stock of Chaparral Delaware, in each case fully paid and nonassessable, of the
same series and with identical designations, preferences, rights,
qualifications, limitations and restrictions, (iii) each share of Common Stock
of Chaparral Delaware issued and outstanding immediately prior thereto shall be
canceled and returned to the status of authorized but unissued shares, and (iv)
each share of Preferred Stock of Chaparral Delaware issued and outstanding
immediately prior thereto shall be canceled and returned to the status of
authorized but unissued shares.
1.6 Stock Certificates. On and after the Effective Date, all of the
outstanding certificates that, prior to that time, represented shares of Common
Stock and Preferred Stock of Chaparral shall be deemed for all purposes to
evidence ownership of and to represent the shares of Chaparral Delaware into
which the shares of Chaparral represented by such certificates have been
converted as herein provided and shall be so registered on the books and records
of the Surviving Corporation or its transfer agents. The registered owner of any
such certificate shall, until such certificate shall have been surrendered for
transfer or conversion or otherwise accounted for to the Surviving Corporation
or its transfer agent, have and be entitled to exercise any voting and other
rights with respect to and to receive any dividend and other distribution upon
the shares of Chaparral Delaware evidenced by such outstanding certificate as
above provided.
1.7 Options. On the Effective Date, if any options or rights granted to
purchase shares of Common Stock of Chaparral remain outstanding, then the
Surviving Corporation will assume outstanding and unexercised portions of such
options and such options, shall be changed and converted into options to
purchase Common Stock of Chaparral Delaware, such that an option to purchase one
(1) share of Common Stock of Chaparral shall be converted into an option to
purchase one (1) share of Common Stock of Chaparral Delaware. No other changes
in the terms and conditions of such options will occur.
1.8 Purchase Rights. On the Effective Date, the Surviving Corporation will
assume outstanding obligations of Chaparral to issue Common Stock or other
capital stock pursuant to contractual purchase rights granted by Chaparral, and
the outstanding and unexercised portions of all outstanding contractual rights
to purchase Common Stock or other capital stock of Chaparral shall be changed
and converted into contractual rights to purchase Common Stock or other capital
stock, respectively, of Chaparral Delaware such that a contractual right to
purchase one (1) share of Common Stock or other capital stock of Chaparral shall
be converted into a contractual right to purchase one (1)share of Common stock
or other capital stock, respectively, of Chaparral Delaware. No other changes in
the terms and conditions of such contractual purchase rights will occur.
1.9 Employee Benefit Plans. On the Effective Date, the Surviving
Corporation shall assume all obligation of Chaparral under any and all employee
benefit plans in effect as of such date with respect to which employee rights or
accrued benefits are outstanding as of such date. On the Effective Date, the
Surviving Corporation shall adopt and continue in effect all such employee
benefit plans upon the same terms and conditions as were in effect immediately
prior to the Merger.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of Chaparral Delaware in effect on the Effective Date shall
continue to be the Certificate of Incorporation of the Surviving Corporation
without change or amendment until further amended in accordance with the
provisions thereof and applicable law. The Bylaws of Chaparral Delaware in
effect on the Effective Date shall continue to be the Bylaws of the Surviving
Corporation without change or amendment until further amended in accordance with
the provisions thereof and applicable law.
2.2 Directors. The directors of Chaparral preceding the Effective Date
shall become the directors of the Surviving Corporation on and after the
Effective Date to serve until expiration of their terms and until their
successors are elected and qualified.
2.3 Officers. The officers of Chaparral preceding the Effective Date shall
become the officers of the Surviving Corporation on and after the Effective Date
to serve at the pleasure of its Board of Directors.
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3. MISCELLANEOUS
3.1 Further Assurances. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, the Surviving
Corporation shall execute and deliver, or cause to be executed and delivered,
such deeds and other instruments, and the Surviving Corporation shall take or
cause to be taken such further and other action as shall be appropriate or
necessary in order to vest or perfect or to conform of record or otherwise, in
the Surviving Corporation the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of Chaparral and otherwise to carry out the purposes of this Merger
Agreement, and the officers and directors of the Surviving Corporation are
authorized fully in the name and on behalf of Chaparral Delaware or otherwise to
take any and all such action and to execute and deliver any and all such deeds
and other instruments.
3.2 Amendment. At any time before or after approval by the stockholders of
Chaparral, this Merger Agreement may be amended in any manner (except that,
after the approval of this Merger Agreement by the stockholders of Chaparral,
the principal terms may not be amended without further approval of the
stockholders of Chaparral) as may be determined in the judgment of the
respective Board of Directors of Chaparral Delaware and Chaparral to be
necessary, desirable, or expedient in order to clarify the intention of the
parties hereto or to effect or facilitate the purpose and intent of this Merger
Agreement.
3.3 Conditions to Merger. The obligation of the Constituent Corporations to
effect the transactions contemplated hereby is subject to satisfaction of the
following conditions (any or all of which may be waived by either of the
Constituent Corporations in its sole discretion to the extent permitted by law):
(a) the Merger shall have been approved by the shareholders of
Chaparral in accordance with applicable provisions of the
Colorado Business Corporation Act;
(b) Chaparral, as sole stockholder of Chaparral Delaware, shall have
approved the Merger in accordance with the General Corporation
Law of the State of Delaware; and
(c) any and all consents, permits, authorizations, approvals, and
orders deemed in the sole discretion of Chaparral to be material
to consummation of the Merger shall have been obtained.
3.4 Abandonment or Deferral. Notwithstanding the approval of this Merger
Agreement by the shareholders of Chaparral and Chaparral Delaware, at any time
before the Effective Date, (a) this Merger Agreement may be terminated and the
Merger may be abandoned by the Board of Directors of either Chaparral or
Chaparral Delaware or both or (b) the consummation of the Merger may be deferred
for a reasonable period of time if, in the opinion of the Board of Directors of
Chaparral or the Board of Directors of Chaparral Delaware, such action would be
in the best interests of such corporations. In the even of termination of this
Merger Agreement, this Merger Agreement shall become void and of no effect and
there shall be no liability on the part of either Constituent Corporation or
their respective Board of Directors or stockholders with respect thereto, except
that Chaparral shall pay all expenses incurred in connection with the Merger or
in respect to this Merger Agreement or relating thereto.
3.5 Counterparts. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
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IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Board of Directors of Chaparral and the Board of Directors of Chaparral
Delaware, hereby is executed on behalf of each such corporation and attested to
by a duly authorized officer thereof as of the date first above written.
CHAPARRAL RESOURCES, INC.
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Dr. Jack A. Krug
President and Chief Operating Officer
CHAPARRAL RESOURCES DELAWARE, INC.
--------------------------------------
Dr. Jack A. Krug
President and Chief Operating Officer
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ANNEX III
DELAWARE CERTIFICATE OF INCORPORATION
OF
CHAPARRAL RESOURCES DELAWARE, INC.
THE UNDERSIGNED, acting as the incorporator of a corporation under and in
accordance with the General Corporation Law of the State of Delaware, hereby
adopts the following Certificate of Incorporation for such corporation:
ARTICLE I
The name of the corporation is Chaparral Resources Delaware, Inc. (the
"Corporation").
ARTICLE II
The purpose for which the Corporation is organized is the transaction of
any or all lawful acts and activities for which corporations may be incorporated
under the General Corporation Law of the State of Delaware.
ARTICLE III
3.1 The aggregate number of shares of capital stock that the Corporation
shall have authority to issue is 101,000,000, of which (a) 100,000,000 shares
shall be common stock, par value 0.0001 per share, and (b) 1,000,000 shares
shall be preferred stock, no par value per share. Unless specifically provided
otherwise herein, the holders of such shares shall be entitled to one vote for
each share held in any stockholder vote in which any of such holders is entitled
to participate.
3.2 The board of directors may determine the powers, designations,
preferences and relative, participating, optional or other special rights,
including voting rights, and the qualifications, limitations or restrictions
thereof, of each class of capital stock and of each series within any such class
and may increase or decrease the number of shares within each such class or
series; provided, however, that the board of directors may not decrease the
number of shares within a class or series to less than the number of shares
within such class or series that are then issued and may not increase the number
of shares within a series above the total number of authorized shares of the
applicable class for which the powers, designations, preferences and rights have
not otherwise been set forth herein.
3.3 Series A Preferred Stock. 75,000 shares of the Corporation's preferred
stock shall consist of the Series A Preferred Stock, no par value per share,
with the rights, preferences, privileges and restrictions as follows:
(a) Definitions. The following definitions shall apply to the
designations of the preferred stock under this Section 3.3:
"Approved Transaction" shall mean a transaction approved by a majority
of the Board for the sale, grant, award or issuance to management,
directors or employees of, or consultants to, the Corporation of
shares of Common Stock or options to purchase such shares pursuant to
which transaction any such sale, grant or award must be approved by
the Board or a committee thereof prior to such sale, grant, award or
issuance.
"Board" shall mean the Board of Directors of the Corporation.
"Commitment Date" means the date of original issuance of the Series A
Preferred Stock.
"Common Stock" shall mean the Common Stock, par value $0.0001 per
share, of the Corporation.
"Corporation Optional Redemption Value" means a price per share that
equals or exceeds the then Conversion Price by at least 50%.
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"Conversion Price" means the initial conversion price for the Series A
Preferred Stock of $128.4696 per share, as adjusted form time to time
as provided by Section 3.3(f).
"Majority of the Series A Preferred Stock" shall mean more than 50% of
the outstanding shares of Series A Preferred Stock.
"Person" shall include all natural persons, corporations, business
trusts, associations, companies, partnerships, joint ventures and
other entities, governments, and agencies and political subdivisions.
"Redemption Price" means the Redemption Price set forth in Section
3.3(d)(iii), as such may be adjusted from time to time as provided in
Section 3.3(d).
"Series A Preferred Stock" shall mean the Series A Preferred Stock, no
par value, of the Corporation.
"Subsidiary" shall mean any corporation, partnership, joint venture,
association or other business entity at least fifty percent (50%) of
the outstanding voting stock or voting interest of which is at the
time owned directly or indirectly by the Corporation or by one or more
of such subsidiary entities, or both.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
(b) Dividends.
(i) Right to Dividends. The holders of the then outstanding
Series A Preferred Stock shall be entitled to receive, when and as
declared by the Board, and out of any funds legally available
therefor, cumulative dividends at the annual rate of $5.00 per share,
payable semiannually in cash on the last day of May and November of
each year. Such dividends shall be cumulative so that, if such
dividends in respect of any previous or current semi-annual dividend
period, at the annual rate specified above, shall not have been paid
or declared and a sum sufficient for the payment thereof set apart,
the deficiency shall first be fully paid before any dividend or other
distribution shall be paid or declared and set part for the Common
Stock.
(ii) Priority. Unless full accumulated and accrued dividends on
the Series A Preferred Stock for all past dividend periods and the
then current dividend period shall have been paid or declared and a
sum sufficient for the payment thereof set apart, no dividend
whatsoever other than a dividend payable solely in Common Stock shall
be paid or declared, and no distribution shall be made, on any Common
Stock.
(c) Liquidation Rights of Preferred. In the event of any liquidation,
dissolution or winning up of the Corporation, whether voluntary or involuntary,
the holders of the Series A Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Corporation available for distribution to
its stockholders, whether such assets are capital, surplus, or earnings, before
any payment or declaration and setting apart for payment of any amount shall be
made in respect of the Common Stock, an amount equal to $100.00 plus all accrued
and unpaid dividends thereon.
(d) Redemptions.
(i) Scheduled Redemption. Commencing on November 30, 2002 and on the
last day of November of each year thereafter (each such date being referred
to as a "Scheduled Redemption Date"), so long as any shares of Series A
Preferred Stock shall be outstanding and to the extent the Corporation
shall have funds legally available for such payment, the Corporation shall
redeem the lesser of (x) the number of shares of Series A Preferred Stock
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outstanding on such scheduled redemption date or (y) one-third of the
largest number of shares of Series A Preferred Stock outstanding at any
time prior to the first Scheduled Redemption Date for the Series A
Preferred Stock. The shares to be redeemed shall be determined pro rata
among the holders of shares of Series A Preferred Stock. If the Corporation
shall fail to discharge all or any part of any scheduled redemption
obligation pursuant to this subsection (i) because insufficient funds are
legally available therefor, funds legally available therefore shall be
applied pro rata to the holders of the Series A Preferred Stock. The
balance of such scheduled redemption obligation shall be discharged as soon
as the Corporation shall have funds legally available to permit such
redemption, at which time the Board shall promptly fix a date for such
redemption and so notify the holders of such shares in writing.
(ii) Corporation Optional Redemption. The Corporation shall have the
right, but not the obligation, to redeem all or any portion of the Series A
Preferred Stock, if the average closing price of the Common Stock for any
thirty (30) consecutive trading day period equals or exceeds the
Corporation Optional Redemption Value. If the Corporation redeems less than
all of the Series A Preferred Stock, such redemption shall be made pro rata
among the holders of such series.
(iii) Redemption Price. The redemption price of the Series A Preferred
Stock (the "Redemption Price") shall be an amount per share equal to
$100.00 plus all unpaid dividends thereon which have accrued, whether or
not earned or declared. Even though the Redemption Price and the Conversion
Price are both initially $100.00, they have no connection with, or
relationship to, one another. (iv) Redemption Notice. The Corporation
shall, not less than thirty (30) days nor more than sixty (60) days prior
to the date fixed for redemption ("Redemption Date"), mail written notice
("Redemption Notice"), postage prepaid, to each holder of shares of record
of the Series A Preferred Stock to be redeemed at such holder's post office
address last shown on the records of the Corporation. The Redemption Notice
shall state:
(1) the total number of shares Series A Preferred Stock which
the Corporation intends to redeem;
(2) the Redemption Date and Redemption Price;
(3) that the holder's right to convert the Series A Preferred
Stock will terminate on the day preceding the Redemption
Date; and
(4) the time, place and manner in which the holder is to
surrender to the Corporation the certificate or certificates
representing the shares of Series A Preferred Stock to be
redeemed.
(v) Surrender of Stock. On or before the Redemption Date, each holder
of Series A Preferred Stock to be redeemed, unless the holder has exercised
his right to convert the shares as provided in Section 3.3(f), shall
surrender the certificate or certificates representing such shares to the
Corporation, in the manner and at the place designated in the Redemption
Notice, and thereupon the Redemption Price for such shares shall be payable
to the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall
be cancelled and retired. In the event less than all of the shares
represented by such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(vi) Termination of Rights. If the Redemption Notice is duly given,
and if on or prior to the Redemption Date the Redemption Price is either
paid or made available for payment, then notwithstanding that the
certificates evidencing any of the shares of Series A Preferred Stock so
called for redemption have not been surrendered, all rights with respect to
such shares shall forthwith after the Redemption Date cease and terminate,
except only (i) the right of the holders to receive the Redemption Price
without interest upon surrender of their certificates therefor or (ii) the
right to receive Common Stock upon exercise of the conversion rights as
provided in Section 3.3(f).
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(vii) Adjustment for Stock Splits and Combinations. If the Corporation
at any time or from time to time after the Commitment Date effects a
subdivision of the outstanding shares of Series A Preferred Stock, the
Redemption Price then in effect immediately before the subdivision shall be
proportionately decreased, and conversely, if the Corporation at any time
or from time to time after the Commitment Date combines the outstanding
shares of Series A Preferred Stock into a smaller number of shares, the
Redemption Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this subsection (vii) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(viii) Adjustment for Certain Dividends and Distributions. If the
Corporation at any time or from time to time after the Commitment Date
makes or issues, or fixes a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive, a dividend or other
distribution payable in additional shares of Series A Preferred Stock, then
and in each such event the Redemption Price then in effect shall be
decreased as of the time of such issuance or, in the event such record date
is fixed, as of the close of business on such record date, by multiplying
the Redemption Price then in effect by a fraction (1) the numerator of
which is the total number of shares of Series A Preferred Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (2) the denominator of which shall be the
total number of shares of Series A Preferred Stock issued and outstanding,
immediately prior to the time of such issuance or the close of business on
such record date plus the total number of shares of Series A Preferred
Stock issuable in payment of such dividend or distribution; provided,
however, that if such record date is fixed and such dividend is not fully
paid or if such distribution is not fully made on the date fixed therefor,
the Redemption Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Redemption Price shall be
adjusted pursuant to this subsection (viii) as of the time of actual
payment of such dividends or distributions.
(e) Voting Rights. Each holder of shares of Series A Preferred Stock shall
be entitled to vote on all matters and, except as otherwise expressly provided
herein, shall be entitled to the number of votes equal to the largest number of
full shares of Common Stock into which all shares of Series A Preferred Stock
held by such holder could be converted, pursuant to the provisions of this
Section 3.3, at the record date for the determination of the stockholders
entitled to vote on such matters or, if no such record date is established, at
the date such vote is taken or any written consent of stockholders is first
executed. This provision for determination of the number of votes to which each
holder of Series A Preferred Stock is entitled shall also apply in all cases in
which the holders of shares of Series A Preferred Stock have the right to vote
separately as a class.
(f) Conversion. The holders of Series A Preferred Stock shall have the
following conversion rights:
( i) Right to Convert. Each share of Series A Preferred Stock shall be
convertible, at the option of the holders thereof, at any time or from time
to time and prior to the Redemption Date for such share, into fully paid
and nonassessable shares of Common Stock.
(ii) Conversion Price. Each share of Series A Preferred Stock shall be
convertible into the number of shares of Common Stock which results from
dividing $100.00 by the Conversion Price per share in effect at the time of
conversion. The initial Conversion Price per share shall be $128.4696 and
shall be subject to adjustment from time to time as provided below.
(iii) Mechanics of Conversion. Each holder of Series A Preferred Stock
who desires to convert the same into shares of Common Stock shall surrender
the certificate or certificates therefor, duly endorsed, at the office of
the Corporation or of any transfer agent for the Series A Preferred Stock
or Common Stock, and shall give written notice to the Corporation at such
office that such holder elects to convert the same and shall state therein
the number of shares of Series A Preferred Stock being converted. Thereupon
the Corporation shall promptly issue and deliver at such office to such
holder a certificate or certificates for the number of shares of Common
Stock to which such holder is entitled. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of
such surrender of the certificate representing the shares of Series A
Preferred Stock to be converted, and the person entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for
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all purposes as the record holder of such shares of Common Stock on such
date. A holder of Series A Preferred Stock who converts any shares of
Series A Preferred Stock shall not be entitled to any accrued but unpaid
dividends with respect to the Series A Preferred Stock so converted.
(iv) Adjustment for Stock Splits and Combinations. If the Corporation
at any time or from time to time after the Commitment Date effects a
subdivision of the outstanding Common Stock, the Conversion Price then in
effect immediately before the subdivision shall be proportionately
decreased, and conversely, if the Corporation at any time or from time to
time after the Commitment Date combines the outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this Section 3.3(f) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
v) Adjustment for Certain Dividends and Distributions. If the
Corporation at any time or from time to time after the Commitment Date
makes or issues, or fixes a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable
in additional shares of Common Stock, then and in each such event the
Conversion Price then in effect shall be decreased as of the time of such
issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the Conversion Price then in
effect by a fraction (1) the numerator of which is the total number of
shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and (2) the
denominator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of shares of
Common Stock issuable in payment of such dividend or distribution;
provided, however, that if such record date is fixed and such dividend is
not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Conversion Price
shall be adjusted pursuant to this Section 3.3(f) as of the time of actual
payment of such dividends or distributions
(vi) Adjustments for Other Dividends and Distributions. In the event
the Corporation at any time or from time to time after the Commitment Date
makes or issues, or fixes a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable
in securities of the Corporation other than shares of Common Stock, then
and in each such event provision shall be made so that the holders of the
Series A Preferred Stock shall receive upon conversion thereof, in addition
to the number of shares of Common Stock receivable thereupon, the amount of
securities of the Corporation which they would have received had their
Series A Preferred Stock been converted into Common Stock on the date of
such event and had they thereafter, during the period from the date of such
event to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 3.3(f) with
respect to the rights of the holders of the Series A Preferred Stock.
(vii) Adjustments for Reclassification, Exchange and Substitution. In
the event that at any time or from time to time after the Commitment Date,
the Common Stock issuable upon the conversion of the Series A Preferred
Stock is changed into the same or a different number of shares of any class
or classes of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock
dividend or a reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 3.3(f)), then and in any such event
each holder of Series A Preferred Stock shall have the right thereafter to
convert such Series A Preferred Stock into the kind and amount of stock and
other securities and property receivable upon such recapitalization,
reclassification or other change, by holders of the number of shares of
Common Stock into which such shares of Series A Preferred Stock could have
been converted immediately prior to such recapitalization, reclassification
or change, all subject to further adjustment as provided herein.
(viii) Reorganization, Mergers, Consolidations or Sales of Assets.
Subject to Section 3.3(b), if at any time or from time to time there is a
capital reorganization of the Common Stock (other than a recapitalization,
subdivision, combination, reclassification or exchange of shares provided
for elsewhere in this Section 3.3(f)) or a merger or consolidation of the
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Corporation with or into another corporation, or the sale of all or
substantially all of the Corporation's properties and assets to any other
person, then, as part of such reorganization, merger, consolidation or
sale, provision shall be made so that the holders of the Series A Preferred
Stock shall thereafter be entitled to receive upon conversion of such
Series A Preferred Stock the number of shares of stock or other securities
or property of the Corporation, or of the successor corporation resulting
from such merger or consolidation or sale, to which a holder of the number
of shares of Common Stock deliverable upon conversion of such Series A
Preferred Stock would have been entitled in such capital reorganization,
merger, consolidation, or sale. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 3.3(f)
with respect to the rights of the holders of such Series A Preferred Stock
after the reorganization, merger, consolidation or sale to the end that the
provisions of this Section 3.3(f) (including adjustment of the Conversion
Price then in effect and the number of shares purchasable upon conversion
of the Series A Preferred Stock) shall be applicable after that event and
be as nearly equivalent as may be practicable.
A. Sale of Shares Below Conversion Price.
--------------------------------------
(1) If at any time or from time to time after the Commitment
Date, the Corporation issues or sells, or is deemed by the express
provisions of this subsection (i) to have issued or sold, Additional
Shares of Common Stock (as hereinafter defined), other than as a
dividend or other distribution on any class of stock as provided in
Section 3.3(f)(v) and other than upon a subdivision or combination of
shares of Common Stock as provided in Section 3.3(f)(iv), for an
Effective Price (as hereinafter defined) less than the then existing
Conversion Price, then the currently existing Conversion Price shall
be reduced, as of the opening of business on the date of such issuance
or sale, to a price determined by multiplying that Conversion Price by
a fraction (i) the numerator of which shall be (A) the number of
shares of Common Stock outstanding at the close of business on the day
next preceding the date of such issuance or sale, plus (B) the number
of shares of Common Stock which the aggregate consideration received
(or by the express provisions hereof deemed to have been received) by
the Corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Conversion Price, and (ii) the
denominator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date of such issuance
after giving effect to such issuance of Additional Shares of Common
Stock. For the purpose of the calculation described in this Section
3.3(f)(viii)(A), the number of shares of Common Stock outstanding
shall include (A) the number of shares of Common Stock into which the
then outstanding shares of Series A Preferred Stock could be fully
converted on the day next preceding the issuance or sale of Additional
Shares of Common Stock and (B) the number of shares of Common Stock
which could be obtained through the conversion of all Convertible
Securities (as hereinafter defined) which are convertible on the day
next preceding the issuance or sale of Additional Shares of Common
Stock.
(2) For the purpose of making any adjustment required under this
Subsection 3.3(f)(viii)(A), the consideration received by the
Corporation for any issuance or sale of securities shall (A) to the
extent it consists of cash be computed at the net amount of cash
received by the Corporation after deduction of any expenses payable by
the Corporation and any underwriting or similar commissions,
compensation, or concessions paid or allowed by the Corporation in
connection with such issuance or sale, (B) to the extent it consists
of property other than cash, be computed at the fair value of that
property as reasonably determined in good faith by the Board, and (C)
if Additional Shares of Common Stock, Convertible Securities (as
hereinafter defined) or rights or options to purchase either
Additional Shares of Common Stock or Convertible Securities are issued
or sold together with other stock or securities or other assets of the
Corporation for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably
determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or rights or
options.
(3) For the purpose of the adjustment required under this
Subsection 3.3(f)(viii)(A), the Corporation issues or sells any rights
or options for the purchase of, or stock or other securities
convertible or exchangeable, with or without consideration, into or
for, Additional Shares of Common Stock (such convertible or
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exchangeable stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such
Additional Shares of Common Stock is less than the Conversion Price
then in effect, then in each case the Corporation shall be deemed to
have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise, conversion or exchange thereof
and to have received as consideration for the issuance of such shares
an amount equal to the total amount of the consideration, if any,
received by the Corporation for the issuance of such rights or options
or Convertible Securities, plus, in the case of such rights or
options, the minimum amounts of consideration, if any, payable to the
Corporation upon the exercise of such rights or options, plus, in the
case of Convertible Securities, the minimum amounts of consideration,
if any, payable to the Corporation (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities)
upon the conversion or exchange thereof. No further adjustment of the
Conversion Price, adjusted upon the issuance of such rights, options
or Convertible Securities, shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exercise of any
such rights or options or the conversion or exchange of any such
Convertible Securities. If any such rights or options or the
conversion or exchange privilege represented by any such Convertible
Securities shall expire without having been exercised, the Conversion
Price adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Conversion Price
which would have been in effect had an adjustment been made on the
basis that the only Additional Shares of Common Stock, if any,
actually issued or sold on the exercise of such rights or options or
rights of conversion or exchange of such Convertible Securities, and
such Additional Shares of Common Stock, if any, were issued or sold
for the consideration actually received by the Corporation upon such
exercise, plus the consideration, if any, actually received by the
Corporation for the granting of all such rights or options, whether or
not exercised, plus the consideration received for issuing or selling
the Convertible Securities actually converted or exchanged, plus the
consideration, if any, actually received by the Corporation (other
than by cancellation of liabilities or obligations evidenced by such
Convertible Securities) on the conversion or exchange of such
Convertible Securities.
(4) For the purpose of the adjustment required under this Section
3.3(f)(viii)(A), if the Corporation issues or sells any rights or
options for the purchase of Convertible Securities and if the
Effective Price of the Additional Shares of Common Stock underlying
such Convertible Securities is less than the Conversion Price then in
effect, then the Corporation shall be deemed to have issued at the
time of the issuance of such rights or options the maximum number of
Additional Shares of Common Stock issuable upon conversion or exchange
of the total amount of Convertible Securities covered by such rights
or options and to have received as consideration for the issuance of
such rights or options, plus the minimum amounts of consideration, if
any, payable to the Corporation upon the exercise of such rights or
options and plus the minimum amount of consideration, if any, payable
to the Corporation (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the
conversion or exchange or such Convertible Securities. No further
adjustment of the Conversion Price adjusted upon the issuance of the
Convertible Securities upon the exercise of such rights or options or
upon the actual issuance of Additional Shares of Common Stock upon the
conversion or exchange of such Convertible Securities. The provisions
of Section 3.3(f)(viii)(A)(3) above for the readjustment of the
Conversion Price upon the expiration of rights or options or the
rights of conversion or exchange of Convertible Securities shall apply
to the rights, options and Convertible Securities referred to in this
Section 3.3(f).
(5) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Corporation after the Commitment, whether
or not subsequently reacquired or retired by the Corporation, other
than (i) shares of Common Stock issued upon conversion of the Series A
Preferred Stock, (ii) shares of Common Stock or options or warrants to
acquire Common Stock issued to management, directors or employees of,
or consultants to, the Corporation or any Subsidiary pursuant to
Approved Transactions, (iii) share of Common Stock issuable upon
exercise of Convertible Securities outstanding on the Commitment Date
and (iv) shares of Common Stock or options or warrants to acquire
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Common Stock issued in connection with investment banking or financial
advisory services provided to the Corporation. The "Effective Price"
of Additional Shares of Common Stock shall mean the quotient
determined by dividing the total number of Additional Shares of Common
Stock issued or sold, or deemed to have been issued or sold by the
Corporation under this Subsection 3.3(f)(viii)(A), into the aggregate
consideration received, or deemed to have been received by the
Corporation for such issuance under this Subsection 3.3(f)(viii)(A),
for such Additional Shares of Common Stock.
(ix) Accountants' Certificate of Adjustment. In each case of an
adjustment or readjustment of the Conversion Price or the number of shares
of Common Stock or other securities issuable upon conversion of the Series
A Preferred Stock, the Corporation, at its expense, shall cause independent
public accountants of recognized standing selected by the Corporation (who
may be the independent public accountants then auditing the books of the
Corporation) to compute such adjustment or readjustment in accordance with
the provisions hereof and prepare a certificate showing such adjustment or
readjustment, and shall mail such certificate, by first class mail, postage
prepaid, to each registered holder of the Series A Preferred Stock at the
holder's address as shown in the Corporation's books. The certificate shall
set forth such adjustment or readjustment, showing in detail the facts upon
which such adjustment or readjustment is based, including a statement of
(1) the consideration received or deemed to be received by the Corporation
for any Additional Shares of Common Stock issued or sold or deemed to have
been issued or sold, (2) the Conversion Price at the time in effect, (3)
the number of Additional Shares of Common Stock and (4) the type and
amount, if any, of other property which at the time would be received upon
conversion of the Series A Preferred Stock.
(x) Notices of Record Date. In the event (i) any taking by the
Corporation of record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock
of the Corporation, any merger or consolidation of the Corporation with or
into any other corporation, or any transfer of all or substantially all of
the assets of the Corporation to any other Person or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, the
Corporation shall mail to each holder of Series A Preferred Stock at least
thirty (30) days prior to the record date specified therein, a notice
specifying (1) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend
or distribution, (2) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation
or winding up is expected to become effective, and (3) the date, if any,
that is to be fixed, as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.
(xi) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Series A Preferred Stock. If more than one share
of Series A Preferred Stock shall be surrendered for conversion at any one
time by the same holder, the number of full shares of Common Stock issuable
upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Series A Preferred Stock so surrendered. In lieu of any
fractional share to which the holder would otherwise be entitled, the
Corporation shall pay case equal to the product of such fraction multiplied
by the fair market value of one share of the Corporation's Common Stock on
the date of conversion as determined by the Board.
(xii) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number of
its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series A Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion for all then
outstanding shares of the Series A Preferred Stock; the Corporation shall
promptly take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be sufficient for such purpose.
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<PAGE>
(xiii) Notices. All notices and other communications required by the
provisions of this Section 3.3(f) shall be in writing and shall be deemed
to have been duly given if delivered personally, mailed by certified mail
(return receipt requested) or sent by overnight delivery service, cable,
telegram, facsimile transmission or telex to each holder of record at the
address of such holder appearing on the books of the Corporation. Notice so
given shall, in the case of notice so given by mail, be deemed to be given
and received on the fourth calendar day after posting, in the case of
overnight delivery service on the date of actual delivery and, in the case
of notice so given by cable, telegram, facsimile transmission, telex or
personal delivery, on the date of actual transmission or, as the case may
be, personal delivery.
(xiv) Payment of Taxes. The Corporation will pay all taxes (other than
taxes based on income) and other governmental charges that may be imposed
with respect to the issuance or delivery of shares of Common Stock upon
conversion of shares of Series A Preferred Stock, including without
limitation any tax or other charge imposed in connection with any transfer
involved in the issuance and delivery of shares of Common Stock in a name
other than that in which the shares of Series A Preferred Stock so
converted were registered.
(xv) No Dilution or Impairment. The Corporation shall not amend or
restate this Certificate of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution,
issuance or sale of securities or any other voluntary action, for the
purpose of avoiding or seeking to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in carrying out all such action
as may be reasonably necessary or appropriate in order to protect the
conversion rights of the holders of the Preferred Stock against dilution or
other impairment.
(xvi) Rounding of Calculation; Minimum Adjustment. All calculations
under this Section 3.3(f) shall be made to the nearest one thousandth
(1/1,000th) cent or to the nearest one thousandth (1/1,000th) of a share,
as the case may be. Any provision of this Section 3.3(f) to the contrary
notwithstanding, no adjustment in any Conversion Price shall be made if the
amount of such adjustment would be less than $0.001, but any such amount
shall be carried forward and an adjustment with respect thereto shall be
made at the time of and together with any such subsequent adjustment which,
together with such amount and any other amount or amounts so carried
forward, shall aggregate $0.001 or more.
(xvii) Waivers. With the written consent of a majority of the Series A
Preferred Stock, the obligations of the Corporation and the rights of the
holders of the Series A Preferred Stock under this Section 3.3 may be
waived (either generally or in a particular instance, either retroactively
or prospectively and either for a specified period of time or
indefinitely). Upon the effectuation of each such waiver, the Corporation
shall promptly give written notice thereof to the holders of Series A
Preferred Stock who have not previously consented thereto in writing.
(xviii) Determination of Percentages. Whenever this Certificate of
Incorporation requires the calculation of a percentage of preferred stock,
such calculation shall be made as if the Series A Preferred Stock has been
fully converted into Common Stock.
ARTICLE IV
The street address of the initial registered office of the Corporation is
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the name
of its initial registered agent at such address is The Corporation Trust
Corporation.
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ARTICLE V
The name and address of the incorporator is as follows:
Name Address
---- -------
Michael Young 2211 Norfolk Street, Suite 1150, Houston, Texas 77098
ARTICLE VI
The powers of the incorporator shall terminate upon the filing of this
Certificate of Incorporation, and the following persons shall thereupon serve as
directors of the Corporation until the first annual meeting of stockholders or
until their successors are duly elected and qualified:
Name Address
---- -------
John G. McMillian 2211 Norfolk Street, Suite 1150, Houston, Texas 77098
Ted Collins, Jr. 2211 Norfolk Street, Suite 1150, Houston, Texas 77098
David A. Dahl 2211 Norfolk Street, Suite 1150, Houston, Texas 77098
Richard L. Grant 2211 Norfolk Street, Suite 1150, Houston, Texas 77098
James Jeffs 2211 Norfolk Street, Suite 1150, Houston, Texas 77098
Arlo Sorensen 2211 Norfolk Street, Suite 1150, Houston, Texas 77098
ARTICLE VII
To the fullest extent permitted by the General Corporation Law of the State
of Delaware, as the same exists or may hereafter be amended, a director of the
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. Any repeal or
amendment of this Article VII by the stockholders of the Corporation or by
changes in applicable law shall, to the extent permitted by applicable law, be
prospective only, and shall not adversely affect any limitation on the personal
liability of any director of the Corporation at the time of such repeal or
amendment.
ARTICLE VIII
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, arbitrative or
investigative, any appeal in such an action, suit or proceeding and any inquiry
or investigation that could lead to such an action, suit or proceeding (whether
or not by or in the right of the Corporation), by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another Corporation, partnership, joint venture, sole proprietorship, trust,
nonprofit entity, employee benefit plan or other enterprise, against all
judgments, penalties (including excise and similar taxes), fines, settlements
and expenses (including attorneys' fees and court costs) actually and reasonably
incurred by such person in connection with such action, suit or proceeding to
the fullest extent permitted by any applicable law, and such indemnity shall
inure to the benefit of the heirs, executors and administrators of any such
person so indemnified pursuant to this Article VIII. The right to
indemnification under this Article VIII shall be a contract right and shall
include, with respect to directors and officers, the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its disposition; provided, however, that, if the General Corporation Law of the
State of Delaware requires, the payment of such expenses incurred by a director
or officer in advance of the final disposition of a proceeding shall be made
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<PAGE>
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Article VIII or otherwise. The Corporation may, by action of its board of
directors, pay such expenses incurred by employees and agents of the Corporation
upon such terms as the board of directors deems appropriate. The indemnification
and advancement of expenses provided by, or granted pursuant to, this Article
VIII shall not be deemed exclusive of any other right to which those seeking
indemnification may be entitled under any law, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office. Any repeal or amendment of this Article VIII by the stockholders of
the Corporation or by changes in applicable law shall, to the extent permitted
by applicable law, be prospective only, and not adversely affect the
indemnification of any person who may be indemnified at the time of such repeal
or amendment.
ARTICLE IX
No contract or other transaction between the Corporation and any other
corporation and no other acts of the Corporation with relation to any other
corporation shall, in the absence of fraud, in any way be invalidated or
otherwise affected by the fact that any one or more of the directors or officers
of the Corporation are pecuniarily or otherwise interested in, or are directors
or officers of, such other corporation. Any director or officer of the
Corporation individually, or any firm or association of which any director or
officer may be a member, may be a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the Corporation, provided that the
fact that such person individually or as a member of such firm or association is
such a party or is so interested shall be disclosed or shall have been known to
the board of directors or a majority of such members thereof as shall be present
at any meeting of the board of directors at which action upon any such contract
or transaction shall be taken; and any director of the Corporation who is also a
director or officer of such other corporation or who is such a party or so
interested may be counted in determining the existence of a quorum at any
meeting of the board of directors during which any such contract or transaction
shall be authorized and may vote thereat to authorize any such contract or
transaction, with like force and effect as if such person were not such a
director or officer of such other corporation or not so interested. Any director
of the Corporation may vote upon any contract or any other transaction between
the Corporation and any subsidiary or affiliated corporation without regard to
the fact that such person is also a director or officer of such subsidiary or
affiliated corporation.
Any contract, transaction or act of the Corporation or of the directors
that shall be ratified at any annual meeting of the stockholders of the
Corporation, or at any special meeting of the stockholders of the corporation,
or at any special meeting called for such purpose, shall, insofar as permitted
by law, be as valid and as binding as though ratified by every stockholder of
the Corporation; provided, however, that any failure of the stockholders to
approve or ratify any such contract, transaction or act, when and if submitted,
shall not be deemed in any way to invalidate the same or deprive the
Corporation, its directors, officers or employees, of its or their right to
proceed with such contract, transaction or act.
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Subject to any express agreement that may from time to time be in effect,
any stockholder, director or officer of the Corporation may carry on and conduct
in such person's own right and for such person's own personal account, or as a
partner in any partnership, or as a joint venturer in any joint venture, or as
an officer, director or stockholder of any corporation, or as a participant in
any syndicate, pool, trust or association, any business that competes with the
business of the Corporation and shall be free in all such capacities to make
investments in any kind of property in which the Corporation may make
investments.
ARTICLE X
Election of directors need not be by written ballot. Any director or the
entire board of directors may be removed, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election of directors,
except as otherwise provided by law. In furtherance and not in limitation of the
powers conferred by statute, the board of directors of the Corporation is
expressly authorized to adopt the original bylaws of the Corporation, to amend
or repeal the bylaws or to adopt new bylaws, subject to any limitations that may
be contained in such bylaws.
IN WITNESS WHEREOF, the incorporator of the Corporation hereto has caused
this Certificate of Incorporation to be duly executed as of April 21, 1999.
---------------------------------
Michael Young, Incorporator
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ANNEX IV
BYLAWS
OF
CHAPARRAL RESOURCES, INC., INC.
ARTICLE I
OFFICES
Section 1.1 Registered Office. The registered office of the Company within
the State of Delaware shall be located at either (i) the principal place of
business of the Company in the State of Delaware or (ii) the office of the
corporation or individual acting as the Company's registered agent in Delaware.
Section 1.2 Additional Offices. The Company may, in addition to its
registered office in the State of Delaware, have such other offices and places
of business, both within and without the State of Delaware, as the Board of
Directors of the Company (the "Board") may from time to time determine or as the
business and affairs of the Company may require.
ARTICLE II
STOCKHOLDERS MEETINGS
Section 2.1 Annual Meetings. Annual meetings of stockholders shall be held
at a place and time on any weekday that is not a holiday and that is not more
than 180 days after the end of the fiscal year of the Company as shall be
designated by the Board and stated in the notice of the meeting, at which the
stockholders shall elect the directors of the Company and transact such other
business as may properly be brought before the meeting.
Section 2.2 Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by law or by the certificate of
incorporation, (i) may be called by the chairman of the board or the president
and (ii) shall be called by the president or secretary at the request in writing
of a majority of the Board or stockholders owning capital stock of the Company
representing at least 10% of all capital stock of the Company entitled to vote
thereat. Such request of the Board or the stockholders shall state the purpose
or purposes of the proposed meeting.
Section 2.3 Notices. Written notice of each stockholders meeting stating
the place, date and hour of the meeting shall be given to each stockholder
entitled to vote thereat by or at the direction of the officer calling such
meeting not less than ten nor more than 60 days before the date of the meeting.
If said notice is for a stockholders meeting other than an annual meeting, it
shall in addition state the purpose or purposes for which said meeting is
called, and the business transacted at such meeting shall be limited to the
matters so stated in said notice and any matters reasonably related thereto.
Section 2.4 Quorum. The presence at a stockholders meeting of the holders,
present in person or represented by proxy, of capital stock of the Company
representing a majority of the votes of all capital stock of the Company
entitled to vote thereat shall constitute a quorum at such meeting for the
transaction of business except as otherwise provided by law, the certificate of
incorporation or these Bylaws. If a quorum shall not be present or represented
at any meeting of the stockholders, a majority of the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such reconvened
meeting at which a quorum shall be present or represented, any business may be
transacted that might have been transacted at the meeting as originally
notified. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the reconvened meeting, a notice of
said meeting shall be given to each stockholder entitled to vote at said
meeting. The stockholders present at a duly convened meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
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Section 2.5 Voting of Shares.
Section 2.5.1 Voting Lists. The officer or agent who has charge of the
stock ledger of the Company shall prepare, at least ten days and no more
than 60 days before every meeting of stockholders, a complete list of the
stockholders entitled to vote thereat arranged in alphabetical order and
showing the address and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
The 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. Failure to comply with the
requirements of this section shall not affect the validity of any action
taken at said meeting.
Section 2.5.2 Votes Per Share. Unless otherwise provided in the
certificate of incorporation, each stockholder shall be entitled to one
vote in person or by proxy at every stockholders meeting for each share of
capital stock held by such stockholder.
Section 2.5.3 Proxies. Every stockholder entitled to vote at a meeting
or to express consent or dissent without a meeting or a stockholder's duly
authorized attorney-in-fact may authorize another person or persons to act
for him by proxy. Each proxy shall be in writing, executed by the
stockholder giving the proxy or by his duly authorized attorney. No proxy
shall be voted on or after three years from its date, unless the proxy
provides for a longer period. Unless and until voted, every proxy shall be
revocable at the pleasure of the person who executed it, or his legal
representatives or assigns, except in those cases where an irrevocable
proxy permitted by statute has been given.
Section 2.5.4 Required Vote. When a quorum is present at any meeting,
the vote of the holders, present in person or represented by proxy, of
capital stock of the Company representing a majority of the votes of all
capital stock of the Company entitled to vote thereat shall decide any
question brought before such meeting, unless the question is one upon
which, by express provision of law or the certificate of incorporation or
these Bylaws, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
Section 2.5.5 Consents in Lieu of Meeting. Any action required to be
or that may be taken at any meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt, written
notice of the action taken by means of any such consent which is other than
unanimous shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 3.1 Powers. The business of the Company shall be managed by or
under the direction of the Board, which may exercise all such powers of the
Company and do all such lawful acts and things as are not by law, the
certificate of incorporation or these Bylaws directed or required to be
exercised or done by the stockholders. Directors need not be stockholders or
residents of the State of Delaware.
Section 3.2 Number. The number of directors constituting the Board shall
never be less than one and shall be determined by resolution of the Board.
Section 3.3 Election. Directors shall be elected by the stockholders by
plurality vote at an annual stockholders meeting as provided in the certificate
of incorporation, except as hereinafter provided, and each director shall hold
office until such director's successor has been duly elected and qualified or
until such director's earlier resignation or removal.
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Section 3.4 Vacancies. Vacancies and newly-created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until
their successors are duly elected and qualified. If there are no directors in
office, then an election of directors may be held in the manner provided by law.
If, at the time of filling any vacancy or any newly-created directorship, the
directors then in office shall constitute less than a majority of the whole
Board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly-created directorships, or to replace
the directors chosen by the directors then in office. No decrease in the size of
the Board shall serve to shorten the term of an incumbent director.
Section 3.5 Removal. Unless otherwise restricted by law, the certificate of
incorporation or these Bylaws, any director or the entire Board may be removed,
with or without cause, by a majority vote of the shares entitled to vote at an
election of directors, if notice of the intention to act upon such matter shall
have been given in the notice calling such meeting.
Section 3.6 Compensation. Unless otherwise restricted by the certificate of
incorporation or these Bylaws, the Board shall have the authority to fix the
compensation of directors. The directors may be reimbursed their expenses, if
any, of attendance at each meeting of the Board and may be paid either a fixed
sum for attendance at each meeting of the Board or a stated salary as director.
No such payment shall preclude any director from serving the Company in any
other capacity and receiving compensation therefor. Members of committees of the
Board may be allowed like compensation for attending committee meetings.
ARTICLE IV
BOARD MEETINGS
Section 4.1 Annual Meetings. The Board shall meet as soon as practicable
after the adjournment of each annual stockholders meeting at the place of the
stockholders meeting. No notice to the directors shall be necessary to legally
convene this meeting, provided a quorum is present.
Section 4.2 Regular Meetings. Regularly scheduled, periodic meetings of the
Board may be held without notice at such times and places as shall from time to
time be determined by resolution of the Board and communicated to all directors.
Section 4.3 Special Meetings. Special meetings of the Board (i) may be
called by the chairman of the board or president and (ii) shall be called by the
president or secretary on the written request of two directors or the sole
director, as the case may be. Notice of each special meeting of the Board shall
be given, either personally or as hereinafter provided, to each director at
least 24 hours before the meeting if such notice is delivered personally or by
means of telephone, telegram, telex or facsimile transmission and delivery; two
days before the meeting if such notice is delivered by a recognized express
delivery service; and three days before the meeting if such notice is delivered
through the United States mail. Any and all business that may be transacted at a
regular meeting of the Board may be transacted at a special meeting. Except as
may be otherwise expressly provided by law, the certificate of incorporation or
these Bylaws, neither the business to be transacted at, nor the purpose of, any
special meeting need be specified in the notice or waiver of notice of such
meeting.
Section 4.4 Quorum; Required Vote. A majority of the directors shall
constitute a quorum for the transaction of business at any meeting of the Board,
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, except as may be otherwise
specifically provided by law, the certificate of incorporation or these Bylaws.
If a quorum shall not be present at any meeting, a majority of the directors
present may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present.
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Section 4.5 Consent In Lieu of Meeting. Unless otherwise restricted by the
certificate of incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board or any committee thereof may be taken
without a meeting, if all members of the Board or 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 or committee.
ARTICLE V
COMMITTEES OF DIRECTORS
Section 5.1 Establishment; Standing Committees. The Board may by resolution
establish, name or dissolve one or more committees, each committee to consist of
one or more of the directors. Each committee shall keep regular minutes of its
meetings and report the same to the Board when required. There shall exist the
following standing committees, which committees shall have and may exercise the
following powers and authority:
Section 5.1.1 Finance Committee. The Finance Committee shall from time
to time meet to review the Company's consolidated operating and financial
affairs, both with respect to the Company, and to report its findings and
recommendations to the Board for final action. The Finance Committee shall
not be empowered to approve any corporate action of whatever kind or
nature, and the recommendations of the Finance Committee shall not be
binding on the Board, except when, pursuant to the provisions of Section
5.2 hereof, such power and authority have been specifically delegated to
such committee by the Board by resolution. In addition to the foregoing,
the specific duties of the Finance Committee shall be determined by the
Board by resolution.
Section 5.1.2 Audit Committee. The Audit Committee shall from time to
time, but no less than two times per year, meet to review and monitor the
financial and cost accounting practices and procedures of the Company and
to report its findings and recommendations to the Board for final action.
The Audit Committee shall not be empowered to approve any corporate action
of whatever kind or nature, and the recommendations of the Audit Committee
shall not be binding on the Board, except when, pursuant to the provisions
of Section 5.2, such power and authority have been specifically delegated
to such committee by the Board by resolution. In addition to the foregoing,
the specific duties of the Audit Committee shall be determined by the Board
by resolution.
Section 5.1.3 Compensation Committee. The Compensation Committee shall
from time to time meet to review the various compensation plans, policies
and practices of the Company and to report its findings and recommendations
to the Board for final action. The Compensation Committee shall not be
empowered to approve any corporate action of whatever kind or nature, and
the recommendations of the Compensation Committee shall not be binding on
the Board, except when, pursuant to the provisions of Section 5.2, such
power and authority have been specifically delegated to such committee by
the Board by resolution. In addition to the foregoing, the specific duties
of the Compensation Committee shall be determined by the Board by
resolution.
Section 5.2 Available Powers. Any committee established pursuant to Section
5.1 including the Finance Committee, the Audit Committee and the Compensation
Committee, but only to the extent provided in the resolution of the Board
establishing such committee or otherwise delegating specific power and authority
to such committee and as limited by law, the certificate of incorporation and
these Bylaws, shall have and may exercise all of the powers and authority of the
Board in the management of the business and affairs of the Company, and may
authorize the seal of the Company to be affixed to all papers that may require
it. Without limiting the foregoing, such committee may, but only to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board as provided in Section 151(a) of the General
Corporation Law of the State of Delaware, fix any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any distribution
of assets of the Company or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Company.
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Section 5.3 Unavailable Powers. No committee of the Board shall have the
power or authority to (1) approve or adopt, or recommend to the stockholders,
any action or matter expressly required by the General Corporation Law of the
State of Delaware to be submitted to stockholders for approval or (2) adopt,
amend or repeal any provision in these Bylaws.
Section 5.4 Alternate Members. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not the
member or members constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member.
Section 5.5 Procedures. Time, place and notice, if any, of meetings of a
committee shall be determined by such committee. At meetings of a committee, a
majority of the number of members designated by the Board shall constitute a
quorum for the transaction of business. The act of a majority of the members
present at any meeting at which a quorum is present shall be the act of the
committee, except as otherwise specifically provided by law, the certificate of
incorporation or these Bylaws. If a quorum is not present at a meeting of a
committee, the members present may adjourn the meeting from time to time,
without notice other than an announcement at the meeting, until a quorum is
present.
ARTICLE VI
OFFICERS
Section 6.1 Elected Officers. The Board shall elect a chairman of the
Board, a president, a treasurer and a secretary (collectively, the "Required
Officers") having the respective duties enumerated below and may elect such
other officers having the titles and duties set forth below that are not
reserved for the Required Officers or such other titles and duties as the Board
may by resolution from time to time establish:
Section 6.1.1 Chairman of the Board. The chairman of the board, or in
his or her absence, the president, shall preside when present at all
meetings of the stockholders and the Board. The chairman of the board shall
advise and counsel the president and other officers and shall exercise such
powers and perform such duties as shall be assigned to or required of the
chairman from time to time by the Board or these Bylaws. The chairman of
the board may execute bonds, mortgages and other contracts requiring a seal
under the seal of the Company, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board to some other officer or
agent of the Company. The chairman of the board may delegate all or any of
his or her powers or duties to the president, if and to the extent deemed
by the chairman of the board to be desirable or appropriate.
Section 6.1.2 President. The president shall be the chief executive
officer of the Company, shall have general and active management of the
business of the Company and shall see that all orders and resolutions of
the Board are carried into effect. In the absence of the chairman of the
board or in the event of his or her inability or refusal to act, the
president shall perform the duties and exercise the powers of the chairman
of the board.
Section 6.1.3 Vice Presidents. In the absence of the president or in
the event of the president's inability or refusal to act, the vice
president (or in the event there be more than one vice president, the vice
presidents in the order designated by the Board, or in the absence of any
designation, then in the order of their election or appointment) shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The
vice presidents shall perform such other duties and have such other powers
as the Board may from time to time prescribe.
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Section 6.1.4 Secretary. The secretary shall attend all meetings of
the stockholders, the Board and (as required) committees of the Board and
shall record all the proceedings of such meetings in books to be kept for
that purpose. The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board and shall
perform such other duties as may be prescribed by the Board or the
president. The secretary shall have custody of the corporate seal of the
Company and the secretary, or an assistant secretary, shall have authority
to affix the same to any instrument requiring it, and when so affixed, it
may be attested by his or her signature or by the signature of such
assistant secretary. The Board may give general authority to any other
officer to affix the seal of the Company and to attest the affixing thereof
by his or her signature.
Section 6.1.5 Assistant Secretaries. The assistant secretary, or if
there be more than one, the assistant secretaries in the order determined
by the Board (or if there be no such determination, then in the order of
their election or appointment) shall, in the absence of the secretary or in
the event of his or her inability or refusal to act, perform the duties and
exercise the powers of the secretary and shall perform such other duties
and have such other powers as the Board may from time to time prescribe.
Section 6.1.6 Treasurer. Unless the Board by resolution otherwise
provides, the treasurer shall be the chief accounting and financial officer
of the Company. The treasurer shall have the custody of the corporate funds
and securities, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Company and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Company in such depositories as may be designated by the Board. The
treasurer shall disburse the funds of the Company as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall render to
the president and the Board, at its regular meetings, or when the Board so
requires, an account of all his or her transactions as treasurer and of the
financial condition of the Company.
Section 6.1.7 Assistant Treasurers. The assistant treasurer, or if
there shall be more than one, the assistant treasurers in the order
determined by the Board (or if there be no such determination, then in the
order of their election or appointment) shall, in the absence of the
treasurer or in the event of his or her inability or refusal to act,
perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the Board may from
time to time prescribe.
Section 6.1.8 Divisional Officers. Each division of the Company, if
any, may have a president, secretary, treasurer or controller and one or
more vice presidents, assistant secretaries, assistant treasurers and other
assistant officers. Any number of such offices may be held by the same
person. Such divisional officers will be appointed by, report to and serve
at the pleasure of the Board and such other officers that the Board may
place in authority over them. The officers of each division shall have such
authority with respect to the business and affairs of that division as may
be granted from time to time by the Board, and in the regular course of
business of such division may sign contracts and other documents in the
name of the division where so authorized; provided that in no case and
under no circumstances shall an officer of one division have authority to
bind any other division of the Company except as necessary in the pursuit
of the normal and usual business of the division of which he or she is an
officer.
Section 6.2 Election. All elected officers shall serve until their
successors are duly elected and qualified or until their earlier death,
resignation or removal from office.
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Section 6.3 Appointed Officers. The Board may also appoint or delegate the
power to appoint such other officers, assistant officers and agents, and may
also remove such officers and agents or delegate the power to remove same, as it
shall from time to time deem necessary, and the titles and duties of such
appointed officers may be as described in Section 6.1 hereof for elected
officers; provided that the officers and any officer possessing authority over
or responsibility for any functions of the Board shall be elected officers.
Section 6.4 Multiple Officeholders; Stockholder and Director Officers. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these Bylaws otherwise provide. Officers need not be
stockholders or residents of the State of Delaware. Officers, such as the
chairman of the board, possessing authority over or responsibility for any
function of the Board must be directors.
Section 6.5 Compensation; Vacancies. The compensation of elected officers
shall be set by the Board. The Board shall also fill any vacancy in an elected
office. The compensation of appointed officers and the filling of vacancies in
appointed offices may be delegated by the Board to the same extent as permitted
by these Bylaws for the initial filling of such offices.
Section 6.6 Additional Powers and Duties. In addition to the foregoing
especially enumerated powers and duties, the several elected and appointed
officers of the Company shall perform such other duties and exercise such
further powers as may be provided by law, the certificate of incorporation or
these Bylaws or as the Board may from time to time determine or as may be
assigned to them by any competent committee or superior officer.
Section 6.7 Removal. Any officer may be removed, either with or without
cause, by a majority of the directors at the time in office, at any regular or
special meeting of the Board.
ARTICLE VII
SHARE CERTIFICATES
Section 7.1 Entitlement to Certificates. Every holder of the capital stock
of the Company, unless and to the extent the Board by resolution provides that
any or all classes or series of stock shall be uncertificated, shall be entitled
to have a certificate, in such form as is approved by the Board and conforms
with applicable law, certifying the number of shares owned by such holder.
Section 7.2 Multiple Classes of Stock. If the Company shall be authorized
to issue more than one class of capital stock or more than one series of any
class, a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualification, limitations or restrictions of such preferences
and/or rights shall, unless the Board shall by resolution provide that such
class or series of stock shall be uncertificated, be set forth in full or
summarized on the face or back of the certificate that the Company shall issue
to represent such class or series of stock; provided that, to the extent allowed
by law, in lieu of such statement, the face or back of such certificate may
state that the Company will furnish a copy of such statement without charge to
each requesting stockholder.
Section 7.3 Signatures. Each certificate representing capital stock of the
Company shall be signed by or in the name of the Company by (i) the chairman of
the board, the president or a vice president; and (ii) the treasurer, an
assistant treasurer, the secretary or an assistant secretary of the Company. The
signatures of the officers of the Company may be facsimiles. In case any officer
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to hold such office before such certificate is issued, it may
be issued by the Company with the same effect as if he or she held such office
on the date of issue.
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Section 7.4 Issuance and Payment. Subject to the provisions of law, the
certificate of incorporation or these Bylaws, shares may be issued for such
consideration and to such persons as the Board may determine from time to time.
Shares may not be issued until the full amount of the consideration has been
paid, unless upon the face or back of each certificate issued to represent any
partly paid shares of capital stock there shall have been set forth the total
amount of the consideration to be paid therefor and the amount paid thereon up
to and including the time said certificate is issued.
Section 7.5 Lost Certificates. The Board may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Company alleged to have been lost, stolen or destroyed
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or such owner's legal
representative, to advertise the same in such manner as it shall require and/or
to give the Company a bond in such sum as it may direct as indemnity against any
claim that may be made against the Company with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 7.6 Transfer of Stock. Upon surrender to the Company or its
transfer agent, if any, of a certificate for shares duly endorsed or accompanied
by proper evidence of succession, assignation or authority to transfer and of
the payment of all taxes applicable to the transfer of said shares, the Company
shall be obligated to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books; provided,
however, that the Company shall not be so obligated unless such transfer was
made in compliance with applicable state and federal securities laws.
Section 7.7 Registered Stockholders. The Company shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, vote and be held liable for calls and
assessments and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any person other than such
registered owner, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 General. The Company shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company), by
reason of the fact that the person is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in, or not opposed to, the best interests of the Company and, with respect to
any criminal action or proceeding, have reasonable cause to believe that his or
her conduct was unlawful.
Section 8.2 Actions by or in the Right of the Company. The Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that the person
is or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture or trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in, or not opposed to, the best interests of the Company and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Company unless
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and only to the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
Section 8.3 Indemnification Against Expenses. To the extent that a present
or former director or officer of the Company has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 8.1 and 8.2, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
Section 8.4 Board Determinations. Any indemnification under Sections 8.1
and 8.2 (unless ordered by a court) shall be made by the Company only as
authorized in the specific case upon a determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct set
forth in Sections 8.1 and 8.2. Such determination shall be made, with respect to
a person who is a director or officer at the time of such determination, (i) by
a majority vote of the directors who were not parties to such action, suit or
proceeding, even though less than a quorum, or (ii) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (iii) if there are no such disinterested directors or if such
directors so direct, by independent legal counsel in a written opinion, or (iv)
by the stockholders.
Section 8.5 Advancement of Expenses. Expenses including attorneys' fees
incurred by an officer or director in defending a civil or criminal action, suit
or proceeding may be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the Company as
authorized by law or in this section. Such expenses incurred by former directors
and officers or other employees and agents may be so paid upon such terms and
conditions, if any, as the Company deems appropriate.
Section 8.6 Nonexclusive. The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall not be deemed exclusive
of any other rights to which any director, officer, employee or agent of the
Company seeking indemnification or advancement of expenses may be entitled under
any other bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office, and shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent of the Company and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 8.7 Insurance. The Company may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted against such person
and incurred by such person in any such capacity or arising out of such person's
status as such, whether or not the Company would have the power to indemnify
such person against such liability under the provisions of applicable statutes,
the certificate of incorporation or this Article VIII.
Section 8.8 Certain Definitions. For purposes of this Section 8.8, (i)
references to "the Company" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger that, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued; (ii) references to "other enterprises" shall include
employee benefit plans; (iii) references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and (iv)
references to "serving at the request of the Company" shall include any service
as a director, officer, employee or agent of the Company that imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to any employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Company" as referred to in this Article VIII.
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Section 8.9 Change in Governing Law. In the event of any amendment or
addition to Section 145 of the General Corporation Law of the State of Delaware
or the addition of any other section to such law that limits indemnification
rights thereunder, the Company shall, to the extent permitted by the General
Corporation Law of the State of Delaware, indemnify to the fullest extent
authorized or permitted hereunder, 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
(including an action by or in the right of the Company), by reason of the fact
that he or she is or was a director, officer, employee or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding.
ARTICLE IX
INTERESTED DIRECTORS, OFFICERS AND STOCKHOLDERS
Section 9.1 Validity. Any contract or other transaction between the Company
and any of its directors, officers or stockholders (or any corporation or firm
in which any of them are directly or indirectly interested) shall be valid for
all purposes notwithstanding the presence of such director, officer or
stockholder at the meeting authorizing such contract or transaction, or his or
her participation or vote in such meeting or authorization.
Section 9.2 Disclosure; Approval. The foregoing shall, however, apply only
if the material facts of the relationship or the interests of each such
director, officer or stockholder are known or disclosed:
(i) to the Board and it nevertheless in good faith authorizes or
ratifies the contract or transaction by a majority of the directors
present, each such interested director to be counted in determining whether
a quorum is present but not in calculating the majority necessary to carry
the vote; or
(ii) to the stockholders and they nevertheless in good faith authorize
or ratify the contract or transaction by a majority of the shares present,
each such interested person to be counted for quorum and voting purposes.
Section 9.3 Nonexclusive. This provision shall not be construed to
invalidate any contract or transaction that would be valid in the absence of
this provision.
ARTICLE X
MISCELLANEOUS
Section 10.1 Place of Meetings. All stockholders, directors and committee
meetings shall be held at such place or places, within or without the State of
Delaware, as shall be designated from time to time by the Board or such
committee and stated in the notices thereof. If no such place is so designated,
said meetings shall be held at the principal business office of the Company.
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Section 10.2 Fixing Record Dates. In order that the Company may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board may fix, in advance, a record date, which
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall not be more than 60 nor less
than ten days prior to any such action. If no record date is fixed by the Board,
the record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the day next
preceding the day notice is given or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
In order that the Company may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which date shall
not be more than ten days after the date upon which the resolution fixing the
record date is adopted by the Board. If no record date has been fixed by the
Board, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
is otherwise required, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Company by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Company having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Company's registered office shall be by hand or
by certified or registered mail, return receipt requested. If no record date has
been fixed by the Board and prior action by the Board is required, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on which
the Board adopts the resolution taking such prior action.
In order that the Company may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or the stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than sixty days prior to such action. 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 adopts the
resolution relating thereto.
Section 10.3 Means of Giving Notice. Whenever under applicable law, the
certificate of incorporation or these Bylaws, notice is required to be given to
any director or stockholder, such notice may be given in writing and delivered
personally, through the United States mail, by a recognized express delivery
service (such as Federal Express) or by means of telegram, telex or facsimile
transmission, addressed to such director or stockholder at his or her address or
telex or facsimile transmission number, as the case may be, appearing on the
records of the Company, with postage and fees thereon prepaid. Such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail or with an express delivery service or when transmitted, as the case
may be. Notice of any meeting of the Board may be given to a director by
telephone and shall be deemed to be given when actually received by the
director.
Section 10.4 Waiver of Notice. Whenever any notice is required to be given
under applicable law, the certificate of incorporation or these Bylaws, a
written waiver of such notice, signed before or after the date of such meeting
by the person or persons entitled to said notice, shall be deemed equivalent to
such required notice. All such waivers shall be filed with the corporate
records. Attendance at a meeting shall constitute a waiver of notice of such
meeting, except where a person attends for the express purpose of objecting to
the transaction of any business on the ground that the meeting is not lawfully
called or convened.
IV-11
<PAGE>
Section 10.5 Attendance via Communications Equipment. Unless otherwise
restricted by applicable law, the certificate of incorporation or these Bylaws,
members of the Board, any committee thereof or the stockholders may hold a
meeting by means of conference telephone or other communications equipment by
means of which all persons participating in the meeting can effectively
communicate with each other. Such participation in a meeting shall constitute
presence in person at the meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
Section 10.6 Dividends. Dividends on the capital stock of the Company, paid
in cash, property or securities of the Company and as may be limited by
applicable law and applicable provisions of the certificate of incorporation (if
any), may be declared by the Board at any regular or special meeting.
Section 10.7 Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Company available for dividends such sum or sums
as the Board from time to time, in its absolute discretion, determines proper as
a reserve or reserves to meet contingencies, for equalizing dividends, for
repairing or maintaining any property of the Company or for such other purpose
as the Board shall determine to be in the best interest of the Company; and the
Board may modify or abolish any such reserve in the manner in which it was
created.
Section 10.8 Reports to Stockholders. The Board shall present at each
annual meeting of stockholders, and at any special meeting of stockholders when
called for by vote of the stockholders, a statement of the business and
condition of the Company.
Section 10.9 Contracts and Negotiable Instruments. Except as otherwise
provided by applicable law or these Bylaws, any contract or other instrument
relative to the business of the Company may be executed and delivered in the
name of the Company and on its behalf by the chairman of the Board or the
president; and the Board may authorize any other officer or agent of the Company
to enter into any contract or execute and deliver any contract in the name and
on behalf of the Company, and such authority may be general or confined to
specific instances as the Board may by resolution determine. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officer, officers, agent or agents and in such manner as
are permitted by these Bylaws and/or as, from time to time, may be prescribed by
resolution (whether general or special) of the Board. Unless authorized so to do
by these Bylaws or by the Board, no officer, agent or employee shall have any
power or authority to bind the Company by any contract or engagement, or to
pledge its credit, or to render it liable pecuniarily for any purpose or to any
amount.
Section 10.10 Fiscal Year. The fiscal year of the Company shall be fixed by
resolution of the Board.
Section 10.11 Seal. The seal of the Company shall be in such form as shall
from time to time be adopted by the Board. The seal may be used by causing it or
a facsimile thereof to be impressed, affixed or otherwise reproduced.
IV-12
<PAGE>
Section 10.12 Books and Records. The Company shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its stockholders, Board and committees and shall keep at its registered
office or principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
Section 10.13 Resignation. Any director, committee member, officer or agent
may resign by giving written notice to the chairman of the board, the president
or the secretary. The resignation shall take effect at the time specified
therein, or immediately if no time is specified. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 10.14 Surety Bonds. Such officers and agents of the Company (if
any) as the president or the Board may direct, from time to time, shall be
bonded for the faithful performance of their duties and for the restoration to
the Company, in case of their death, resignation, retirement, disqualification
or removal from office, of all books, papers, vouchers, money and other property
of whatever kind in their possession or under their control belonging to the
Company, in such amounts and by such surety companies as the president or the
Board may determine. The premiums on such bonds shall be paid by the Company and
the bonds so furnished shall be in the custody of the Secretary.
Section 10.15 Proxies in Respect of Securities of Other Corporations. The
chairman of the Board, the president, any vice president or the secretary may
from time to time appoint an attorney or attorneys or an agent or agents for the
Company to exercise, in the name and on behalf of the Company, the powers and
rights that the Company may have as the holder of stock or other securities in
any other corporation to vote or consent in respect of such stock or other
securities, and the chairman of the board, the president, any vice president or
the secretary may instruct the person or persons so appointed as to the manner
of exercising such powers and rights; and the chairman of the board, the
president, any vice president or the secretary may execute or cause to be
executed, in the name and on behalf of the Company and under its corporate seal
or otherwise, all such written proxies or other instruments as he or she may
deem necessary or proper in order that the Company may exercise such powers and
rights.
Section 10.16 Amendments. These Bylaws may be altered, amended, repealed or
replaced by the stockholders, or by the Board when such power is conferred upon
the Board by the certificate of incorporation, at any annual stockholders
meeting or annual or regular meeting of the Board, or at any special meeting of
the stockholders or of the Board if notice of such alteration, amendment, repeal
or replacement is contained in the notice of such special meeting. If the power
to adopt, amend, repeal or replace these Bylaws is conferred upon the Board by
the certificate of incorporation, the power of the stockholders to so adopt,
amend, repeal or replace these Bylaws shall not be divested or limited thereby.
IV-13
<PAGE>
CHAPARRAL RESOURCES, INC.
----------------
REVOCABLE PROXY
----------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CHAPARRAL
RESOURCES, INC. FOR USE AT THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
APRIL 21, 1999 AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
The undersigned shareholder of Chaparral Resources, Inc., a Colorado
corporation (the "Company"), hereby appoints Dr. Jack A. Krug or John G.
McMillian, and each of them, as proxies for the undersigned, with full power of
substitution in each of them, to attend the Special Meeting of Shareholders of
the Company to be held on Wednesday, April 21, 1999 at 10:00 a.m., Eastern
Standard Time, at the offices of Allen & Company Incorporated located at 711
Fifth Avenue, 9th Floor, New York, New York 10022, and at any adjournment(s) or
postponement(s) thereof, to cast on behalf of the undersigned all votes that the
undersigned is entitled to cast at such meeting and otherwise to represent the
undersigned at the meeting, with the same effect as if the undersigned were
present. The undersigned hereby revokes any proxy previously given with respect
to such shares.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Proposal to approve the Amendment to Article Fourth FOR |_| AGAINST |_| ABSTAIN |_|
of the Company's Amended and Restated Articles of
Incorporation so as to effect a reverse stock split
in which one new share of the Company's common stock,
par value $0.10 per share, would be exchanged for
every 60 shares of common stock of the Company, par
value $0.10 per share, presently authorized, issued,
and outstanding. The number of authorized shares of
common stock and preferred stock will remain
unchanged at 100,000,000 and 1,000,000, respectively.
2. Proposal to approve the reincorporation of the FOR |_| AGAINST |_| ABSTAIN |_|
Company by changing the state of incorporation from
Colorado to Delaware by the adoption of a Plan and
Agreement of Merger
3. Proposal to adjourn the Special Meeting to another FOR |_| AGAINST |_| ABSTAIN |_|
date and/or place for the purpose of soliciting
additional proxies in favor of Proposal 1 and/or
Proposal 2 above.
</TABLE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE SHARES OF THE
COMPANY'S COMMON STOCK SERIES A PREFERRED STOCK WILL BE VOTED AS SPECIFIED. IF
NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND
OTHERWISE AT THE DISCRETION OF THE PROXIES. YOU MAY REVOKE THIS PROXY AT ANY
TIME PRIOR TO THE TIME IT IS VOTED AT THE SPECIAL MEETING.
The undersigned acknowledges receipt of the Notice of Special Meeting of
Shareholders and the accompanying Proxy Statement.
Please sign exactly as name appears hereon and date. If the shares are
held jointly, each holder should sign. When signing as an attorney,
executor, administrator, trustee, guardian or as an officer signing
for a corporation, please give full title under signature.
Dated: ____________________, 1999
Signature:
-----------------------------------------------------------
Signature, if held jointly:
----------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
