As filed with the Securities and Exchange Commission on December 17, 1997.
Registration No. 333-____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
ARCH PETROLEUM INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 83-0248900
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
777 TAYLOR STREET, SUITE II LARRY KALAS, PRESIDENT
FORT WORTH, TEXAS 76102 777 TAYLOR STREET, SUITE II
(Address, Including Zip Code, of FORT WORTH, TEXAS 76102
Registrant's Principal Executive (817) 332-9209
Offices) (Name, Address, Including Zip Code, and
Telephone Number, Including Area Code, of
Agent for Service)
ARCH PETROLEUM INC.
1993 STOCK OPTION PLAN
(Full Title of the Plan)
Copies of all communications, including all communications sent to
agent for service, should be sent to:
R. SCOTT COHEN
CRAIG W. ADAS
WEIL, GOTSHAL & MANGES LLP
100 CRESCENT COURT, SUITE 1300
DALLAS, TEXAS 75201
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Price Aggregate Amount of
to be Registered (1) Registered (1) Per Share (2) Offering Price (2) Registration Fee
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock,
$.01 Par Value 1,635,044 Shares $3,729,860.03 $1,100.31
===================================================================================================
<FN>
(1) Shares of common stock, $.01 par value per share ("Common Stock"), of Arch
Petroleum Inc. (the "Company") being registered hereby relate to the 1993
Stock Option Plan (the "Plan"). Pursuant to Rule 416 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), there is also
being registered an indeterminate amount of additional shares of Common
Stock as may become issuable as a result of stock splits, stock dividends
or similar transactions.
(2) In accordance with sections (c) and (h)(1) of Rule 457 promulgated under
the Securities Act, calculated on the basis of the weighted average of (i)
the average of the high and low sales prices for Common Stock as reported
on the Nasdaq Stock Market on December 16, 1997, with respect to 1,275,754
shares of Common Stock as to which the exercise price has not been
determined under the Plan and (ii) the weighted average exercise price of
options to purchase 359,290 shares of Common Stock as to which the
exercise price has been determined under the Plan.
</FN>
</TABLE>
1
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are incorporated by reference in this Registration
Statement:
(a) The Company's Annual Report on Form 10-K (File No. 0-9976) for the
year ended December 31, 1996 filed pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which contains audited
financial statements for the year ended December 31, 1996.
(b) All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since the end of the fiscal year covered by the Annual
Report referred to in (a) above.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment to this Registration Statement that indicates that all
of the shares of Common Stock offered have been sold or which deregisters all of
such shares then remaining unsold, shall be deemed to be incorporated by
reference in this Registration Statement and to be a part hereof from the date
of filing of such documents. Any statement incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
The following summary description is qualified in its entirety by
reference to the Company's Certificate of Incorporation, as amended, which is
filed as an exhibit hereto. The authorized capital stock of the Company consists
of 50,000,000 shares of Common Stock, par value $.01 per share, and 1,000,000
shares of Preferred Stock, par value $.01 per share ("Preferred Stock").
The authorized and unissued shares of Common Stock and Preferred Stock may
be used by the Company for various purposes, including possible future
acquisitions. The Company currently does not have any specific plans or
obligations to issue shares of Common Stock or Preferred Stock, other than (i)
the issuance of Common Stock under the Plan, (ii) the issuance of Common Stock
upon the exchange of the Exchangeable Convertible Preferred Stock, par value
$.01 per share ("Exchangeable Convertible Preferred Stock") and (iii) the
issuance of
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Common Stock upon a conversion of the 9.75% Series A Convertible Subordinated
Notes due 2004 (the "Series A Notes") and the 10.563% Series C Convertible
Subordinated Notes due 2004 (the "Series C Notes").
Common Stock. As of December 16, 1997, there were 17,301,804 shares of
Common Stock outstanding and held of record by 1,401 stockholders. After giving
effect to the issuance of 1,635,044 shares of Common Stock upon exercise of
options granted pursuant to the Plan, the exchange of the Exchangeable
Convertible Preferred Stock and a conversion of the Series A Notes and the
Series C Notes there will be 28,052,713 shares of Common Stock outstanding. The
holders of shares of Common Stock are entitled to one vote for each share held
on all matters submitted to a vote of common stockholders. There is no provision
in the Company's Certificate of Incorporation for cumulative voting with respect
to the election of directors. Each share of Common Stock is entitled to
participate equally in dividends, when, as and if declared by the board of
directors of the Company ("Board of Directors"), and in the distribution of
assets in the event of liquidation, subject in all cases to any prior rights of
outstanding shares of Preferred Stock. The shares of Common Stock have no
preemptive or conversion rights, redemption rights or sinking fund provisions
and are not subject to calls, assessments or rights of redemption by the
Company. All shares of Common Stock outstanding upon the filing of this
Registration Statement will be duly authorized, validly issued, fully paid and
nonassessable.
Preferred Stock. As of December 16, 1997, there were 727,273 shares of
Exchangeable Convertible Preferred Stock outstanding and held of record by four
stockholders. The holders of shares of the Exchangeable Convertible Preferred
Stock are entitled to one vote per share on an as converted basis, and vote with
the holders of the Common Stock. The vote or consent of at least 66 2/3% of the
issued and outstanding shares of Exchangeable Convertible Preferred Stock,
voting as a separate class, is required for the Company to (a) issue or
authorize the issuance of any class or series of equity securities senior to the
Exchangeable Convertible Preferred Stock, (b) change the par value of the
Exchangeable Convertible Preferred Stock, (c) alter or change the powers,
preferences or special rights of the shares of Exchangeable Convertible
Preferred Stock or any other provision of the Company's Certificate of
Incorporation so as to affect the shares of Exchangeable Convertible Preferred
Stock adversely, (d) merge, consolidate or amalgamate with any other person or
(e) sell, lease, transfer or otherwise dispose of all or substantially all of
the assets of the Company. The Exchangeable Convertible Preferred Stock accrues
annual dividends at the rate of $2.20 per share and the dividends are
cumulative. If dividends remain unpaid for more than one semiannual period, the
holders of the Exchangeable Convertible Preferred Stock have the right to elect
two additional directors to the Board of Directors until such time that all
cumulative dividends have been paid. The Exchangeable Convertible Preferred
Stock has a liquidation preference of $27.50 per share and is exchangeable in
whole at the option of the Company, for its Series C Notes. The Exchangeable
Convertible Preferred Stock is exchangeable on April 20 and October 20 of each
year. On or after October 20, 1998, the Exchangeable Convertible Preferred Stock
is redeemable, in whole or in part, at any time at the option of the Company at
redemption prices ranging from $28.366 per share at October 28,
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<PAGE>
1998, to $27.644 per share at October 20, 2003. On October 20, 2004 all
outstanding shares of the Exchangeable Convertible Preferred Stock are
mandatorily redeemable by the Company at a price of $27.50 plus accrued and
unpaid dividends. Each share of Exchangeable Convertible Preferred Stock is
convertible, at any time at the option of the holder thereof, into shares of
Common Stock at a price of $2.75 per share.
Anti-takeover Provisions. The Company's amended Certificate of
Incorporation and By-laws have special provisions that could have an
anti-takeover effect. The provisions are intended to enhance the likelihood of
continuity and stability in the composition of, and the policies formulated by,
the Board of Directors. These provisions are also intended to help ensure that
the Board of Directors, if confronted by a surprise proposal from a third party
which has acquired a block of stock of the Company, will have sufficient time to
review the proposal and appropriate alternatives to the proposal, and to act in
what it believes to be the best interests of the Company's stockholders.
The Company's Certificate of Incorporation provides that the Board of
Directors may authorize the issuance of up to 1,000,000 shares of preferred
stock in one or more classes or series and may designate the dividend rate,
voting rights and other rights, preferences and restrictions of each such class
or series. Except as described above, the Company has no present intention to
issue any Preferred Stock; however, the Company could issue a series of
Preferred Stock that could, depending on the terms of such series, either impede
or facilitate the completion of a merger, tender offer or other takeover
attempt. Although the Board of Directors is required to make any determination
to issue such stock based on its judgment as to the best interests of the
stockholders of the Company, the Board of Directors could act in a manner that
would discourage any acquisition attempt or other transaction that some, or a
majority, of the stockholders might believe to be in their best interests or in
which the stockholders might receive a premium for their stock over the then
market price of such stock. The Board of Directors does not intend to seek
stockholder approval prior to any issuance of such Preferred Stock, unless
required to do so by law, stock exchange rules, or otherwise.
The Company's Certificate of Incorporation also contains certain
provisions permitted under the Delaware General Corporation Law (the "DGCL")
regarding the liability of directors. These provisions eliminate the personal
liabilities of directors to the Company and its stockholders for monetary
damages for any breach of their fiduciary duties in their capacity as directors,
except for any breach of the duty of loyalty, for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, for
liability under Section 174 of the DGCL (regarding certain unlawful dividends,
stock repurchases or stock redemptions) or for any transaction from which the
director derived an improper personal benefit. These provisions do not eliminate
a director's duty of care and do not affect the availability of equitable
remedies such as an action to enjoin or rescind a transaction involving a breach
of fiduciary duty. Moreover, these provisions do not apply to claims against a
director for violation of certain laws, including the federal securities laws.
The Company's Certificate of Incorporation further provides that the Company
shall indemnify its directors and officers, and may indemnify any employee or
agent of the Company, to the fullest extent
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<PAGE>
permitted by the DGCL. The Company believes that these provisions will assist
the Company in attracting and retaining qualified individuals to serve as
officers and directors.
Copies of the Company's amended Certificate of Incorporation and the
By-laws have been filed as exhibits to this Registration Statement. The Board of
Directors has no current plans to formulate or effect additional measures that
could have an anti-takeover effect.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Certain legal matters in connection with the shares of Common Stock
initially offered upon exercise of options pursuant to the Plan have been passed
upon for the Company by Weil, Gotshal & Manges LLP, Dallas, Texas.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Delaware law authorizes corporations to limit or to eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The Company's
Certificate of Incorporation limits the liability of the Company's directors to
the Company or its stockholders to the fullest extent permitted by the Delaware
statute as in effect from time to time. Specifically, directors of the Company
will not be personally liable for monetary damages for breach of a director's
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in the Delaware law, or (iv) for any
transaction from which the director derived an improper personal benefit.
The Certificate of Incorporation of the Company provides that the Company
shall indemnify its officers and directors and former officers and directors to
the fullest extent permitted by the General Corporation Law of the State of
Delaware. Pursuant to the provisions of Section 145 of the General Corporation
Law of the State of Delaware, the Company has the power to 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 interest of the Company,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe the person's 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
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<PAGE>
that the person did not act in good faith and in a manner which the person
reasonable believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that the person's conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of
the Company as well, but only to the extent of defense and settlement expenses
and not to any satisfaction of a judgment or settlement of the claim itself, and
with the further limitation that in such actions no indemnification shall be
made in the event such person shall have been adjudged to be liable to the
Company unless and only to the extent that the court determines that, in view of
all the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses the court shall deem proper.
The statute further specifically provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer, or controlling person of the Company in
the successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
4.1 Certificate of Incorporation of Arch Petroleum Inc.*
4.2 Certificate of Amendment of Certificate of Incorporation of Arch Petroleum
Inc., as filed with the Delaware Secretary of State on May 21, 1992.*
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4.3 Certificate of Correction to Certificate of Amendment of Arch Petroleum
Inc., as filed with the Delaware Secretary of State on December 22, 1994.*
4.4 Certificate of Amendment of Certificate of Incorporation of Arch Petroleum
Inc., as filed with the Delaware Secretary of State on February 8, 1995.*
4.5 Certificate of Designation of Preferences and Rights of Exchangeable
Convertible Preferred Stock of Arch Petroleum Inc.*
4.6 By-laws of Arch Petroleum Inc.*
4.7 Arch Petroleum Inc. 1993 Stock Option Plan.*
5.1 Opinion of Weil, Gotshal & Manges LLP.*
23.1 Consent of Price Waterhouse LLP.*
23.2 Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1).
24.1 Power of Attorney (see pages II-8 and II-9 of this Registration Statement).
* Filed herewith.
ITEM 9. UNDERTAKINGS.
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement to include any material information with respect to
the plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
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(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer, or controlling person of the Company in
the successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Worth, State of Texas, on this 17th day of
December, 1997.
ARCH PETROLEUM INC.
By: /s/ Larry Kalas
----------------------------------------
Larry Kalas
President and Chief Executive Officer
Each person whose signature to this Registration Statement appears below
hereby appoints Johnny H. Vinson, Larry Kalas and Randall W. Scroggins, and each
of them, as his attorney-in-fact to sign on his behalf individually and in the
capacity stated below and to file all post-effective amendments to this
Registration Statement, which amendments may make such changes in and additions
to this Registration Statement as such attorney-in-fact may deem necessary or
appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Johnny H. Vinson Chairman of the Board of Director December 15, 1997
- --------------------------------
Johnny H. Vinson
/s/ Larry Kalas Director, President and Chief December 15, 1997
- -------------------------------- Executive Officer (Principal Executive
Larry Kalas Officer of the Registrant)
/s/ Fred Cantu Treasurer and Chief Financial December 15, 1997
- -------------------------------- Officer (Principal Financial and
Fred Cantu Accounting Officer of the Registrant)
/s/ Randall W. Scroggins Director, Executive Vice December 15, 1997
- -------------------------------- President and Secretary
Randall W. Scroggins
II-8
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/s/ Richard O. Harris Director December 15, 1997
- --------------------------------
Richard O. Harris
/s/ C. Randall Hill Director December 15, 1997
- --------------------------------
C. Randall Hill
/s/ John F. Gilsenan Director December 15, 1997
- --------------------------------
John F. Gilsenan
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
No. Description Page
4.1 Certificate of Incorporation of Arch Petroleum Inc.
4.2 Certificate of Amendment of Certificate of Incorporation of Arch
Petroleum Inc., as filed with the Delaware Secretary of State on
May 21, 1992.
4.3 Certificate of Correction to Certificate of Amendment of Arch
Petroleum Inc., as filed with the Delaware Secretary of State on
December 22, 1994.
4.4 Certificate of Amendment of Certificate of Incorporation of Arch
Petroleum Inc., as filed with the Delaware Secretary of State on
February 8, 1995.
4.5 Certificate of Designation of Preferences and Rights of
Exchangeable Convertible Preferred Stock of Arch Petroleum Inc.
4.6 By-laws of Arch Petroleum Inc.
4.7 Arch Petroleum Inc. 1993 Stock Option Plan.
5.1 Opinion of Weil, Gotshal & Manges LLP.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1).
24.1 Power of Attorney (see pages II-7 and II-8 of this Registration
Statement).
Exhibit 4.1
CERTIFICATE OF INCORPORATION
OF
ARCH PETROLEUM INC.
I, the undersigned natural person acting as an incorporator of a
corporation (hereinafter called the "Corporation") under the General Corporation
Law of the State of Delaware, do hereby adopt the following Certificate of
Incorporation for the Corporation:
FIRST: The name of the Corporation is Arch Petroleum Inc.
SECOND: The registered office of the Corporation in the State of Delaware
is located at Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to engage in
any and all lawful acts and activity for which corporations may be organized
under the General Corporation Law of Delaware. The Corporation will have
perpetual existence.
FOURTH: The aggregate number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is Seventy-five Million
(75,000,000) shares. All such shares shall be nonassessable after the
subscription price or par value thereof is paid to the Corporation. The
authorized shares are classified as follows: (i) Fifty Million (50,000,000)
shares of Common Stock, $.01 par value per share (the "Common Stock"); and (ii)
Twenty--five Million (25,000,000) shares of Preferred Stock, $.01 par value per
share (the "Preferred Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Common Stock and the Preferred Stock are as
follows:
1. Provisions Relating to the Common Stock.
(a) Except as otherwise required by law, and subject to any special voting
rights which may be granted any class or series of Preferred Stock in the board
resolution which creates such class or series, each holder of Common Stock shall
be entitled to one vote for each share of Common Stock standing in such holder's
name on the records of the Corporation on each matter submitted to a vote of the
stockholders.
(b) Subject to the rights of the holders of the Preferred Stock, the
holders of the Common Stock shall be entitled to receive when, as and if
declared by the board of directors, out of funds legally available therefor,
dividends payable in cash, stock or otherwise.
(c) Upon any liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary, and after the holders of the Preferred Stock
shall have been paid in full the amounts to which they shall be entitled (if
any), or a sum sufficient for such payment in full shall have been set aside,
the remaining net assets of the Corporation shall be distributed pro rata to the
holders of the Common Stock in accordance with their respective rights and
interests, to the exclusion of the holders of the Preferred Stock.
<PAGE>
2. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time in one or more
classes or series, the shares of each class or series to have such designations
and powers, preferences, and rights, and qualifications, limitations, and
restrictions thereof as are stated and expressed herein and in the resolution or
resolutions providing for the issue of such class or series adopted by the board
of directors as hereafter prescribed.
(b) Authority is hereby expressly granted to and vested in the board of
directors to authorize the issuance of the Preferred Stock from time to time in
one or more classes or series, and with respect to each class or series of the
Preferred Stock, to fix and state by the resolution or resolutions from time to
time adopted providing for the issuance thereof the following:
(i) whether or not the class or series is to have voting rights,
full, special or limited, or is to be without voting rights, and whether
or not such class or series is to be entitled to vote as a separate class
either alone or together with the holders of one or more other classes or
series of stock;
(ii) the number of shares to constitute the class or series and the
designations thereof;
(iii) the preferences, and relative, participating, optional or
other special rights, if any, and the qualifications, limitations or
restrictions thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series shall be
redeemable at the option of the Corporation or the holders thereof or upon
the happening of any specified event, and if redeemable the redemption
price or prices (which may be payable in the form of cash, notes,
securities, or other property), and the time or times at which, such
shares shall be redeemable and the manner of redemption;
(v) whether or not the shares of a class of series shall be subject
to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and if such
retirement or sinking fund or funds are established, the annual amount
thereof and the terms and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in cash, stock
of the Corporation or other property, the conditions upon which and the
times when such dividends are payable, the preference to or the relation
to the payment of dividends payable on any other class or classes or
series of stock, whether or not such dividends shall be cumulative or
noncumulative, and if cumulative, the date or dates from which such
dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which the
holders of any class or series thereof shall be entitled to receive upon
the voluntary or involuntary dissolution of, or upon any distribution of
the assets of, the Corporation;
(viii) whether or not the shares of any class or series, at the
option of the Corporation or the holder thereof or upon the happening of
any specified event, shall be convertible into or exchangeable for, the
shares of any other class or classes or of any other series of the same or
any other class or classes of stock, securities, or other property of the
Corporation and the conversion price or prices or ratio or ratios or the
rate or rates at which such exchange may be made, with such adjustments,
if any, as shall be stated and expressed or provided for in such
resolution or resolutions; and
(ix) such other special rights and protective provisions with
respect to any class or series as may to the board of directors seem
advisable.
<PAGE>
(c) The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any or all of the foregoing
respects. The board of directors may increase the number of shares of the
Preferred Stock designated for any existing class or series by a resolution
adding to such class or series authorized and unissued shares of the Preferred
Stock not designated for any other class or series. The board of directors may
decrease the number of shares of the Preferred Stock designated for such class
or series, and the shares so subtracted shall become authorized, unissued, and
undesignated shares of the Preferred Stock.
3. General.
(a) Subject to the provisions of law and the foregoing provisions of this
Certificate of Incorporation, the Corporation may issue shares of its Common
Stock and Preferred Stock from time to time for such consideration (not less
than the par value thereof) as may be fixed by the board of directors, which is
expressly authorized to fix the same in its absolute and uncontrolled discretion
subject to the foregoing conditions. Shares so issued for which the
consideration shall have been paid or delivered to the Corporation shall be
deemed fully paid stock and shall not be liable to any further call or
assessment thereon and the holders of such shares shall not be liable for any
further payments in respect of such shares.
(b) The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase shares of the Corporation's capital
stock of any class or series, or other securities of the Corporation, as such
rights and options shall be evidenced by instrument(s) approved by the
Corporation's board of directors. The board of directors shall be empowered to
set the exercise price, duration, times for exercise, and other terms of such
options or rights; provided, however, that the consideration to be received for
any shares of capital stock subject thereto shall not be less than the par value
thereof.
FIFTH: The name of the incorporator of the Corporation is C. Randall Hill,
and the mailing address of such incorporator is 4100 NCNB Plaza, 901 Main
Street, Dallas, Texas 75202.
SIXTH: The number of directors constituting the initial board of directors
is one, and the name and mailing address of the person who is to serve as such
director until the first annual meeting of stockholders or until his successor
is elected and qualified is Larry Kalas, 777 Taylor Street, Suite II, Fort
Worth, Texas 76102.
SEVENTH: Directors of the Corporation need not be elected by written ballot
unless the by-laws of the Corporation otherwise provide.
EIGHTH: The directors of the Corporation shall have the power to adopt,
amend, and repeal the by--laws of the Corporation.
NINTH: No contract or transaction between the Corporation and one or more
of its directors, officers, or stockholders or between the Corporation and any
person (as used herein "person" means other corporation, partnership,
association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers, or stockholders are directors, officers, or stockholders, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee which authorizes the contract or transaction, or solely
because his, her, or their votes are counted for such purpose, if: (i) the
material facts as to his or her relationship or interest and as to the contract
or transaction are disclosed or are known to the board of directors or the
committee, and the board of directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (iii) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved, or ratified by the board of directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
<PAGE>
TENTH: The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by reason
of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, 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 foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the Delaware General Corporation Law, as the same
exists or may hereafter be amended. Such right shall be a contract right and as
such shall run to the benefit of any director or officer who is elected and
accepts the position of director or officer of the Corporation or elects to
continue to serve as a director or officer of the Corporation while this Article
Tenth is in effect. Any repeal or amendment of this Article Tenth shall be
prospective only and shall not limit the rights of any such director or officer
or the obligations of the Corporation with respect to any claim arising from or
related to the services of such director or officer in any of the foregoing
capacities prior to any such repeal or amendment to this Article Tenth. Such
right shall include the right to be paid by the Corporation expenses incurred in
defending any such proceeding in advance of its final disposition to the maximum
extent permitted under the Delaware General Corporation Law, as the same exists
or may hereafter be amended. If a claim for indemnification or advancement of
expenses hereunder is not paid in full by the Corporation within sixty (60) days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim, and if successful in whole or in part, the claimant shall
also be entitled to be paid the expenses of prosecuting such claim. It shall be
a defense to any such action that such indemnification or advancement of costs
of defense are not permitted under the Delaware General Corporation Law, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its board of directors or any committee thereof,
independent legal counsel, or stockholders) to have made its determination prior
to the commencement of such action that indemnification of, or advancement of
costs of defense to, the claimant is permissible in the circumstances nor an
actual determination by the Corporation (including its board of directors or any
committee thereof, independent legal counsel, or stockholders) that such
indemnification or advancement is not permissible shall be a defense to the
action or create a presumption that such indemnification or advancement is not
permissible. In the event of the death of any person having a right of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, by--law,
resolution of stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means 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.
ELEVENTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. Any repeal or amendment of this Article Eleventh by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a director of the
Corporation is not personally liable as set forth in the foregoing provisions of
this Article Eleventh, a director shall not be liable to the Corporation or its
stockholders to such further extent as permitted by any law hereafter enacted,
including without limitation any subsequent amendment to the Delaware General
Corporation Law.
TWELFTH: The Corporation expressly elects not to be governed by Section 203
of the General Corporation Law of Delaware.
I, the undersigned, for the purpose of forming the Corporation under the
laws of the State of Delaware, do make, file, and record this Certificate of
Incorporation and do certify that this is my act and deed and that the facts
stated herein are true and, accordingly, I do hereunto set my hand on this 11th
day of November, 1991.
C. Randall Hill
Exhibit 4.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ARCH PETROLEUM INC.
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
May 18, 1992
Arch Petroleum Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify as follows:
FIRST: The name of the Corporation is Arch Petroleum Inc.
SECOND: On April 3, 1992, the Board of Directors of the Corporation duly
adopted a resolution setting forth the following amendment to the Certificate of
Incorporation of the Corporation.
The Fourth Article of the Corporation's Certificate of Incorporation is
amended in its entirety to read as follows:
"The aggregate number of shares of all clauses ofcapital stock which the
corporation shall have the authority to issue is Twenty-Six Million
(26,000,000) shares. All such shares shall be nonassessable after the
subscription price or par value thereof is paid to the Corporation. The
authorized shares are classified as follows: (i) Twenty--Five Million
(25,000,000) shares of Common Stock, S.0l par value per share (the "Common
Stock"); and (ii) One Million (1,000,000) shares of Preferred Stock, S.0l
par value per share (the Preferred Stock").
THIRD: A majority of each class of shareholders of the Corporation entitled
to vote on the above-stated proposed amendment executed written consents in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware adopting such amendment and written notice of the taking
of such corporate action was given in accordance with the such Section 228 to
THOSE shareholders entitled to vote thereon who did not execute such written
consents.
Fourth: Said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment as of the date first above written.
ARCH PETROLEUM INC.
Larry Kalas, President
ATTEST:
Randall W. Scroggins, Secretary
Exhibit 4.3
CORRECTED
CERTIFICATE OF AMENDMENT
OF
ARCH PETROLEUM INC.
Pursuant to Sections 103(f) and 242 of the
General Corporation Law of the State of Delaware
Arch Petroleum Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that:
On May 21, 1992 (the "Amendment Filing Date"), the Corporation filed with
the Secretary of State of the State of Delaware a Certificate of Amendment (the
"Certificate of Amendment") to the Corporation's Certificate of Incorporation.
The Certificate of Amendment inaccurately recited that the amendment set forth
therein amended Article Fourth of the Certificate of Incorporation in its
entirety rather than amending solely the first paragraph of Article Fourth of
the Certificate of Incorporation.
Therefore, the Corporation files this Corrected Certificate of Amendment
to correct such inaccuracy effective as of the Amendment Filing Date.
[The remainder of this page is left blank intentionally.]
1
<PAGE>
FIRST: The name of the Corporation is Arch Petroleum Inc.
SECOND: On April 3, 1992, the Board of Directors of the Corporation duly
adopted a resolution setting forth the following amendment to the Certificate of
Incorporation of the Corporation.
The first paragraph of the Fourth Article of the Corporation's Certificate
of Incorporation is amended in its entirety to read as follows:
"The aggregate number of shares of all classes of capital stock which the
Corporation shall have the authority to issue is Twenty-Six Million
(26,000,000) shares. All such shares shall be nonassessable after the
subscription price or par value thereof is paid to the Corporation. The
authorized shares are classified as follows: (i) Twenty-Five Million
(25,000,000) shares of Common Stock, $.01 par value per share (the "Common
Stock"); and (ii) One Million (1,000,000) shares of Preferred Stock, $.01
par value per share (the "Preferred Stock")."
Other than as set forth above, Article Fourth of the Corporation's Certificate
of Incorporation and all other Articles thereto shall be unaffected by the
foregoing amendment.
THIRD: A majority of each class of stockholders of the Corporation
entitled to vote on the above-stated proposed amendment executed written
consents in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware adopting such amendment and written
notice of the taking of such corporate action was given in accordance with
Section 228 to those stockholders entitled to vote thereon who did not execute
such written consents.
FOURTH: Said amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
[The remainder of this page is left blank intentionally.]
2
<PAGE>
IN WITNESS WHEREOF, Arch Petroleum Inc. has caused this Corrected
Certificate of Amendment to be executed in its corporate name by its duly
authorized officers this day of December, 1994, to be effective as of May 21,
1992, the date of the filing of the Certificate of Amendment which it corrects.
ARCH PETROLEUM INC.
By: /s/ LARRY KALAS
-----------------------------
Larry Kalas, President
ATTEST:
/s/ RANDALL W. SCROGGINS
- ---------------------------------
Randall W. Scroggins, Secretary
3
Exhibit 4.4
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
ARCH PETROLEUM INC.
(Pursuant to Section 242 of the
General Corporation Law of the State of Delaware)
The undersigned, duly authorized officers of Arch Petroleum Inc., a
Delaware corporation (the "Corporation"), do hereby certify that:
FIRST: The name of the Corporation is Arch Petroleum
Inc.
SECOND: The first paragraph of Article FOURTH of the Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation") be, and it
hereby is, amended and restated to read in its entirety as follows:
"The aggregate number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is Fifty-One
Million (51,000,000) shares. All such shares shall be nonassessable after
the subscription price or par value thereof is paid to the Corporation.
The authorized shares are classified as follows: (i) Fifty Million
(50,000,000) shares of Common Stock, $.01 par value per share (the "Common
Stock"); and (ii) One Million (1,000,000) shares of Preferred Stock, $.01
par value per share (the "Preferred Stock")."
Other than as set forth above, Article FOURTH of the Certificate of
Incorporation and all other Articles thereto shall be unaffected by the
foregoing amendment.
THIRD: The aforementioned amendment to the Certificate of
Incorporation was duly adopted in accordance with Section 242 of the General
Corporation Law of the State of Delaware (the "DGCL"). A special meeting of the
stockholders of the Corporation was duly called and held, upon notice in
accordance with Section 222 of the DGCL, at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
1
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed pursuant to Section 103(a)(2) of the DGCL by the
undersigned duly authorized officers of the Corporation as of this 8th day of
February, 1995.
ARCH PETROLEUM INC.
By: /s/ LARRY KALAS
---------------------------
Name: Larry Kalas
Title: President
ATTEST:
By: /s/ FRED CANTU
-----------------------------
Name: Fred Cantu
Title: Assistant Secretary
2
Exhibit 4.5
CERTIFICATE OF DESIGNATION OF
PREFERENCES AND RIGHTS OF
EXCHANGEABLE CONVERTIBLE PREFERRED STOCK OF
ARCH PETROLEUM INC.
Arch Petroleum Inc., a Delaware corporation (the "Company"),
pursuant to Section 151 of the General Corporation Law of the State of Delaware
does hereby make this Certificate of Designation and does hereby state and
certify that pursuant to the authority expressly vested in the Board of
Directors of the Company (the "Board") by the Certificate of Incorporation, the
Board hereby adopts the following resolution:
RESOLVED, that pursuant to Article Four of the Certificate of
Incorporation (which authorizes 1,000,000 shares of Preferred Stock, $.01 par
value per share), the Board hereby creates and authorizes the issuance of a
series of Exchangeable Convertible Preferred Stock of the Company, consisting of
727,273 shares, and hereby fixes the designations, powers and preferences, and
the relative participating, optional and other special rights, and the
qualifications, limitations and restrictions of the shares of such series as
follows:
SECTION 1. Designation; Rank. This series of Preferred Stock
shall be designated "Exchangeable Convertible Preferred Stock, $.01 par value
per share" (the "Convertible Preferred Stock"). The Convertible Preferred Stock
will rank, with respect to the dividend rights and rights on liquidation,
winding-up and dissolution, (a) senior to all classes of Common Stock and, each
other class of capital stock or series of preferred stock established by the
Board which does not expressly provide that it ranks senior to or on a parity
with the Convertible Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution (collectively referred to with the
Common Stock of the Company as "Junior Securities"), and (b) on a parity with
each other class of capital stock or series of preferred stock issued by the
Company established by the Board which expressly provides that such class or
series will rank on a parity with the Convertible Preferred Stock as to dividend
rights and rights on liquidation, winding-up and dissolution (collectively
referred to as "Parity Securities").
SECTION 2. Certain Definitions. Unless the context otherwise
requires, the following terms shall have their
CERTIFICATE OF DESIGNATION
<PAGE>
2
respective meanings set forth below whenever used in this
Certificate of Designation:
"Affiliate" - the meaning stated in Exhibit A hereto.
"As Converted Basis" - the meaning stated in Exhibit A
hereto.
"Board" - the meaning stated in the preamble hereto.
"Business Day" - the meaning stated in Exhibit A hereto.
"Common Stock" means the Company's Common Stock, $.01 par value per
share, as constituted on October 20, 1994, and any shares of capital stock into
which such Common Stock may thereafter be changed or that may be issued in
respect of, in exchange for, or in substitution of such shares of Common Stock
by reason of any transaction described in Section 6.
"Convertible Preferred Stock" - the meaning stated in
Section 6.
"Conversion Price" - the meaning stated in Section 6.
"Current Market Price" - the meaning stated in Section
6(c)(iv).
"default period" - the meaning stated in Section 5(c)(i).
"Exchange Notes" - the meaning stated in Section 8.
"Junior Securities" - the meaning stated in Section 1.
"Liquidation Preference" - the meaning stated in Section 4.
"Liquidation Value" - the meaning stated in Section 4.
"Mandatory Conversion Date" - the meaning stated in Section
6(b).
"Mandatory Conversion Notice" - the meaning stated in
Section 6(b).
"Note Exchange Date" - the meaning stated in Section 8.
"Parity Securities" - the meaning stated in Section 1.
"Purchase Agreements" - the meaning stated in Section 8.
CERTIFICATE OF DESIGNATION
<PAGE>
3
"Required Stockholders" - means (a) the holder or holders of at least 66
2/3% of the shares of Convertible Preferred Stock at the time outstanding if at
such time the institutional investors listed on Schedule 1 to the Purchase
Agreements and their respective affiliates in the aggregate hold at least 66
2/3% of the then outstanding Securities on an As Converted Basis, and (b)
otherwise the holder or holders of at least a majority of the shares of
Convertible Preferred Stock at the time outstanding.
"Securities" - the meaning stated in Exhibit A hereto.
"Senior Securities" - means each class of capital stock or series of
preferred stock established by the Board the terms of which specifically provide
that such class or series will rank senior to the Convertible Preferred Stock as
to dividend rights or rights on liquidation, winding-up or dissolution.
"Subsidiary" - the meaning stated in Exhibit A hereto.
"Travelers" means The Travelers Indemnity Company.
"Wholly-owned Subsidiary" - the meaning stated in Exhibit A
hereto.
SECTION 3. Dividends. Holders of shares of the Convertible
Preferred Stock will be entitled to receive, when, as and if declared by the
Board out of funds of the Company legally available for payment, cash dividends
at an annual rate of $2.20 per share of Convertible Preferred Stock, payable
semiannually in arrears on April 20 and October 20 of each year, commencing
April 20, 1995, in lawful money of the United States of America. Each dividend
will be payable to holders of record as they appear on the stock books of the
Company on a record date, not less than ten days nor more than 60 days before
the payment date, fixed by the Board. Dividends will be cumulative from the date
of original issuance of the Convertible Preferred Stock. Dividends payable on
the Convertible Preferred Stock for each full dividend period will be computed
by annualizing the dividend rate and dividing by two. Dividends payable for any
period less than a full dividend period will be computed on the basis of a
360-day year consisting of twelve 30-day months. The Convertible Preferred Stock
will not be entitled to any dividend, whether payable in cash, property or
stock, in excess of full cumulative dividends. No interest, or sum of money in
lieu of interest, will be payable in respect of any accrued and unpaid
dividends.
No full dividends may be declared or paid or funds set apart for
the payment of dividends on any Parity Securities for any period unless full
cumulative dividends shall have been paid
CERTIFICATE OF DESIGNATION
<PAGE>
4
or set apart for such payment on the Convertible Preferred Stock. If full
dividends are not so paid, the Convertible Preferred Stock shall share dividends
pro rata with the Parity Securities. No dividends may be paid or set apart for
such payment on Junior Securities (except dividends on Junior Securities in
additional shares of Junior Securities) and no Junior Securities may be
repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full dividends have not been paid on the
Convertible Preferred Stock. Notwithstanding the foregoing, the Company may make
redemptions, purchases or other acquisitions of Junior Securities payable in
Junior Securities or repurchases of Junior Securities in the ordinary course of
business pursuant to the terms of any employee stock incentive plan adopted by
the Board.
SECTION 4. Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, before any
payment or distribution of assets is made on any Junior Securities, including
without limitation Common Stock of the Company, the holders of Convertible
Preferred Stock shall receive a liquidation preference of $27.50 per share (the
"Liquidation Preference") and shall be entitled to receive an amount equal to
all unpaid dividends accrued to and including the date of distribution (the sum
of the Liquidation Preference and such unpaid dividends is sometimes called the
"Liquidation Value"), and the holders of any Parity Securities shall be entitled
to receive an amount equal to the full respective liquidation preferences to
which they are entitled and shall receive an amount equal to all unpaid
dividends accrued with respect to their respective shares to and including the
date of distribution. If, upon such a voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the assets of the Company are
insufficient to pay in full the amounts described above as payable with respect
to the Convertible Preferred Stock and any Parity Securities, the holders of the
Convertible Preferred Stock and such Parity Securities will share ratably in any
such distribution of assets of the Company first in proportion to their
respective liquidation preferences until such preferences are paid in full, and
then in proportion to their respective amounts of accrued but unpaid dividends.
After payment of any such liquidating preference and accrued dividends, the
shares of Convertible Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Company. Neither the sale or
transfer of all or substantially all the assets of the Company, nor the merger
or consolidation of the Company into or with any other corporation or a merger
of any other corporation with or into the Company, will be deemed to be a
liquidation, dissolution or winding-up of the Company.
CERTIFICATE OF DESIGNATION
<PAGE>
5
SECTION 5. Voting Rights. In addition to such other vote, if any,
as may be required by Delaware law or provided by the resolution creating any
other series of preferred stock of the Company, so long as any shares of
Convertible Preferred Stock are outstanding, the holders of shares of
Convertible Preferred Stock shall have the following voting rights:
(a) Except as otherwise provided by law or as specified in this
Certificate of Designation, the Convertible Preferred Stock shall have
equal voting rights, on an As Converted Basis, with every outstanding
share of Common Stock of the Company and each holder of Convertible
Preferred Stock shall be entitled to one vote for each share of Common
Stock, on an As Converted Basis, into which such Convertible Preferred
Stock is at the time convertible on each matter on which the holders of
Common Stock are entitled to vote.
(b) The vote or consent of the Required Stockholders, voting
together as a single class, shall be necessary for the Company to (i)
issue, authorize or increase the authorized amount of, or issue or
authorize or increase any obligation or security convertible into or
evidencing a right to purchase, any class or series of Senior
Securities, (ii) change the par value of the shares of Convertible
Preferred Stock, (iii) alter or change the powers, preferences, or
special rights of the shares of Convertible Preferred Stock or any other
provision of the Certificate of Incorporation of the Company so as to
affect the shares of Convertible Preferred Stock adversely (provided
that neither an increase in the number of authorized shares of Preferred
Stock, $.01 par value per share, as a class nor the creation and
issuance of any series of Parity Securities or Junior Securities shall
be deemed adverse), (iv) merge, consolidate or amalgamate with any other
person (other than a Wholly-owned Subsidiary of the Company) or (v)
sell, lease, transfer or otherwise dispose of all or substantially all
of the assets of the Company in any transaction or series of related
transactions.
(c) (i) In the event that dividends on the Convertible Preferred
Stock remain unpaid in cash for one Business Day more than a full
semiannual period, the maximum authorized number of directors of the
Company will be increased by two and holders of Convertible Preferred
Stock shall be entitled to vote their shares of Convertible Preferred
Stock, in accordance with the procedures set forth below, to elect, as a
class, an additional two directors. So long as at least 87,273 shares of
Convertible Preferred Stock shall be
CERTIFICATE OF DESIGNATION
<PAGE>
6
outstanding, the holders of Convertible Preferred Stock shall retain the
right to vote and elect, as a class, such number of directors until all
dividends on the Convertible Preferred Stock are paid in full or
declared and set aside for payment. Such period during which dividends
remain unpaid is hereinafter referred to as a "default period"; and a
default period with respect to any unpaid dividends shall be deemed to
continue so long as such dividends or any other dividends on the
Convertible Preferred Stock remain unpaid in cash.
(ii) So long as any shares of Convertible Preferred Stock
shall be outstanding, during any default period, such voting right of
the holders of Convertible Preferred Stock pursuant to paragraph W above
may be exercised initially at a special meeting called pursuant to
paragraph (iii) below or at any annual meeting of stockholders. The
absence of a quorum of holders of Common Stock or any class thereof
shall not affect the exercise of such voting rights by the holders of
Convertible Preferred Stock.
(iii) Unless the holders of Convertible Preferred Stock
have, during an existing default period, previously exercised their
right to elect directors pursuant to paragraph (i) above, the Board may
order, or any stockholder or stockholders owning in the aggregate not
less than 10% of the outstanding shares of Convertible Preferred Stock
may request, the calling of a special meeting of holders of Convertible
Preferred Stock, which meeting shall thereupon be called by the
President, a Vice President or the Secretary of the Company. Notice of
such meeting and of any annual meeting at which holders of Convertible
Preferred Stock are entitled to vote pursuant to this paragraph shall be
given to each holder of record of Convertible Preferred Stock by mailing
a copy of such notice to such holder at such holder's last address as
the same appears on the books of the Company. Such meeting shall be
called for a time not later than 20 days after such order or request,
or, in default of the calling of such meeting within 20 days after such
order or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than 10% of
the outstanding shares of Convertible Preferred Stock. Notwithstanding
the provisions of this paragraph, no such special meeting shall be
called during the period within 60 days immediately preceding the date
fixed for the next annual meeting of stockholders.
CERTIFICATE OF DESIGNATION
<PAGE>
7
(iv) During any default period, the holders of Common
Stock and other classes of stock of the Company, if applicable, shall
continue to be entitled to elect all of the directors unless and until
the holders of Convertible Preferred Stock shall have exercised their
right to elect two directors voting as a class, after the exercise of
which right (A) the directors so elected by the holders of Convertible
Preferred Stock pursuant to paragraph (i) above shall continue in office
until the earlier of (1) such time as their successors shall have been
elected by such holders and (2) the expiration of the default period,
and (B) any vacancy in the Board may be filled by vote of the remaining
directors theretofore elected by the holders of the class of stock which
elected the director whose office shall have become vacant. References
in this paragraph to directors elected by the holders of a particular
class of stock shall include directors elected by such directors to fill
vacancies as provided in clause (B) of the foregoing sentence.
(v) Immediately upon the expiration of a default period,
(A) the right of the holders of Convertible Preferred Stock to elect
directors pursuant to paragraph (i) above shall cease, (B) the term of
any directors elected by the holders of Convertible Preferred Stock as a
class pursuant to paragraph (i) above shall terminate, and (C) the
number of directors shall be such number as may be provided for in the
Certificate of Incorporation or Bylaws of the Company, without regard to
any increase made pursuant to the provisions of paragraph (i) above
(such number being subject, however, to change thereafter in any manner
provided by law or in the Certificate of Incorporation or Bylaws).
(d) Travelers (as purchaser of at least 60% of the Convertible
Preferred Stock originally issued pursuant to the Purchase Agreements)
shall be entitled to designate one person who shall, without further
action by the Company or the Board, become a director of the Company.
After such right is exercised, W the director so designated by Travelers
shall continue in office until the earlier of (A) such time as his or
her successor shall have been designated by Travelers and (B) such time
as Travelers and its affiliates in the aggregate cease to hold at least
87,273 shares of Convertible Preferred Stock, Common Stock into which
such number of shares of Preferred Stock was converted pursuant to
Section 6, or Exchange Notes for which such number of shares of
Preferred Stock was exchanged pursuant to Section 8, and (ii) any
vacancy in the Board resulting
CERTIFICATE OF DESIGNATION
<PAGE>
8
from the resignation, removal, death or incapacity of the director
designated by Travelers from time to time may be filled by Travelers.
Reference in this paragraph to a director designated by Travelers shall
include any director designated by Travelers to fill a vacancy as
provided in clause (ii) of the foregoing sentence.
SECTION 6. Conversion.
(a) Right to Convert. Each share of Convertible Preferred Stock
will be convertible, at any time at the option of the holder thereof, into such
number of whole shares of Common Stock as is equal to the aggregate Liquidation
Preference of the shares of Convertible Preferred Stock surrendered for
conversion divided by the conversion price of $2.75 per share of Common Stock,
subject to adjustment as described in subsection (c) below (the "Conversion
Price"). The Company will, out of funds legally available therefor, pay to the
holder of each share of Convertible Preferred Stock being so converted all
accrued and unpaid dividends on such share to the date of such conversion.
Shares of Convertible Preferred Stock called for redemption will not be
convertible after the close of business on the Business Day preceding the date
fixed for redemption, unless the Company defaults in payment of the redemption
price.
(b) Company's Right to Require Conversion. If at any time after
August 20, 1998 the Common Stock is listed on a national securities exchange or
trades in the National Market System or in the over-the-counter market, and for
a period of at least 60 consecutive trading days commencing on or after August
20, 1998 the closing sale price of the Common Stock reported on such exchange or
in the National Market System or the average of the bid and asked prices of the
Common Stock in the over-the-counter market equals or exceeds 125% of the Target
Price (as below defined) then in effect, the Company may convert the shares of
Convertible Preferred Stock, as a whole but not in part, into the respective
numbers of whole shares of Common Stock specified in subsection (a) above at the
Conversion Price then in effect. As used herein, the term "Target Price" means,
as of any date of determination, the product of (a) the applicable redemption
price set forth in Section 7(a) and (b) the Conversion Price then in effect
Notice of such conversion (a "Mandatory Conversion Notice") shall
be given to the holders of record of the shares of Convertible Preferred Stock
within ten days following the completion of the 60-day trading period referred
to in the foregoing paragraph at their respective addresses as the same shall
appear on the books of the Company and shall specify (i)
CERTIFICATE OF DESIGNATION
<PAGE>
9
price information with respect to the Common Stock for such 60- day trading
period in sufficient detail to establish the availability of the Company's right
to convert the shares of Convertible Preferred Stock into shares of Common Stock
pursuant to this subsection (b), (ii) the date fixed for such conversion, which
shall be the tenth Business Day following such notice (the "Mandatory Conversion
Date"), (iii) the place where certificates for shares of the Convertible
Preferred Stock are to be surrendered for shares of Common Stock and (iv) that
accrued dividends on shares of the Convertible Preferred Stock to and including
the Mandatory Conversion Date shall be paid on the Mandatory Conversion Date to
such holders of record and that dividends will cease to accrue on the Mandatory
Conversion Date, but neither failure to mail such notice, nor any defect therein
or in the mailing thereof, to any particular holder shall affect the sufficiency
of the notice or the validity of the proceedings for conversion with respect to
the other holders. Any notice mailed in the manner herein provided shall be
conclusively presumed to have been duly given whether or not the holder receives
the notice. If any Mandatory Conversion Notice has been given pursuant to this
subsection (b), then (unless the Company defaults in issuing shares of Common
Stock in exchange for the Convertible Preferred Stock or fails to pay accrued
and unpaid dividends on the Convertible Preferred Stock as set forth in the
following paragraph of this subsection (b) and notwithstanding that any
certificates for shares of the Convertible Preferred Stock have not been
surrendered for conversion) on the Mandatory Conversion Date the holders of the
Convertible Preferred Stock will (A) cease to be stockholders with respect to
such shares of Preferred Stock and will have no interests in or claims against
the Company by virtue thereof (except the right to receive shares of Common
Stock in exchange therefor and accrued and unpaid dividends thereon to the
Mandatory Conversion Date) and will have no voting, conversion or other rights
with respect to such shares and the shares of Convertible Preferred Stock will
no longer be outstanding and (B) be treated for all purposes as the record
holders of shares of Common Stock.
No shares of Convertible Preferred Stock may be converted into
shares of Common Stock pursuant to this subsection (b) unless the Company has
paid all accrued and unpaid dividends on the Convertible Preferred Stock to and
including the Mandatory Conversion Date.
(c) Anti-dilution Provisions. The Conversion Price is subject to
adjustment from time to time as follows:
(i) In case the Company shall (A) pay a dividend or make a
distribution on Common Stock in shares of Common
CERTIFICATE OF DESIGNATION
<PAGE>
10
Stock, (B) subdivide its outstanding shares of Common Stock into a
greater number of shares or (C) combine its outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such action shall be adjusted as provided below so
that the holder of any security thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock which
such holder would have received or been entitled to receive immediately
following such action had such security been converted immediately prior
thereto. An adjustment made pursuant to this subsection (c) shall become
effective immediately, except as provided in subsection (f) below, after
the record date in the case of a dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision or combination.
(ii) In case the Company shall issue rights, warrants or options
to all holders of Common Stock entitling them (for a period expiring
within 45 days after the record date therefor) to subscribe for or
purchase shares of Common Stock at a price per share less than the
Current Market Price per share (as determined pursuant to paragraph Uv)
below) of the Common Stock on the record date for the determination of
holders entitled to receive such rights, warrants or options, the
Conversion Price shall be adjusted to a price, computed to the nearest
cent, so that the same shall equal the price determined by multiplying:
(A) the Conversion Price in effect immediately prior to
the date of issuance of such rights, warrants or options*by a
fraction, of which
(B) the numerator shall be (1) the number of shares of
Common Stock outstanding on the date of issuance of such rights,
warrants or options immediately prior to such issuance, plus (2)
the number of shares which the aggregate offering price of the
total number of shares so offered for subscription or purchase
would purchase at such Current Market Price (determined by
multiplying such total number of shares by the sum of the
exercise price of such rights, warrants or options plus the fair
market value of any consideration paid to the Company for such
rights, warrants or options and dividing the product so obtained
by such Current Market Price), and of which
(C) the denominator shall be (1) the number of shares of
Common Stock outstanding on the date of
CERTIFICATE OF DESIGNATION
<PAGE>
11
issuance of such rights, warrants or options, immediately prior
to such issuance, plus (2) the number of additional shares of
Common Stock which are so offered for subscription or purchase.
Such adjustment shall become effective immediately, except as provided
in paragraph (v) below, after the record date for the determination of
holders entitled to receive such rights, warrants or options.
(iii) In case the Company shall distribute to all or
substantially all holders of Common Stock documents or instruments
evidencing indebtedness, equity securities (including equity interests
in a Subsidiary) other than Common Stock, or other assets (other than
ordinary cash dividends out of earnings), or shall distribute to all or
substantially all holders of Common Stock rights, warrants or options to
subscribe to securities (other than those referred to in paragraph (ii)
above), then in each such case the Company shall pay to the holder of
each share of Convertible Preferred Stock such holder's pro rata share,
on an As Converted Basis, of such distributions.
(iv) For the purpose of any computation under paragraph (ii)
above, the "Current Market Price" per share of Common Stock on any date
of determination shall be deemed to be the average of the last sale
prices of a share of Common Stock for the five consecutive trading days
commencing not more than 20 trading days before the day (the "Benchmark
Date") which is the earlier of (A) such date of determination and (B)
the day immediately preceding the "ex" date with respect to the issuance
or distribution requiring such computation, and ending not later than
the Benchmark Date. For purposes of this paragraph, the term "'ex'
date", when used with respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading (or if not so listed or admitted on NASDAQ or a
similar organization if NASDAQ is no longer reporting trading
information) without the right to receive such issuance or distribution.
(v) In any case in which this Section 6 shall require that an
adjustment be made immediately following a record date, the Company may
elect to defer the effectiveness of such adjustment (but in no event
until a date later than the effective time of the event giving rise to
such adjustment), in which case the Company shall, with respect to any
CERTIFICATE OF DESIGNATION
<PAGE>
12
security converted after such record date and before such adjustment
shall have become effective (A) defer making any cash payment or issuing
to the holder of such security the number of shares of Common Stock and
other capital stock of the Company issuable upon such conversion in
excess of the number of shares of Common Stock and other capital stock
of the Company issuable thereupon only on the basis of the Conversion
Price prior to adjustment, and (B) not later than five Business Days
after such adjustment shall have become effective, pay to such holder
the appropriate cash payment and issue to such holder the additional
shares of Common Stock and other capital stock of the Company issuable
on such conversion.
(vi) No adjustment in the Conversion Price shall be required if
securityholders are to participate in the transaction on a basis and
with notice that the Board determines in good faith to be fair and
appropriate in light of the basis and notice on which holders of Common
Stock participate in the transaction. In addition, no adjustment in the
Conversion Price shall be required unless such adjustment would require
an increase or decrease of at least 11~ in the Conversion Price,
provided that any adjustment which by reason of this paragraph (vi) is
not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 6
shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
(vii) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly mail or cause to be mailed to each
holder of Convertible Preferred Stock at the address of such as the same
appears on the stock transfer books of the Company a notice setting
forth the Conversion Price after such adjustment and setting forth in
reasonable detail the facts requiring such adjustment and the
calculations on which the adjustment is based.
(viii) At its option, the Company may make such reduction in the
Conversion Price, in addition to those otherwise required by this
Section 6, as the Board deems advisable to avoid or diminish any income
tax to holders of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes; provided that any such
reduction shall not be effective until written evidence of the action of
the Board authorizing such reduction shall be filed with the secretary
of the Company and notice thereof shall have been given by first class
mail, postage prepaid,
CERTIFICATE OF DESIGNATION
<PAGE>
13
to each holder of shares of the Convertible Preferred Stock at such
holder's address as the same appears on the stock transfer books of the
Company.
(d) Consolidation, Merger or Sale of Assets. If any transaction
shall occur, including without limitation (i) any recapitalization or
reclassification of shares of Common Stock (other than a change in par value, or
from no par value to par value, or as a result of a subdivision or combination
of the Common Stock), (ii) any consolidation, merger or amalgamation of the
Company with or into another person or any merger of another person into the
Company (other than a merger that does not result in a reclassification,
conversion, exchange or cancellation of Common Stock), (iii) any sale or
transfer of all or substantially all of the assets of the Company, or (iv) any
compulsory share exchange, pursuant to any of which holders of Common Stock
shall be entitled to receive other securities, cash or other property, then
appropriate provision satisfactory to the Required Stockholders shall be made so
that the holder of each share of Convertible Preferred Stock then outstanding
shall have the right thereafter to convert such share only into the kind and
amount of the securities, cash or other property that would have been receivable
upon such recapitalization, reclassification, consolidation, merger,
amalgamation, sale, transfer, or share exchange by a holder of the number of
shares of Common Stock issuable upon conversion of such share of Convertible
Preferred Stock immediately prior to such recapitalization, reclassification,
consolidation, merger, amalgamation, sale, transfer or share exchange, after
giving effect to any adjustment in the Conversion Price in accordance with
Section 6 hereof, and the Company shall not enter into any such consolidation,
merger, amalgamation or sale, unless the company formed by such consolidation or
amalgamation or resulting from such merger or that acquires such assets or that
acquires the Company's shares, as the case may be, shall make provisions in its
certificate or articles of incorporation or other constituent document to
establish such right. Such certificate or articles of incorporation or other
constituent document shall provide for adjustments that, for events subsequent
to the effective date of such certificate or articles of incorporation or other
constituent documents, shall be as nearly equivalent as may be practicable to
the relevant adjustments provided for in subsection (c) above and in this
subsection (d).
(e) Accrued Dividends and Fractional Shares. Dividends shall
cease to accrue on shares of the Convertible Preferred Stock surrendered for
conversion into Common Stock pursuant to subsection (a) above or required to be
converted pursuant to subsection (b) above. No fractional shares of Common Stock
shall
CERTIFICATE OF DESIGNATION
<PAGE>
14
be issued upon conversion of the Convertible Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the Company
shall, after aggregation of all fractional share interests held by each holder,
pay cash equal to such remaining fractional interest multiplied by the fair
market value (determined in good faith by the Board and described in a
resolution of the Board) of such share at the time of conversion.
(f) Mechanics of Conversion. Before any holder of Convertible
Preferred Stock shall be entitled to convert the same into shares of Common
Stock pursuant to subsection (a) above and to receive certificates therefor,
such holder shall surrender the certificate or certificates for the Convertible
Preferred Stock to be converted, duly endorsed, at the office of the Company or
of any transfer agent for the Convertible Preferred Stock, and shall give
written notice to the Company at such office that such holder elects to convert
the same. Such conversion pursuant to subsection (a) above shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date. The
Company shall, within five Business Days after such surrender (or, in the case
of a mandatory conversion pursuant to subsection (b) above, on the Mandatory
Conversion Date), issue and deliver at such office to such holder of the
Convertible Preferred Stock (or to any other person specified in the notice
delivered by such holder), a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid and a
check payable to the holder for any cash amounts payable as the result of a
conversion into fractional shares of Common Stock. In case any certificate for
shares of the Convertible Preferred Stock shall be surrendered for conversion of
only a part of the shares represented thereby, the Company shall deliver within
five Business Days at such office to or upon the written order of the holder
thereof, a certificate or certificates for the number of shares of Convertible
Preferred Stock represented by such surrendered certificate which are not being
converted. Notwithstanding the foregoing, the Company shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon such
conversion (other than a mandatory conversion pursuant to subsection (b) above)
unless the certificates evidencing the Convertible Preferred Stock are either
delivered to the Company or its transfer agent or the Company or its transfer
agent shall have received evidence satisfactory to it that such certificates
have been lost, stolen, destroyed or mutilated and the holder of such
Convertible Preferred Stock executes an indemnity satisfactory to the Company.
The issuance
CERTIFICATE OF DESIGNATION
<PAGE>
15
of certificates of shares of Common Stock issuable upon conversion of shares of
Convertible Preferred Stock shall be made without charge to the converting
holder for any tax imposed in respect of the issuance thereof, provided that the
Company shall not be required to pay any tax which may be payable with respect
to any transfer involved in the issue and delivery of any certificate in a name
other than that of the holder of the shares of Convertible Preferred Stock being
converted, and provided further that the Company in no event shall be required
to pay any income taxes which may be incurred by any holder upon such conversion
or transfer.
(g) No Impairment. The Company will not, through any
reorganization, transfer of assets, consolidation, merger, amalgamation,
dissolution, issue or sale of securities or any other action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all of the provisions of this Section 6 and in the taking
of all such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Convertible Preferred Stock against
impairment.
SECTION 7. Redemption. The Convertible Preferred Stock
shall not be redeemable except as set forth below.
(a) Optional Redemption. On or after October 20, 1998, the
Company may, at its option, redeem all or from time to time any part of the
shares of Convertible Preferred Stock (provided that any such partial redemption
shall not be for less than 100,000 shares of Convertible Preferred Stock), out
of funds legally available therefor, upon giving a notice of redemption as set
forth below at the following redemption prices per share (expressed as a
percentage of the Liquidation Preference thereof as of the date of such
redemption), plus an amount equal to accrued and unpaid dividends, if any, on
such shares up to and including the date fixed for redemption:
Redemption
Redemption Date Price
October 20, 1998 to October 19, 1999......................... 103.150%
October 20, 1999 to October 19, 2000......................... 102.625%
October 20, 2000 to October 19, 2001......................... 102.100%
October 20, 2001 to October 19, 2002......................... 101.575%
October 20, 2002 to October 19, 2003......................... 101.050%
October 20, 2003 to October 19, 2004......................... 100.525%
CERTIFICATE OF DESIGNATION
<PAGE>
16
provided that if the date fixed for redemption is an April 20 or October 20,
then the dividends payable on such date shall be paid to the holder of record on
the next preceding April 5 or October 5 and an amount equal to such dividend
paid shall not be included in the amount to be paid upon redemption.
(b) Mandatory Redemption. All outstanding shares of Convertible
Preferred Stock shall be redeemed by the Company, to the extent of funds legally
available therefor, on October 20, 2004, upon giving of notice of redemption, at
a redemption price per share equal to the Liquidation Preference plus an amount
equal to accrued and unpaid dividends up to and including the date of such
redemption.
(c) Partial Redemptions. If fewer than all of the outstanding
shares of the Convertible Preferred Stock are to be redeemed, the shares to be
redeemed will be determined pro rata as nearly as practicable among all holders
of such outstanding shares. In the event that any semiannual dividends payable
on the Convertible Preferred Stock are in arrears, the Convertible Preferred
Stock may not be redeemed unless all outstanding shares 6f Convertible Preferred
Stock are simultaneously redeemed.
(d) Notice of Redemption. Notice of optional or mandatory
redemption will be given by mail, not less than 30 nor more than 60 days prior
to the date fixed for such redemption, to each record holder of the shares of
Convertible Preferred Stock to be redeemed at the address of such holder in the
stock transfer books of the Company. If a notice of redemption has been given,
from and after the specified redemption date (unless the Company defaults in
making payment of the redemption price), dividends on the Convertible Preferred
Stock so called for redemption will cease to accrue, such shares will no longer
be deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Company (except the right to receive the redemption price)
will cease.
SECTION 8. Exchange Provisions. (a) Shares of Convertible
Preferred Stock will be exchangeable at the option of the Company, to the extent
of funds legally available therefor, in whole but not in part, on any April 20
or October 20 up to and including April 20, 2004 (a "Note Exchange Date"),
through the issuance of the Company's 10.563% Series C Convertible Subordinated
Notes due 2004 (the "Exchange Notes") in redemption of and in exchange for
shares of Convertible Preferred Stock, in the manner provided in this Section 8.
The Exchange Notes will be in the form and subject to the terms and conditions
provided in the several Securities Purchase Agreements dated as of October 15,
1994 (the "Purchase Agreements") between the Company and the
CERTIFICATE OF DESIGNATION
<PAGE>
17
institutional investors listed on Schedule 1 thereto, in the form, without
Exhibits thereto, attached hereto as Exhibit A.
(b) Holders of the Convertible Preferred Stock will be entitled
to receive Exchange Notes in an aggregate principal amount equal to the
aggregate Liquidation Preference of the shares of Convertible Preferred Stock
being exchanged. Such exchange may be made only if, at the time of the exchange
(i) all conditions precedent to the issuance of the Exchange Notes pursuant to
the Purchase Agreements shall have been satisfied or waived in accordance with
the terms of the Purchase Agreements, and (ii) there shall be no dividend
arrearage (including the dividend payable on the date of exchange) on the shares
of the Convertible Preferred Stock.
(c) The Company will mail notice of its intention to redeem
through such an exchange to each holder of record of the Convertible Preferred
Stock not less than 30 nor more than 60 days before the Note Exchange Date. Such
notice shall be given by first class mail, postage prepaid, to the holders of
record of shares of the Convertible Preferred Stock at their respective
addresses as the same shall appear on the books of the Company, specifying the
Note Exchange Date and the place where certificates for shares of the
Convertible Preferred Stock are to be surrendered for Exchange Notes and stating
that dividends on shares of the Convertible Preferred Stock will cease to accrue
on the Note Exchange Date, but neither failure to mail such notice, nor any
defect therein or in the mailing thereof, to any particular holder shall affect
the sufficiency of the notice or the validity of the proceedings for redemption
and exchange with respect to the other holders. Any notice which was mailed in
the manner herein provided shall be conclusively presumed to have been duly
given whether or not the holder receives the notice. If notice of exchange has
been given pursuant to this subsection (c) then (unless the Company defaults in
issuing Exchange Notes in redemption of and in exchange for the Convertible
Preferred Stock or fails to pay or set aside accrued and unpaid dividends on the
Convertible Preferred Stock as set forth in subsection (d) below and
notwithstanding that any certificates for shares of the Convertible Preferred
Stock have not been surrendered for exchange) on the Note Exchange Date the
holders of the Convertible Preferred Stock will (i) cease to be stockholders
with respect to such shares and will have no interests in or claims against the
Company by virtue thereof (except the right to receive Exchange Notes in
exchange therefor and accrued and unpaid dividends thereon to the Note Exchange
Date) and will have no voting, conversion or other rights with respect to such
shares, and the shares of Convertible Preferred Stock will no
CERTIFICATE OF DESIGNATION
<PAGE>
18
longer be outstanding and (ii) be treated for all purposes as the
registered holders of Exchange Notes.
Upon the surrender (and endorsement, if required by the Company)
in accordance with such notice of the certificates for shares of the Convertible
Preferred Stock such certificates shall be exchanged for Exchange Notes and such
accrued and unpaid dividends in accordance with this subsection (c).
Notwithstanding the foregoing, if notice of redemption and exchange has been
given pursuant to this subsection (c) and any holder of shares of the
Convertible Preferred Stock shall, prior to the close of business on the
Business Day next preceding the Note Exchange Date, give written notice to the
Company pursuant to Section 8 hereof of the conversion of any or all of the
shares to be redeemed and exchanged held by such holder (accompanied by a
certificate or certificates for such shares, duly endorsed or assigned to the
Company, and any necessary transfer tax payment, as required by Section 6
hereof), then such redemption and exchange shall not become effective as
provided in Section 8 on its behalf, with a paying agent or segregated and held
in trust by the Company for the redemption and exchange of such shares shall
(subject to any right of the holder of such shares to receive the accrued
dividends payable thereon as provided in Section 6 hereof) immediately upon such
conversion be returned to the Company or, if then held in trust by the Company,
shall be discharged from such trust.
CERTIFICATE OF DESIGNATION
<PAGE>
19
(d) No shares of Convertible Preferred Sock may be exchanged for
Exchange Notes unless the Company has paid or set aside for the benefit of the
holders of the Convertible Preferred Stock all accrued and unpaid dividends on
the Convertible Preferred Stock to the Note Exchange Date.
SECTION 9. Status of Reacquired Shares. If shares of the
Convertible Preferred Stock are converted pursuant to Section 6 hereof, redeemed
pursuant to Section 7 hereof or exchanged pursuant to Section 8 hereof, the
shares so converted, redeemed or exchanged shall, upon compliance with any
statutory requirements, assume the status of authorized but unissued shares of
preferred stock of the Company.
SECTION 10. Reserved Shares. So long as any shares of Convertible
Preferred Stock remain outstanding, the Company agrees to keep reserved for
issuance in connection with the conversion of the Convertible Preferred Stock at
all times a number of authorized but unissued shares of Common Stock at least
equal to 100% of the number of shares of Common Stock issuable upon conversion
of all of the Convertible Preferred Stock outstanding at such time.
SECTION 11. Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or when sent by telex or telecopier (with
receipt confirmed), provided a copy is also sent by express (overnight, if
possible) courier, addressed (i) in the case of a holder of the Convertible
Preferred Stock, to such holder's address of record, and (ii) in the case of the
Company, to the Company's principal executive offices to the attention of the
Company's president.
SECTION 12. Amendments and Waivers. Any right, preference,
privilege or power of, or restriction provided for the benefit of, the
Convertible Preferred Stock set forth herein may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively) with the written consent of the Company and the
vote or consent of the Required Stockholders, and any amendment or waiver so
effected shall be binding upon the Company and all holders of the Convertible
Preferred Stock.
CERTIFICATE OF DESIGNATION
<PAGE>
20
IN WITNESS WHEREOF, Arch Petroleum Inc. has caused this Certificate of
Designation to be duly executed by its duly authorized officer and
attested by its secretary this day of October, 1994.
ARCH PETROLEUM INC.
By
Name:
Title:
ATTEST:
Name:
Title: Secretary
CERTIFICATE OF DESIGNATION
<PAGE>
EXHIBIT A
TO
CERTIFICATE OF DESIGNATION
[FORM OF SECURITIES PURCHASE AGREEMENT WITHOUT EXHIBITS]*
- -------------------------
* Counterparts of the Securities Purchase Agreements shall omit this
Exhibit to the form Certificate of Designation attached thereto as
Exhibit A.
<PAGE>
Exhibit A
ARCH PETROLEUM INC.
-------------------------------------
SECURITIES PURCHASE AGREEMENT
-------------------------------------
727,273 Shares
Exchangeable Convertible Preferred Stock
$500,000
9.75% Series A Convertible Subordinated Notes due 2004
$4,500,000
Adjustable Rate Series B Subordinated Notes due 2004
Dated as of October 15, 1994
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. ISSUANCE OF SECURITIES............................... 1
1.1 Authorization........................................ 1
1.2 Purchase and Sale of Securities;
the Closing.......................................... 2
SECTION 2. REPRESENTATION AND WARRANTIES OF
THE COMPANY.......................................... 2
2.1 Organization, Qualification,
Authorization, Capital Stock......................... 2
2.2 Business, Properties and Other
Information.......................................... 4
2.3 Incorporation, Good Standing and
Ownership of Subsidiaries............................ 5
2.4 Financial Statements................................. 5
2.5 Compliance with Laws, Other
Instruments, Etc..................................... 6
2.6 No Defaults Under Existing
Indebtedness......................................... 6
2.7 Governmental Authorizations, Etc..................... 7
2.8 Litigation; Observance of Statutes,
Regulations and Orders............................... 7
2.9 Taxes................................................ 7
2.10 Title to Properties; Reserve
Reports, Etc......................................... 7
2.11 Licenses, Permits, Etc............................... 8
2.12 Compliance with ERISA................................ 8
2.13 Private Offering..................................... 9
2.14 Use of Proceeds; Margin
Regulations.......................................... 9
2.15 Foreign Assets Control Regulations................... 10
2.16 Investment Company Act and Holding
Company Status....................................... 10
2.17 Environmental Matters................................ 10
2.18 Solvency..............................................12
2.19 Registration Rights...................................12
2.20 Other Agreements......................................12
SECTION 3. REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER.........................................12
3.1 Purchase of Securities................................12
3.2 Source of Funds.......................................12
3.3 Accredited Investor...................................13
SECTION 4. CONDITIONS OF CLOSING.................................14
i
<PAGE>
Page
4.1 Proceedings..........................................14
4.2 Representations and Warranties; No
Default..............................................14
4.3 Opinions of Counsel..................................14
4.4 Registration Rights Agreement........................14
4.5 Board Designee.......................................14
4.6 Private Placement Number.............................15
4.7 Reliance Letter for Reserve
Reports..............................................15
4.8 Legality.............................................15
4.9 Payment of Fees......................................15
4.10 Sale of Securities to Other
Purchasers...........................................15
SECTION 5. PREPAYMENTS OF NOTES; PURCHASE OF
SECURITIES...........................................15
5.1 Option Prepayment....................................15
5.2 Notice of Optional Prepayment........................16
5.3 Required Prepayments of Series B
Notes................................................16
5.4 Partial Prepayments Pro Rata.........................17
5.5 Purchase of Securities...............................17
SECTION 6. FINANCIAL STATEMENTS AND INFORMATION.................17
SECTION 7. INSPECTION OF PROPERTIES AND BOOKS;
CONFIDENTIALITY BOARD OBSERVATION
RIGHTS...............................................19
SECTION 8. COVENANTS............................................21
8.1 Payment of Principal, Interest and
Premium, Etc.........................................21
8.2 To Keep Books, Reserves; Corporate
Existence; Payment of Taxes;
Maintenance of Properties;
Compliance with Laws; Etc............................21
8.3 Insurance............................................22
8.4 Nature of Business...................................22
8.5 Certain Financial Conditions.........................23
8.6 Limitation on Restricted Payments
and Restricted Investments, Etc......................24
8.7 Consolidation, Merger or
Disposition of Assets as an
Entirety.............................................24
8.8 Transactions with Affiliates.........................25
SECTION 9. DEFINITIONS..........................................25
9.1 Definitions..........................................25
9.2 Accounting Terms.....................................35
ii
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Page
SECTION 10. EVENTS OF DEFAULT; REMEDIES...........................36
10.1 Events of Default; Acceleration of
Maturity and Rescission...............................36
10.2 Suits for Enforcement.................................39
10.3 Remedies Cumulative...................................39
10.4 Remedies Not Waived...................................39
SECTION 11. CONVERSION AND EXCHANGE OF NOTES;
ANTIDILUTION PROVISIONS...............................39
11.1 Conversion of Notes...................................39
11.2 Exchange of Convertible Preferred
Stock for Series C Notes..............................41
11.3 Antidilution Provisions; Accrued
Interest and Fractional Shares;
Mechanics of Conversion; No
Impairment; Etc.......................................42
SECTION 12. SUBORDINATION OF NOTES................................46
12.1 General...............................................46
12.2 Effects of Certain Defaults in
Respect of Senior Indebtedness........................47
12.3 Insolvency, Etc.......................................47
12.4 Turnover of Payment...................................48
12.5 No Prejudice or Impairment............................48
12.6 Payment of Senior Indebtedness,
Subrogation, Etc......................................49
12.7 Miscellaneous.........................................49
SECTION 13. REGISTRATION, TRANSFER AND EXCHANGE
OF SECURITIES; RESTRICTIVE LEGENDS
TRANSFER RESTRICTIONS.................................49
SECTION 14. LOST, ETC., NOTES.....................................50
SECTION 15. AMENDMENT AND WAIVER..................................51
SECTION 16. HOME OFFICE PAYMENT...................................52
SECTION 17. LIABILITIES OF THE PURCHASER..........................52
SECTION 18. CERTAIN TAXES.........................................52
SECTION 19. MISCELLANEOUS.........................................53
19.1 Expenses..............................................53
19.2 Reliance on and Survival of
Representations.......................................54
19.3 Successors and Assigns................................54
19.4 Communications........................................54
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Page
19.5 Consent to Jurisdiction; Service of
Process; Waiver of Jury Trial..........................54
19.6 Indemnification........................................56
19.7 Governing Law..........................................56
19.8 Headings...............................................56
19.9 Counterparts...........................................56
SCHEDULE I - Names and Addresses of Purchasers
EXHIBIT A -- FORM OF CERTIFICATE OF DESIGNATION
EXHIBIT B-1 -- FORM OF SERIES A NOTE
EXHIBIT B-2 -- FORM OF SERIES B NOTE
EXHIBIT B-3 -- FORM OF SERIES C NOTE
EXHIBIT C -- FORM OF OPINION OF SPECIAL COUNSEL TO THE
PURCHASERS
EXHIBIT D -- FORM OF OPINION OF COUNSEL TO THE COMPANY
EXHIBIT E -- FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT F -- FORM OF OPINION TO BE DELIVERED UPON AN
EXCHANGE OF CONVERTIBLE PREFERRED STOCK FOR
SERIES C NOTES
EXHIBIT 2.1 -- OUTSTANDING CONVERTIBLE SECURITIES, OPTIONS,
ETC.
EXHIBIT 2.3 -- SUBSIDIARIES
EXHIBIT 2.6 -- EXISTING INDEBTEDNESS
EXHIBIT 2.8 -- LITIGATION
EXHIBIT 2.17 -- ENVIRONMENTAL MATTERS
EXHIBIT 8.6 -- EXISTING INVESTMENTS
iv
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ARCH PETROLEUM INC.
777 Taylor Street, Suite II
Fort Worth, Texas 76102
--------------------
SECURITIES PURCHASE AGREEMENT
--------------------
As of October 15, 1994
TO THE PURCHASER WHOSE NAME
APPEARS IN THE ACCEPTANCE
FORM AT THE END HEREOF
Ladies and Gentlemen:
ARCH PETROLEUM INC., a Delaware corporation (the "Company"),
hereby agrees with you as follows:
SECTION 1. ISSUANCE OF SECURITIES.
SECTION 1.1. Authorization. The Company has duly authorized the
issue and sale of (A) 727,273 shares of its Exchangeable Convertible Preferred
Stock, par value $.01 per share (the "Convertible Preferred Stock"), having an
aggregate liquidation preference of $20,000,000 and other rights as specified in
the Certificate of Designation of Preferences and Rights in the form of Exhibit
A attached hereto (the "Certificate of Designation"), (B) $500,000 aggregate
principal amount of its 9.75% Series A Convertible Subordinated Notes due 2004
(the "Series A Notes"), each such Series A Note to be substantially in the form
of Exhibit B-1 attached hereto, (C) $4,500,000 aggregate principal amount of its
Adjustable Rate Series B Subordinated Notes due 2004 (the "Series B Notes"),
each such Series B Note to be substantially in the form of Exhibit B-2 attached
hereto, and (D) under circumstances described in the Certificate of Designation
up to $20,000,000 aggregate principal amount of its 10.563% Series C Convertible
Subordinated Notes due 2004 (the "Series C Notes" and, together with the Series
A Notes and the Series B Notes, the "Notes", and the Notes, together with the
Convertible Preferred Stock, the "Securities"), each such Series C Note to be
substantially in the form of Exhibit B-3 attached hereto. The Series C Notes
will be issued in exchange for shares of Convertible Preferred Stock.
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As used herein, the term "Shares" shall mean all shares of
Convertible Preferred Stock originally issued pursuant to this Agreement and the
other agreements referred to in Section 2.20, and the term "Notes" shall mean
all notes originally delivered pursuant to this Agreement and said other
agreements and all notes delivered in substitution or exchange for any such
note. Where applicable, such terms shall include the singular number as well as
the plural. The terms "Share", "Series A Note", "Series B Note", "Series C Note"
and "Note" shall mean one of the Shares, Series A Notes, Series B Notes, Series
C Notes and Notes, respectively.
SECTION 1.2. Purchase and Sale of Securities; the Closing.
Subject to the terms and conditions hereof, the Company hereby agrees to sell to
you, and you agree to purchase from the Company, the number of Shares and/or the
respective aggregate principal amounts of Series A Notes and Series B Notes as
set forth opposite your name in Schedule I attached hereto, at a purchase price
equal to $27.50 for each Share and 100% of the principal amount of each Note
being purchased by you. The closing of such purchase shall be held at 10:00
A.M., New York time, on October 20, 1994 or on such later Business Day as may be
agreed to by you and the Company (the "Closing Date"), at the offices of Willkie
Farr & Gallagher, 153 East 53rd Street, New York, NY 10022.
On the Closing Date, the Company will deliver to you (A) if you
are purchasing Shares, one or more certificates representing the Shares to be
purchased by you, registered in your name or in the name of one or more of your
nominees and, in any denominations (in a minimum of 10,000 shares), all as you
may specify by timely notice to the Company (or, in the absence of such notice,
one certificate registered in your name), and (B) if you are purchasing Notes,
one or more Notes of each series, dated the Closing Date and registered in your
name or in the name of one or more of your nominees, in any denominations (in a
minimum amount of $500,000) and in the aggregate principal amount to be
purchased by you, all as you may specify by timely notice to the Company (or, in
the absence of such notice, one Series A Note and one Series B Note registered
in your name) in each case against your delivery to the Company of immediately
available funds in the amount of the purchase price of such Securities, such
delivery to be by wire transfer to the Company's Account No. 9740426379 at Bank
One, Texas, N.A. (Forth Worth, Texas) (ABA No. 111000614).
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to you as follows:
2
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SECTION 2.1. Organization, Qualification, Authorization, Capital
Stock. A. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
power and authority to own or hold under lease the property it purports to own
or hold under lease, to transact the business it transacts, to execute and
deliver this Agreement and each of the other Transaction Documents and to
perform the provisions hereof and thereof. The Company is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which the
character of the properties owned or held under lease by it or the nature of the
business transacted by it requires such qualification, except where the failure
to be so qualified individually and in the aggregate would not have a Material
Adverse Effect.
B. The execution, delivery and performance of this Agreement and
each of the other Transaction Documents have been duly authorized by all
necessary action on the part of the Company. This Agreement is, and the other
Transaction Documents when executed and delivered by the Company will be, legal,
valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency or other similar laws relating to or affecting the
enforcement of creditors, rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
C. The authorized capital stock of the Company consists of
25,000,000 shares of Common Stock, $.01 par value per share, and 1,000,000
shares of Preferred Stock, $.01 par value per share, of which 17,186,404 shares
of Common Stock and no shares of Preferred Stock are issued and outstanding. All
of such issued and outstanding shares of Common Stock are (and upon issuance on
the Closing Date as provided in this Agreement 727,273 shares of Convertible
Preferred Stock will be) validly issued, fully paid and nonassessable without
preemptive rights of shareholders with respect thereto. Except as described on
Exhibit 2.1, as of the Closing Date the Company will have no outstanding
securities (other than the Series A Notes, the Series 2 Notes and the
Convertible Preferred Stock) convertible into or exchangeable for any shares of
its capital stock or any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
any shares of its capital stock or any securities convertible into or
exchangeable for any shares of its capital stock. As of
3
<PAGE>
the Closing Date, 7,454,547 shares of Common Stock, being all shares of Common
Stock issuable upon conversion of the Series A Notes and the Convertible
Preferred Stock (or the Series C Notes issuable in exchange for shares of
Convertible Preferred Stock), will have been reserved for issuance upon such
conversion and, when so issued, will be fully paid and nonassessable. The Board
of Directors has unanimously approved submission to the stockholders of the
Company, for approval at the next annual meeting of such stockholders (or at an
earlier special meeting of such stockholders), a proposal that the Certificate
of Incorporation of the Company be amended to increase the authorized number of
shares of Common Stock to at least 26,636,364 shares, of which 1,636,364 such
shares, being all shares of Common Stock issuable upon conversion of the Series
B Notes as of the Closing Date, will be reserved for issuance upon such
conversion and, when so issued, will be fully paid and nonassessable.
SECTION 2.2. Business, Proportion and Other Information. The
Company is subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended, and has delivered to you copies of the following reports
and proxy statement filed with the Commission:
A. its Annual Report on Form 10-K for its fiscal year ended
December 31, 1993, filed pursuant to Section 13(a) of said Act, as
amended on Form 10-K/A-1 dated July 14, 1994 and Form 10-K/A-2 dated
August 10, 1994;
B. its Quarterly Reports on Form 10-Q for its fiscal quarters
ended March 31 (as amended on Form 10-Q/A-1 dated July 14, 1994 and Form
10-Q/A-2 dated August 10, 1994) and June 30, 1994, each filed pursuant
to Section 13(a) of said Act;
C. its Current Report on Form 8-K dated as of March 31, 1994, as
amended on Form 8-K/A-1 dated June 10, 1994 and Form 8-K/A-2 dated July
14, 1994; and
D. the Proxy Statement for its 1994 Annual Meeting of
Stockholders, filed pursuant to Section 14 of said Act.
Said reports and proxy statement comprise all reports and proxy
statements required to be filed by the Company with the Commission since
December 31, 1993 and are collectively called the "SEC Reports", which term
shall also include on the Closing Date all further reports and proxy statements
which the Company may theretofore have furnished to you pursuant to Section 6D.
4
<PAGE>
The Company has also delivered to you a private placement
memorandum dated May 25, 1994 (the "Placement Memorandum"), prepared by the
Company, and used by EnCap Investments L.C. in connection with the transactions
contemplated hereby.
Neither the SEC Reports listed above, the Placement Memorandum,
this Agreement, nor any other document, slide presentation, certificate, written
statement or projection of future economic performance furnished to you by or on
behalf of the Company in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein, in the light
of the circumstances under which they were made, not misleading; provided that
to the extent any such information therein was based upon or constitutes an
estimate or projection, the Company represents only that in preparing such
estimate or projection it acted in good faith and on a basis which the Company
reasonably believed to be reasonable based on the assumptions set forth in the
Placement Memorandum and on a basis consistent with the financial statements
referred to in Section 2.4. The Company knows of no facts (other than matters of
a general economic nature) not disclosed in the SEC Reports listed above, the
Placement Memorandum or such other documents referred to above as having been
delivered to you which facts individually or in the aggregate have a Material
Adverse Effect or, so far as the Company can now foresee, could have a Material
Adverse Effect.
SECTION 2.3. Incorporation, Good Standing and Ownership of
Subsidiaries. Exhibit 2.3 is a complete and correct list of Subsidiaries of the
Company, showing, as to each Subsidiary, the correct name thereof, the
jurisdiction of its organization and the percentage of shares of each class of
securities of such Subsidiary owned by the Company and each other Subsidiary of
the Company. All of the outstanding shares of each of the Subsidiaries shown in
Exhibit 2.3 as being owned by the Company and its Subsidiaries have been validly
issued, are fully paid and nonassessable and, except as set forth in Exhibit
2.3, are owned by the Company or another Subsidiary free and clear of any Lien.
All of the Subsidiaries are consolidated Subsidiaries of the Company. No shares
of the Company are owned by any of its Subsidiaries.
Each Subsidiary is a corporation or limited liability company
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and is duly qualified as a
foreign corporation and
5
<PAGE>
is in good standing in each jurisdiction in which the character of the
properties owned or held under lease by it or nature of the business transacted
by it requires such qualification, except where the failure to be so qualified
individually and in the aggregate would not have a Material Adverse Effect. Each
Subsidiary has all requisite power and authority to own or hold under lease the
property it purports to own or hold under lease and to transact the business it
transacts.
SECTION 2.4. Financial Statements. The Company has
delivered to you copies of
A. the consolidated balance sheets of the Company and its
Subsidiaries as of October 31 and December 31, 1991 and December 31,
1992 and 1993 and the related consolidated statements of operations,
changes in shareholders, equity and cash flows of the Company and its
Subsidiaries for each of the fiscal years ending on October 31, 1991 and
December 31, 1992 and 1993 and for the two-month period ended on
December 31, 1991, all with reports thereon of Price Waterhouse,
independent public accountants; and
B. the unaudited consolidated balance sheet of the Company and
its Subsidiaries as of June 30, 1994 and the related consolidated
statements of operations and cash flows of the Company and its
Subsidiaries for the fiscal quarter and six-month period then ended.
All such financial statements (including any related schedules and
notes) are complete and correct and present fairly the consolidated financial
condition of the Company and its Subsidiaries as of the respective dates of such
consolidated balance sheets and the consolidated results of their operations for
the periods ended on said dates and have been prepared in accordance with GAAP
consistently applied by the Company and its Subsidiaries throughout the periods
involved (subject to normal year-end audit adjustments). There has been no
material adverse change in the assets, liabilities, financial condition or
results of operations of the Company and its Subsidiaries since December 31,
1993 from that set forth in the financial statements as of and for the period
ended on said date, except as set forth in the Company's most recent Quarterly
Report on Form 10-Q referred to in Section 2.2B.
SECTION 2.5. Compliance with Laws, Other Instruments,
Etc. The execution, delivery and performance by the Company of
this Agreement, the Series A Notes, the Series B Notes and the
other Transaction Documents and the issuance of the Convertible
6
<PAGE>
Preferred Stock to be issued on the Closing Date will not: (A) conflict with the
corporate charter, by-laws or other organizational documents of the Company or
any Subsidiary; (B) result in any breach of, or constitute a default under, or
result in the creation of any Lien in respect of any property of the Company or
any Subsidiary under, any indenture, mortgage, deed of trust, bank loan or
credit agreement, or any other agreement or instrument to which the Company or
any Subsidiary is a party or by which their respective properties may be bound
or affected; or (C) conflict with or result in a breach of any of the terms,
conditions or provisions of any Order of any court, arbitrator or Governmental
Body applicable to the Company or any Subsidiary or violate any provision of any
law, statute, rule or regulation of any Governmental Body applicable to the
Company or any Subsidiary.
As used in this Agreement, the term "Governmental Body" includes
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign; and the term
"Order" includes any order, writ, injunction, decree, judgment, award, penalty,
determination, direction or demand.
SECTION 2.6. No Defaults Under Existing Indebtedness. Exhibit 2.6
is a complete and correct list of all outstanding Indebtedness of the Company
and each Subsidiary as of the dates therein stated, showing as to each item the
obligor, the obligee, the aggregate principal amount outstanding and the final
maturity date (other than properties and assets disposed of in the ordinary
course of business).
The Placement Memorandum includes Reserve Reports of Ryder Scott
Company, Independent Petroleum Engineers, dated February 17, 1994 and May 11,
1994 as to Hydrocarbon Interests described therein as of January 1, 1994 and
April 1, 1994, respectively. The Company does not know of any facts that would
require any material changes in the conclusions set forth in said Reserve
Reports if said Reserve Reports were made as of the date hereof.
SECTION 2.11. Licenses, Permits, Etc. The Company and its
Subsidiaries own or possess all licenses, permits, franchises, authorizations,
patents, copyrights, trademarks and trade names, or rights thereto, material to
the conduct of their respective businesses, without known conflict with the
rights of others, and there are no agreements providing for the expiration or
termination of any of the same prior to the final maturity of the Notes
7
<PAGE>
The Company and its Subsidiaries have made all necessary material
rate filings, certificate applications, well category filings, interim
collection filings and notices, and all other material filings or
certifications, and have received all necessary material regulatory
authorizations from appropriate Governmental Bodies with respect to their
respective producing Hydrocarbon Properties and the production of Hydrocarbons
therefrom.
At all times since the acquisition thereof by the Company or a
Subsidiary and to the best knowledge of the Company prior thereto, the oil and
gas wells comprising their respective producing Hydrocarbon Properties have been
drilled and operated in all material respects in accordance with the material
terms of relevant leases and agreements and applicable federal, state and local
laws and regulations and are bottomed on and producing from the drilling and
spacing units or blocks therefor.
SECTION 2.12. Compliance with ERISA. Neither the Company nor any
ERISA Affiliate has incurred with respect to an ERISA Plan (A) any "accumulated
funding deficiency" or "waived funding deficiency" within the meaning of Section
412 of the Code or Sections 302 and 303(c) of ERISA which has not been fully
satisfied, or (B) any liability to the PBGC established under ERISA (other than
for the payment of current premiums); nor has the Company or any ERISA Affiliate
had any tax or penalty assessed against it by the Internal Revenue Service or
the Department of Labor for any alleged violation under Section 406 of ERISA or
Section 4975 of the Code. The current value of the benefit liabilities (as
defined in Section 4001(a)(16) of ERISA) of each ERISA Plan other than a
Multiemployer Plan does not exceed the fair market value of the assets of such
Plan as of the most recently ended plan year of each such Plan. Full payment has
been made of all amounts which are required under the terms of each ERISA Plan
to have been paid as contributions to such Plan. Neither the Company nor any
ERISA Affiliate has incurred an unsatisfied withdrawal liability obligation with
respect to a Multiemployer Plan which is not reflected in the most recent
audited financial statements referred to in Section 2.4A, and neither the
Company nor any ERISA Affiliate would incur such a liability if it were to make
a partial or complete withdrawal from any Multiemployer Plan. Neither the
Company nor any ERISA Affiliate provides health or welfare benefits to retirees
or to their beneficiaries other than as required under Section 4980B of the Code
or Section 601 et seq. of ERISA and neither the Company nor any ERISA Affiliate
has any liability in respect of any health or welfare benefits payable to
retirees or their beneficiaries which is not reflected in said most recent
8
<PAGE>
financial statements. With respect to each ERISA Plan, if any, identified by you
in writing to the Company in accordance with Section 3.2D, neither the Company
nor any "affiliate" of the Company (as defined in Section V(c) of PTE 84-14) has
at this time, nor has exercised at any time during the immediately preceding
year, the authority to appoint or terminate the "QPAM" (as defined in Part V of
PTE 84-14, issued March 13, 1984) identified by you to the Company pursuant to
Section 3.2D as manager of any of the assets of any such Plan or to negotiate
the terms of any management agreement with such QPAM on behalf of any such Plan,
and the Company is not an "affiliate" (as so defined) of such QPAM. The Company
is not a party in interest with respect to any ERISA Plan identified by you in
accordance with Section 3.2C or 3.2E. The transactions contemplated by this
Agreement and the Securities will not involve a prohibited transaction (as such
term is defined in Section 4975(c)(1)(A), (B), (C) or (D) of the Code or Section
406(a) of ERISA) that could subject the Company or any holder of a Security to
any tax or penalty on prohibited transactions imposed under said Section 4975 of
the Code or by Section 502(i) of ERISA. The representation by the Company in the
preceding sentence is made in reliance upon your representation in Section 3.2
and the representations of the other purchasers in Section 3.2 of the other
agreements referred to in Section 2.20.
SECTION 2.13. Private Offering. Neither the Company nor anyone
acting on its behalf has offered the Securities or any similar securities for
sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any Person other than you, the
other purchasers listed in Schedule I and not more than 14 other institutional
investors. Neither the Company nor anyone acting on its behalf has taken, or
will take, any action which would subject the issuance or sale of the Shares or
the Notes to Section 5 of the Securities Act of 1933, as amended.
SECTION 2.14. Use of Proceeds; Margin Regulations. The Company
will use the proceeds of the issuance of the Securities to repay existing
Indebtedness. No part of the date and a brief description of any security
therefor. Neither the Company nor any Subsidiary is in default (whether or not
waived) in the performance or observance of any of the terms, covenants or
conditions contained in any instrument evidencing any Indebtedness and no event
has occurred and is continuing which, with the giving of notice or the lapse of
time or both, would become such a default.
SECTION 2.7. Governmental Authorizations, Etc. No consent,
approval or authorization of, or declaration,
9
<PAGE>
registration or filing with, any Governmental Body is required for the validity
of the execution and delivery or for the performance of this Agreement, the
Registration Rights Agreement, or the Securities.
SECTION 2.8. Litigation; Observance of Statutes, Regulations and
Orders. Except as set forth in Exhibit 2.8, there are no actions, suits or
proceedings (including counterclaims) pending or, to the knowledge of the
Company, threatened against or affecting the Company or any Subsidiary or any
property of the Company or any Subsidiary in any court or before any arbitrator
of any kind or before or by any Governmental Body, except actions, suits or
proceedings which (A) individually do not represent a potential claim in excess
of $500,000 and (B) in the aggregate, if adversely determined, would not have a
Material Adverse Effect.
Neither the Company nor any Subsidiary is in default under any
Order of any court, arbitrator or Governmental Body or is in violation of any
statute, rule or regulation of any Governmental Body, except for possible
defaults or violations which would not in the aggregate have a Material Adverse
Effect.
SECTION 2.9. Taxes. The Company and its Subsidiaries have filed
all tax returns in all jurisdictions in which such returns are required to have
been filed by them and have paid all taxes, assessments, fees and governmental
charges due and payable with respect to such returns to the extent the same have
become due and payable and before they have become delinquent, other than those
being contested in good faith by appropriate means and with respect to which the
Company or a Subsidiary, as the case may be, has set aside on its books adequate
reserves in conformity with GAAP. The federal income tax returns of the Company
have not been audited by the Internal Revenue Service.
SECTION 2.10. Title to Properties; Reserve Reports, Etc. The
Company and each Subsidiary has good and marketable record title to all
Hydrocarbon Interests covered by the Reserve Reports referred to below, good and
marketable title to its respective other real properties and good title to its
other properties reflected in the consolidated balance sheet as at December 31,
1993, described in Section 2.4A, or purported to have been acquired by the
Company or such Subsidiary after said proceeds from the sale of the Securities
hereunder will be used, and no part of the proceeds of such existing
Indebtedness was used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207,
10
<PAGE>
as amended), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). The assets of the Company
and its Subsidiaries do not include any such margin stock, and the Company does
not presently intend that margin stock will constitute more than 25% of such
assets. As used in this Section, the terms "margin stock" and "purpose of buying
or carrying" shall have the meanings assigned to them in the aforementioned
Regulation G.
SECTION 2.15. Foreign Assets Control Regulations. None of the
transactions contemplated by this Agreement (including the use of proceeds of
the sale of the Securities) will result in a violation of any of the foreign
assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended), or any ruling issued thereunder or any
enabling legislation or Presidential Executive Order in connection therewith.
SECTION 2.16. Investment Company Act and Holding Company Status.
Neither the Company nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. Neither the Company nor any Subsidiary is a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", or a "public utility", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 2.17. Environmental Matters. (A) The operations of the
Company and its Subsidiaries comply in all respects with all Environmental Laws
and all other applicable Requirements of Law concerning environmental health and
safety, except where the failure so to comply individually and in the aggregate
would not have a Material Adverse Effect.
(B) In addition and without limitation to the foregoing, except
as set forth on Exhibit 2.17:
(1) neither the Company nor any Subsidiary, nor any property or
operations currently owned or leased by the Company or any Subsidiary,
is subject to, and no property or operations formerly owned or leased by
the Company or any Subsidiary during such period of ownership or lease
were subject to, any outstanding order from or agreement with any
11
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court, arbitrator or Governmental Body of competent jurisdiction or
subject to any judicial or docketed administrative proceeding respecting
(x) any Environmental Law or any other environmental or health or safety
Requirement of Law, (y) any action required to clean up, remove, treat
or in any other way address Contaminants in the indoor environment or
(z) any claim under any Environmental Law arising from the release or
threatened release of a Contaminant into the environment;
(2) all necessary authorizations, consents, permissions,
licenses and agreements required by Environmental Laws
(collectively "Environmental Consents") have been lawfully
obtained by the Company and its Subsidiaries to enable each of
such entities to carry on its business effectively in the places
and in the manner in which such business is now carried on, and
all Environmental Consents are valid and subsisting and are in
full force and effect;
(3) the Company and its Subsidiaries have complied at all times
with all material conditions attaching to Environmental Consents
(whether such conditions are expressly imposed or implied by statute)
and the Company is not aware of any circumstances which would render it
impossible for the Company or any Subsidiary to comply with such
conditions in the future;
(4) neither the Company nor any Subsidiary has received any
notice, Order, correspondence or communication in any other form from
any Governmental Body in respect of any Environmental Consent revoking,
suspending, modifying or varying the same, or threatening to do so, and
the Company does not know of any reason for any Environmental Consent to
be revoked, suspended, modified or varied;
(5) neither the Company nor any Subsidiary has received any
communication in any form from any Governmental Body in respect of any
violation of any Environmental Law; and the Company is not aware of any
circumstances which would be reasonably expected to give rise to such a
communication being received, or of any intention on the part of any
competent authority to deliver any such communication;
(6) there are no conditions or circumstances associated with any
property of the Company or any Subsidiary currently owned or operated by
the Company or any
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Subsidiary or any of their predecessors or with the current or, to the
best of the Company's knowledge, former operations of the Company or any
Subsidiary, and there were no such conditions or circumstances
associated with any property of the Company or any Subsidiary formerly
owned or operated by the Company or any Subsidiary or with their former
operations which were applicable during such period of ownership or
operation, in all cases including off-site disposal practices, of the
Company or any Subsidiary which would reasonably be expected to give
rise to liability to any Person in respect of any Environmental Law;
(7) no site owned or occupied by the Company or any Subsidiary
has been used for the deposit of waste during the ownership or
occupation of the Company or any Subsidiary except for such usage in
accordance with Environmental Law or pursuant to all requisite material
consents thereunder;
(8) all Contaminants produced in the course of the businesses of
the Company and its Subsidiaries have been lawfully disposed of; and
(9) the Company and its Subsidiaries have at all times supplied
to the competent authorities such information as is required by
Environmental Laws, and all such information given was correct at the
time such information was supplied.
SECTION 2.18. Solvency. The Company is, and after giving effect
to the issuance of the Securities on the Closing Date will be, a "solvent
institution", as said term is used in Section 1405(c) of the New York Insurance
Law, whose "obligations . . . are not in default as to principal or interest",
as said terms are used in said Section 1405(c).
SECTION 2.19. Registration Rights. Except as contemplated by this
Agreement and the Registration Rights Agreement, no Person has the right to
cause the Company to effect the registration under the Securities Act of 1933,
as amended, of any shares of Common Stock or any other securities (including
securities evidencing indebtedness) of the Company.
SECTION 2.20. Other Agreements. Concurrently with the execution
and delivery of this Agreement, the Company is entering into Securities Purchase
Agreements identical with this Agreement (except as to the identity of the
purchasers and the number of Shares and/or the aggregate principal amount of
Series A Notes and Series B Notes to be purchased) with the other purchasers
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named in Schedule I. The sales to you and said other purchasers are to be
separate and several sales.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER. You represent and warrant to the Company as follows:
SECTION 3.1. Purchase of Securities. You are acquiring the
Securities being purchased by you on the Closing Date without a view to the
distribution thereof, provided that the disposition of your property shall at
all times be within your control.
SECTION 3.2. Source of Funds. With respect to each source of
funds to be used by you to purchase the Securities being purchased by you on the
Closing Date (respectively, the "Source"), at least one of the following
statements is accurate as of the Closing Date:
A. the Source is an insurance company general
account, in which case (1) such purchase would be exempt in
accordance with the proposed Prohibited Transaction
Exemption ("PTE") published at 59 Fed. Reg. 43134 (1994)
(Application No. D-9662); or (2) assuming the continued
applicability of paragraph (b) of Department of Labor
Interpretive Bulletin 75-2, 29 CFR S 2509.75-2, the Source
is not a "plan";
B. the Source is a "governmental plan" as defined in
Section 3(32) of ERISA;
C. the Source is either an insurance company pooled separate
account or a bank collective investment fund, in which case (1) the
purchase is exempt in accordance with PTE 90-1 (issued January 29, 1990)
or PTE 91-38 (issued July 12, 1991) with respect to each "plan" whose
assets in such separate account or investment fund do not exceed and are
not expected to exceed 10% of the total assets of such account or fund
as of the Closing Date and (2) on or prior to the Closing Date you shall
have identified to the Company in writing pursuant to this Subsection C
each "plan" whose assets in such separate account or investment fund
exceed or are expected to exceed 10% of the total assets of such account
or fund as of the Closing Date;
D. the Source is an "investment fund" managed by a "qualified
professional asset manager" or "QPAM" (as defined in Part V of PTE
84-14, issued March 13, 1984) which QPAM has been identified in writing,
and the purchase is exempt under PTE 84-14, provided that no other party
to the
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transactions described in this Agreement and no "affiliate" of such
other party (as defined in Section V(c) of PTE 84-14) has at this time,
and has not exercised at any time during the immediately preceding year,
the authority to appoint or terminate said QPAM as manager of the assets
of any "plan" identified in writing pursuant to this Subsection D or to
negotiate the terms of said QPAM's management agreement on behalf of any
such identified "plans"; or
E. the Source is one or more "plans", or a separate account or
trust fund comprising one or more "plans", each of which has been
identified in writing pursuant to this Subsection E.
As used in this Section, "Plan" or "plans" shall have the meaning
set forth in Section 3(3) of ERISA.
SECTION 3.3. Accredited investor. You are an "accredited
investor" within the meaning of Rule 501(a) of Regulation D promulgated by the
Commission under the Securities Act.
SECTION 4. CONDITIONS OF CLOSING. Your obligation to
purchase and pay for the Securities to be purchased by you
hereunder is subject to the satisfaction on or before the Closing
Date of the following conditions:
SECTION 4.1. Proceedings. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents and papers incident thereto shall be satisfactory in form and
substance to you, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents and papers
as you may reasonably request related thereto.
SECTION 4.2. Representations and Warranties; No Default. The
representations and warranties contained in Section 2 shall (except as expressly
affected by the transactions contemplated hereby) be true on and as of the
Closing Date as if made on and as of the Closing Date; the Company shall have
performed all agreements to be performed by it under this Agreement on or before
the Closing Date; there shall exist on the Closing Date no Default or Event of
Default; the Company shall not have consolidated with, merged with or into, or
sold, leased or otherwise disposed of its properties as an entirety or
substantially as an entirety to any Person, whether or not permitted by Section
8.7; and the Company shall have delivered to
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you a certificate of the Chief Executive Officer or the Chief Financial Officer
of the Company, dated the Closing Date, to each such effect.
SECTION 4.3. Opinions of Counsel. You shall have received from
(A) Willkie Farr & Gallagher, who are acting as your special counsel in
connection with the transactions contemplated hereby and (B) Weil, Gotshal &
Manges, counsel to the Company in connection with such transactions, opinions
substantially in the respective forms of Exhibits C and D attached hereto, each
dated the Closing Date and addressed to you. Each such opinion shall also cover
such other legal matters as you may reasonably request.
SECTION 4.4. Registration Rights Agreement. A Registration Rights
Agreement, substantially in the form of Exhibit E attached hereto (the
"Registration Rights Agreement"), shall have been executed and delivered, shall
be in full force and effect and no term or condition thereof shall have been
amended, modified or waived.
SECTION 4.5. Board Designee. If you are The Travelers indemnity
Company, the nominee designated by you (as purchaser of at least 60% of the
Shares) shall have been duly elected as a director of the Company as provided in
the Certificate of Designation.
SECTION 4.6. Private Placement Number. The Notes of
each series and the Convertible Preferred Stock shall have been
assigned a Private Placement Number by Standard & Poor's
Corporation.
SECTION 4.7. Reliance Letter for Reserve Reports. You shall have
received from Ryder Scott Company a reliance letter, addressed to you and in
form and substance satisfactory to you, with respect to the Reserve Reports
included in the Placement Memorandum.
SECTION 4.8. Legality. On the Closing Date, the Securities to be
purchased by you hereunder shall be a legal investment for you under the laws of
each jurisdiction to which you may be subject (without resort, unless you so
choose, to any so-called basket or leeway provision of said laws, such as ss.
1405(a)(8) of the Insurance Law of the State of New York), and you shall have
received such certificates or other evidence as you may reasonably request
demonstrating the legality of such purchase under such laws.
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SECTION 4.9. Payment of Fees. The Company shall have paid the
fees and disbursements of your special counsel as contemplated by the second
paragraph of Section 19.1.
SECTION 4.10. Sale of Securities to Other Purchasers. The Company
shall sell to the other purchasers referred to in Section 2.20 the Securities
respectively to be purchased by them pursuant to the other agreements referred
to in said Section.
SECTION 5. PREPAYMENTS OF NOTES; PURCHASE OF SECURITIES. In
addition to the payment of the entire unpaid principal amount of the Notes at
the final maturity thereof, the Company may make optional prepayments in respect
of the Notes and under certain circumstances may be required to prepay Series B
Notes, all as hereinafter provided.
SECTION 5.1. Optional Prepayment. Upon notice given as provided
in Section 5.2, the Company may at any time on or after October 20, 1998 prepay
the Notes as a whole (subject to the final paragraph of this Section 5.1), or
from time to time in part (in a minimum amount of $500,000 and otherwise in
integral multiples of $100,000), in each case at the principal amount to be
prepaid, together with interest accrued thereon to the date fixed !or such
prepayment, plus the applicable prepayment premium (expressed as a percentage of
the principal amount so to be prepaid) indicated below:
Prepayment Date Prepayment Premium
October 20, 1998 to October 19, 1999 3.150%
October 20, 1999 to October 19, 2000 2.625%
October 20, 2000 to October 19, 2001 2,100%
October 20, 2001 to October 19, 2002 1,575%
October 20, 2002 to October 19, 2003 1.050%
October 20, 2003 to October 19, 2004 0.525%
provided that for every $100,000 in principal amount of Notes so to be prepaid
Shares having an aggregate Liquidation Value of at least $400,000 shall have
been redeemed or converted into Common Stock in accordance with the provisions
of the Certificate of Designation as of the date of such prepayment.
So long as any Shares are outstanding the Company will not prepay
the Notes as a whole pursuant to this Section 5.1 without the prior written
approval of the holders of all outstanding shares of Convertible Preferred
Stock.
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SECTION 5.2. Notice of Optional Prepayment. The Company shall
call Notes for prepayment pursuant to Section 5.1 by giving written notice
thereof to each holder of the Notes, which notice shall be given not less than
30 nor more than 60 days prior to the date fixed for such prepayment and shall
specify the principal amount so to be prepaid and the date fixed for such
prepayment and the prepayment premium in respect of such prepayment.
Notice of prepayment having been so given, the aggregate
principal amount of the Notes so to be prepaid as specified in such notice,
together with interest accrued thereon to the date fixed for such prepayment,
plus the prepayment premium with respect thereto shall become due and payable on
the specified prepayment date.
SECTION 5.3. Required Prepayments of Series B Notes. If the Series B
Share Reservation Date shall not have occurred on or before October 20, 1999,
the Company will on the immediately following Business Day give written notice
thereof to the holders of all outstanding Series B Notes, which notice shall (A)
refer specifically to this Section 5.3, (B) specify the Series B Prepayment Date
and the Response Date (as respectively defined below) in respect thereof and (C)
contain an offer to prepay all Series B Notes at the price specified below and
in such notice on the date therein specified (the "Series B Prepayment Date"),
which shall be a Business Day not less than 30 nor more than 45 days after the
date of such notice. Each holder of a Series B Note shall notify the Company of
such holder's acceptance or rejection of such offer by giving written notice
(which shall be irrevocable) of such acceptance or rejection to the Company at
least ten days prior to the Series B Prepayment Date (the "Response Date");
provided, however, that the failure by the holder of a Series B Note to respond
to such offer in writing on or before the Response Date shall be deemed to be a
rejection of such offer. The Company shall prepay on the Series B Prepayment
Date all of the Series B Notes held by the holders as to which such offer has
been so accepted, at the principal amount of each such Series B Note, together
with interest accrued thereon to the Series B Prepayment Date. If any holder
shall reject such offer, such holder shall be deemed to have waived its rights
under this Section 5.3 to require prepayment of all Series B Notes held by such
holder.
SECTION 5.4. Partial Prepayments Pro Rata. Upon any prepayment of less
than all of the outstanding Notes pursuant to Section 5.1, the principal amount
so prepaid shall be allocated
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to all Notes at the time outstanding ratably in proportion to the respective
unpaid principal amounts thereof.
SECTION 5.5. Purchase of Securities. The Company will not, and
will not permit any of its Subsidiaries or Affiliates to, acquire directly or
indirectly by purchase or prepayment or otherwise any of the outstanding
Securities except by way of payment or prepayment in accordance with the
provisions of the Notes and of this Agreement and redemption or exchange of
Convertible Preferred Stock in accordance with the provisions of the Certificate
of Designation.
SECTION 6. FINANCIAL STATEMENTS AND INFORMATION. The Company will
furnish to you, so long as you shall be obligated to purchase or shall hold any
of the Securities, and to each other institutional investor holder of any
Securities, in duplicate:
A. promptly upon their becoming available and in any
event within 105 days after the end of each fiscal year of
the Company, copies of
(1) a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations, cash flows and changes in
shareholders' equity of the Company and its Subsidiaries for such
fiscal year, all in reasonable detail and stating in comparative
form the respective consolidated figures as of the end of and for
the previous fiscal year and all accompanied by a report of
independent public accountants of recognized national standing
selected by the Company, which report shall state that such
financial statements have been prepared in accordance with GAAP;
and
(2) a written statement of the accountants referred to in
clause (1) above to the effect that in making the examination
necessary for their report on such financial statements they
obtained no knowledge of any Default or Event of Default or, if
such accountants shall have obtained any such knowledge,
specifying the same and the nature and status thereof;
B. promptly upon their becoming available and in any event within
45 days after the end of each quarterly accounting period (other than
the last quarterly period) in each fiscal year of the Company, copies of
an unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the last day of such quarterly period and
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the related unaudited consolidated statements of operations, cash flows
and changes in shareholders' equity of the Company and its Subsidiaries
for such quarterly period and the period from the beginning of the then
current fiscal year to the end of such quarterly period, all in
reasonable detail and stating in comparative form the consolidated
figures for the corresponding date and period in the previous fiscal
year, and all certified by the chief financial officer of the Company to
present fairly in all material respects the information contained
therein, in. each case in accordance with GAAP, subject to normal
year-end audit adjustments;
C. concurrently with each delivery of financial statements
required to be furnished pursuant to Subsections A and B above, a
certificate of the chief financial officer of the Company (1) setting
forth computations in reasonable detail showing as at the end of such
quarterly accounting period or fiscal year whether there was compliance
with the covenants contained in Section 8.5 and (2) stating that, based
upon such examination or investigation and review of this Agreement as
in the opinion of the signer is necessary to enable the signer to
express an informed opinion with respect thereto, no Default or Event of
Default has occurred during such period, or, if any Default or Event of
Default shall have occurred, specifying all of the same and the nature
and period of existence thereof and what action the Company has taken,
is taking or proposes to take with respect thereto;
D. promptly upon their becoming available,
(1) copies of all other financial statements sent or made
available by the Company or a Subsidiary to its equity or other
security holders (other than the Company or another Subsidiary),
all regular and periodic reports and proxy statements, and all
registration statements and prospectuses, if any, filed by the
Company or any Subsidiary with any securities exchange or with
the Commission, and
(2) copies of all press releases and other statements made
available generally by the Company or any Subsidiary to the
public relating to financial matters or to other material
developments in the business of the Company or any Subsidiary;
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E. promptly after receipt thereof, copies of each management
letter submitted to the Company or any Subsidiary by independent public
accountants in connection with any annual, interim or special audit made
by them of the books of the Company or such Subsidiary;
F. promptly and in any event within five Business Days after an
officer of the Company becomes aware of the occurrence of any Default or
Event of Default or any other event that, individually or together with
any other circumstance, could reasonably be expected to have a Material
Adverse Effect, an Officer's Certificate specifying the nature and
period of existence thereof and what action the Company proposes to take
with respect thereto;
G. as soon as available and in any event within 90 days after the
end of each fiscal year of the Company, (1) a Reserve Report with
respect to Hydrocarbon Properties owned by the Company and its
Subsidiaries as of the first day of the then current fiscal year (the
"Report Date") and (2) a certificate signed by the Chief Financial
Officer and the chief engineer of the Company certifying as to the
factual and other matters furnished by the Company to the Independent
Petroleum Engineer who prepared such Reserve Report; and
H. such other financial statements, computations and other
information relating to the affairs of the Company and its Subsidiaries
as you or such other holder may from time to time reasonably request.
The Company will keep at its principal executive office a true
copy of this Agreement (as at the time in effect), and cause the same to be
available for inspection at said office during normal business hours by any
holder of a Security or any prospective transferee of a Security designated by a
holder thereof. The Company also agrees to provide, at any time that it is not
subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, to any such prospective transferee information satisfying the
requirements of subsection (d)(4)(i) of Rule 144A of the Securities and Exchange
Commission or any similar rule then in effect.
SECTION 7. INSPECTION OF PROPERTIES AND BOOKS; CONFIDENTIALITY BOARD
OBSERVATION RIGHTS. A. The Company will permit you and each Qualified Holder
(and your or such Holder's agents or representatives) to visit and inspect any
of the properties of the Company or any Subsidiary and examine such of
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their corporate books and financial records, and make copies thereof or extracts
therefrom, and discuss the affairs, finances and accounts of the Company and its
Subsidiaries with their respective officers, independent public accountants and
Independent Petroleum Engineers (and by this provision the Company authorizes
such accountants to discuss such affairs, finances and accounts, and authorizes
such Independent Petroleum Engineers to discuss Reserve Reports and related
matters, in each case whether or not a representative of the Company is
present), in each case upon reasonable notice and at such reasonable times
during normal business hours and as often as you or such Holder may reasonably
request. All expenses incurred by you or any Qualified Holder in connection with
your and such Holder's exercise of rights pursuant to this Subsection shall be
borne by you or by such Holder, except that the Company agrees to pay all
out-of-pocket expenses incurred by you and such other Holder in connection with
such exercise of rights at any time when a Default or an Event of Default has
occurred and is continuing.
B. Without limiting any obligation with regard to confidential
information arising under applicable law in connection with your observation
rights pursuant to Section 7C (if you are Connecticut General Life Insurance
Company or CIGNA Mezzanine Partners III, L.P.) or your designee being a member
of the Board of Directors pursuant to Section 5(d) of the Certificate of
Designation (if you are The Travelers Indemnity Company), you agree that you
will use your commercially reasonable efforts not to disclose without the prior
consent of the Company (other than to your and your Affiliates' directors,
employees, trustees, agents, representatives, auditors or counsel who are
subject to confidentiality obligations in the course of their duties) any
information with respect to the Company or any Subsidiary which is furnished
pursuant to or obtained under this Agreement and which is designated by the
Company to you in writing as confidential, provided that you may disclose any
such information (1) as has become generally available to the public (other than
through disclosure by you or your Affiliate in contravention of this Agreement),
(2) as may be required or appropriate in any report, statement or testimony
submitted to any Governmental Body having or claiming to have jurisdiction over
you or to the National Association of Insurance Commissioners or similar
organizations or their successors, (3) as may be required or appropriate in
response to any summons or subpoena or in connection with any litigation in
which you are involved, (4) to the extent you believe it necessary in order to
comply with any law, order, regulation or ruling applicable to you, (5) to a
prospective transferee in connection with any contemplated transfer of any of
the Securities by you (provided
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that such prospective transferee agrees to be bound by the provisions of this
Section 7B) or (6) to the extent you reasonably believe such disclosure is
necessary to correct any public information about the relationship of you to the
Company or any Subsidiary under any of the Transaction Documents.
C. If you are Connecticut General Life Insurance Company or CIGNA
Mezzanine Partners III, L.P., a single representative designated by either or
both of you from time to time shall be furnished (concurrently with the
directors) with copies of all notices, reports and other information from time
to time furnished to directors of the Company and shall have the right to attend
all meetings of the Board of Directors and to participate in any discussions
conducted at such meetings; and you shall have the foregoing observation and
other rights so long as either of you and your respective affiliates (including
each other) in the aggregate shall hold at least 12% of the then outstanding
Securities on an As Converted Basis.
SECTION 8. COVENANTS. The Company covenants and agrees
that so long as any of the Notes shall be outstanding:
SECTION 8.1. Payment of Principal, Interest and Premium, Etc. The
Company will duly and punctually pay the principal of, interest and premium, if
any, on, the Notes in accordance with the terms of the Notes and this Agreement.
SECTION 8.2. To Keep Books, Reserves; Corporate
Existence; Payment of Taxes; Maintenance of Properties;
Compliance with Laws; Etc. The Company will, and will cause each
Subsidiary to,
A. keep proper books of record and account, and keep
appropriate reserves, all in accordance with GAAP;
B. subject to Section 8.7, do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate
existence, material rights (charter and statutory) and franchises,
provided that the Company shall not be required to preserve any of its
rights or franchises, and no Subsidiary shall be required to preserve
its corporate existence or any right or franchise of such Subsidiary, if
the senior management of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of the Company and the Company and its Subsidiaries taken as a
whole and that the loss thereof would not have a Material Adverse
Effect;
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C. pay and discharge or cause to be paid and discharged all
taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or upon any of its property, real, personal
or mixed, or upon any part thereof, when due and so long as the same can
be paid without interest or penalty, as well as all lawful claims for
labor, materials and supplies which, if unpaid, could by law become a
Lien upon its property, provided that neither the Company nor any
Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim if (1) the amount, applicability or validity thereof shall
be contested on a timely basis in good faith by appropriate proceedings
(so long as the enforcement of any Lien arising out of such nonpayment
shall be stayed during any proceedings) and if appropriate reserves, to
the extent required by GAAP, shall have been made therefor and (2) the
nonpayment of all such taxes, assessments, charges, levies or claims in
the aggregate would not have a Material Adverse Effect:
D. maintain and keep, or cause to be maintained and kept, its
material properties in good repair, working order and condition (other
than ordinary wear and tear), so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times, provided that nothing in this Subsection shall prevent the
Company or any Subsidiary from discontinuing the operation and the
maintenance of any such properties if such discontinuance is, in the
opinion of the senior management of the Company, in the best interest of
the Company and the Company and its Subsidiaries taken as a whole and
would not have a Material Adverse Effect; and
E. obtain, comply in all material respects with, preserve and
keep in full force and effect all licenses, permits, authorizations and
approvals of all Governmental Bodies individually or in the aggregate
material to the conduct of its business and its ownership of properties
and comply with all applicable statutes, regulations and orders of, and
all applicable material restrictions imposed by, any Governmental Body,
in respect of the conduct of its business and the ownership of its
properties (including without limitation applicable Environmental Laws
and statutes, regulations and orders relating to equal employment
opportunities and employee benefits), except to the extent any failure
so to comply would not either individually or in the aggregate have a
Material Adverse Effect.
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SECTION 8.3. Insurance. The Company will, and will cause each
Subsidiary to, insure and keep insured with financially sound and reputable
insurers so much of its respective properties, and such insurance shall be
against such hazards and risks and in such amounts (and with such deductibles),
as is reasonable and prudent in the circumstances and as is in accordance with
good business practice for companies in the same or similar businesses, of the
same or similar size and in the same or similar localities, provided that such
insurance may be subject to co-insurance, deductibility or similar clauses
which, in effect, result in self-insurance of certain losses if and to the
extent that (1) adequate reserves in accordance with applicable GAAP are
maintained with respect thereto and (2) such self-insurance is consistent with
the approved practices of corporations of established reputation engaged in the
same or similar businesses and owning or operating similar properties.
SECTION 8.4. Nature of Business. The Company and its Subsidiaries
will continue to be primarily engaged in the businesses of oil and gas
exploration, development, production, transportation and marketing primarily in
the Southwestern United States, and other businesses related thereto.
SECTION 8.5. Certain Financial Conditions. A. The
Company will not at any time permit
(1) the sum of
(a) the Present Value of Future Net Revenues,
plus
(b) the lesser of W the aggregate book value of all
Operating Pipeline Assets and (ii) five times the portion of
EBITDA for the then most recently ended period of four
consecutive fiscal quarters attributable to such operating
Pipeline Assets, plus
(c) Consolidated Working Capital, to be less than
(2) 150% of Consolidated Total Indebtedness (which term shall
include on any date all declared but unpaid dividends on shares of
Convertible Preferred Stock).
As used in this Agreement, the term "Present Value of Future Net Revenues"
means, at any date of determination, with respect to all Hydrocarbon Properties
covered by a then current Reserve Report, estimated net revenues (before income
taxes) in respect
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of Proved Reserves attributable to the net interest in production of the Company
and its Subsidiaries in such Hydrocarbon Properties, as reflected in such
Reserve Report, discounted monthly to present value at a rate of 10% per annum;
and taking into account for such purpose the following assumptions, limitations
and other matters:
(i) the net interest in production of the Company and its
Subsidiaries in any event shall be determined by excluding f rom such
Proved Reserves all Proved Reserves allocable to then existing
Production Payments and in such connection allocable projected operating
expenses and taxes attributable to any volumetric Production Payment
shall be determined or separately verified by the Independent Petroleum
Engineer who prepared such then current Reserve Report;
(ii) the price of Hydrocarbons shall be no greater than the
average price received during the 12-month period ending on the report
date for Hydrocarbons from the respective Hydrocarbon Properties (or, as
appropriate, in the absence of prior production from a Hydrocarbon
Property, for comparable Hydrocarbons in the area in which such
Hydrocarbon Property is located), without escalation; and
(iii) the projected operating costs, capital expenditures,
abandonment costs, overriding royalties, and production, severance, ad
valorem, excise, conservation, school, occupation, gathering, pipeline
regulating and other taxes and assessments charged against or measured
by production or gross revenues and not paid or payable by the
purchasers of such production for their own account, and other
deductions from gross revenues, shall be based on the guidelines
promulgated by the Commission and used by the Company for reporting
purposes under the Securities Exchange Act of 1934, as amended.
B. The Company will not permit EBITDA for any period of four
consecutive fiscal quarters to be less than 150% of Fixed Charges for such
period.
SECTION 8.6. Limitation on Restricted Payments and Restricted
Investments, Etc. A. The Company will not, and will not permit any Subsidiary
to, directly or indirectly make any Restricted Payment or Restricted Investment,
except
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(1) the Company may make Restricted Payments in respect of the
Convertible Preferred Stock in accordance with the Certificate of
Designation, and
(2) the Company and its Subsidiaries may make Restricted
Investments and other Restricted Payments if, after giving effect to any
such Restricted Investment or other Restricted Payment
(a) no Default or Event of Default shall have
occurred and be continuing, and
(b) the sum of W the aggregate amount of all such other
Restricted Payments made after the Closing Date to and including
the date of such Restricted Investment or other Restricted
Payment and (ii) the aggregate amount of Restricted Investments
at the time, shall not exceed $2,500,000.
For purposes of this Subsection A, in computing the amount of any Investment in
any Person, unrealized increases or decreases in value, or write-ups,
write-downs or write-offs of Investments in such Person shall be disregarded
(except to the extent included in the determination of net income of the Company
or a Subsidiary).
B. The Company will not, and will not permit any Subsidiary to,
enter into any Guarantee unless the maximum dollar amount of the Indebtedness or
other obligation being guaranteed is readily ascertainable by the terms of such
obligation or the agreement or instrument evidencing such Guarantee specifically
limits the dollar amount of the maximum exposure of the Company or such
Subsidiary as guarantor thereunder.
SECTION 8.7. Consolidation, Merger or Disposition of Assets as an
Entirety. The Company will not, and will not permit any Subsidiary to, directly
or indirectly, merge, consolidate or amalgamate with any other Person or sell,
lease, transfer or otherwise dispose of all or substantially all of its assets
to any Person, except
A. subject to the last paragraph of this Section, a Subsidiary
may merge into or consolidate or amalgamate with or sell, lease,
transfer or otherwise dispose of all or substantially all of its assets
to the Company or a Wholly-owned Subsidiary or a Person which thereupon
becomes a Wholly-owned Subsidiary, and
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B. subject to the last paragraph of this Section, the Company may
merge into, or consolidate or amalgamate with, or sell or otherwise
(except by lease) dispose of all or substantially all of its assets to,
any Person, provided that
(1) the Company shall be the continuing or surviving
corporation or the continuing, surviving or acquiring Person
shall be a solvent corporation organized in the United States of
America and shall expressly assume in writing (in a form
reasonably satisfactory to the Required Holders) the due and
punctual payment of the principal, premium (if any) and interest
on the Notes and all of the other obligations of the Company
under this Agreement and the other Transaction Documents, and
(2) the Company shall have delivered to each holder of a Note an
opinion of legal counsel (in form and substance reasonably satisfactory
to the Required Holders) stating that such transaction complies with
this Section 8.7 and all conditions precedent provided herein with
respect to such transaction have been satisfied.
Immediately after any such merger, consolidation, amalgamation,
sale or other disposition and giving effect to any concurrent transactions, no
Default or Event of Default shall have occurred and be continuing.
SECTION 8.8. Transactions with Affiliates. The Company will not,
and will not permit any Subsidiary to, engage in any transaction or arrangement
with an Affiliate (other than the Company or a Wholly-owned Subsidiary) except
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would have been obtained in arms, length dealing with a Person
other than an Affiliate.
SECTION 9. DEFINITIONS.
SECTION 9.1. Definitions. Except as otherwise specified or as the
context may otherwise require, the following terms shall have the respective
meanings set forth below whenever used in this Agreement and shall include the
singular as well as the plural:
"Affiliate" of any specified Person shall mean any other Person
(A) which directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common
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control with, such Person, (R) which beneficially owns or holds 10% or more of
any class of any Voting Stock of such Person or (C) 10% or more of any class of
any Voting Stock of which is beneficially owned or held by such Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, in no
event shall you or any of your Affiliates or any other holder of any Securities
be deemed to be an Affiliate of the Company solely by reason of the ownership of
the Securities or the shares of Common Stock acquired upon the conversion of the
Securities.
"As Converted Basis" shall mean, when used in reference to
Securities, whether at the time of a determination of the number of shares of
Common Stock or otherwise, that number of shares of Common Stock into which such
Securities may then (or, prior to the Series B Share Reservation Date in the
case of the Series B Notes, as of such Date) be converted based upon the
conversion rights of the Securities as adjusted pursuant to Section 11.3 in the
case of the Notes and Section 6 of the Certificate of Designation in the case of
the Convertible Preferred Stock.
"Board of Directors" shall mean the Board of Directors of the
Company or any committee of directors lawfully exercising the relevant powers of
said Board or Directors, as the case may be.
"Business Day" shall mean any day other than a Saturday or Sunday
or a day on which commercial banks are required or authorized by law to be
closed in New York, New York.
"Capitalized Lease Obligations" shall mean, with respect to any
Person, all outstanding obligations of such Person in respect of any rental
obligation which is required to be capitalized on the face of a balance sheet of
such Person under GAAP, taken at the capitalized amount thereof accounted for as
indebtedness (net of interest expense) in accordance with GAAP.
"Certificate of Designation" shall have the meaning
specified in Section 1.1.
"Closing Date" shall have the meaning specified in
Section 1.2.
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"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange Commission
and any successor agency of the United States federal government having similar
powers.
"Common Stock" shall mean the shares of common stock, par value
$.01 per share, of the Company.
"Consolidated Current Assets" shall mean all assets of the
Company and its Subsidiaries which may properly be classified as consolidated
current assets in accordance with GAAP, provided that in determining such
current assets (A) notes and accounts receivable shall be included only if good
and collectible and arising in connection with the sale of goods or the
performance of services in the ordinary course of business and shall be taken at
their face value less reserves determined to be sufficient in accordance with
GAAP and (B) life insurance policies (other than the cash surrender value of
unencumbered policies) and Restricted Investments shall be excluded.
"Consolidated Current Liabilities" shall mean, as of any date of
determination, all liabilities of the Company and its Subsidiaries which may
properly be classified as current liabilities in accordance with GAAP,
consolidated in accordance with GAAP.
"Consolidated Not Income" for any period shall mean the net
income of the Company and its Subsidiaries, determined on a consolidated basis
in accordance with GAAP, excluding any extraordinary gains or losses.
"Consolidated Total Indebtedness" shall mean Indebtedness of the
Company and its Subsidiaries consolidated in accordance with GAAP (it being
understood that the Notes and the Convertible Preferred Stock shall constitute
Indebtedness of the Company for purposes of this definition).
"Consolidated Working Capital" shall mean Consolidated
Current Assets minus Consolidated Current Liabilities.
"Contaminant" shall mean any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, special or toxic waste, petroleum
or petroleum-derived substance or waste, or any constituent of any such
substance or waste, including any such substance regulated under any
Environmental Law.
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"Conversion Price" shall have the meaning specified in
Section 11.1A.
"Convertible Preferred Stock" shall have the meaning
specified in Section 1.1.
"Default" shall mean an event which, with the lapse of time
and/or the giving of notice, would constitute an Event of Default.
"EBITDA" shall mean for any period the sum of Consolidated Net
Income plus all amounts that were deducted from gross income in the computation
of such Consolidated Net Income on account of (A) income taxes, (B) Interest
Expense and (C) depreciation and amortization of intangibles.
"Environmental Claim" shall mean any written notice by any court,
arbitrator or Governmental Body or other Person alleging potential liability of
the Company or any Subsidiary for damage to the environment, potential liability
for personal injury (including sickness, disease or death), resulting from or
based upon (A) the presence or release (including sudden or non-sudden,
accidental or nonaccidental, leaks or spills) of any Contaminant at, in or from
property, whether or not owned by the Company or any Subsidiary, or (B)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
"Environmental Laws" shall mean all applicable laws, regulations
or ordinances, primary or secondary, in any jurisdiction whatsoever and having
the force of law, designed for, or having among its objectives, the Protection
of the Environment or the regulation of the handling of Contaminants; and
"Protection of the Environment" means the protection of all environmental media,
living organisms, ecological systems, human persons, property and senses and
includes without limitation the conservation of natural amenities, resources and
energy.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean each trade or business (whether or
not incorporated) which together with the Company would be deemed to be a
"single employer" within the meaning of Section 414 of the Code.
"ERISA Plan" shall mean an "employee benefit plan" (as such term
is defined in Section 3(3) of ERISA) which is (or
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within six years prior to the Closing Date was) maintained, sponsored or
contributed to by the Company or an ERISA Affiliate.
"Event of Default" shall have the meaning specified in
Section 10.1.
"Executive Officer" shall mean, in the case of the Company or any
Subsidiary, the Chairman, President, Chief Executive Officer, the Chief
Financial Officer, any person reporting directly to the Chief Financial Officer
whose duties include matters relating to financing, and the Treasurer.
"Fixed Charges" shall mean, for any period, the sum (without
duplication) for the Company and its Subsidiaries on a consolidated basis of (A)
all Interest Expense, (B) all dividends and mandatory redemption amounts
required to be paid in respect of preferred shares of the Company and its
Subsidiaries (other than preferred shares of Subsidiaries owned by the Company
directly or indirectly through one or more Wholly-owned Subsidiaries) and (C)
all minimum rental and other obligations required to be paid by the lessee under
all operating leases (excluding any amounts required to be paid by the lessee on
account of maintenance and repairs, insurance, taxes, assessments, utilities,
operating and labor costs and similar charges).
"GAAP" shall mean generally accepted accounting principles from
time to time in the United States.
"Governmental Body" shall have the meaning specified in
Section 2.5.
"Guarantee" by any Person shall mean any obligation, contingent
or non-contingent, of such Person directly or indirectly guaranteeing any
Indebtedness of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or non-contingent, of
such Person (A) to purchase, pay or support (or advance or supply funds for the
purchase or payment or support of) such Indebtedness (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise), or (B) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Guarantee shall be
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equal to the outstanding amount of the Indebtedness or other obligation directly
or indirectly guaranteed. The term "Guarantee" used as a verb has a correlative
meaning.
"Hydrocarbons" shall mean (A) oil, natural gas, casinghead gas,
drip gasoline, natural gasoline, distillate, condensate and other liquid or
gaseous hydrocarbons and (B) all minerals and substances produced with or
extracted, separated, processed or produced from the substances included in
clause (A) of this definition.
"Hydrocarbon Interests" shall mean (A) leases affecting, relating
to or covering any Hydrocarbons and the leasehold interests and estates in the
nature of working or operating interests under such leases, as well as
overriding royalties, net profits interests, production payments, carried
interests, rights of recoupment and other interests in, under or relating to
such leases, (B) fee interests in Hydrocarbons, (C) royalty interests in
Hydrocarbons, (D) any other interest in Hydrocarbons in place and (E) any
economic or contractual rights, options or interests in and to any of the
foregoing, including without limitation any farmout or farmin agreement or
production payment affecting any interest or estate in Hydrocarbons.
"Hydrocarbon Properties" shall mean all real property described
in, covered by and subject to the leases, conveyances, agreements and other
instruments creating, granting, reserving or otherwise establishing any
Hydrocarbon Interest owned by the Company or any of its Subsidiaries.
"Indebtedness" of any Person shall mean all obligations which in
accordance with GAAP are classified as liabilities upon a balance sheet of such
Person and in any event shall include, without duplication: (A) all obligations
of such Person for borrowed money or for the deferred purchase price of property
acquired by such Person; (B) all obligations of such Person created or arising
under any conditional sale or other title retention agreement with respect to
any property acquired by such Person (other than in each case accounts payable
and accrued liabilities that arose in the ordinary course of business and not
overdue); (C) all Capitalized Lease Obligations of such Person; and (D) all
obligations of others secured by a Lien on any asset of, such Person, whether or
not such obligations are assumed by such Person, excluding, however, all such
obligations with respect to Production Payments to the extent that Proved
Reserves allocable to such Production Payments are excluded from the net
interest in production of the Company and its Subsidiaries for the purposes of
Section 8.5A.
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"Independent Petroleum Engineer" shall mean (A) Ryder Scott
Company or (B) such other firm of independent petroleum engineers expert in the
matters required to be performed in connection with the preparation and delivery
of a Reserve Report and otherwise satisfactory to the Required Holders.
"Interest Expense" shall mean all amounts which, in accordance
with GAAP, would be deducted in computing Consolidated Net Income on account of
interest on Indebtedness, including imputed interest in respect of Capitalized
Lease Obligations and amortization of debt discount and expense.
"Investment" shall mean with respect to any Person, any direct or
indirect purchase or other acquisition by such Person of stock or other
securities of any other Person, or any direct or indirect loan or advance (other
than loans or advances to employees for moving and travel expenses drawing
accounts and similar expenditures in the ordinary course of business) or capital
contribution by such Person to any other Person, including all Indebtedness and
accounts receivable from such other Person which are not current assets or did
not arise from sales to such other Person in the ordinary course of business,
and any direct or indirect purchase or other acquisition by such Person of any
property or assets other than property or assets used in the ordinary course of
business.
"Lion" shall mean any mortgage, lien, pledge or other security
interest or other charge or encumbrance.
"Material Adverse Effect" shall mean, with respect to an action
or event or group of actions or events, a material adverse effect on (A) the
business, properties or condition (financial or other) of the Company or of the
Company and its Subsidiaries taken as a whole, (B) the ability of the Company to
perform its obligations under this Agreement and the other Transaction Documents
or (C) the legality, validity or enforceability of this Agreement or the other
Transaction Documents.
"Minimum Amount" shall have the meaning specified in
Section 7A.
"Multiemployer Plan" shall mean "multiemployer plan" (as such
term is defined in Section 3(37) of ERISA and Section 414(f) of the Code) to
which contributions are or have been made by the Company or any ERISA Affiliate.
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"Notes" shall have the meaning specified in Section
1.1.
"Officer's Certificate" shall mean a certificate signed in the
name of the Company by an Executive Officer.
"Operating Pipeline Asset" shall mean, at any date of
determination, total pipeline net assets of the Company and its Subsidiaries, as
shown on or in a note to the then most recent consolidated balance sheet
furnished pursuant to Section 6A or 62, minus the aggregate book value of all
such pipeline net assets attributable to pipelines that are not operating as of
such date of determination or during any period in question as of such date of
determination.
"Order" shall have the meaning specified in Section
2.5.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established under ERISA or any successor thereto.
"Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a limited liability company, a trust, an
association, a joint-stock company, an unincorporated organization and a
government or any department or agency thereof.
"Placement Memorandum" shall have the meaning specified
in Section 2.2.
"Preferred Stock" shall mean the shares of preferred stock, par
value $.01 per share, of the Company and shall include, without limitation, the
Convertible Preferred Stock.
"Production Payment" shall mean any obligation (other than a
royalty or overriding royalty) represented by sales, reservations or other
dispositions of rights to receive a specified part of Hydrocarbons or other
products to be recovered at specified locations, or by any other interest in
property of the character commonly referred to as, or similar to, a production
payment.
"Proved Developed Nonproducing Reserves" shall have the meaning
given to the term "proved developed nonproducing reserves" from time to time by
the Society of Petroleum Engineers of the American Institute of Petroleum.
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"Proved Developed Producing Reserves" shall have the meaning
given to the term "proven developed producing reserves" from time to time by the
Society of Petroleum Engineers of the American Institute of Petroleum.
"Proved Reserves" shall have the meaning given to the term
"proved reserves" from time to time by the Society of Petroleum Engineers of the
American Institute of Petroleum.
"PTE" shall have the meaning specified in Section 3.2A.
"Qualified Holder" shall mean, at any date, any holder or group
of affiliated holders holding at least 12% of the then outstanding Securities on
an As Converted Basis.
"Registration Rights Agreement" shall have the meaning
specified in Section 4.4.
"Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to an
ERISA Plan.
"Required Holders" shall mean (A) the holder or holders of at
least 66 2/3% of the aggregate unpaid principal amount of the Notes at the time
outstanding if at such time you, the other purchasers referred to in Section
2.20 and your and their respective affiliates in the aggregate hold at least 66
2/3% of the then unpaid principal amount of such Notes, and (B) otherwise the
holder or holders of at least a majority of the aggregate unpaid principal
amount of the Notes at the time outstanding.
"Required Preferred Stockholders" shall mean (A) the holder or
holders of at least 66 2/3% of the Shares at the time outstanding if at such
time you, the other purchasers referred to in Section 2.20 and your and their
respective affiliates in the aggregate hold at least 66 2/3% of the then
outstanding Shares and (3) otherwise the holder or holders of at least a
majority of the Shares at the time outstanding.
"Requirement of Law" shall mean, as to any Person, each law, rule
or regulation, including Environmental Laws and ERISA, or order, decree or other
determination of an arbitrator or a court or other Governmental Body applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Reserve Report" shall mean a report prepared by an
Independent Petroleum Engineer evaluating, as of the date
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specified in such report, Hydrocarbon Properties owned by the Company or any of
its Subsidiaries, setting forth for each such Hydrocarbon Property (A) the
separate categories of Proved Developed Producing Reserves, Proved Developed
Nonproducing Reserves and Proved Undeveloped Reserves attributable thereto and
(B) a projection of the rate of production of Hydrocarbons therefrom and future
net income with respect thereto based upon pricing assumptions consistent with
Commission reporting requirements then in effect. Each Reserve Report furnished
to holders of the Securities after the Closing Date shall be addressed to the
holders of the Securities or shall be accompanied by a letter addressed to the
holders of the Securities to the effect that such holders are entitled to rely
thereon.
"Reserves" shall have the meaning given to the term "reserves"
from time to time by the Society of Petroleum Engineers of the American
Institute of Petroleum.
"Restricted Investment" shall mean any Investment other
than:
(A) Investments existing on the Closing Date and described in
Exhibit 8.6;
(B) Investments in open market commercial paper, maturing within
270 days after the date of acquisition thereof, having a rating in the
highest rating category obtainable from Standard & Poor's Corporation or
Moody's
Investors Service, Inc.;
(C) Investments in direct obligations of the United States of
America or of any agency or instrumentality thereof (to the extent the
obligations of such agency are backed by the full faith and credit of
the United States of America), maturing within one year after the date
of acquisition thereof;
(D) Investments in domestic and Eurodollar time deposits or
certificates of deposit maturing within one year from the date of
acquisition thereof or money market deposit accounts issued by
commercial banks incorporated under the laws of the United States of
America or any state thereof or the District of Columbia, each of which
banks (collectively, the "Permitted Banks") shall, as of any date of
determination (1) have combined capital and surplus in excess of
$500,000,000 and (2) have been assigned a rating on its long-term
certificates of deposit of either "A-2" or
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higher by Moody's Investors Service, Inc. or "All or higher
by Standard & Poor's Corporation;
(E) Investments in a Subsidiary;
(F) Investments made as a result of settlements or compromises of
accounts receivable or trade payables in the ordinary course of
business; and
(G) Investments made in oil and gas partnerships, limited
liability companies and joint ventures in the ordinary course of
business.
"Restricted Payment" shall mean any payment or declaration of any
dividend or other distribution on shares of any class of the Company's capital
stock or any payment or distribution on account of the redemption, purchase or
other acquisition of shares of any class of the Company's capital stock, or any
warrant, option or other right to acquire such shares, or any other payment or
distribution made in respect thereof, either directly or indirectly (other than
distributions payable solely in shares of the Company's common stock or
warrants, options or other rights to acquire such shares).
"SEC Reports" shall have the meaning specified in
Section 2.2.
"Securities" shall have the meaning specified in
Section 1.1.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Security Register" shall have the meaning specified in
Section 13.
"Senior Indebtedness" shall mean principal of, premium (if any)
and interest on and claims in respect of all Indebtedness of the Company for
borrowed money, whether now existing or hereafter arising, which by its terms is
not subordinate and junior in right of payment to, or on a parity in right of
payment with, the Notes, including without limitation Indebtedness outstanding
under the Company's Second Restated Revolving Credit Loan Agreement, dated as of
March 31, 1994, between the Company and Bank One, Texas, N.A., as such agreement
may be extended, renewed, modified or amended from time to time.
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"Series A Notes" shall have the meaning specified in
Section 1.1.
"Series B Notes" shall have the meaning specified in
Section 1.1.
"Series B Share Reservation Date" shall mean the date on which
authorized capital stock of the Company shall have been increased (as evidenced
by the filing and effectiveness of an amendment to the Certificate of
Incorporation of the Company) so that a sufficient number of shares of Common
Stock shall be reserved for issuance upon conversion of the Series B Notes
pursuant to Section 11.1.
"Series C Notes" shall have the meaning specified in
Section 1.1.
"Shares" shall have the meaning specified in Section
1.1.
"Subsidiary" of any Person shall mean any corporation or other
entity a majority of the total combined voting power of all classes of Voting
Stock of which shall, at the time as of which any determination is being made,
be owned by such Person and/or one or more of its Subsidiaries. Except as
otherwise expressly indicated herein, references to Subsidiaries shall mean
Subsidiaries of the Company.
"Transaction Documents" shall mean this Agreement, the
Notes, the Certificate of Designation and the Registration Rights
Agreement.
"Voting Stock" shall mean, with respect to any Person, any shares
of stock or other equity interests of any class or classes of such Person whose
holders are entitled under ordinary circumstances (irrespective of whether at
the time stock or other equity interests of any other class or classes shall
have or might have voting power by reason of the happening of any contingency)
to vote for the election of a majority of the directors, managers, trustees or
other governing body of such Person.
"Wholly-owned Subsidiary" shall mean any Subsidiary all of the
equity ownership of which (other than directors' qualifying shares required by
law) is at the time owned by the Company and/or one or more other Wholly-owned
Subsidiaries.
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SECTION 9.2. Accounting Terms. All accounting terms used herein
which are not expressly defined in this Agreement have the meanings respectively
given to them in accordance with GAAP. Except as otherwise specifically provided
herein, all computations made pursuant to this Agreement shall be made in
accordance with GAAP and all balance sheets and other financial statements with
respect thereto shall be prepared in accordance with GAAP consistently applied.
Except as otherwise expressly provided, any consolidated financial statement or
financial computation shall be done in accordance with GAAP; and, if at the time
that any such statement or computation is required to be made the Company shall
not have any Subsidiary, such terms shall mean a financial statement or a
financial computation, as the case may be, with respect to the Company only.
SECTION 10. EVENTS OF DEFAULT; REMEDIES.
SECTION 10.1. Events of Default; Acceleration of Maturity and
Rescission. If any of the following Events of Default shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
A. default shall be made in the due and punctual
payment of any principal of or premium, if any, on any Note
when and as the same shall become due and payable, whether
at stated maturity, by acceleration, by notice of prepayment
or otherwise; or
B. default shall be made in the due and punctual payment of any
interest on any Note when and as the same shall become due and payable
and such default shall have continued for a period of five days; or
C. default shall be made in the due performance or observance of
any term, covenant or agreement contained in Section 5.3, 6F or 8.5 to
8.8, inclusive; or
D. default shall be made in the due performance or observance of
any other term, covenant or agreement contained in this Agreement or any other
Transaction Document and such default shall have continued for a period of 30
days; or
E. the Company or any Subsidiary shall default beyond any
applicable grace period in any payment of principal of or premium or interest on
any Indebtedness (other than the Notes) or in the due performance or observance
of any provision contained in any agreement relating to such Indebtedness the
effect of
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which is (1) to cause (or to permit the holder of such Indebtedness or a trustee
to cause) such Indebtedness to become or be declared due and payable prior to
its stated maturity or (2) to require (or to permit such holder or trustee to
require) the repayment or repurchase of such Indebtedness prior to its stated
maturity; or
F. any representation or warranty made by the Company or.any
Subsidiary in this Agreement or any other Transaction Document or in any
certificate or other writing furnished pursuant hereto or thereto shall prove to
have been false, incorrect or misleading in any material respect on the date as
of which made; or
G. the Company or any Subsidiary shall (1) apply for or consent
to the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(2) admit in writing its inability to pay its debts as such debts become due,
(3) make a general assignment for the benefit of its creditors, (4) commence a
voluntary case under any law relating to bankruptcy, insolvency or
reorganization, (5) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (6) fail to controvert in a timely or
appropriate manner (but within 30 days in any event), or acquiesce in writing
to, any petition filed against it in an involuntary case under any law relating
to bankruptcy, insolvency or reorganization, (7) take any action under the laws
of its jurisdiction of incorporation analogous to any of the foregoing, or (8)
take any corporate action for the purpose of effecting any of the foregoing; or
H. a proceeding or case shall be commenced against the Company or
any Subsidiary, without the application or consent of the Company or such
Subsidiary in any court of competent jurisdiction seeking (1) its liquidation,
reorganization, dissolution or winding up, or composition or readjustment of its
debts, (2) the appointment of a trustee, receiver, custodian, liquidator,
encumbrancer or the like of it or of all or any substantial part of its assets
or (3) similar relief in respect of it under any law providing for the relief of
debtors, and such proceeding or case shall continue undismissed, or unstayed and
in effect, for a period of 60 days; or an order for relief shall be entered in
an involuntary case under any law relating to bankruptcy, insolvency or
reorganization against the Company or any Subsidiary; or
I. final judgment for the payment of money shall be
rendered by a court of competent jurisdiction against the Company
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or any Subsidiary and such judgment shall not be discharged or execution thereof
stayed pending appeal within 60 days from the date of entry thereof or within
such longer period as is specified in such judgment, or in the event of such a
stay, such judgment shall not be discharged within 60 days after such stay
expires, and such judgment (net of insurance proceeds applied thereto or, if the
insurer has admitted liability, payable with respect to the discharge thereof)
shall equal or exceed $500,000;
then U.) upon the occurrence of any Event of Default described in Subsection G
or H, the unpaid principal amount of all Notes, together with the interest
accrued thereon and an amount equal to the Additional Amount (as hereinafter
defined) in respect of each such Note, shall automatically become immediately
due and payable, without presentment, demand, protest or other requirements of
any kind, all of which are hereby expressly waived by the Company, or (ii) upon
the occurrence and during the continuance of any other Event of Default, the
Required Holders may, by written notice to the Company, declare the unpaid
principal amount of all Notes to be, and the same shall forthwith become, due
and payable, together with the interest accrued thereon and an amount equal to
the Additional Amount in respect of each such Note, without presentment, further
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by the Company, provided that during the existence of an Event
of Default described in Subsection A or B above with respect to any Note, the
holder of such Note may, by written notice to the Company declare such Note to
be, and the same shall forthwith become, due and payable, together with the
interest accrued thereon and an amount equal to the Additional Amount, without
presentment, further demand, protest or other requirements of any kind, all of
which are hereby expressly waived by the Company. If any holder of any Note
shall exercise the option specified in the proviso to the preceding sentence,
the Company will forthwith give written notice thereof to the holders of all
other outstanding Notes and each such holder may (whether or not such notice is
given or received), by written notice to the Company, declare the unpaid
principal amount of all Notes held by it to be, and the same shall forthwith
become, due and payable, together with the interest accrued thereon and an
amount equal to the Additional Amount, without presentment, further demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Company.
For purposes of this Section, the term "Additional Amount" shall
mean, with respect to any Note to the extent not prohibited by applicable law,
an amount equal to the prepayment premium that would be payable with respect to
such Note if the
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Company had elected to prepay such Note in full pursuant to Section 5.1 on the
date of acceleration.
The provisions of this Section are subject, however, to the
condition that if, at any time after any Note shall have become declared due and
payable, the Company shall pay all arrears of interest on the Notes and all
payments on account of the principal of and premium (if any) on the Notes which
shall have become due otherwise than by acceleration (with interest on such
principal, premium (if any) and, to the extent permitted by law, on overdue
payments of interest, at the respective rates specified in the Notes with
respect to overdue payments) and an additional amount sufficient to reimburse
the holders of the Notes for the reasonable costs and expenses incurred in
connection with any such declaration, and all Events of Default (other than
nonpayment of principal of, premium, if any, and accrued interest on Notes due
and payable solely by virtue of acceleration) shall be remedied or waived
pursuant to Section 15, then, and in every such case, the Required Holders, by
written notice to the Company, may rescind and annul any such acceleration of
Notes and its consequences; but no such action shall affect any subsequent
Default or Event of Default or impair any right consequent thereon.
SECTION 10.2. Suits for Enforcement. If any Event of Default
shall have occurred and be continuing, the holder of any of the Securities may
proceed to protect and enforce its rights, either by suit in equity or by action
at law, or both, whether for the specific performance of any covenant or
agreement contained in this Agreement or in the other Transaction Documents or
in aid of the exercise of any power granted in this Agreement or in the other
Transaction Documents, or the holder of any Security may proceed to enforce the
payment of all sums due upon such Security or to enforce any other legal or
equitable right of the holder of such Security.
Without limiting the generality of Section 19.1, the Company
covenants that, if default shall be made in the making of any payment due under
any Security or in the performance or observance of any agreement contained in
this Agreement or the other Transaction Documents, the Company will pay to each
holder of Securities such further amounts, to the extent lawful, as shall be
sufficient to pay all costs and expenses of collection or of otherwise enforcing
such holder's rights under this Agreement or the other Transaction Documents,
including counsel fees.
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SECTION 10.3. Remedies Cumulative. No remedy herein conferred
upon you or the holder of any Security is intended to be exclusive of any other
remedy and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise.
SECTION 10.4. Remedies Not Waived. No course of dealing between
the Company and you or the holder of any Security and no delay or failure in
exercising any rights hereunder or under any other Transaction Document in
respect of such Security shall operate as a waiver of any of your rights or the
rights of any holder of such Security.
SECTION 11. CONVERSION AND EXCHANGE OF NOTES;
ANTIDILUTION PROVISIONS.
SECTION 11.1. Conversion of Notes. A. Each Note will be
convertible, at any time in the case of a Series A Note or Series C Note and on
or at any time after the Series B Share Reservation Date in the case of a Series
B Note, at the option of the holder thereof, into such number of whole shares of
Common Stock as is equal to the unpaid principal amount of such Note divided by
the conversion price of $2.75 per share of Common Stock, subject to adjustment
as described in Section 11.3 (the "Conversion Price"). The Company will pay to
the holder of each Note being so converted all accrued and unpaid interest on
such Note to the date of such conversion. Notes called for prepayment pursuant
to Section 5.1 will not be convertible after the close of business on the
Business Day preceding the date fixed for such prepayment, unless the Company
defaults in payment of the amount due upon such prepayment.
B. If at any time after August 20, 1998 the Common Stock is
listed on a national securities exchange or trades in the National Market System
or in the over-the-counter market, and for a period of at least 60 consecutive
trading days commencing on or after August 20, 1998 the closing sale price of
the Common Stock reported on such exchange or in the National Market System or
the average of the bid and asked prices of the Common Stock in the
over-the-counter market equals or exceeds 125% of the Target Price (as below
defined) then in effect, the Company may convert the Notes, as a whole but not
in part, into the respective numbers of whole shares of Common Stock specified
in Subsection A above at the Conversion Price then in effect. For purposes of
this Section 11.1, the term "Target Price" means, as of any date of
determination, the product of (1) the applicable prepayment price set forth in
Section 5.1 (expressed as a percentage of the
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principal amount to be prepaid, including any prepayment premium) and (2) the
Conversion Price then in effect.
Notice of such conversion (a "Mandatory Conversion Notice") shall be
given to the holders of the Notes within ten days following the completion of
the 60-day trading period referred to in the foregoing paragraph and shall
specify (1) price information with respect to the Common Stock for such 60-day
trading period in sufficient detail to establish the availability of the
Company's right to convert the Notes into shares of Common Stock pursuant to
this Subsection B, (2) the date fixed for such conversion, which shall be the
tenth Business Day following such notice (the "Mandatory Conversion Date"), (3)
the place where the Notes are to be surrendered for shares of Common Stock and
(4) that interest accrued on the Notes to and including the Mandatory Conversion
Date shall be paid on the Mandatory Conversion Date to such holders and that
interest will cease to accrue on the Mandatory Conversion Date, but neither
failure to give such notice, nor any defect therein or in the giving thereof, to
any particular holder shall affect the sufficiency of the notice or the validity
of the proceedings for conversion with respect to the other holders. If any
Mandatory Conversion Notice has been given pursuant to this Subsection 3, then
(unless the Company defaults in issuing shares of Common Stock in exchange for
the Notes or fails to pay accrued and unpaid interest on the Notes as set forth
in the following paragraph of this Subsection 3 and notwithstanding that any
Notes have not been surrendered for conversion) on the Mandatory Conversion Date
the holders of the Notes will (a) cease to be holders of such Notes and will
have no interests in or claims against the Company by virtue thereof (except the
right to receive shares of Common Stock in exchange therefor and accrued and
unpaid interest thereon to the Mandatory Conversion Date) and will have no
voting, conversion or other rights with respect to such Notes and the Notes will
no longer be outstanding and (b) be treated for all purposes as the record
holders of shares of Common Stock.
No Notes may be converted into shares of Common Stock pursuant to
this Subsection B unless the Company has paid all accrued and unpaid interest on
the Notes to and including the Mandatory Conversion Date.
SECTION 11.2. Exchange of Convertible Preferred Stock for Series
C Notes. Notwithstanding any provisions of Section 8 of the Certificate of
Designation to the contrary, the Company will not issue any Series C Notes in
exchange for Shares unless:
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A. the Company shall have obtained from Weil, Gotshal Manges or
other outside counsel to the Company satisfactory to the Required
Preferred Stockholders, a favorable opinion in a form satisfactory to
the Required Preferred Stockholders substantially to the effect set
forth in Exhibit F attached hereto and containing no qualifications or
limitations unsatisfactory to the Required Preferred Stockholders (it
being understood, however, that qualifications routinely included in
opinions of such counsel as to the enforceability of securities
evidencing indebtedness at the time such opinion is delivered will be
deemed to be satisfactory to the Required Preferred Stockholders);
B. at the time of such exchange and after giving effect thereto,
the Company shall not (1) be insolvent, (2) have an unreasonably small
capital to conduct its business, and (3) have liabilities (including
contingent, unmatured and subordinated liabilities) that are beyond its
ability to pay as such liabilities mature;
C. after giving effect to such exchange, the capital of the
Company shall not and would not be impaired within the meaning of
Section 160 of the General Corporation Law of the State of Delaware or
any successor provision as at the time in effect; and
D. such exchange shall not involve the Company in any prohibited
transaction (as such term is defined in Section 4975(c)(1)(A), (B), (C)
or (D) of the Code or Section 406(a) of ERISA) that could subject the
Company or any holder of a Series C Note to any tax or penalty on
prohibited transactions imposed under said Section 4975 of the Code or
Section 502 of ERISA.
SECTION 11.3. Antidilution Provisions; Accrued Interest
and Fractional Shares; Mechanics of Conversion; No Impairment;
Etc. A. The Conversion Price is subject to adjustment from time
to time as follows:
(1) In case the Company shall (a) pay a dividend or make a
distribution on Common Stock in shares of Common Stock, (b) subdivide
its outstanding shares of Common Stock into a greater number of shares
or (c) combine its outstanding shares of Common Stock into a smaller
number of shares, the Conversion Price in effect immediately prior to
such action shall be adjusted as provided below so that the holder of
any security thereafter surrendered for conversion
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shall be entitled to receive the number of shares of Common Stock which
such holder would have received or been entitled to receive immediately
following such action had such security been converted immediately prior
thereto. An adjustment made pursuant to this Subsection A shall become
effective immediately, except as provided in Subsection D below, after
the record date in the case of a dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision or combination.
(2) In case the Company shall issue rights, warrants or options
to all holders of Common Stock entitling them (for a period expiring
within 45 days after the record date therefor) to subscribe for or
purchase shares of Common Stock at a price per share less than the
Current Market Price per share (as determined pursuant to clause (4)
below) of the Common Stock on the record date for the determination of
holders entitled to receive such rights, warrants or options, the
Conversion Price shall be adjusted to a price, computed to the nearest
cent, so that the same shall equal the price determined by multiplying:
(a) the Conversion Price in effect immediately prior to
the date of issuance of such rights, warrants or options by a
fraction, of which
(b) the numerator shall be W the number of shares of
Common Stock outstanding on the date of issuance of such rights,
warrants or options immediately prior to such issuance, plus (ii)
the number of shares which the aggregate offering price of the
total number of shares so offered for subscription or purchase
would purchase at such Current Market Price (determined by
multiplying such total number of shares by the sum of the
exercise price of such rights, warrants or options plus the fair
market value of any consideration paid to the Company for such
rights, warrants or options and dividing the product so obtained
by such Current Market Price), and of which
(c) the denominator shall be W the number of shares of
Common Stock outstanding on the date of issuance of such rights,
warrants or options, immediately prior to such issuance, plus
(ii) the number of additional shares of Common Stock which are so
offered for subscription or purchase.
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Such adjustment shall become effective immediately, except as provided in clause
(5) below, after the record date for the determination of holders entitled to
receive such rights, warrants or options.
(3) In case the Company shall distribute to all or substantially
all holders of Common Stock documents or instruments evidencing
indebtedness, equity securities (including equity interests in a
Subsidiary) other than Common Stock, or other assets (other than
ordinary cash dividends out of earnings), or shall distribute to all or
substantially all holders of Common Stock rights, warrants or options to
subscribe to securities (other than those referred to in clause (2)
above), then in each such case the Company shall pay to the holder of
each Note such holder's pro rata share, on an As Converted Basis in
respect of such Note, of such distributions.
(4) For the purpose of any computation under clause (2) above,
the "Current Market Price" per share of Common Stock on any date of
determination shall be deemed to be the average of the last sale prices
of a share of Common Stock for the five consecutive trading days
commencing not more than 20 trading days before the day (the "Benchmark
Date") which is the earlier of (a) such date of determination and (b)
the day immediately preceding the "ex" date with respect to the issuance
or distribution requiring such computation, and ending not later than
the Benchmark Date. For purposes of this clause (4), the term "'ex'
date", when used with respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading (or if not so listed or admitted on NASDAQ or a
similar organization if NASDAQ is no longer reporting trading
information) without the right to receive such issuance or distribution.
(5) In any case in which this Section 11.3 shall require that an
adjustment be made immediately following a record date, the Company may
elect to defer the effectiveness of such adjustment (but in no event
until a date later than the effective time of the event giving rise to
such adjustment), in which case the Company shall, with respect to any
security converted after such record date and before such adjustment
shall have become effective (a) defer making any cash payment or issuing
to the holder of such security the number of shares of Common Stock and
other capital stock of the Company issuable upon such conversion
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in excess of the number of shares of Common Stock and other capital
stock of the Company issuable thereupon only on the basis of the
Conversion Price prior to adjustment, and (b) not later than five
Business Days after such adjustment shall have become effective, pay to
such holder the appropriate cash payment and issue to such holder the
additional shares of Common Stock and other capital stock of the Company
issuable on such conversion.
(6) No adjustment in the Conversion Price shall be required if
securityholders are to participate in the transaction on a basis and
with notice that the Board of Directors determines in good faith to be
fair and appropriate in light of the basis and notice on which holders
of Common Stock participate in the transaction. In addition, no
adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least it in the
Conversion Price, provided that any adjustment which by reason of this
clause (6) is not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(7) whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly give each holder of Notes a notice setting
forth the Conversion Price after such adjustment and setting forth in
reasonable detail the facts requiring such adjustment and the
calculations on which the adjustment is based.
(8) At its option, the Company may make such reduction in the
Conversion Price, in addition to those otherwise required by this Section 11.3,
as the Board of Directors deems advisable to avoid or diminish any income tax to
holders of Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes; provided that, any such reduction shall not be effective until written
evidence of the action of the Board of Directors authorizing such reduction
shall be filed with the secretary of the Company and notice thereof shall have
been given to each holder of Notes.
B. If any transaction shall occur, including without limitation
(1) any recapitalization or reclassification of shares of Common Stock (other
than a change in par value, or from no par value to par value, or as a result of
a subdivision or combination of the Common stock), (2) any consolidation, merger
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or amalgamation of the Company with or into another person or any merger of
another person into the Company (other than a merger that does not result in a
reclassification, conversion, exchange pre-cancellation of Common Stock), (3)
any sale or transfer of all or substantially all of the assets of the Company,
or (4) any compulsory share exchange, pursuant to any of which holders of Common
Stock shall be entitled to receive other securities, cash or other property,
then appropriate provision satisfactory to the Required Holders shall be made so
that the holder of each Note then outstanding shall have the right thereafter to
convert such Note only into the kind and amount of the securities, cash or other
property that would have been receivable upon such recapitalization,
reclassification, consolidation, merger, amalgamation, sale, transfer, or share
exchange by a holder of the number of shares of Common Stock issuable upon
conversion of such Note immediately prior to such recapitalization,
reclassification, consolidation, merger, amalgamation, sale, transfer or share
exchange, after giving effect to any adjustment in the Conversion Price in
accordance with this Section 11.3, and the Company shall not enter into any such
consolidation, merger, amalgamation or sale, unless the company formed by such
consolidation or amalgamation or resulting from such merger or that acquires
such assets or that acquires the Company's shares, as the case may be, shall
make provisions in its certificate or articles of incorporation or other
constituent document to establish such right. Such certificate or articles of
incorporation or other constituent document shall provide for adjustments that,
for events subsequent to the effective date of such certificate or articles of
incorporation or other constituent documents, shall be as nearly equivalent as
may be practicable to the relevant adjustments provided for in this Section
11.3.
C. Interest shall cease to accrue on the Notes surrendered for
conversion into Common Stock pursuant to Section 11.1A or required to be
converted pursuant to Section 11.1B. No fractional shares of Common Stock shall
be issued upon conversion of any Note. In lieu of any fractional shares to which
the holder of any Note would otherwise be entitled, the Company shall, after
aggregation of all fractional share interests held by each holder, pay cash
equal to such remaining fractional interest multiplied by the fair market value
(determined in good faith by the Board of Directors and described in a
resolution of the Board of Directors) of such share at the time of conversion.
D. Before any holder of a Note shall be entitled to convert the
same into shares of Common Stock pursuant to Section 11-1A and to receive
certificates therefor, such holder shall
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surrender such Note to be converted at the office of the Company where the
Security Register is maintained pursuant to Section 13 or at the place of
payment named in such Note, and shall give written notice to the Company at such
office or place of payment that such holder elects to convert the same. Such
conversion pursuant to Section 11.1A shall be deemed to have been made
immediately prior to the close of business on the date of such surrender and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date. The Company shall, within
five Business Days after such surrender (or, in the case of a mandatory
conversion pursuant to Section 11.13, on the Mandatory Conversion Date), issue
and deliver at such office or place of payment to the holder of such Note (or to
any other person specified in the notice delivered by such holder), a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid and a check payable to such holder
for any cash amounts payable as the result of a conversion into fractional
shares of Common Stock. In case any Note shall be surrendered for conversion of
only a part of the unpaid principal amount thereof, the Company shall deliver
within five Business Days at such office or place of payment a new Note or
Notes, as may be requested by such holder and payable to such holder, in the
same aggregate unpaid principal amount as the unpaid principal amount of the
Note so surrendered which is not being converted. Notwithstanding the foregoing,
the Company shall not be obligated to issue certificates evidencing the shares
of Common Stock issuable upon conversion of any Notes (other than a mandatory
conversion pursuant to Section 11.1B) unless such Note is either delivered to
the Company or the Company shall have received evidence pursuant to Section 14
that such Note has been lost, stolen, destroyed or mutilated and an indemnity
satisfactory to the Company pursuant to said Section. The issuance of
certificates of shares of Common Stock issuable upon conversion of Notes shall
be made without charge to the converting holder for any tax imposed in respect
of the issuance thereof, provided that the Company shall not be required to pay
any tax which may be payable with respect to any transfer involved in the issue
and delivery of any certificate in a name other than that of the holder of the
Notes being converted, and provided further that the Company in no event shall
be required to pay any income taxes which may be incurred by any holder upon
such conversion or transfer.
E. The Company will not, through any reorganization, transfer of
assets, consolidation, merger, amalgamation, dissolution, issue or sale of
securities or any other action,
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avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all of the provisions of this Section 11 and
in the taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Notes against impairment.
SECTION 12. SUBORDINATION OF NOTES.
SECTION 12.1. General. Notwithstanding any provision of this
Agreement or the Notes to the contrary, payments of the principal of and
premium, if any, and interest on the Notes shall be subordinate and junior in
right of payment to the prior payment in full of all Senior Indebtedness to the
extent and in the mariner provided in this Section.
SECTION 12.2. Effects of Certain Defaults in Respect of Senior
Indebtedness. A. If the Company shall default in the payment of any principal
of, or premium, if any, or interest on or other amount with respect to any
Senior Indebtedness when the same becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise (a "Payment
Default"), then, during a period commencing on the date on which the Company
shall have received written notice of such Payment Default from the holder or
holders of at least 25% of the aggregate unpaid principal amount of all Senior
Indebtedness and continuing until such Payment Default shall have been remedied
or waived or shall have ceased to exist, no direct or indirect payment by the
Company from any source whatsoever shall be made on account of the principal of,
or premium, if any, or interest on or other amount with respect to, any Note.
B. Upon the happening of a default under any restrictive covenant
with respect to any Senior Indebtedness (a "Material Senior Non-payment
Default") and unless and until such Material Senior Non-payment Default shall
have been remedied or waived or shall have ceased to exist, no direct or
indirect payment by the Company from any source whatsoever shall be made on
account of the principal of, or premium, if any, or interest on or other amount
with respect to, any Note, during a period of 180 days after the Company shall
have received written notice of such Material Senior Non-payment Default (which
notice shall expressly state that it is being delivered under this Section
12.2B) from the holder or holders of at least 25% of the aggregate unpaid
principal amount of all Senior Indebtedness, provided that only one notice may
be given for purposes of
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initiating such 180-day period pursuant to the terms of this Section 12.2B in
any 365-day period.
SECTION 12.3. Insolvency, Etc. In the event of any liquidation,
reorganization, dissolution, winding up or composition or readjustment of the
Company or its securities (whether voluntary or involuntary, or in bankruptcy,
insolvency, reorganization, liquidation, receivership proceedings, or upon a
general assignment for the benefit of the Company's creditors or any other
marshalling of the assets and liabilities of the Company, or otherwise), all
Senior Indebtedness (including any claim for interest thereon accruing at the
contract rate after the commencement of any such proceedings and any claim for
additional interest that would have accrued thereon but for the commencement of
such proceedings, in either case to the extent such claim shall be allowed in
such proceedings) shall first be paid in full before any direct or indirect
payment or distribution, whether in cash, securities or other property (other
than securities of the Company or any other corporation provided for by a plan
of reorganization or readjustment which are subordinate, at least to the extent
provided in this Section 12 with,respect to the Notes, to the payment of all
Senior Indebtedness at the time outstanding and to any securities issued in
respect of such Senior Indebtedness under any such plan of reorganization or
readjustment), is made in respect of any Note, and any cash, securities or other
property (other than securities subordinated as aforesaid) which would otherwise
(but for these subordination provisions) be payable or deliverable in respect of
the Notes directly or indirectly by the Company from any source whatsoever shall
be paid or delivered directly to the holders of Senior Indebtedness in
accordance with the priorities then existing among such holders until all Senior
Indebtedness (including claims for interest and additional interest as
aforesaid) shall have been paid in full.
SECTION 12.4. Turnover of Payments. If (A) any payment or
distribution shall be collected or received by any holder of a Note in
contravention of any of the terms of this Section 12 and prior to the payment in
full of Senior Indebtedness at the time outstanding and (B) any holder of such
Senior Indebtedness (or any authorized agent thereof) shall have notified such
holder of a Note of the facts by reason of which such collection or receipt so
contravenes this Section 12, such holder of a Note will deliver such payment or
distribution, to the extent necessary to pay all such Senior Indebtedness in
full, to the holders of such Senior Indebtedness and, until so delivered, the
same shall be held in trust by such holder of a Note as the property of the
holders of such Senior Indebtedness. If after any amount is
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delivered to the holders of Senior Indebtedness pursuant to this Section 12.4,
which amount has not been applied to the payment of Senior Indebtedness, and the
outstanding Senior Indebtedness shall thereafter be paid in full by the Company
or otherwise, other than pursuant to this Section 12.4, the holders of Senior
Indebtedness shall return to such holder of a Note an amount equal to the amount
delivered to such holders of Senior Indebtedness pursuant to this Section 12.4
which has not been so applied.
SECTION 12.5. No Prejudice or Impairment. No present or future
holder of any Senior Indebtedness shall be prejudiced in the right to enforce
subordination of the Notes by any act or failure to act on the part of the
Company. The holders of Senior Indebtedness may, without notice to or consent of
you or any other holder of any of the Notes, extend, renew, modify or amend the
terms of such Senior Indebtedness (including changing the terms of payment) or
any security therefor and release, sell or exchange such security or release any
person in any manner liable for such Senior Indebtedness and otherwise deal
freely with the Company, all without affecting the obligations of the Company
under this Agreement and the other Notes and, so long as such Indebtedness
constitutes Senior Indebtedness, all without affecting the subordination
provisions contained in this Section 12. Nothing contained herein shall impair,
as between the Company and the holder of any Note, the obligation of the Company
to pay to the holder thereof the principal thereof and premium, if any, and
interest thereon as and when the same shall become due and payable in accordance
with the terms thereof, or, except as provided herein, prevent the holder of any
Note from exercising all rights, powers and remedies otherwise permitted by
applicable law or thereunder upon the happening of an Event of Default, all
subject to the rights of the holders of Senior Indebtedness to receive cash,
securities or other property otherwise payable or deliverable to the holders of
the Notes directly or indirectly by the Company from any source whatsoever.
SECTION 12.6. Payment of Senior Indebtedness, Subrogation, Etc.
Upon the payment in full of all Senior Indebtedness, the holders of the Notes
shall be subrogated to all rights of the holders of Senior Indebtedness to
receive any further payments or distributions applicable to Senior Indebtedness
until the Notes shall, have been paid in full, and, for the purposes of such
subrogation, no payment or distribution received by the holders of Senior
Indebtedness of cash, securities, or other property to which the holders of the
Notes would have been entitled except for this Section 12 shall, as between the
Company and its creditors other than the holders of
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Senior Indebtedness, on the one hand, and the holders of the Notes, on the other
hand, be deemed to be a payment or distribution by the Company on account of
Senior Indebtedness.
SECTION 12.7. Miscellaneous. The subordination provisions
contained in this Section 12 are for the benefit of the holders of Senior
Indebtedness and, so long as any Senior Indebtedness is outstanding under any
agreement, may not be rescinded, cancelled or modified adversely to the
interests of the holders of Senior Indebtedness without the prior written
consent thereto of the holders of the requisite percentage of Senior
Indebtedness as provided in such agreements under which any Senior Indebtedness
is outstanding.
SECTION 13. REGISTRATION, TRANSFER AND EXCHANGE OF SECURITIES;
RESTRICTIVE LEGENDS TRANSFER RESTRICTIONS. The Company will keep at the
Company's principal office, or at such other office or agency in the United
States as the Company may from time to time designate in writing to the holders
of the Securities a register (the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, but at its expense (other than
transfer taxes, if any), it will provide for the registration and transfer of
Shares and Notes.
Whenever a Note shall be surrendered either at such office of the
Company or at the place of payment named in such Note, for transfer or exchange,
within five Business Days thereafter the Company will execute and deliver in
exchange therefor a new Note or Notes, as may be requested by such holder, in
the same aggregate unpaid principal amount as the unpaid principal amount of the
Note so surrendered. Each such new Note shall be payable to such Person as such
holder may request. Each Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
such holder's attorney duly authorized in writing. Any Note issued in exchange
for any other Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so exchanged or
transferred, and neither gain nor loss of interest shall result from any such
transfer or exchange. Any transfer tax relating to such transaction shall be
paid by the holder requesting the exchange.
The certificates evidencing the shares of Convertible Preferred
Stock and the shares of Common Stock issuable upon conversion of the Securities
shall bear at the time of issuance a legend in substantially the following form:
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"This security has not been registered under the Securities Act
of 1933, as amended, or applicable state securities laws, and
this security may not be sold, transferred or otherwise disposed
of in the absence of such registration or an exemption therefrom
under said Act and laws and the respective rules and regulations
thereunder. The transferability of this security is also subject
to restrictions contained in a Securities Purchase Agreement and
a Registration Rights Agreement which agreements the Company will
furnish to the holder of this security upon request."
You agree that the Company shall not be required to register the
transfer of any Security to any Person (other than your nominee) unless the
Company receives prior written notice of such transfer and an opinion of legal
counsel (which may be your in-house counsel) in a form reasonably satisfactory
to the Company stating that such transfer is not subject to Section 5 of the
Securities Act of 1933, as amended.
The Company and any agent of the Company may deem and treat the
Person in whose name any Note is registered as the owner of such Note for the
purpose of receiving payment of the principal of and premium, if any, and
interest on such Note and for all other purposes whatsoever, whether or not such
Note be overdue and the Company shall not be affected by notice to the contrary.
SECTION 14. LOST, ETC., NOTES. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Note, and (in case of loss, theft or destruction) of indemnity
satisfactory to it, and upon surrender and cancellation of such Note, if
mutilated, within five Business Days thereafter the Company will deliver in lieu
of such Note a new Note in a like unpaid principal amount, dated as of the date
to which interest has been paid thereon or dated the date of the lost, stolen,
destroyed or mutilated Note if - no interest shall have been paid thereon. In
the case of you or any-other institutional investor holder of a Note, your or
such holder's unsecured agreement of indemnity shall be deemed satisfactory to
the Company.
SECTION 15. AMENDMENT AND WAIVER. A. Any provision of
this Agreement or the other Transaction Documents may, with the
consent of the Company, be amended or waived (either generally or
in a particular instance and either retroactively or
prospectively), by one or more substantially concurrent written
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instruments signed by the Required Holders and the Required Preferred
Stockholders, provided that provisions hereof or of the other Transaction
Documents affecting only the Convertible Preferred Stock or the Notes may, with
the consent of the Company, be so amended or waived by the Required Preferred
Stockholders or the Required Holders, as the case may be, acting alone, and
provided further that
(1) no such amendment or waiver shall
(a) change the rate or time of payment of interest on any
of the Notes, change the number or the method of calculating the
number of shares of Common Stock that may be purchased upon
conversion of any Security, chance the amount or time of payment
or prepayment of any of the Notes or affect the premium payable
on any prepayment or purchase of a Note, or modify Section 16,
without the consent of the holder of each Security so affected,
(b) modify any of the provisions of this Agreement with
respect to the payment or prepayment or purchase of Notes, or
change the percentage of the principal amount of the Notes the
holders of which are required with respect to any such amendment
or to effectuate any such waiver, or to accelerate any Note or
Notes, without the consent of the holders of all of the Notes
then outstanding, or
(c) be effective prior to the Closing Date without your
consent, and
(2) no such waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon.
B. Any amendment or waiver pursuant to Subsection A above shall
apply equally to all of the holders of the Shares or Notes, as the case may be,
and shall be binding upon them, upon each future holder of any such Security and
upon the Company, in each case whether or not a notation thereof shall have been
placed on any Security.
C. The Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the other Transaction Documents unless each holder of a Security
affected thereby (irrespective of the number of shares of Preferred Stock or the
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principal amount of Notes, as the case may be, then held by it) shall be
informed thereof by the Company and shall be afforded the opportunity of
considering the same and shall be supplied by the Company with sufficient
information to enable it to make an informed decision with respect thereto.
Executed or true and correct copies of any amendment or waiver effected pursuant
to the provisions of this Section shall be delivered by the Company to each
holder of Securities forthwith following the date on which the same shall have
become effective. Neither the Company nor any of its Affiliates will directly or
indirectly pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of a type
of Security as consideration for or as an inducement to the entering into by
such holder of any such amendment or waiver unless such remuneration is
concurrently paid ratably to the holders of all of the Securities of such type
then outstanding.
D. For purposes of determining whether the holders of outstanding
Securities of the requisite percentage of outstanding shares or unpaid principal
amount at any time have taken any action authorized by this Section or otherwise
by this Agreement, any Securities owned by the Company, any Subsidiary or any
Affiliate of the Company shall not be deemed outstanding.
SECTION 16. HOME OFFICE PAYMENT. Notwithstanding anything to the
contrary in this Agreement or the Transaction Documents, so long as you or any
nominee designated by you shall be the holder of any Security, the Company shall
pay all amounts which become due and payable on such Security by wire or
electronic funds transfer of immediately available funds to you at your address
set forth in Schedule I by 11:00 A.M., New York City time, on the date any such
amounts become due, or at such other place in the United States and in such
other manner as you may designate by notice to the Company, without presentation
or surrender of such Security. You agree that prior to the sale, transfer or
other disposition of any Note, you will make notation thereon of the portion of
the principal amount prepaid and the date to which interest has been paid
thereon, or surrender the same in exchange for a Note or Notes aggregating the
same principal amount as the unpaid principal amount of the Note so surrendered.
The Company agrees that the provisions of this Section shall inure to the
benefit of any other institutional investor holder of a Security (or nominee
thereof) who shall have agreed to comply with the requirements of this Section.
SECTION 17. LIABILITIES OF THE PURCHASER. Neither this
Agreement nor any disposition of any of the Securities shall be
deemed to create any liability or obligation of you or any other
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holder of any of the Securities to enforce any provision hereof or of any of the
other Transaction Documents for the benefit or on behalf of any other Person who
may be the holder of any of the Securities.
SECTION 18. CERTAIN TAXES. The Company agrees to pay all stamp,
documentary or similar taxes which may be payable in respect of the execution
and delivery of this Agreement or the other Transaction Documents (but not the
transfer of any Security) or of any amendment of, or waiver or consent under or
with respect to, this Agreement or any of the other Transaction Documents and
will save you and all subsequent holders harmless against any loss or liability
resulting from nonpayment or delay in payment of any such tax. The obligations
of the Company under this Section shall survive the payment of the Notes.
SECTION 19. MISCELLANEOUS.
SECTION 19.1. Expenses. The Company agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay all reasonable
expenses incident to such transactions (including all document production costs
and other expenses, the fees and disbursements of your special counsel for their
services with relation to such transactions and for their services to"the
Purchasers with relation to obtaining stockholder approval as contemplated by
Section 2.1C, the expenses of obtaining private placement numbers for the
Securities and all out-of-pocket expenses in connection with the shipping to
and-from your office or the office of your nominee of the Securities and upon
any exchange or substitution pursuant to the provisions of this Agreement or the
other Transaction Documents), and to reimburse you for any reasonable
out-of-pocket expenses in connection therewith. The Company also agrees to pay
all reasonable expenses incurred by you (including reasonable counsel and
financial adviser fees) in connection with the enforcement and collection of the
Notes, the enforcement of this Agreement or the other Transaction Documents,
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or the transactions contemplated
hereby or by reason of any holder's having acquired any Security, including
without limitation costs and expenses incurred in any bankruptcy case, and in
connection with any amendment or requested amendment of, or waiver or consent or
requested waiver or consent under or with respect to, this Agreement or any of
the other Transaction Documents, whether or not the same shall become effective
(it being understood and agreed that only one such special counsel for all
holders of the Securities and one local counsel for such holders in each
applicable jurisdiction shall be entitled to
59
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reimbursement hereunder). The obligations of the Company under
this Section and Section 10.2 shall survive the payment of or
other performance under any of the Transaction Documents
In furtherance of the foregoing, on the Closing Date the
Company will pay or cause to be paid the fees and disbursements
of your special counsel which are reflected in the statement of
such special counsel submitted to the Company on or prior to the
Closing Date. The Company will also pay, promptly upon receipt of
supplemental statements therefor, additional fees, if any, and
disbursements of such special counsel in connection with the
transactions hereby contemplated (including disbursements
unposted as of the Closing Date).
SECTION 19.2. Reliance on and Survival of Representations. All
agreements, representations and warranties of the Company or any Subsidiary
contained herein and in any certificates or other instruments delivered pursuant
to this Agreement shall (A) be deemed to have been relied upon by you,
notwithstanding any investigation heretofore or hereafter made by you or on your
behalf, and (B) shall survive the execution and delivery of this Agreement and
the delivery of the Securities to you, and shall continue in effect so long as
any Security is outstanding and thereafter as provided in Sections 18, 19.1 and
19.6.
SECTION 19.3. Successors and Assigns. This Agreement shall bind
and inure to the benefit of and be enforceable by the Company and its permitted
successors and assigns hereunder, you and your successors and assigns, and, in
addition, shall inure to the benefit of and be enforceable by all holders from
time to time of the Securities, provided that the benefits of Sections 6, 7, 14
(as to satisfactory indemnity) and 16 shall be limited as provided therein.
SECTION 19.4. Communications. Except as otherwise specifically
provided herein, all notices and other communications provided for in this
Agreement shall be in writing and shall be sent by confirmed facsimile
transmission (hard copy to be sent by overnight mail on the date of such
transmission) or delivered by hand or sent by a reputable overnight courier
service prepaid (with confirmation of receipt).
A. if to the Company, at 777 Taylor Street, Fort
Worth, Texas 76102, or at such other address as the Company
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may hereafter designate by notice to you and to each other
holder of a Security at the time outstanding,
B. if to you, at your address as set forth in
Schedule I or at such other address as you may hereafter
designate by notice to the Company, or
C. if to any other holder of a Security, at the
address of such holder as it appears on the Security
Register.
Any notice or other communication herein provided to be given to
the holders of all outstanding Securities shall be deemed to have been duly
given if sent as aforesaid to each of the registered holders of the Securities
at the time outstanding at the address for such purpose of such holder as it
appears on Schedule I or the Security Register, as the case may be.
SECTION 19.5. Consent to Jurisdiction; Service of Process; Waiver
of Jury Trial. A. The Company irrevocably submits to the non-exclusive in
personam jurisdiction of any New York State or federal court sitting in the
Borough of Manhattan, The City of New York, over any suit, action or proceeding
arising out of or relating to this Agreement or the other Transaction Documents.
To the fullest extent permitted by applicable law, the Company irrevocably
waives and agrees not to assert, by way of motion, as a defense or otherwise,
any claim that it is not subject to the in personam jurisdiction of any such
court, any objection that it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
B. The Company agrees, to the fullest extent permitted by
applicable law, that a final judgment in any suit, action or proceeding of the
nature referred to in Subsection A above brought in any such court shall be
conclusive and binding upon the Company subject to rights of appeal, as the case
may be, and may be enforced in the courts of the United States of America or the
State of New York (or any other courts to the jurisdiction of which the Company
is or may be subject) by a suit upon such judgment.
C. The Company consents to process being served in any suit,
action or proceeding of the nature referred to in Subsection A above by mailing
a copy thereof by registered or certified mail, postage prepaid, return receipt
requested, to the
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Company at its address specified in Section 19.4 or at such other address of
which you shall then have been notified pursuant to said Section. The Company
agrees that such service upon receipt (1) shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding and
(2) shall, to the fullest extent permitted by applicable law, be taken and held
to be valid personal service upon and personal delivery to the Company. Notices
hereunder shall be conclusively presumed received as evidenced by a delivery
receipt furnished by the United States Postal Service or any reputable
commercial delivery service.
D. Nothing in this Section 19.5 shall affect the right of any
holder of Securities to serve process in any manner permitted by law, or limit
any right that the holders of any of the Securities may have to bring
proceedings against the Company in the courts of any appropriate jurisdiction or
to enforce in any lawful manner a judgment obtained in one Jurisdiction in any
other jurisdiction.
E. THE COMPANY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR
WITH RESPECT TO THIS AGREEMENT, THE SECURITIES, THE OTHER TRANSACTION DOCUMENTS
OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH.
SECTION 19.6. Indemnification. The Company agrees, to the fullest
extent permitted by applicable law, to indemnify, exonerate and hold you and
each of your officers, directors, employees and agents (collectively the
"Indemnitees" and individually an "Indemnitee") free and harmless from and
against any and all actions, causes of action, suits, losses, liabilities and
damages, and expenses in connection therewith, including without limitation
reasonable counsel fees and disbursements (collectively the "Indemnified
Liabilities") incurred by the Indemnitees or any of them as a result of, or
arising out of, or relating to, any transaction financed or to be financed in
whole or in part directly or indirectly with proceeds from the sale of any of
the Securities, the obtaining of stockholder approval as contemplated by Section
2.1C or the execution, delivery, performance or enforcement of this Agreement,
any other Transaction Document or any instrument contemplated hereby by any of
the Indemnitees, except as to any Indemnitee for any such Indemnified
Liabilities arising on account of such Indemnitee's gross negligence or willful
misconduct; and if and to the extent the foregoing undertaking may be
unenforceable for any reason, the Company agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities
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which is permissible under applicable law. The obligations of the Company under
this Section shall survive payment of the Notes.
SECTION 19.7. Governing Law. This Agreement and the
Notes shall be governed by and construed in accordance with the
laws of the State of New York.
SECTION 19.8. Headings. The headings in this Agreement
are for convenience of reference only and shall not limit or
otherwise affect any of the terms hereof.
SECTION 19.9. Counterparts. This Agreement may be
- -executed in two or more counterparts, each of which shall be
deemed to be an original but all of which together shall
constitute one and the same instrument.
If you are in agreement with the foregoing, please sign the form
of acceptance in the space below provided, whereupon this Agreement shall become
a binding agreement between you and the Company.
Very truly yours,
ARCH PETROLEUM INC.
By
President
The foregoing Agreement is hereby accepted as of the date first above written.
THE TRAVELERS INDEMNITY COMPANY
By /s/ Allen R. Cantrell
Title: Investment Officer
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Exhibit 4.6
BY-LAWS
OF
ARCH PETROLEUM INC.
A Delaware Corporation
<PAGE>
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent..........................................1
1.2 Other Offices........................................................1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting.......................................................1
2.2 Special Meeting......................................................1
2.3 Place of Meetings....................................................2
2.4 Notice...............................................................2
2.5 Voting List..........................................................2
2.6 Quorum...............................................................2
2.7 Required Vote; Withdrawal of Quorum..................................2
2.8 Method of Voting; Proxies............................................3
2.9 Record Date..........................................................3
2.10 Conduct of Meeting...................................................4
2.11 Inspectors...........................................................4
ARTICLE THREE: DIRECTORS
3.1 Management...........................................................4
3.2 Number; Qualification; Election; Term................................4
3.3 Change in Number.....................................................4
3.4 Removal..............................................................5
3.5 Vacancies............................................................5
3.6 Meetings of Directors................................................5
3.7 First Meeting........................................................5
3.8 Election of Officers.................................................5
3.9 Regular Meetings.....................................................5
3.10 Special Meetings.....................................................5
3.11 Notice...............................................................5
3.12 Quorum; Majority Vote................................................6
3.13 Procedure............................................................6
3.14 Presumption of Assent................................................6
3.15 Compensation.........................................................6
ARTICLE FOUR: COMMITTEES
4.1 Designation..........................................................6
4.2 Number; Qualification; Term..........................................6
4.3 Authority............................................................6
4.4 Committee Changes....................................................7
4.5 Alternate Members of Committees......................................7
4.6 Regular Meetings.....................................................7
4.7 Special Meetings.....................................................7
4.8 Quorum; Majority Vote................................................7
4.9 Minutes..............................................................7
4.10 Compensation.........................................................7
4.11 Responsibility.......................................................7
<PAGE>
ARTICLE FIVE: NOTICE
5.1 Method...............................................................7
5.2 Waiver...............................................................8
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office.......................................8
6.2 Removal..............................................................8
6.3 Vacancies............................................................8
6.4 Authority............................................................8
6.5 Compensation.........................................................8
6.6 Chairman of the Board................................................8
6.7 President............................................................8
6.8 Vice Presidents......................................................9
6.9 Treasurer............................................................9
6.10 Assistant Treasurers.................................................9
6.11 Secretary............................................................9
6.12 Assistant Secretaries................................................9
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificates for Shares..............................................9
7.2 Replacement of Lost or Destroyed Certificates.......................10
7.3 Transfer of Shares..................................................10
7.4 Registered Stockholders.............................................10
7.5 Regulations.........................................................10
7.6 Legends.............................................................10
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends...........................................................10
8.2 Reserves............................................................10
8.3 Books and Records...................................................11
8.4 Fiscal Year.........................................................11
8.5 Seal................................................................11
8.6 Resignations........................................................11
8.7 Securities of Other Corporations....................................11
8.8 Telephone Meetings..................................................11
8.9 Action Without a Meeting............................................11
8.10 Invalid Provisions..................................................12
8.11 Mortgages, etc......................................................12
8.12 Headings............................................................12
8.13 References..........................................................12
8.14 Amendments..........................................................12
<PAGE>
BY-LAWS
OF
ARCH PETROLEUM INC.
A Delaware Corporation
PREAMBLE
These by-laws are subject to, and governed by, the General
Corporation Law of the State of Delaware (the "Delaware General Corporation
Law") and the certificate of incorporation of Arch Petroleum Inc., a Delaware
corporation (the "Corporation"). In the event of a direct conflict between the
provisions of these by-laws and the mandatory provisions of the Delaware General
Corporation Law or the provisions of the certificate of incorporation of the
Corporation, such provisions of the Delaware General Corporation Law or the
certificate of incorporation of the Corporation, as the case may be, will be
controlling.
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent The registered office and registered
agent of the Corporation shall be as designated from time to time by the
appropriate filing by the Corporation in the office of the Secretary of State of
the State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or as the business of the Corporation
may require
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting An annual meeting of stockholders of the
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting or in a duly executed waiver of notice of such
meeting. At such meeting, the stockholders shall elect directors and transact
such other business as may properly be brought before the meeting.
2.2 Special Meeting A special meeting of the stockholders may be
called at any time by the Chairman of the Board, the President, the board of
directors, and shall be called by the President or the Secretary at the request
in writing of the stockholders of record of not less than ten percent of all
shares entitled to vote at such meeting or as otherwise provided by the
certificate of incorporation of the Corporation. A special meeting shall be held
on such date and at such time as shall be designated by the person(s) calling
the meeting and stated in the notice of the meeting or in a duly executed waiver
of notice of such meeting. Only such business shall be transacted at a special
meeting as may be stated or indicated in the notice of such meeting or in a duly
executed waiver of notice of such meeting.
<PAGE>
2.3 Place of Meetings. An annual meeting of stockholders may be held
at any place within or without the State of Delaware designated by the board of
directors. A special meeting of stockholders may be held at any place within or
without the State of Delaware designated in the notice of the meeting or a duly
executed waiver of notice of such meeting. Meetings of stockholders shall be
held at the principal office of the Corporation unless another place is
designated for meetings in the manner provided herein.
2.4 Notice. Written or printed notice stating the place, day, and
time of each meeting of the stockholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called shall be delivered not less
than ten nor more than 60 days before the date of the meeting, either personally
or by mail, by or at the direction of the President, the Secretary, or the
officer or person(s) calling the meeting, to each stockholder of record entitled
to vote at such meeting. If such notice is to be sent by mail, it shall be
directed to such stockholder at his address as it appears on the records of the
Corporation, unless he shall have filed with the Secretary of the Corporation a
written request that notices to him be mailed to some other address, in which
case it shall be directed to him at such other address. Notice of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy and shall not, at the beginning of
such meeting, object to the transaction of any business because the meeting is
not lawfully called or convened, or who shall, either before or after the
meeting, submit a signed waiver of notice, in person or by proxy.
2.5 Voting List. At least ten days before each meeting of
stockholders, the Secretary or other officer of the Corporation who has charge
of the Corporation's stock ledger, either directly or through another officer
appointed by him or through a transfer agent appointed by the board of
directors, shall prepare a complete list of stockholders entitled to vote
thereat, arranged in alphabetical order and showing the address of each
stockholder and number of shares registered in the name of each stockholder. For
a period of ten days prior to such meeting, such list shall be kept on file at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of meeting or a duly executed waiver of notice of such
meeting or, if not so specified, at the place where the meeting is to be held
and shall be open to examination by any stockholder during ordinary business
hours. Such list shall be produced at such meeting and kept at the meeting at
all times during such meeting and may be inspected by any stockholder who is
present.
2.6 Quorum. The holders of a majority of the outstanding shares
entitled to vote on a matter, present in person or by proxy, shall constitute a
quorum at any meeting of stockholders, except as otherwise provided by law, the
certificate of incorporation of the Corporation, or these by-laws. If a quorum
shall not be present, in person or by proxy, at any meeting of stockholders, the
stockholders entitled to vote thereat who are present, in person or by proxy,
or, if no stockholder entitled to vote is present, any officer of the
Corporation may adjourn the meeting from time to time, without notice other than
announcement at the meeting (unless the board of directors, after such
adjournment, fixes a new record date for the adjourned meeting), until a quorum
shall be present, in person or by proxy. At any adjourned meeting at which a
quorum shall be present, in person or by proxy, any business may be transacted
which may have been transacted at the original meeting had a quorum been
present; provided that, if the adjournment is for more than 30 days or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting.
<PAGE>
2.7 Required Vote: Withdrawal of Quorum. When a quorum is present at
any meeting, the vote of the holders of at least a majority of the outstanding
shares entitled to vote who are present, in person or by proxy, shall decide any
question brought before such meeting, unless the question is one on which, by
express provision of statute, the certificate of incorporation of the
Corporation, or these by-laws, a different vote is required, in which case such
express provision shall govern and control the decision of such question. The
stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
2.8 Method of Voting; Proxies. Except as otherwise provided in the
certificate of incorporation of the Corporation or by law, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. Elections of directors need
not be by written ballot. At any meeting of stockholders, every stockholder
having the right to vote may vote either in person or by a proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact. Each such
proxy shall be filed with the Secretary of the Corporation before or at the time
of the meeting. No proxy shall be valid after three years from the date of its
execution, unless otherwise provided in the proxy. If no date is stated in a
proxy, such proxy shall be presumed to have been executed on the date of the
meeting at which it is to be voted. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power or unless otherwise made
irrevocable by law.
2.9 Record Date. (a) For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the board of directors 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 of directors, for any such determination of
stockholders, such date in any case to be not more than 60 days and not less
than ten days prior to such meeting nor more than 60 days prior to any other
action. If no record date is fixed:
(i) 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 on which 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.
(ii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which
the board of directors adopts the resolution relating thereto.
(iii) 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 of
directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the board
of directors 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 of
directors, 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 of
directors. If no record date has been fixed by the board of directors, the
<PAGE>
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by law or these by-laws, 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 Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
in the State of Delaware, principal place of business, or such officer or agent
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the board of directors and prior action by
the board of directors is required by law or these by-laws, 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 of directors adopts the resolution taking such prior action.
2.10 Conduct of Meeting. The Chairman of the Board, if such office
has been filled, and, if not or if the Chairman of the Board is absent or
otherwise unable to act, the President shall preside at all meetings of
stockholders. The Secretary shall keep the records of each meeting of
stockholders. In the absence or inability to act of any such officer, such
officer's duties shall be performed by the officer given the authority to act
for such absent or non-acting officer under these by-laws or by some person
appointed by the meeting.
2.11 Inspectors. The board of directors may, in advance of any meeting
of stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If any of the inspectors so appointed shall fail to appear
or act, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares of capital stock of the Corporation
outstanding and the voting power of each, the number of shares represented at
the meeting, the existence of a quorum, and the validity and effect of proxies
and shall receive votes, ballots, or consents, hear and determine all challenges
and questions arising in connection with the right to vote, count and tabulate
all votes, ballots, or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request, or matter determined by them and shall
execute a certificate of any fact found by them. No director or candidate for
the office of director shall act as an inspector of an election of directors.
Inspectors need not be stockholders.
ARTICLE THREE: DIRECTORS
3.1 Management. The business and property of the Corporation shall be
managed by the board of directors. Subject to the restrictions imposed by law,
the certificate of incorporation of the Corporation, or these by-laws, the board
of directors may exercise all the powers of the Corporation.
3.2 Number: Qualification: Election: Term. The number of directors
which shall constitute the entire board of directors shall be not less than one.
The first board of directors shall consist of the number of directors named in
the certificate of incorporation of the Corporation or, if no directors are so
named, shall consist of the number of directors elected by the incorporator(s)
at an organizational meeting or by unanimous written consent in lieu thereof.
Thereafter, within the limits above specified, the number of directors which
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shall constitute the entire board of directors shall be determined by resolution
of the board of directors or by resolution of the stockholders at the annual
meeting thereof or at a special meeting thereof called for that purpose. Except
as otherwise required by law, the certificate of incorporation of the
Corporation, or these by--laws, the directors shall be elected at an annual
meeting of stockholders at which a quorum is present. Directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy and entitled to vote on the election of directors. Each director so chosen
shall hold office until the first annual meeting of stockholders held after his
election and until his successor is elected and qualified or, if earlier, until
his death, resignation, or removal from office. None of the directors need be a
stockholder of the Corporation or a resident of the State of Delaware. Each
director must have attained the age of majority.
3.3 Change in Number. No decrease in the number of directors
constituting the entire board of directors shall have the effect of shortening
the term of any incumbent director.
3.4 Removal. Except as otherwise provided in the certificate of
incorporation of the Corporation or these by-laws, at any meeting of
stockholders called expressly for that purpose, any director or the entire board
of directors may be removed, with or without cause, by a vote of the holders of
a majority of the shares then entitled to vote on the election of directors;
provided, however, that so long as stockholders have the right to cumulate votes
in the election of directors pursuant to the certificate of incorporation of the
Corporation, if less than the entire board of directors is to be removed, no one
of the directors may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors.
3.5 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 the
sole remaining director, and each director so chosen shall hold office until the
first annual meeting of stockholders held after his election and until his
successor is elected and qualified or, if earlier, until his death, resignation,
or removal from office. If there are no directors in office, an election of
directors may be held in the manner provided by statute. 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 of directors (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least 10% 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. Except as otherwise provided in these by--laws,
when one or more directors shall resign from the board of directors, effective
at a future date, a majority of the directors then in office, including those
who have so resigned, shall have the power to fill such vacancy or vacancies,
the vote thereon to take effect when such resignation or resignations shall
become effective, and each director so chosen shall hold office as provided in
these by-laws with respect to the filling of other vacancies.
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3.6 Meetings of Directors. The directors may hold their meetings and
may have an office and keep the books of the Corporation, except as otherwise
provided by statute, in such place or places within or without the State of
Delaware as the board of directors may from time to time determine or as shall
be specified in the notice of such meeting or duly executed waiver of notice of
such meeting.
3.7 First Meeting. Each newly elected board of directors may hold its
first meeting for the purpose of organization and the transaction of business,
if a quorum is present, immediately after and at the same place as the annual
meeting of stockholders, and no notice of such meeting shall be necessary.
3.8 Election of Officers. At the first meeting of the board of
directors after each annual meeting of stockholders at which a quorum shall be
present, the board of directors shall elect the officers of the Corporation.
3.9 Regular Meetings. Regular meetings of the board of directors shall
be held at such times and places as shall be designated from time to time by
resolution of the board of directors. Notice of such regular meetings shall not
be required.
3.10 Special Meetings. Special meetings of the board of directors
shall be held whenever called by the Chairman of the Board, the President, or
any director.
3.11 Notice. The Secretary shall give notice of each special meeting
to each director at least 24 hours before the meeting. Notice of any such
meeting need not be given to any director who shall, either before or after the
meeting, submit a signed waiver of notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of notice to him.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified in the notice or
waiver of notice of such meeting.
3.12 Quorum: Majority Vote. At all meetings of the board of directors,
a majority of the directors fixed in the manner provided in these by--laws shall
constitute a quorum f or the transaction of business. If at any meeting of the
board of directors there be less than a quorum present, a majority of those
present or any director solely present may adjourn the meeting from time to time
without further notice. Unless the act of a greater number is required by law,
the certificate of incorporation of the Corporation, or these by--laws, the act
of a majority of the directors present at a meeting at which a quorum is in
attendance shall be the act of the board of directors. At any time that the
certificate of incorporation of the Corporation provides that directors elected
by the holders of a class or series of stock shall have more or less than one
vote per director on any matter, every reference in these by--laws to a majority
or other proportion of directors shall refer to a majority or other proportion
of the votes of such directors.
3.13 Procedure. At meetings of the board of directors, business shall
be transacted in such order as from time to time the board of directors may
determine. The Chairman of the Board, if such office has been filled, and, if
not or if the Chairman of the Board is absent or otherwise unable to act, the
President shall preside at all meetings of the board of directors. In the
absence or inability to act of either such officer, a chairman shall be chosen
by the board of directors from among the directors present. The Secretary of the
Corporation shall act as the secretary of each meeting of the board of directors
unless the board of directors appoints another person to act as secretary of the
meeting. The board of directors shall keep regular minutes of its proceedings
which shall be placed in the minute book of the Corporation.
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3.14 Presumption of Assent. A director of the Corporation who is
present at the meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof or shall forward any
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
3.15 Compensation. The board of directors shall have the authority to
fix the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, that nothing contained herein
shall be construed to preclude any director from serving the Corporation in any
other capacity or receiving compensation therefor.
ARTICLE FOUR: COMMITTEES
4.1 Designation. The board of directors may, by resolution adopted by
a majority of the entire board of directors, designate one or more committees.
4.2 Number: Qualification: Term. Each committee shall consist of one
or more directors appointed by resolution adopted by a majority of the entire
board of directors. The number of committee members may be increased or
decreased from time to time by resolution adopted by a majority of the entire
board of directors. Each committee member shall serve as such until the earliest
of (i) the expiration of his term as director, (ii) his resignation as a
committee member or as a director, or (iii) his removal as a committee member or
as a director.
4.3 Authority. Each committee, to the extent expressly provided in the
resolution establishing such committee, shall have and may exercise all of the
authority of the board of directors in the management of the business and
property of the Corporation except to the extent expressly restricted by law,
the certificate of incorporation of the Corporation, or these by--laws.
4.4 Committee Changes. The board of directors shall have the
power at any time to fill vacancies in, to change the membership of, and to
discharge any committee.
4.5 Alternate Members of Committees. The board of directors may
designate one or more directors as alternate members of any committee. Any such
alternate member may replace any absent or disqualified member at any meeting of
the committee. If no alternate committee members have been so appointed to a
committee or each such alternate committee member is absent or disqualified, the
member or members of such committee present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member.
4.6 Regular Meetings. Regular meetings of any committee may be held
without notice at such time and place as may be designated from time to time by
the committee and communicated to all members thereof.
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4.7 Special Meetings. Special meetings of any committee may be held
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least two days before such special meeting. Neither the business to be
transacted at, nor the purpose of, any special meeting of any committee need be
specified in the notice or waiver of notice of any special meeting.
4.8 Quorum: Majority Vote. At meetings of any committee, a majority of
the number of members designated by the board of directors shall constitute a
quorum for the transaction of business. If a quorum is not present at a meeting
of any committee, a majority of 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. The act of a majority of the members present at any meeting
at which a quorum is in attendance shall be the act of a committee, unless the
act of a greater number is required by law, the certificate of incorporation of
the Corporation, or these by-laws.
4.9 Minutes. Each committee shall cause minutes of its proceedings to
be prepared and shall report the same to the board of directors upon the request
of the board of directors. The minutes of the proceedings of each committee
shall be delivered to the Secretary of the Corporation for placement in the
minute books of the Corporation.
4.10 Compensation. Committee members may, by resolution of the board
of directors, be allowed a fixed sum and expenses of attendance, if any, for
attending any committee meetings or a stated salary.
4.11 Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the board of
directors or any director of any responsibility imposed upon it or such director
by law.
ARTICLE FIVE: NOTICE
5.1 Method. Whenever by statute, the certificate of incorporation of
the Corporation, or these by--laws, notice is required to be given to any
committee member, director, or stockholder and no provision is made as to how
such notice shall be given, personal notice shall not be required and any such
notice may be given (a) in writing, by mail, postage prepaid, addressed to such
committee member, director, or stockholder at his address as it appears on the
books or (in the case of a stockholder) the stock transfer records of the
Corporation, or (b) by any other method permitted by law (including but not
limited to overnight courier service, telegram, telex, or telefax). Any notice
required or permitted to be given by mail shall be deemed to be delivered and
given at the time when the same is deposited in the United States mail as
aforesaid. Any notice required or permitted to be given by overnight courier
service shall be deemed to be delivered and given at the time delivered to such
service with all charges prepaid and addressed as aforesaid. Any notice required
or permitted to be given by telegram, telex, or telefax shall be deemed to be
delivered and given at the time transmitted with all charges prepaid and
addressed as aforesaid.
5.2 Waiver. Whenever any notice is required to be given to any
stockholder, director, or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation, or these by--laws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director, or committee
member at a meeting shall constitute a waiver of notice of such meeting, except
where such 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.
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ARTICLE SIX: OFFICERS
6.1 Number: Titles: Term of Office. The officers of the Corporation
shall be a President, a Secretary, and such other officers as the board of
directors may from time to time elect or appoint, including a Chairman of the
Board, one or more Vice Presidents (with each Vice President to have such
descriptive title, if any, as the board of directors shall determine), and a
Treasurer. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified, until his death, or until he shall resign
or shall have been removed in the manner hereinafter provided. Any two or more
offices may be held by the same person. None of the officers need be a
stockholder or a director of the Corporation or a resident of the State of
Delaware.
6.2 Removal. Any officer or agent elected or appointed by the board of
directors may be removed by the board of directors whenever in its judgment the
best interest of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the Corporation
(by death, resignation, removal, or otherwise) may be filled by the board of
directors.
6.4 Authority. Officers shall have such authority and perform such
duties in the management of the Corporation as are provided in these by-laws or
as may be determined by resolution of the board of directors not inconsistent
with these by--laws.
6.5 Compensation. The compensation, if any, of officers and agents
shall be fixed from time to time by the board of directors; provided, however,
that the board of directors may delegate the power to determine the compensation
of any officer and agent (other than the officer to whom such power is
delegated) to the Chairman of the Board or the President.
6.6 Chairman of the Board. The Chairman of the Board, if elected by
the board of directors, shall have such powers and duties as may be prescribed
by the board of directors. Such officer shall preside at all meetings of the
stockholders and of the board of directors. Such officer may sign all
certificates for shares of stock of the Corporation.
6.7 President. The President shall be the chief executive officer of
the Corporation and, subject to the board of directors, he shall have general
executive charge, management, and control of the properties and operations of
the Corporation in the ordinary course of its business, with all such powers
with respect to such properties and operations as may be reasonably incident to
such responsibilities. If the board of directors has not elected a Chairman of
the Board or in the absence or inability to act of the Chairman of the Board,
the President shall exercise all of the powers and discharge all of the duties
of the Chairman of the-Board. As between the Corporation and third parties, any
action taken by the President in the performance of the duties of the Chairman
of the Board shall be conclusive evidence that there is no Chairman of the Board
or that the Chairman of the Board is absent or unable to act.
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6.8 Vice Presidents. Each Vice President shall have such powers and
duties as may be assigned to him by the board of directors, the Chairman of the
Board, or the President, and (in order of their seniority as determined by the
board of directors or, in the absence of such determination, as determined by
the length of time they have held the office of Vice President) shall exercise
the powers of the President during that officer's absence or inability to act.
As between the Corporation and third parties, any action taken by a Vice
President in the performance of the duties of the President shall be conclusive
evidence of the absence or inability to act of the President at the time such
action was taken.
6.9 Treasurer. The Treasurer shall have custody of the Corporation's
funds and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and to
the credit of the Corporation in such depository or depositories as may be
designated by the board of directors, and shall perform such other duties as may
be prescribed by the board of directors, the Chairman of the Board, or the
President.
6.10 Assistant Treasurers. Each Assistant Treasurer shall have such
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Treasurers (in the order
of their seniority as determined by the board of directors or, in the absence of
such a determination, as determined by the length of time they have held the
office of Assistant Treasurer) shall exercise the powers of the Treasurer during
that officer's absence or inability to act.
6.11 Secretary. Except as otherwise provided in these by-laws, the
Secretary shall keep the minutes of all meetings of the board of directors and
of the stockholders in books provided for that purpose, and he shall attend to
the giving and service of all notices. He may sign with the Chairman of the
Board or the President, in the name of the Corporation, all contracts of the
Corporation and affix the seal of the Corporation thereto. He may sign with the
Chairman of the Board or the President all certificates for shares of stock of
the Corporation, and he shall have charge of the certificate books, transfer
books, and stock papers as the board of directors may direct, all of which shall
at all reasonable times be open to inspection by any director upon application
at the office of the Corporation during business hours. He shall in general
perform all duties incident to the office of the Secretary, subject to the
control of the board of directors, the Chairman of the Board, and the President.
6.12 Assistant Secretaries. Each Assistant Secretary shall have such
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Secretaries (in the order
of their seniority as determined by the board of directors or, in the absence of
such a determination, as determined by the length of time they have held the
office of Assistant Secretary) shall exercise the powers of the Secretary during
that officer's absence or inability to act.
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificates for Shares. Certificates for shares of stock of the
Corporation shall be in such form as shall be approved by the board of
directors. The certificates shall be signed by the Chairman of the Board or the
President or a Vice President and also by the Secretary or an Assistant
Secretary or by the Treasurer or an Assistant Treasurer. Any and all signatures
on the certificate may be a facsimile and may be sealed with the seal of the
<PAGE>
Corporation or a facsimile thereof. If any officer, transfer agent, or registrar
who has signed, or whose facsimile signature has been placed upon, a certificate
has ceased to be such officer, transfer agent, or registrar before such
certificate is issued, such certificate may be issued by the Corporation with
the same effect as if he were such officer, transfer agent, or registrar at the
date of issue. The certificates shall be consecutively numbered and shall be
entered in the books of the Corporation as they are issued and shall exhibit the
holder's name and the number of shares.
7.2 Replacement of Lost or Destroyed Certificates. The board of
directors may direct a new certificate or certificates to be issued in place of
a certificate or certificates theretofore issued by the Corporation and alleged
to have been lost or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate or certificates representing shares to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may direct
as indemnity against any claim, or expense resulting from a claim, that may be
made against the Corporation with respect to the certificate or certificates
alleged to have been lost or destroyed.
7.3 Transfer of Shares. Shares of stock of the Corporation shall be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
7.4 Registered Stockholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
7.5 Regulations. The board of directors shall have the power and
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer, and registration or the replacement of
certificates for shares of stock of the Corporation.
7.6 Legends. The board of directors shall have the power and authority
to provide that certificates representing shares of stock bear such legends as
the board of directors deems appropriate to assure that the Corporation does not
become liable for violations of federal or state securities laws or other
applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends. Subject to provisions of law and the certificate of
incorporation of the Corporation, dividends may be declared by the board of
directors at any regular or special meeting and may be paid in cash, in
property, or in shares of stock of the Corporation. Such declaration and payment
shall be at the discretion of the board of directors.
<PAGE>
8.2 Reserves. There may be created by the board of directors out of
funds of the Corporation legally available therefor such reserve or reserves as
the directors from time to time, in their discretion, consider proper to provide
for contingencies, to equalize dividends, or to repair or maintain any property
of the Corporation, or for such other purpose as the board of directors shall
consider beneficial to the Corporation, and the board of directors may modify or
abolish any such reserve in the manner in which it was created.
8.3 Books and Records. The Corporation shall keep correct and complete
books and records of account, shall keep minutes of the proceedings of its
stockholders and board of directors 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.
8.4 Fiscal Year. The fiscal year of the Corporation shall be fixed by
the board of directors; provided, that if such fiscal year is not fixed by the
board of directors and the selection of the fiscal year is not expressly
deferred by the board of directors, the fiscal year shall be the calendar year.
8.5 Seal. The seal of the Corporation shall be such as from time to
time may be approved by the board of directors.
8.6 Resignations. Any director, committee member, or officer may
resign by so stating at any meeting of the board of directors or by giving
written notice to the board of directors, the Chairman of the Board, the
President, or the Secretary. Such resignation shall take effect at the time
specified therein or, if no time is specified therein, immediately upon its
receipt. Unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
8.7 Securities of Other Corporations. The Chairman of the Board, the
President, or any Vice President of the Corporation shall have the power and
authority to transfer, endorse for transfer, vote, consent, or take any other
action with respect to any securities of another issuer which may be held or
owned by the Corporation and to make, execute, and deliver any waiver, proxy, or
consent with respect to any such securities.
8.8 Telephone Meetings. Stockholders (acting for themselves or through
a proxy), members of the board of directors, and members of a committee of the
board of directors may participate in and hold a meeting of such stockholders,
board of directors, or committee by means of a conference telephone or similar
communications equipment by means of which persons participating in the meeting
can hear each other, and participation in a meeting pursuant to this section
shall constitute presence in person at such 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.
8.9 Action Without a Meeting. (a) Unless otherwise provided in the
certificate of incorporation of the Corporation, any action required by the
Delaware General Corporation Law to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders (acting for themselves or
through a proxy) 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 the holders of all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Every written consent of stockholders
shall bear the date of signature of each stockholder who signs the consent and
no written consent shall be effective to take the corporate action referred to
therein unless, within sixty days of the earliest dated consent delivered in the
<PAGE>
manner required by this Section 8.9(a) to the Corporation, written consents
signed by a sufficient number of holders to take action are delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office, principal place
of business, or such officer or agent shall be by hand or by certified or
registered mail, return receipt requested.
(b) Unless otherwise restricted by the certificate of incorporation of
the Corporation or by these by--laws, any action required or permitted to be
taken at a meeting of the board of directors, or of any committee of the board
of directors, may be taken without a meeting if a consent or consents in
writing, setting forth the action so taken, shall be signed by all the directors
or all the committee members, as the case may be, entitled to vote with respect
to the subject matter thereof, and such consent shall have the same force and
effect as a vote of such directors or committee members, as the case may be, and
may be stated as such in any certificate or document filed with the Secretary of
State of the State of Delaware or in any certificate delivered to any person.
Such consent or consents shall be filed with the minutes of proceedings of the
board or committee, as the case may be.
8.10 Invalid Provisions. If any part of these by-laws shall be held
invalid or inoperative for any reason, the remaining parts, so far as it is
possible and reasonable, shall remain valid and operative.
8.11 Mortgages, etc. With respect to any deed, deed of trust,
mortgage, or other instrument executed by the Corporation through its duly
authorized officer or officers, the attestation to such execution by the
Secretary of the Corporation shall not be necessary to constitute such deed,
deed of trust, mortgage, or other instrument a valid and binding obligation
against the Corporation unless the resolutions, if any, of the board of
directors authorizing such execution expressly state that such attestation is
necessary.
8.12 Headings. The headings used in these by-laws have been inserted
for administrative convenience only and do not constitute matter to be construed
in interpretation.
8.13 References. Whenever herein the singular number is used, the same
shall include the plural where appropriate, and words of any gender should
include each other gender where appropriate.
8.14 Amendments. These by-laws may be altered, amended, or repealed or
new by-laws may be adopted by the stockholders or by the board of directors at
any regular meeting of the stockholders or the board of directors or at any
special meeting of the stockholders or the board of directors if notice of such
alteration, amendment, repeal, or adoption of new by--laws be contained in the
notice of such special meeting.
The undersigned, the Secretary of the Corporation, hereby certifies
that the foregoing by-laws were adopted by unanimous consent by the directors of
the Corporation as of November 12, 1991.
Randall W. Scroggins, Secretary
<PAGE>
Exhibit 4.7
ARCH PETROLEUM INC.
1993 STOCK OPTION PLAN
I. PURPOSES
Arch Petroleum Inc., a Delaware corporation (the "Company"), desires to
afford certain of its key employees, directors and the key employees of any
subsidiary corporation or parent corporation of the Company who are responsible
for the continued growth of the Company an opportunity to acquire a proprietary
interest in the Company, and thus to create in such key employees and directors
an increased interest in and a greater concern for the welfare of the Company
and its shareholders.
The stock options ("Options") offered pursuant to this 1993 Stock
Option Plan (the "Plan") are a matter of separate inducement and are not in lieu
of any salary or other compensation for the services of any key employee or
director.
The Company, by means of the Plan, seeks to retain the services of
persons now holding key positions and to secure the services of persons capable
of filling such positions.
The Options granted under the Plan are intended to be either incentive
stock options ("Incentive Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options that do not
meet the requirements for Incentive Options ("Non-Qualified Options"), but the
Company makes no warranty as to the qualification of any Option as an Incentive
Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
The total number of shares of capital stock of the Company which may be
purchased pursuant to the exercise of Options granted under the Plan shall not
exceed, in the aggregate, 830,000 shares of the authorized common stock, $.01
par value per share, of the Company (the "Shares").
Shares which may be acquired under the Plan may be (i) authorized but
unissued Shares, (ii) Shares of issued stock held in the Company's treasury,
(iu) Shares of issued stock reacquired by the Company, or (iv) any combination
of the above, at the discretion of the Company. If and to the extent that
Options granted under the Plan expire or terminate without having been
exercised, new Options may be granted with respect to the Shares covered by such
expired or terminated Options, provided that the grant and the terms of such new
Options shall in all respects comply with the provisions of the Plan; provided,
however, that no Option shall be granted under the Plan more than ten (10) years
after the date the Plan is adopted or the date the Plan is approved by the
shareholders of the Company, whichever occurs earlier. Shareholder approval
shall be obtained within twelve months of the adoption of the Plan.
Except as provided in Article XXII and subject to Article IV, the
Company may from time to time during the period from June 1, 1993 (the
"Effective Date") through May 31, 2003 (the "Termination Date"), grant to
certain key employees and directors of the Company, or of any subsidiary
corporation or parent corporation, Options under the terms hereinafter set
forth.
<PAGE>
As used in the Plan, the terms "subsidiary corporation" and "parent
corporation" shall mean, respectively, a corporation coming within the
definition of such terms contained in Sections 424(t) and 424(e) of the Code.
III. ADMINISTRATION
The board of directors of the Company (the "Board of Directors") shall
designate from among its members an option committee (the "Committee"), which
shall consist of no fewer than two members of the Board of Directors, to
administer the Plan. A majority of the members of the Committee shall constitute
a quorum, and the act of a majority of the members of the Committee shall be the
act of the Committee. If the Committee consists of only two members, then both
members shall constitute a majority for purposes of the preceding sentence. Any
member of the Committee may be removed at any time either with or without cause
by resolution adopted by the Board of Directors, and any vacancy on the
Committee may at any time be filled by resolution adopted by the Board of
Directors. The Board of Directors shall promptly fill any vacancy that causes
the number of members of the Committee to be below two.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its sole and absolute discretion, to determine the employees and
directors to whom Options shall be granted, the time when such Options shall be
granted to employees and directors, the number of Shares which shall be subject
to each Option, the purchase price of each Share which shall be subject to each
Option, the period(s) during which such Options shall be exercisable (whether in
whole or in part), and the other terms and provisions thereof. In determining
the employees and directors to whom Options shall be granted and the number of
Shares for which Options shall be granted to each such employee and director,
the Committee shall consider the length of service, the amount of earnings, and
the responsibilities and duties of each employee and director.
Subject to the express provisions of the Plan, the Committee also shall
have authority to construe the Plan and Options granted thereunder, to amend the
Plan and Options granted thereunder, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the terms and provisions of the
respective Options (which need not be identical) and to make all other
determinations necessary or advisable for administering the Plan. The Committee
also shall have the authority to require, in its sole and absolute discretion,
as a condition of the granting of any such Option, that the employee or director
agree (i) not to sell or otherwise dispose of Shares acquired pursuant to the
exercise of a Non-Qualified Option for a period of six (6) months following the
date of acquisition of such Shares or not to sell or otherwise dispose of Shares
acquired pursuant to the exercise of an Incentive Option for a period of two (2)
years from the grant of such Incentive Option nor within one (1) year from the
date of the acquisition of such Shares pursuant to the exercise of such
Incentive Option and (ii) that in the event of termination of employment of such
employee or resignation of such director, other than as a result of dismissal
without cause, such employee or director will not, for a period to be fixed by
the Committee at the time of the grant of the Option, enter into any other
employment or participate directly or indirectly in any other business or
enterprise which is competitive with the business of the Company or any
subsidiary corporation or parent corporation of the Company, or enter into any
employment in which such employee or director will be called upon to utilize
special knowledge obtained through employment with the Company or any subsidiary
corporation or parent corporation thereof.
The determination of the Committee on matters referred to in this
Article III shall be conclusive.
<PAGE>
The Committee may employ such legal counsel, consultants and agents as
it may deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such counsel or consultant and any computation received from
any such consultant or agent. Expenses incurred by the Committee in the
engagement of such counsel, consultant or agent shall be paid by the Company. No
member or former member of the Committee or the Board of Directors shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted hereunder. The Committee may delegate to one or more
of its members, or to one or more agents, such administrative duties as it may
deem advisable, and the Committee or any person to whom it has delegated duties
as aforesaid may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan.
IV. ELIGIBILITY
Non-Qualified Options may be granted to key employees and directors of
the Company or of any subsidiary corporation or parent corporation of the
Company. Incentive Options may be granted only to key employees of the Company
or of any subsidiary corporation or parent corporation of the Company, including
officers and directors thereof who are also employees thereof. Any person who
shall have retired from the active employment by the company, although such
person shall have entered into a consulting contract with the Company, shall not
be eligible to receive an Option.
Except as otherwise permitted under the Code, the aggregate fair market
value of stock with respect to which Incentive Options are exercisable for the
first time by a key employee during any calendar year (under all stock option
plans of the Company and any parent corporation or subsidiary corporation of the
Company) shall not exceed $100,000. For purposes of this limitation (i) the fair
market value of stock is determined as of the time the Incentive Option is
granted, and (ii) the limitation will be applied by taking into account
Incentive Options in the order in which they were granted.
VI. OPTION PRICE AND PAYMENT
The price ("Exercise Price") for each Share purchasable under any
Non-qualified Option granted hereunder shall be such amount as the Committee
shall deem appropriate.
The Exercise Price for each Share purchasable under any Incentive
Option granted hereunder shall be such amount as the Committee shall, in its
best judgment made in good faith, determine on the basis of facts and
circumstances to be not less than one hundred percent (100%) of the fair market
value per Share at the date such Incentive Option is granted; provided, however,
that in the case of an Incentive Option granted to a person who at the time such
Incentive Option is granted, owns shares of the Company or any subsidiary
corporation or parent corporation of the Company which possesses more than ten
percent (10%) of the total combined voting power of all classes of shares of the
Company or of any subsidiary corporation or parent corporation of the Company (a
"Ten Percent Owner"), the Exercise Price for each Share purchasable thereunder
shall be such amount as the Committee, in its best judgment made in good faith,
shall determine to be not less than one hundred ten percent (110%) of the fair
market value per Share at the date the Option is granted. Notwithstanding
anything herein to the contrary, in no event shall the Exercise Price of any
Non-Qualified Option or Incentive Option be less than the par value per Share.
In determining stock ownership of a key employee for any purposes under the
Plan, the rules of Section 424(d) of the Code shall be applied, and the Board of
Directors and the Committee may rely on representations of fact made to it by
the key employee and believed by it to be true.
<PAGE>
If the Shares are listed on a national securities exchange in the
United States on the date any Option is granted, the fair market value per share
shall be deemed to be the average of the high and low quotations at which such
Shares are sold on such national securities exchange on the date such Option as
granted. If the Shares are listed on a national securities exchange in the
United States on such date but the Shares are not traded on such date, or such
national securities exchange is not open for business on such date, the fair
market value per Share shall be determined as of the closest preceding date on
which such exchange shall have been open for business and the Shares were
traded. If the Shares are listed on more than one national securities exchange
in the United States on the date any such Option is granted, the Committee shall
determine which national securities exchange shall be used for the purpose of
determining the fair market value per Share.
For purposes of this Plan, the determination by the Committee of the
fair market value of a Share shall be conclusive.
Upon the exercise of an Option granted hereunder, the Company shall
cause the purchased Shares to be issued only when it shall have received the
full purchase price for the Shares (i) in cash, (ii) by certified check, (iii)
as long as the fair market value of the Shares on the date of exercise is at
least equal to the purchase price and with the Committee's prior consent, by
executing a recourse promissory note to the order of the Company in an amount
equal to the purchase price providing for the payment of interest at least
annually at a rate equal to the applicable federal rate as defined in Section
1274(d) of the Code or at such higher rate necessary to avoid any reduction in
the principal amount of the note or imputation of income for federal income tax
purposes, payable on demand or with a term of no more than five years, or (iv)
any combination of the foregoing.
VII. USE OF PROCEEDS
Any cash proceeds of the sale of Shares subject to the Options granted
hereunder are to be added to the general funds of the Company and used for its
general corporate purposes as the Board of Directors shall determine.
VIII. TERMS OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Subject to Article V, any Incentive Option granted hereunder shall be
exercisable during a period of not more than ten (10) years from the date of
grant of such Option at such times and in such amounts as the Committee shall
determine at such date of grant. In the case of a Ten Percent Owner, the period
during which an Incentive Option shall be exercisable shall not exceed five (5)
years from the date of grant of such option.
Any Non-Qualified Option granted hereunder shall be exercisable at such
times, in such amounts and during such period or periods as the Committee shall
determine at the date of the grant of such Option.
Unless otherwise specified by the Committee, no Option granted
hereunder may be disposed of, nor may any Option be exercised or converted into
Shares, until after six months after the grant of such Option.
The Committee shall have the right to accelerate, in whole or in part,
from time to time, conditionally or unconditionally, rights to exercise any
Option granted hereunder.To the extent that an Option is not exercised within
the period of exercisability specified therein, it shall expire as to the then
unexercised part. If any Option granted hereunder shall terminate prior to the
Termination Date, the Committee shall have the right to use the Shares as to
which such Option shall not have been exercised to grant one or more additional
Options to any eligible key employee or director, but any such grant of an
additional Option shall be made prior to the close of business on the
Termination Date.
<PAGE>
In no event shall an Option granted hereunder be exercised for a
fraction of a share.
IX. EXERCISE OF OPTIONS
Options granted under the Plan shall be exercised by the optionee as to
all or part of the Shares covered thereby by the giving of written notice of the
exercise thereof to the Corporate Secretary of the Company at the principal
business office of the Company, specifying (i) the number of Shares to be
purchased, (ii) a business day not more than fifteen (15) days from the date
such notice is given, for the payment of the purchase price against delivery of
the Shares being purchased, and (iii) the manner in which the optionee proposes
to pay the purchase price in accordance with Article VI. Subject to the terms of
Articles XIV, XVI and XVII, the Company shall cause certificates for the Shares
so purchased to be delivered to the optionee at the principal business office of
the Company, against payment of the full purchase price.
X. NONTRANSFERABILITY OF OPTIONS
No grant of any "derivative security" (as defined by Rule 16a-1(c)
promulgated under the Exchange Act) made under the Plan or any rights or
interests therein shall be assignable or transferable by an optionee, whether by
operation of law or otherwise, other than by will or the laws of descent and
distribution. Any Option granted hereunder shall be exercisable, during the
lifetime of the optionee, only by such optionee.
XI. TERMINATION OF EMPLOYMENT
Upon termination of employment of any employee, or the resignation of
any director, with the Company and all subsidiary corporations and parent
corporations of the Company, any Option previously granted to the employee or
director, unless otherwise specified by the Committee, shall, to the extent not
theretofore exercised, terminate and become null and void, provided that:
(a) if the employee or director shall die while in the employ
of such corporations or during either the three (3) month or one (1)
year period, whichever is applicable, specified in clause (b) below and
at a time when such employee was entitled to exercise an option as
herein provided, the legal representative of such employee or director,
or such person who acquired such Option by bequest or inheritance or by
reason of the death of the employee or director, may, not later than
one (1) year from the date of death, exercise such Option, to the
extent not theretofore exercised, in respect of any or all of such
number of Shares as specified by the Committee in such Option; and
(b) if the employment of any employee or director to whom such
Option shall have been granted shall terminate by reason of the
employee's or director's retirement or resignation (at such age or upon
such conditions as shall be specified by the Committee), disability (as
described in Section 22(e) (3) of the Code) or dismissal by the
employer other than for cause (as defined below), and while such
employee or director is entitled to exercise such Option as herein
provided, such employee or director shall have the right to exercise
such Option so granted, to the extent not theretofore exercised, in
respect of any or all of such number of shares as specified by the
Committee in such Option, at any time up to and including (i) three (3)
months after the date of such termination of employment or resignation
from the Board of Directors in the case of termination or resignation
by reason of retirement or dismissal other than for cause and (ii) one
(1) year after the date of termination of employment or resignation
from the Board of Directors in the case of termination or resignation
by reason of disability; and
<PAGE>
(c) in the case of Non-Qualified Options, the Committee may
specify (at the date of grant of such Option) different periods from
those specified in the preceding two paragraphs. Such periods shall not
be increased in the case of Incentive Options, except that the period
for exercise by the estate of a deceased holder of an Incentive Option
may be extended by the Committee.
If an employee or director voluntarily terminates his or her employment
or resigns his or her seat on the Board of Directors, or is discharged for
cause, any Option granted hereunder shall, unless otherwise specified by the
Committee in such Option, forthwith terminate with respect to any unexercised
portion thereof.
Notwithstanding the preceding paragraphs of this Article XI, if the
employment of any employee or director with the Company and all subsidiary and
parent corporations of the Company is terminated, whether voluntarily or
involuntarily, within a one year period following a change in control of the
Company (as defined in Article XII) and while such employee or director is
entitled to exercise an Option as herein provided, other than a termination of
such employment by the employer for cause, such employee or director shall have
the right to exercise all or any portion of such Option at any time up and to
and including three (3) months after the date of such termination of employment,
at which time such Option shall cease to be exercisable. Notwithstanding the
preceding paragraphs of this Article XI, no Option may be exercised after the
expiration of the period of exercisability provided for in such Option.
If an Option granted hereunder shall be exercised by the legal
representative of a deceased employee or director or former employee or
director, or by a person who acquired an Option granted hereunder by bequest or
inheritance or by reason of the death of any employee or director or former
employee or director, written notice of such exercise shall be accompanied by a
certified copy of letters testamentary or equivalent proof of the right of such
legal representative or other person to exercise such Option.
For the purposes of the Plan, the term "for cause" shall mean (i) with
respect to an employee or director who is a party to a written agreement with,
or alternatively, participates in a compensation or benefit plan of the Company
or a subsidiary corporation or parent corporation of the Company, which
agreement or plan contains a definition of "for cause" or "cause" (or words of
like import) for purposes of termination of employment thereunder by the Company
or such subsidiary corporation or parent corporation of the Company, "for cause"
or "cause" as defined in the most recent of such agreements or plans, or (ii) in
all other cases, as determined by the Committee or the Board of Directors, in
its sole and absolute discretion, (a) the willful commission by an employee or
director of a criminal or other act that causes or will probably cause
substantial economic damage to the Company or a subsidiary corporation or parent
corporation of the Company or substantial injury to the business reputation of
the Company or a subsidiary corporation or parent corporation of the Company;
(c) the continuing willful failure of an employee or director to perform the
duties of such employee or director to the Company or a subsidiary corporation
or parent corporation of the Company (other than such failure resulting from the
employee's or director's incapacity due to physical or mental illness) after
written thereof (specifying the particulars thereof in reasonable detail) and a
reasonable opportunity to be heard and cure such failure are given to the
employee or director by the Board of Directors or the Committee; or (d) the
order of a federal or state bank regulatory agency or a court of competent
jurisdiction requiring the termination of the employee's or director's
employment. For purposes of the Plan, no act, or failure to act, on the
employee's or director's part shall be considered "willful" unless done or
omitted to be done by the employee or director not in good faith and without
reasonable belief that the employee's or director's action or omission was in
the best interest of the Company or a subsidiary corporation or parent
corporation of the Company.
<PAGE>
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for purposes
of Section 422(a) of the Code. If an individual is on military, sick leave or
other bona fide leave of absence such individual shall be considered an "
employee" for purposes of the exercise of an Option and shall be entitled to
exercise such Option during such leave if the period of such leave does not
exceed 90 days, or, if longer, so long as the individual's right to reemployment
with the corporation granting the option (or a related corporation) is
guaranteed either by statute or by contract. If the period of leave exceeds
ninety (90) days, the employment relationship shall be deemed to have terminated
on the ninety-first (91) days of such leave, unless the individual's right to
reemployment is guaranteed by statute or contract.
A termination of employment shall not be deemed to occur by reason of
(i) the transfer of an employee from employment by the Company to employment by
a subsidiary corporation or a parent corporation of the Company or (ii) the
transfer of an employee from employment by a subsidiary corporation or a parent
corporation of the Company to employment by the Company or by another subsidiary
corporation or parent corporation of the Company.
XII. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTION
In the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, liquidation, stock dividend,
stock split, split-up, split-off, spinoff, combination of shares, exchange of
shares, or other like change in capital structure of the Company, an adjustment
shall be made to each outstanding Option such that each such Option shall
thereafter be exercisable for such securities, cash and/or other property as
would have been received in respect of the Shares subject to such Option had
such Option been exercised in full immediately prior to such change, and such an
adjustment shall be made successively each time any such change shall occur. Any
fractional shares or interests resulting from such adjustment shall be
eliminated. The term "Shares" shall after any such change refer to the
securities, cash and/or property then receivable upon exercise of an Option. In
addition, in the event of any such change, the Committee shall make any further
adjustment as may be appropriate to the maximum number of Shares subject to the
Plan, the maximum number of Shares of which Options may be granted to any one
employee or director, and the number of Shares and price per Share subject to
outstanding Options as shall be equitable to prevent dilution or enlargement of
rights under such Options, and the determination of the Committee as to these
matters shall be conclusive. Notwithstanding the foregoing, (i) each such
adjustment with respect to an Incentive Option shall comply with the rules of
Section 424(a) of the Code, and (ii) in no event shall any adjustment be made
which would render any Incentive Option granted hereunder other than an
incentive stock option for purposes of Section 422 of the Code.
In the event of a change in control of the Company, all then
outstanding Options shall immediately become exercisable, provided, however,
that with respect to an Incentive Option, such Incentive Option shall become
exercisable under this Article XII only to the extent that such accelerated
exercisability does not result in such Incentive Option's failing to comply with
Article V, unless the optionee consents to such result. For purposes of the
Plan, a "change in control" of the Company occurs if: (a) any "person" (defined
as such term is used in Sections 13(d) and 14 (d) (2) of the Exchange Act, as
amended) other than a stockholder of the Company as of the date of the adoption
of the Plan by the Board of Directors or any affiliate of any such stockholder
is or becomes the beneficial owner, directly or indirectly, of securities of the
Company representing fifty percent or more of the combined voting power of the
Company's outstanding securities then entitled to vote for the election of
directors; (b) the Board of Directors shall approve the sale of all or
substantially all of the assets of the Company; or (c) the Board of Directors
shall approve any merger, consolidation, issuance of securities or purchase of
assets, the result of which would be the occurrence of any event described in
clause (a) above.
<PAGE>
The Committee, in its sole and absolute discretion, may determine that,
upon the occurrence of a transaction described in the preceding paragraph, each
Option outstanding hereunder shall terminate within a specified number of days
after notice to the holder, and such holder shall receive, with respect to each
Share subject to such Option, cash in an amount equal to the excess of the fair
market value of such Share immediately prior to the occurrence of such
transaction over the exercise price per Share of such Option. The provisions
contained in the preceding sentence shall be inapplicable to an Option granted
within six (6) months before the occurrence of a transaction described above if
the holder of such Option is a director or officer of the Company or a
beneficial owner of the Company who is described in Section 16(a) of the
Exchange Act, unless such holder dies or becomes disabled (within the meaning of
Section 22(e) (3) of the Code) prior to the expiration of such six-month period.
XIII. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or on any
subsidiary corporation or parent corporation thereof to continue the employment
of any holder of an Option; and it shall not impose any obligation on the part
of any holder of an Option to remain in the employ of the Company or of any
subsidiary corporation or parent corporation thereof.
XIV. PURCHASE FOR INVESTMENT
Except as hereafter provided, the holder of an Option granted hereunder
shall, upon any exercise thereof, execute and deliver to the Company a written
statement, in form satisfactory to the Company, in which such holder represents
and warrants that such holder is purchasing or acquiring the Shares acquired
thereunder for such holder's own account, for investment only and not with a
view to the resale or distribution thereof, and agrees that any subsequent offer
for sale or sale or distribution of any of such Shares shall be made pursuant to
either (a) a Registration Statement on an appropriate form under the Securities
Act of 1933, as amended (the "Securities Act"), which Registration Statement has
become effective and is current with regard to the Shares being offered or sold
or, (b) a specific exemption from the registration requirements of the
Securities Act, but in claiming such exemption the holder shall, prior to any
offer for sale or sale of such Shares, obtain a prior favorable written opinion,
in form and substance satisfactory to the Company from counsel for or approved
by the Company, as to the applicability of such exemption thereto. The foregoing
restrictions shall not apply to (i) issuances by the Company so long as the
Shares being issued are registered under the Securities Act and a prospectus in
respect thereof is current or (ii) reofferings of Shares by affiliates of the
Company (as defined in Rule 405 or any successor rule or regulation promulgated
under the Securities Act) if the Shares being reoffered are registered under the
Securities Act and a prospectus in respect thereof is current. Notwithstanding
anything in this Plan to the contrary, the Company shall not be required to
deliver Common Stock pursuant to any exercise of an Option if such action would,
in the opinion of counsel to the Company, result in a violation of any state or
federal securities law, and the Company may require that the exercising optionee
deliver any such written representations, written covenants and other documents
as the Company or its counsel deems reasonably necessary, if any, including,
without limitation, an opinion of counsel reasonably satisfactory to the Company
to the effect that such delivery of stock would not result in a violation of any
state or federal securities laws.
XV. ISSUANCE OF CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
Upon any exercise of an Option which may be granted hereunder and, in
the case of an Option, payment of the purchase price, a certificate or
certificates for the Shares as to which the Option has been exercised shall be
issued by the Company in the name of the person exercising the Option and shall
be delivered to or upon the order of such person or persons.
<PAGE>
The Company may endorse such legend or legends upon the certificates
for Shares issued upon exercise of an Option granted hereunder and may issue
such "stop transfer" instructions to its transfer agent in respect of such
Shares as, in its sole and absolute discretion, it determines to be necessary or
appropriate to (i) prevent a violation of, or to perfect an exemption from, the
registration requirements of the Securities Act, (ii) implement the provisions
of the Plan and any agreement between the Company and the optionee or grantee
with respect to such Shares, or (iii) permit the Company to determine the
occurrence of a disqualifying disposition, as described in Section 421(b) of the
Code, of Shares transferred upon exercise of an Incentive Option granted under
the Plan.
The Company shall pay all issue taxes with respect to the issuance of
Shares, as well as all fees and expenses necessarily incurred by the Company in
connection with such issuance.
All Shares issued as provided herein shall be fully paid and
non-assessable to the extent permitted by law.
The Company may require an employee exercising a Non-Qualified Option
granted hereunder, or disposing of Shares acquired pursuant to the exercise of
an Incentive Option in a disqualifying disposition (within the meaning of
Section 42 1(b) of the Code), to reimburse the corporation that employs such
employee or director for any taxes required by any government to be withheld or
otherwise deducted and paid by such corporation in respect of the issuance or
disposition of Shares. In lieu thereof, the corporation that employs such
employee or director shall have the right to withhold the amount of such taxes
from any other sums due or to become due from such corporation to the employee
or director upon such terms and conditions as the Committee shall prescribe. At
any time that the Company, or a parent corporation or a subsidiary corporation
thereof, becomes subject to a withholding obligation under applicable law with
respect to the exercise of a Non-Qualified Option except as set forth below, an
employee or director may elect to satisfy, in whole or in part, the employee's
or director's related personal tax liabilities (an "Election") by (i) directing
the Company or the subsidiary to withhold from Shares issuable in the related
exercise either a specified number of Shares or Shares having a specified value
in each case with a value not in excess of such tax liabilities, (ii) tendering
Shares previously issued pursuant to an exercise or other shares of the
Company's common stock owned by the employee or director or (iii) combining any
or all of the foregoing options in any fashion. An Election shall be
irrevocable. The withheld Shares and other shares tendered in payment should be
valued at their fair market value on the date that the withholding obligation
arises (the "Tax Date"). The committee may disapprove of any Election, suspend,
or terminate the right to make Elections or provide that the right to make
Elections shall not apply to particular grants, Shares or exercises. If an
employee or director is a person subject to Section 16 of the Exchange Act then
(1) any Election by such employee or director must be made (i) at least six
months prior to the relevant Tax Date or (ii) on or prior to the relevant Tax
Date and during a period that begins on the third business day following the
date of release for publication of the Company's quarterly or annual summary
statements of sales and earnings and that ends on the twelfth business day
following such date and (2) the Election may not be made with respect to an
exercise, or the withholding obligation arising thereon, if the relevant
Non-Qualified Option was granted six months or less prior to the date of
Election. The Personnel Committee may impose any other conditions or
restrictions on the right to make an Election as it shall deem appropriate.
<PAGE>
XVII. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board of Directors shall determine in its sole and
absolute discretion that the listing, registration or qualification of the
Shares covered by the Plan upon any national securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
sale or purchase of Shares under the Plan, no Shares shall be issued unless and
until such listing, registration, qualification, consent or approval shall have
been effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Board of Directors.
XVIII. AMENDMENT OF THE PLAN
The Board of Directors may, from time to time, amend the Plan, provided
that no amendment shall be made, without the approval of the shareholders of the
Company, that will (i) increase the total number of Shares reserved for Options
under the Plan (other than an increase resulting from an adjustment provided for
in Article XII), (ii) reduce the exercise price of any Incentive Option granted
hereunder below the price required by Article VI, (iii) modify the provisions of
the Plan relating to eligibility, or (iv) materially increase the benefits
accruing to participants under the Plan. The Board of Directors or the
Committee, as the case may be, shall be authorized to amend the Plan and the
Options granted thereunder to permit the Incentive Options granted thereunder to
qualify as incentive stock options within the meaning of Section 422 of the
Code. The rights and obligations under any Option granted before amendment of
the Plan or any unexercised portion of such Option shall not be adversely
affected by amendment of the Plan or the Option without the consent of the
holder of the Option.
XLX. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate the Plan.
The Plan, unless sooner terminated under Article XXII or by action of the Board
of Directors, shall terminate at the close of business on the Termination Date.
An Option may not be granted while the Plan is suspended or after it is
terminated. Rights and obligations under any Option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except upon the consent of the person to whom the Option was granted. The
power of the Committee to construe and administer any Options granted prior to
the termination or suspension of the Plan under Article III nevertheless shall
continue after such termination or during such suspension.
XX. GOVERNING LAW
The Plan, such Options as may be granted thereunder and all related
matters shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware from time to time obtaining.
XXI. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not be
deemed to affect the validity of any other provision.
XXII. EFFECTIVE DATE
The Plan shall become effective at 5:00 P.M., Fort Worth, Texas time,
on the Effective Date; provided, however, that if the Plan is not approved by a
vote of the shareholders of the Company at an annual meeting or any special
meeting or by written consent within twelve months after the Effective Date, the
Plan and any Options granted thereunder shall terminate.
Exhibit 5.1
WEIL, GOTSHAL & MANGES LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
(214) 746-7700
December 17, 1997
Arch Petroleum Inc.
777 Taylor Street, Suite II
Fort Worth, Texas 76102
Ladies and Gentlemen:
We have acted as counsel to Arch Petroleum Inc. (the "Company") in
connection with the preparation and filing by the Company of a Registration
Statement on Form S-8 to be filed with the Securities and Exchange Commission on
or about December 17, 1997 (the "Registration Statement"), under the Securities
Act of 1933, as amended, with respect to the offer and sale by the Company of up
to 1,635,044 shares (the "Registered Shares") of the common stock, par value
$.01 per share, of the Company issuable upon the exercise of stock options (the
"Stock Options") granted pursuant to the Company's 1993 Stock Option Plan (the
"Plan"). Capitalized terms defined in the Plan and used but not otherwise
defined herein are used herein as so defined.
In so acting, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Plan and such corporate
records, agreements, documents and other instruments, and such certificates or
comparable documents of public officials and of officers and representatives of
the Company, and have made such inquiries of such officers and representatives,
as we have deemed relevant and necessary as a basis for the opinions hereinafter
set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. As to all questions
of fact material to this opinion that have not been independently established,
we have relied upon certificates or comparable documents of officers and
representatives of the Company.
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Arch Petroleum Inc.
December 17, 1997
Page 2
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that when the Registered Shares are issued and
delivered against receipt of payment therefor in accordance with the terms of
the Plan, such Registered Shares will be validly issued, fully paid and
nonassessable.
The opinions expressed herein are limited to the corporate laws of
the State of Delaware, and we express no opinion as to the effect on the matters
covered by this letter of the laws of any other jurisdiction.
We consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/S/ Weil, Gotshal & Manges LLP
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<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Arch Petroleum Inc.:
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated March 25, 1997 appearing on page 18
of Arch Petroleum Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996.
/S/ Price Waterhouse LLP
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PRICE WATERHOUSE LLP
Fort Worth, TX
December 10, 1997
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