SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 8, 1999
TEXOIL, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 0-12633 88-0177083
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
110 Cypress Station Drive
Suite 220
Houston, Texas 77090
(Address of principal executive offices)
(281) 537-9920
(Issuer's telephone number)
(NOT APPLICABLE)
(Former name or former address, if changed since last report)
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ITEM 5. AMENDED ARTICLES OF INCORPORATION AND BYLAWS
At the Annual Meeting of Shareholders held on November 8, 1999, the shareholders
approved the adoption of the Amended and Restated Articles of Incorporation
attached hereto as Exhibit 3.1 and the adoption of Amended and Restated Bylaws
attached hereto as Exhibit 3.2. Further, the shareholders approved the issuance
of the Series A Convertible Preferred Stock which was funded on November 10,
1999. The Certificate of Designation establishing Series A Convertible Preferred
Stock is attached hereto as Exhibit 4.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit 3.1 - Amended and Restated Articles of Incorporation of
Texoil, Inc.
Exhibit 3.2 - Amended and Restated Bylaws of Texoil, Inc.
Exhibit 4.1 - Certificate of Designation establishing Series A
Convertible Prefered Stock of Texoil, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
DATE: NOVEMBER 15, 1999 TEXOIL, INC.
By: /S/ FRANK A. LODZINSKI
FRANK A. LODZINSKI
President and
Principal Financial Officer
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
TEXOIL, INC.
ARTICLE I
The name of the Corporation is Texoil, Inc (the "Corporation").
ARTICLE II
The name and street address of the resident agent of the Corporation in
the State of Nevada is Corporation Trust Co. of Nevada, 6100 Neil Road, Suite
500, Reno, Nevada 89520. Branch offices may hereafter be established at such
other place or places, either within or without the State of Nevada as may be
determined from time to time by the Board of Directors.
ARTICLE III
The Corporation may engage in any lawful activity.
ARTICLE IV
The total number of shares that the Corporation shall have authority to
issue is 45,000,000 shares, of which 25,000,000 shall be common shares ("Common
Stock") with a par value of $.01 per share, 10,000,000 shall be Class B Common
Stock ("Class B Common Stock") with a par value of $.01 per share and 10,000,000
shall be preferred shares ("Preferred Stock") with a par value of $.01 per
share.
The designation, relative rights, preferences and liabilities of each
class of stock, itemized by class, shall be as follows:
(a) PREFERRED STOCK. Shares of Preferred Stock may be issued from
time to time in one or more series, the shares of each series to have such
designations, powers, preferences, rights, limitations and restrictions as
are stated in the resolution or resolutions providing for the issuance of
such series adopted by the Board of Directors of the Corporation (the
"Board of Directors" or the "Board"). Authority is hereby expressly
granted to the Board of Directors to authorize the issuance of the
Preferred Stock from time to time in one or more series. The authority of
the Board with respect to each series of Preferred Stock shall include,
but not be limited to, determination of the following:
(i) The number of shares constituting that series and
the distinctive designation of that series;
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(ii) The dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from which
date or dates;
(iii) Whether that series shall have voting rights in
addition to any voting rights provided by law, and, if so, the
terms of such voting rights;
(iv) Whether that series shall have conversion
privileges and, if so, the terms and conditions of such
conversion, including provision for adjustment of the
conversion rate in such events as the Board of Directors shall
determine;
(v) Whether or not shares of that series shall be
redeemable and whether or not the Corporation or the holder
(or both) may exercise the redemption right, including the
date or dates upon which they shall be redeemable, and the
amount per share payable in case of redemption, which amount
may vary under different conditions; and
(vi) The rights of the shares of that series in the
event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation and any other relative rights,
preferences and limitations of that class or series as may be
permitted or required by law.
(b) COMMON STOCK. Except as provided in subsections (i) through
(iii) of this subsection (b) below, the Common Stock and the Class B
Common Stock shall be identical in every respect, including, but not
limited to, voting rights, dividends, distributions, designations,
preferences, qualifications, limitations, restrictions and special or
relative rights (if any).
(i) Issuance of Class B Common Stock. Class B Common
Stock may only be issued upon the automatic conversion of the
Series A Convertible Preferred Stock of the Corporation (the
"Series A Preferred") pursuant to Section 4(b) of the
Certificate of Designation Establishing Series A Convertible
Preferred Stock of Texoil, Inc. (the "Certificate") filed with
the Secretary of State of Nevada contemporaneously with the
filing of these Amended and Restated Articles of
Incorporation, as such Certificate may hereafter be amended in
accordance with its terms.
(ii) VOTING RIGHTS
(1) The voting rights of the Common Stock and the
Class B Common Stock are identical except that the
holders of the Common Stock are entitled to elect the
Class A Directors of the Corporation, and the holders of
the Class B Common Stock, if any is outstanding, are
entitled to elect the Class B Directors of the
Corporation, except as provided in Article V(b).
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(2) The Common Stock and the Class B Common Stock
vote together as a single class on all matters on which
shareholders are entitled to vote, except for the
election of directors as provided herein and in the
Certificate, and Class B Common Stock may never
otherwise vote separately as a class.
(3) Each share of Common Stock and Class B Common
Stock shall be entitled to one vote on all matters
submitted to a vote of shareholders.
(iii) CONVERSION OF CLASS B COMMON STOCK.
(1) RIGHT TO CONVERT. Each share of Class B Common
Stock shall initially be convertible, at the option of
the holder thereof, at any time on or after the date of
issuance thereof, into fully paid and nonassessable
shares of Common Stock at the rate of one share of
Common Stock for each share of Class B Common Stock
surrendered for conversion. The number of shares of
Common Stock into which each share of Class B Common
Stock is convertible, as such number may be adjusted
from time to time pursuant to Article IV(b)(iii)(3), is
referred to as the "Conversion Ratio."
(2) MECHANICS OF CONVERSION. Before any holder of
Class B Common Stock shall be entitled to convert shares
of Class B Common Stock into shares of Common Stock and
to receive certificates therefor, such holder shall
surrender the certificate or certificates therefor, duly
endorsed, at the principal office of the Corporation or
of any transfer agent for the Class B Common Stock, and
shall give written notice to the Corporation at such
office that such holder elects to convert the same. The
Corporation shall as soon as practicable after such
delivery issue and deliver at such office to such holder
a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled.
Such conversion shall be deemed to have been made
immediately prior to the close of business on the date
of such surrender of the shares of Class B Common Stock
to be converted, 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
holder or holders of such shares of Common Stock on such
date.
(3) ADJUSTMENTS TO CONVERSION PRICE.
(A) SUBDIVISIONS, COMBINATIONS OR
CONSOLIDATION OF COMMON STOCK. In the event the
outstanding shares of
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Common Stock shall be subdivided, combined or
consolidated, by stock split, stock dividend,
combination or like event, into a greater or
lesser number of shares of Common Stock, the
Conversion Ratio in effect immediately prior to
such subdivision, combination or consolidation
shall, concurrently with the effectiveness of such
subdivision, combination or consolidation, be
proportionately adjusted.
(B) RECLASSIFICATIONS. In the case, at any
time after the date hereof, of any capital
reorganization or any reclassification of the
stock of the Corporation (other than as a result
of a stock dividend or subdivision, split-up or
combination of shares), or the consolidation or
merger of the Corporation with or into another
person (other than a consolidation or merger in
which the Corporation is the continuing entity and
which does not result in any change in the Common
Stock) the shares of Class B Common Stock shall,
after such reorganization, reclassification,
consolidation or merger, be convertible into the
kind and number of shares of stock or other
securities or property of the surviving
corporation or otherwise to which a holder of
Class B Common Stock would have been entitled if
immediately prior to such reorganization,
reclassification, consolidation or merger such
holder had converted his shares of Class B Common
Stock into Common Stock. In any such case,
appropriate adjustment shall be made in the
application of the provisions of this Article
IV(b)(iii) after such reorganization,
reclassification, consolidation or merger so that
the provisions of this Article IV(b)(iii)
(including adjustments to the Conversion Ratio)
shall be applicable after such event and shall be
as nearly equivalent as practicable. The
provisions of this Article IV(b)(iii)(3)(B) shall
similarly apply to successive reorganizations,
reclassifications, consolidations or mergers.
(4) CERTIFICATE AS TO ADJUSTMENTS. Upon the
occurrence of each adjustment or readjustment of the
Conversion Ratio pursuant to Article IV(b)(iii)(3), the
Corporation at its expense shall promptly thereafter
compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each holder of
Class B Common Stock a certificate setting forth such
adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is
based. The Corporation shall, upon the written request
at any time of any such holder, furnish or cause to be
furnished to such holder a like certificate setting
forth (A) such adjustments and readjustments, if any,
(B) the Conversion Ratio of
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the Class B Common Stock at the time in effect, and (C)
the number of shares of Common Stock and the amount, if
any, of other property which at the time would be
received upon the conversion of the Class B Common
Stock.
(5) STATUS OF CONVERTED STOCK. Any shares of Class
B Common Stock converted pursuant to this Article
IV(b)(iii) shall be retired and canceled, and shall no
longer be available for issuance.
(6) MISCELLANEOUS. All calculations under this
Article IV(b)(iii) shall be made to the nearest one
hundredth (1/100) of a share.
(7) NO IMPAIRMENT. The Corporation will not
through any reorganization, recapitalization, transfer
of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist
in the carrying out of all the provisions of this
Article IV(b)(iii) and in the taking of all action as
may be necessary or appropriate in order to protect the
conversion rights of the holders of Class B Common Stock
against impairment.
(8) RESERVATION OF STOCK ISSUABLE UPON CONVERSION.
The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the
conversion of the shares of Class B Common Stock, such
number of its shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all
outstanding shares of Class B Common Stock. If at any
time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of Class B
Common Stock, the Corporation will take such corporate
action as may be necessary to increase its authorized
but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(iv) DIVIDENDS. To the extent permitted by law and
subject to the rights of any series of Preferred Stock, the
holders of the Common Stock and Class B Common Stock shall be
entitled to share pro rata according to the number of shares
held in such dividends as may be declared by the Board of
Directors from time to time.
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(v) LIQUIDATION. In the event of the liquidation,
dissolution or winding up, whether voluntary or involuntary of
the Corporation, the remaining assets and funds of the
Corporation, after payment to creditors and to those holders
of securities with preference over the Common Stock and the
Class B Common Stock, shall be divided among the holders of
Common Stock and Class B Common Stock pro rata according to
the number of shares held.
(c) INCORPORATION BY REFERENCE. For all purposes of these Amended
and Restated Articles of Incorporation, the Certificate of Designation
establishing the Series A Convertible Preferred Stock of Texoil, Inc.,
attached hereto as EXHIBIT A, including all attachments thereto, is hereby
incorporated by reference.
(d) APPLICATION OF NEVADA STATUTES. The provisions of Nevada Revised
Statutes 78.378 through 78.3793 do not apply to the acquisition of the
Series A Preferred pursuant to the Purchase Agreement (as defined in the
Certificate) or to the acquisition of Conversion Shares (as defined in the
Certificate) by the holders of Series A Preferred.
ARTICLE V
Members of the governing board shall be known as "Directors." The maximum
number of members of the Board of Directors shall be nine (9), with the exact
number of Directors to be determined from time to time as provided in this
Article V. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. The Board shall take action by
the affirmative vote of a majority of the directors present at a meeting, except
as otherwise provided by law or these Articles (as they may be modified by a
certificate of designation with respect to the issuance by the Board of a series
of preferred stock), provided that a quorum is present. The Board of Directors
may adopt such rules and regulations for the conduct of its meetings and the
management of the Corporation as it deems appropriate, consistent with law,
these Articles or the Bylaws of the Corporation, as amended.
Directors need not be shareholders of the Corporation. The Board of
Directors shall be classified, into two (2) classes (Class A and Class B) as
provided under Paragraphs (a) and (b) below, with the members of each class to
hold office until their successors are elected and qualified.
(a) CLASS A DIRECTORS. Not less than one (1) or more than six (6) of
the directors shall be designated Class A directors. Within that range,
the exact number of Class A Directors shall be determined from time to
time by a majority of the Class A Directors then in office, though less
than a quorum, or by the holders of Common Stock at the annual meeting of
shareholders; provided that no Class A Director's term shall be shortened
by a reduction in the number of Class A Directors. Class A directorships
will initially be held by the six members of the Board of Directors who
hold office on the date these Articles are filed with the Secretary of the
State of Nevada, and such members will continue to serve pursuant to the
terms hereof. Class A directors shall hold office for three (3) years and
be divided into three (3) equal groups, Group One to initially hold office
one year and to be elected in the
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first annual meeting after the date these Articles become effective, and
every three years thereafter, Group Two to hold office for two (2) years
and to be elected in the second annual meeting after the date these
Articles become effective, and and every three years thereafter and Group
Three to hold office for three (3) years and to be elected in the third
annual meeting after the date these Articles become effective, and every
three years thereafter.
Until a Trigger Event (as defined in the Certificate) occurs or six
(6) years elapse from the date these Articles are filed with the Secretary
of State of Nevada, whichever occurs first, the Class A Directors shall
have a total of six (6) votes, to be divided equally among the Class A
Directors then holding office. After a Trigger Event has occurred or six
years have elapsed, the Class A Directors shall, without further action by
the Corporation or its Board of Directors, have a total of three (3)
votes, to be divided equally among the Class A Directors then holding
office. In each of the next annual meetings of the shareholders after the
Trigger Event, only one (1) Class A Director of each Group shall be
elected with the result that the actual number of Class A Directors shall
be reduced by Group to a total of three (3), without requiring the
involuntary resignation or removal of any Class A Director.
(b) CLASS B DIRECTORS. Not less than one (1) or more than three (3)
of the Directors shall be designated Class B Directors of the Corporation
who shall be elected by the holders of Series A Preferred of the
Corporation as long as there are any shares of Series A Preferred
outstanding, and by the holders of the Class B Common Stock of the
Corporation if there are no outstanding shares of Series A Preferred.
Within that range, the exact number of Class B Directors shall be
determined from time to time by a majority of the Class B Directors then
in office, though less than an quorum, or by the holders of a majority of
the outstanding shares of Series A Preferred or Class B Common Stock;
provided that no Class B Director's term shall be shortened by a reduction
in the number of Class B Directors. Class B directorships will initially
be filled by nominees elected by the holders of the Series A Preferred,
and the initial Class B Directors will serve until the next annual meeting
following their election. Thereafter, subject to the provisions of the
Certificate, Class B directors shall be elected every year at the annual
meeting of shareholders by the holders of Series A Preferred Stock or
holders of Class B Common Stock as provided above. Nominees for Class B
directorships shall be made by the holders of the Series A Preferred Stock
or Class B Common Stock, as applicable, and shall be designated and
elected as Class B Directors. At such time, after the Original Issue Date
(as defined in the Certificate), as less than the Threshold Amount of
Series A Preferred and less than the Threshold Amount of Class B Common
Stock are outstanding, the right to elect Class B Directors shall cease
and the Board shall consist solely of Class A Directors. With respect to
the Series A Preferred, "Threshold Amount" has the meaning specified in
the Certificate. With respect to the Class B Common Stock, "Threshold
Amount" means ten percent (10%) of the number of shares of Class B Common
Stock outstanding immediately after the automatic conversion of the Series
A Preferred pursuant to Section 4(b) of the Certificate.
Until a Trigger Event occurs or six (6) years elapse from the date
these Articles are filed with the Secretary of State of Nevada, whichever
occurs first, the Class B Directors shall have a total of three (3) votes,
to be divided equally among the Class B Directors then
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holding office. After a Trigger Event has occurred or six (6) years have
elapsed, the Class B Directors shall, without further action by the
Corporation or its Board of Directors, have a total of six (6) votes, to
be divided equally among the Class B Directors then holding office. As the
actual numbers of Class A Directors are reduced pursuant to Article V(a),
the holders of Series A Preferred Stock or Class B Common Stock, as
applicable, may correspondingly increase the actual number of Class B
Directors up to a total number of six (6).
(c) VACANCIES. Any vacancies on the Board of Directors resulting
from the death, resignation, disqualification or removal of any Class A
Director, and any vacancies resulting from an increase in the number of
Class A Directors, may be filled by the Class A Directors, whether or not
there is a quorum of Directors. Class A Directors may only be removed for
cause by the affirmative vote of the holders of not less than two-thirds
of the voting power of the Common Stock. Any vacancies on the Board of
Directors resulting from the death, resignation, disqualification or
removal of any Class B Director, and any vacancies resulting from an
increase in the number of Class B Directors, may be filled by a majority
of the remaining Class B Directors, though less than a quorum, or by the
holders of a majority of the outstanding shares of Series A Preferred or
Class B Common Stock. Class B Directors may be removed from the Board at
any time, with or without cause, by the vote or consent of the holders of
not less than two-thirds of the voting power of the outstanding shares of
Series A Preferred or Class B Common Stock. The Board of Directors may not
create and fill new directorships or otherwise fill any vacancies, except
in accordance with the terms hereof.
ARTICLE VI
The Corporation shall become effective January 1, 1982, and shall have
perpetual existence.
ARTICLE VII
A resolution, in writing, signed by all of the members of the Board of
Directors of the Corporation, shall be and constitute action by the Board of
Directors to the effect therein expressed with the same force and effect as
though such resolution has been passed at a duly convened meeting, and it shall
be the duty of the Secretary to record every such resolution in the minute book
of the Corporation under its proper date.
ARTICLE VIII
Subject to any Bylaws adopted by the Shareholders of the Corporation, the
Directors shall have the power to make, alter or repeal from time to time the
Bylaws of the Corporation in any manner not inconsistent with the law, these
Articles or the Certificate. Bylaws so made by the Directors under the powers so
conferred may be altered, amended, or repealed by the Directors or the
shareholders in any manner not inconsistent with the law, these Articles or the
Certificate at any meeting called and held for that purpose.
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ARTICLE IX
No director or officer of the Corporation shall be liable to the
Corporation or its shareholders for damages for breach of fiduciary duty as a
director or officer, except for (a) acts of omission which involve intentional
misconduct, fraud or a knowing violation of law; or (b) the payment of dividends
in violation of Nevada Revised Statutes Section 78.300.
ARTICLE X
(a) INDEMNIFICATION. The Corporation shall indemnify any Director of
the Corporation who was or is a party (whether plaintiff, defendant or
third party) or witness, or is threatened to be made a party or witness to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or
in the right of the Corporation, by reason of the fact that the Director
is or was a director, officer, shareholder, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise (whether or not for profit), or by reason of anything
done or not done by the Director in any such capacity or capacities,
against expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by the Director in
connection with the action, suit or proceeding if the Director acted in
good faith and in a manner which he or she reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
or her conduct was illegal. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and that, with respect to an criminal action
or proceeding, he or she had reasonable cause to believe that his or her
conduct was unlawful.
The Corporation shall indemnify any Director of the Corporation who
was or is a party (whether plaintiff, defendant or third party) or
witness, or is threatened to be made a party or witness to any threatened,
pending or completed action or suit by or in the right of the Corporation
to procure a judgment in its favor by reason of the fact that the Director
is or was a director, officer, shareholder, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise (whether or not for profit), or by reason of anything
done or not done by the Director in any such capacity or capacities,
against expenses, including amounts paid in settlement and attorneys' fees
actually and reasonably incurred by the Director in connection with the
defense or settlement of the action or suit if he or she acted in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation. Indemnification may not
be made for any claim, issue or matter as to which such a person has been
adjudged by a court of competent jurisdiction after exhaustion of all
appeals therefrom, to be liable to the Corporation or for amounts paid in
settlement to the
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Corporation, unless and only to the extent that the court in which the
action or suit was brought or other court of competent jurisdiction
determines, upon application, that in view of all of the circumstances of
the case, the person is fairly and reasonably entitled to indemnity for
such expenses as the court deems proper.
The expenses of Directors incurred in defending a civil or criminal
action, suit or proceeding shall be paid by the Corporation as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the Director
to repay the amount if it is ultimately determined by a court of competent
jurisdiction that the Director is not entitled to be indemnified by the
Corporation. The provisions of this paragraph do not affect any rights to
advancement of expenses to which corporate personnel other than Directors
may be entitled under any contract or otherwise by law.
The indemnification and advancement of expenses authorized by this
Article:
(i) Does not exclude any other rights to which a
Director seeking indemnification or advancement of expenses
may be entitled under any other Article or any Bylaw,
agreement, vote of shareholders or disinterested directors,
insurance policy or otherwise, for either an action in his or
her official capacity or an action in another capacity while
holding his or her office, except that indemnification, unless
ordered by a court or for the advancement of expenses made
pursuant to this Article, may not be made to or on behalf of
any Director if a final adjudication establishes that his or
her acts or omissions involved intentional misconduct, fraud
or a knowing violations of the law and was material to the
cause of action.
(ii) Continues for a person who has ceased to be a
director or officer and inures to the benefit of the estate,
spouse, heirs, executors, administrators and personal
representatives of such a person.
Any change or amendment in these Articles that would adversely
affect the rights granted to the indemnified person shall be prospective
only and shall not be operative to adversely affect any rights of any
person entitled to indemnification hereunder.
(b) INSURANCE. The Corporation shall use its best efforts to
purchase and maintain insurance or make other financial arrangements on
behalf of any Director who is or was a director, officer, shareholder,
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise (whether or not for profit), or by
reason of anything done or not done by the Director in any such capacity
or capacities, for any liability asserted against him and liability and
expenses incurred by him in his capacity as a director, officer,
shareholder, employee or agent, or arising out of his status as such,
whether or not the Corporation has the authority to indemnify him against
such liability and expenses.
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(c) OTHER FINANCIAL ARRANGEMENTS. The other financial arrangements
which may be made by the Corporation pursuant to part (b) above may
include, but are not limited to, the following:
(i) The creation of a trust fund;
(ii) The establishment of a program of
self-insurance;
(iii) The securing of its obligations of indemnification
by granting a security interest or other lien on any assets of
the Corporation; or
(iv) The establishment of a letter of credit, guaranty
or surety.
No financial arrangement made pursuant to this part (c) may provide
protection for a person adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable for intentional
misconduct, fraud or a knowing violation of law, except with respect to
the advancement of expenses or indemnification ordered by a court.
Any insurance or other financial arrangement made on behalf of a
person pursuant to this Article may be provided by the Corporation or any
other person approved by the Board of Directors, even if all of the other
person's stock or other securities is owned by the Corporation.
(d) GENERAL. In the absence of intentional misconduct, fraud or a
knowing violation of law:
(i) The decision of the Board of Directors as to the
propriety of the terms and conditions of any insurance or
other financial arrangement made pursuant to parts (b) and (c)
above and the choice of the person to provide the insurance or
other financial arrangement is conclusive; and
(ii) The insurance or other financial arrangement:
(1) Is not void or voidable; and
(2) Does not subject any director approving it to
personal liability for his or her action, even if a
director approving the insurance or other financial
arrangement is a beneficiary of the insurance or other
financial arrangement.
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ARTICLE XI
This Corporation elects not to be governed by Nevada Revised Statutes
78.411 to 78.444, inclusive concerning combinations with interested
stockholders.
EXECUTED by the undersigned, effective as of this 8th day of
November, 1999.
/s/ FRANK A. LODZINSKI
Frank A. Lodzinski, President
/s/ JERRY M. CREWS
Jerry M. Crews, Secretary
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EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS OF
TEXOIL, INC.
NOVEMBER 8, 1999
(HEREINAFTER THE "CORPORATION")
ARTICLE I
SHAREHOLDERS
SECTION 1.1 ANNUAL MEETING. An annual meeting of the Corporation=s
shareholders shall be held for the election of directors at such date, time and
place, either within or without the State of Nevada, as designated by resolution
adopted from time to time by the Corporation=s Board of Directors. Any other
proper business may be transacted at the annual meeting.
SECTION 1.2 SPECIAL MEETINGS.
(a) Special meetings of the shareholders for any purpose or
purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, may be called by the chairman, the president or the Board
of Directors and shall be called by the chairman, the president or the
Board of Directors at the written request of the holders of not less than
ten percent (10%) of the voting power of all the outstanding shares of the
Corporation entitled to vote at such meeting.
(b) Business transacted at all special meetings shall be confined to
the purpose or purposes stated in the notice of the meeting, unless one of
the conditions for the holding of a meeting without notice set forth in
Section 1.5 shall be satisfied, in which case any business may be
transacted and the meeting shall be valid for all purposes.
SECTION 1.3 PLACE OF MEETINGS. Any meeting of the shareholders of the
Corporation may be held at its registered office in the State of Nevada, its
principal office in the State of Texas or at such other place in or out of the
United States as the Board of Directors may designate in a notice of meeting.
SECTION 1.4 NOTICE OF MEETINGS.
(a) The president, a vice president, the secretary, an assistant
secretary or any other individual designated by the Board of Directors
shall sign and deliver written notice of any meeting to each shareholder
of record entitled to vote at such meeting not fewer than ten (10) days,
nor more than sixty (60) days, before the date of such meeting. The notice
shall state the place, date and time of the meeting and the purpose or
purposes for which the meeting is called. Notice of a special meeting
shall also state the purpose or purposes for which the meeting is called
and the person or persons calling the meeting.
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(b) A copy of the notice shall be delivered personally or
mailed postage prepaid to each shareholder of record entitled to vote at
the meeting at the address appearing on the records of the Corporation,
and the notice shall be deemed effective when mailed the date the same is
correctly deposited in the United States mail for transmission to such
shareholder. Personal delivery of any such notice to any officer of a
corporation or association, or to any member of a partnership, constitutes
delivery of the notice to the corporation, association or partnership.
(c) The written certificate of the individual signing a notice of
meeting, setting forth the substance of the notice or having a copy
thereof attached, the date the notice was mailed or personally delivered
to the shareholders and the addresses to which the notice was mailed,
shall be prima facie evidence of the manner and fact of giving such
notice.
(d) Any shareholder may waive notice of any meeting by a signed
writing, either before or after the meeting. Neither the business to be
transacted at nor the purpose of any regular or special meeting of
shareholders need be specified in any written waiver of notice or consent,
except as otherwise provided in Section 1.4 (a) of these Bylaws. All such
waivers shall be filed with the minutes or other Corporation records.
(e) Unless otherwise provided in the Articles of Incorporation as
they may be amended or, whenever notice is required to be given, under any
provision of the laws of the State of Nevada, the Articles of
Incorporation or these Bylaws, to any shareholder to whom:
(i) Notice of two consecutive annual meetings, and all
notices of meetings or the taking of action by written consent
without a meeting to that shareholder during the period
between those two consecutive annual meetings; or
(ii) All, and at least two, payments sent by first class
mail of dividends or interest on securities during a 12-month
period, have been mailed addressed to that shareholder at his
address as shown on the records of the Corporation and have
been returned undeliverable, the giving of further notices to
that shareholder is not required. Any action or meeting taken
or held without notice to that shareholder has the same effect
as if the notice had been given. If any such shareholder
delivers to the Corporation written notice setting forth the
current address of that shareholder, the requirement that
notice be given to that shareholder is reinstated. If the
action taken by the Corporation is such as to require the
filing of a certificate as required under the laws of the
State of Nevada, the certificate need not state that notice
was not given to persons to whom notice was not required to be
given.
(f) Notice delivered or mailed to shareholders in accordance with
the provisions of this Section 1.4 and the provisions, if any, of the
Articles of Incorporation, or an amendment thereof, is sufficient, and in
the event of transfer of that shareholder's stock after
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such delivery or mailing and before the holding of the meeting it is not
necessary to deliver or mail notice of the meeting to the transferee.
SECTION 1.5 MEETING WITHOUT NOTICE.
(a) Whenever all persons entitled to vote at any meeting of
shareholders consent, either by:
(i) A writing on the records of the meeting or filed with
the secretary; or
(ii) Presence at such meeting and oral consent entered on the
minutes; or
(iii) Taking part in the deliberations at such meeting without
objection;
the actions taken at such meeting shall be as valid as if such had
occurred at a meeting regularly called and noticed.
(b) If any meeting be irregular for want of notice or of such
consent, provided a quorum was present at such meeting, the proceedings of
the meeting may be ratified and approved and rendered likewise valid and
the irregularity or defect therein waived by a writing signed by all
parties having the right to vote at such meeting.
(c) Such consent or approval may be by proxy or attorney, but all
such proxies and powers of attorney must be in writing.
SECTION 1.6 DETERMINATION OF SHAREHOLDERS OF RECORD.
(a) For the purpose of determining the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment
thereof or for the purpose of determining shareholders entitled to receive
payment of any distribution or the 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, in advance, a record date for the determination of such
shareholders, which shall not be more than sixty (60) days nor less than
ten (10) days before the date of such meeting, nor more than sixty (60)
days prior to any other action.
(b) If no record date is fixed for the purposes set forth in Section
1.6 (a), the record date for determining shareholders: (i) entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the business
day next preceding the date on which the meeting is held; and (ii) 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. A determination
of shareholders of record entitled to notice of or to vote at any meeting
of shareholders 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.
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(c) The Board of Directors may adopt a resolution prescribing a date
upon which the shareholders of record are entitled to give written consent
pursuant to Section 1.9. The date prescribed by the Board of Directors may
not precede nor be more than ten (10) days after the date the resolution
is adopted by the Board of Directors. If the Board of Directors does not
adopt a resolution prescribing a date upon which the shareholders of
record are entitled to give written consent pursuant to Section 1.9, and
(i) no prior action by the Board of Directors is required, the
date is the first date on which a valid written consent is delivered
in accordance with the provisions of Section 1.9;
(ii) prior action by the Board of Directors is required, the
date is at the close of business on the day on which the Board of
Directors adopt the resolution taking the required action.
SECTION 1.7 QUORUM; ADJOURNED MEETINGS.
(a) Unless the Articles of Incorporation provide for a different
proportion, shareholders holding a majority of the voting power of the
Corporation=s stock issued and outstanding and entitled to vote,
represented in person or by proxy, are necessary to constitute a quorum
for the transaction of business at any meeting. If, on any issue, voting
by classes is required by the laws of the State of Nevada, the Articles of
Incorporation or these Bylaws, at least a majority of the voting power
within each such class is necessary to constitute a quorum of each such
class.
(b) If a quorum is not present or represented by proxy, a majority
of the voting power so represented may adjourn the meeting from time to
time until holders of the voting power required to constitute a quorum
shall be represented. At any such adjourned meeting at which a quorum
shall be represented, any business may be transacted which might have been
transacted as originally called. When a shareholders meeting is adjourned
to another time and place hereunder, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. The shareholders present at a
duly convened meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum of the voting power.
(c) With respect to shares outstanding in the name of another
corporation, partnership, limited liability company or other legal entity
on the record date, votes may be cast: (i) in the case of a corporation,
by such individual as the bylaws of such other corporation prescribe, by
such individual as may be appointed by resolution of the board of
directors of such other corporation or by such individual (including the
officer making the authorization) authorized in writing to do so by the
chairman of the board of directors, president or any vice-president of
such corporation and (ii) in the case of a partnership, limited liability
company or other legal entity, by an individual representing such
shareholder
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upon presentation to the Corporation of satisfactory evidence of that
person's authority to do so.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast for shares owned by this Corporation or its
subsidiaries, if any. If shares are held by this Corporation or its
wholly-owned subsidiaries, if any, in a fiduciary capacity, no votes shall
be cast with respect thereto on any matter except to the extent that the
beneficial owner thereof possesses and exercises either a right to vote or
to give the Corporation holding the same binding instructions on how to
vote.
(e) Except as otherwise required by law, the Articles of
Incorporation, as amended, or these Bylaws, and except with respect to the
election of directors, if a quorum is present, the affirmative vote of
holders of at least a majority of the voting power represented at the
meeting and entitled to vote shall be the act of the shareholders, unless
voting by classes is required for any action of the shareholders by the
laws of the State of Nevada, the Articles of Incorporation or these Bylaws
in which case the affirmative vote of holders of at least a majority of
the voting power of each such class shall be required. Each class of
Directors shall be elected by a plurality of the votes cast by the holders
of shares entitled to vote in the election of that class of directors at a
meeting of shareholders at which a quorum is present.
SECTION 1.8 PROXIES.
(a) At any meeting of shareholders, any holder of shares entitled to
vote may designate, in a manner permitted by the laws of the State of
Nevada, another person or persons to act as proxy or proxies. No proxy is
valid after the expiration of six (6) months from the date of its
creation, unless it is coupled with an interest or unless otherwise
specified in the proxy. In no event shall the term of a proxy exceed seven
(7) years from the date of its creation. Subject to these restrictions,
every proxy properly created is not revoked and shall continue in full
force and effect until another instrument or transmission revoking it or a
properly created proxy bearing a later date is filed with or transmitted
to the secretary of the Corporation or another person or persons appointed
by the Corporation to count the votes of shareholders and determine the
validity of proxies and ballots.
(b) Without limiting the manner in which a shareholder may authorize
another person or persons to act on behalf thereof as proxy pursuant to
Section 1.8 (a), the following constitute valid means by which a
shareholder may grant such authority:
(i) a shareholder may execute a writing authorizing another
person or persons to act for that shareholder as proxy. Execution
may be accomplished by the signing of the writing by the shareholder
or his authorized officer, director, employee or agent or by causing
the signature of the shareholder to be affixed to the writing by any
reasonable means, including, but not limited to, a facsimile
signature;
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(ii) a shareholder may authorize another person or persons to
act for that shareholder as proxy by transmitting or authorizing the
transmission of a telegram, cablegram or other means of electronic
transmission to the person who will be the holder of the proxy or to
a firm which solicits proxies or like agent who is authorized by the
person who will be the holder of the proxy to receive the
transmission. Any such telegram, cablegram or other means of
electronic transmission must either set forth or be submitted with
information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the
shareholder. If it is determined that the telegram, cablegram or
other electronic transmission is valid, the persons appointed by the
Corporation to count the votes of shareholders and determine the
validity of proxies and ballots or other persons making those
determinations must specify the information upon which they relied.
(c) Any copy, communication by telecopier, or other reliable
reproduction of the writing or transmission created pursuant to
subparagraph (b), may be substituted for the original writing or
transmission for any purposes for which the original writing or
transmission could be used, if the copy, communication by telecopier, or
other reproduction is a complete reproduction of the entire original
writing or transmission.
SECTION 1.9 ACTION TAKEN WITHOUT A MEETING.
(a) Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if a written consent thereto
is signed by the holders of the voting power of the Corporation that would
be required at a meeting to constitute the act of the shareholders. Any
action required or permitted to be taken by the holders of any class or
series of shares of the Corporation may be taken without a meeting if a
written consent thereto is signed by the holders of a majority of the
outstanding shares of such class or series, except that if a different
proportion of voting power is required for such an action, then the
written consent of the holders of that portion of the outstanding shares
of such class or series shall be required. Whenever action is taken by
written consent, a meeting of shareholders need not be called or notice
given. The written consent may be signed in counterparts and must be filed
with the minutes of the proceedings of the shareholders.
(b) The board of directors may determine the record date of the
written consent for the purpose of determining the shareholders entitled
to deliver a consent, which date shall be no more than sixty (60) days
prior to the date of the first written consent executed. If the board does
not set a record date, it shall be the date of receipt by the Corporation
of the first written consent.
(c) A written consent is not valid unless it is:
(i) Signed by the shareholder;
(ii) Dated, as to the date of the shareholder's signature;
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(iii) Delivered to the Corporation, in the manner prescribed
herein, within sixty (60) days after the earliest date that the
first shareholder signed and delivered the written consent. Delivery
of a written consent may be made personally, by certified or
registered mail, return receipt requested, by any receipted delivery
service or by facsimile transmission to the Corporation=s principal
place of business. Any certificate required to be filed with the
Secretary of State of the State of Nevada must state that the
written consent has been effected in accordance with the provisions
of the laws of the State of Nevada.
ARTICLE II
DIRECTORS
SECTION 2.1 NUMBER AND QUALIFICATION. Unless a larger number is required
by the laws of the State of Nevada or the Articles of Incorporation or until
changed in the manner provided herein, the Board of Directors of the Corporation
shall consist of two (2) classes, Class A, which shall consist of not fewer than
one (1) or more than six (6), and Class B, which shall consist of not fewer than
one (1) or more than three (3), subject to adjustment upon a Trigger Event, as
provided in the Articles of Incorporation, as amended. The exact number of
directors of each Class any time, removal of directors and filling vacancies on
the Board of Directors shall be determined or effected as provided in the
Articles of Incorporation, as amended from time to time.
SECTION 2.2 ANNUAL AND REGULAR MEETINGS. Immediately following the
adjournment of, and at the same place as, the annual or any special meeting of
the shareholders at which directors are elected, the Board of Directors,
including newly elected directors, shall hold its annual meeting without notice,
other than this provision, to elect officers and to transact such further
business as may be necessary or appropriate. The Board of Directors may provide
by resolution the place, date, and hour for holding regular meetings between
annual meetings.
SECTION 2.3 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the chairman or the president and shall be called by the
chairman, the president or the secretary upon the request of any two (2)
directors. If the chairman refuses or, if there is no chairman, if both the
president and secretary refuse or neglect to call such special meeting within
five (5) business days of the request, a special meeting may be called by notice
signed by any two (2) directors.
SECTION 2.4 PLACE OF MEETINGS. Any regular or special meeting of the
directors of the Corporation may be held at such place as the Board of Directors
may designate or, in the absence of such designation, at the place designated in
the notice calling the meeting.
SECTION 2.5 NOTICE OF MEETINGS.
(a) Except as otherwise provided in Section 2.7, there shall be
delivered to all directors, at least forty-eight (48) hours before the
time of a meeting, a copy of a written notice of the meeting, by delivery
of such notice personally, by mailing such notice postage prepaid, or by
telegraph or telecopier. Such notice shall be addressed to each director
at the address appearing on the records of the Corporation. If mailed, the
notice shall be deemed
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delivered on the date the same is deposited in the United States mail,
postage prepaid. Any director may waive notice of any meeting, and the
attendance of a director at a meeting and oral consent entered on the
minutes of the meeting or taking part in deliberations of the meeting
without objection shall constitute a waiver of notice of such meeting.
Attendance for the express purpose of objecting to the transaction of
business thereat because the meeting is not properly called or convenient
shall not constitute presence nor a waiver of notice for purposes hereof.
(b) Whenever all persons entitled to vote at any meeting of
directors consent, either by:
(i) A writing on the records of the meeting or filed with
the secretary; or
(ii) Presence at such meeting and oral consent entered on the
minutes; or
(iii) Taking part in the deliberations at such meeting without
objection;
the actions taken at such meeting shall be as valid as if such had
occurred at a meeting regularly called and noticed.
(c) At such meeting any business may be transacted that is not
excepted from the written consent or to the consideration of which no
objection for want of notice is made at the time.
(d) If any meeting be irregular for want of notice or of such
consent, provided a quorum was present at such meeting, the proceedings of
the meeting may be ratified and approved and rendered likewise valid and
the irregularity or defect therein waived by a writing signed by all
parties having the right to vote at such meeting.
(e) Such consent or approval may be by proxy or attorney, but all
such proxies and powers of attorney must be in writing.
SECTION 2.6 QUORUM; ADJOURNED MEETINGS.
(a) A majority of the directors in office, provided that each of
Class A and Class B has at least one (1) representative, at a meeting duly
assembled, is necessary to constitute a quorum for the transaction of
business.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn the meeting, from time to
time, until a quorum is present, and no notice of such adjournment shall
be required. At any adjourned meeting where a quorum is present, any
business may be transacted which could have been transacted at the meeting
originally called.
SECTION 2.7 BOARD OF DIRECTORS' DECISIONS. The affirmative vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
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SECTION 2.8 TELEPHONIC MEETINGS. Members of the Board of Directors or of
any committee designated by the Board of Directors may participate in a meeting
of the Board of Directors or committee by means of a telephone conference or
similar method of communication by which all persons participating in such
meeting can hear each other. Participation in a meeting pursuant to this Section
2.13 constitutes presence in person at the meeting.
SECTION 2.9 ACTION WITHOUT MEETING. Any action required or permitted to be
taken at a meeting of the Board of Directors or of a committee thereof, or by
any Class of Directors, may be taken without meeting if, before or after the
action, a written consent thereto is signed by all of the members of the Board
of Directors, the committee or such Class, as the case may be. The written
consent may be signed in counterparts and must be filed with the minutes of the
proceedings of the Board of Directors or committee. A telegram, telex,
cablegram, or similar transmission by a director or member of a committee, or a
photographic, photostatic, facsimile, or similar reproduction of a writing
signed by a director or member of a committee, shall be regarded as signed by
the director or member of a committee for purposes of this section.
SECTION 2.10 POWERS AND DUTIES. Except as otherwise restricted by Nevada
law or the Articles of Incorporation, as amended, the Board of Directors shall
have full control over the affairs of the Corporation. The Board of Directors
may delegate any of its authority to manage, control or conduct the business of
the Corporation to any standing or special committee or to any officer or agent
and to appoint any person to be agents of the Corporation with such powers,
including the power to subdelegate, and upon such terms as may be deemed fit.
SECTION 2.11 COMPENSATION. The directors and members of committees shall
be allowed and paid all necessary expenses incurred in attending any meetings of
the Board of Directors or committees. Unless otherwise provided in the Articles
of Incorporation, the Board of Directors may fix by resolution the compensation
of directors for services in any capacity.
SECTION 2.12 BOARD OF DIRECTORS' OFFICERS.
(a) At its annual meeting, the Board of Directors may elect from
among its members, a chairman who shall preside at meetings of the Board
of Directors and may preside at meetings of the shareholders. The Board of
Directors may also elect such other officers of the Board of Directors and
for such terms as it may from time to time deem advisable.
(b) Any vacancy in any office of the chairman of the Board of
Directors because of death, resignation, removal or otherwise may be
filled by the Board of Directors for the unexpired portion of the term of
such office.
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SECTION 2.13 COMMITTEES OF DIRECTORS; CONDUCT OF BUSINESS.
(a) The Board of Directors may, by resolution or resolutions passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation,
which, to the extent provided in said resolution or resolutions, shall
have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall have
power to authorize the seal of the Corporation to be affixed to all papers
which may require it. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the
Board of Directors.
(b) Each committee may determine the procedural rules for meeting
and conducting its business and shall act in accordance therewith, except
as otherwise provided herein or required by the laws of the State of
Nevada. Adequate provisions shall be made for notice to members of all
meetings and all matters shall be determined by a majority vote of the
members present.
ARTICLE III
OFFICERS
SECTION 3.1 ELECTION. The Board of Directors, at its annual meeting, shall
elect a chairman of the board, a president and chief executive officer, a
secretary and a treasurer to hold office for a term of one (1) year or until
their successors are chosen and qualify. Any individual may hold two or more
offices. The Board of Directors may, from time to time, by resolution, elect one
or more vice-presidents, assistant secretaries and assistant treasurers and
appoint agents of the Corporation, prescribe their duties and fix their
compensation.
SECTION 3.2 REMOVAL; RESIGNATION. Any officer or agent elected or
appointed by the Board of Directors may be removed by it with or without cause.
Any officer may resign at any time upon written notice to the Corporation. Any
such removal or resignation shall be subject to the rights, if any, of the
respective parties under any contract between the Corporation and such officer
or agent.
SECTION 3.3 VACANCIES. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
SECTION 3.4 CHAIRMAN OF THE BOARD. The chairman of the board shall, in the
absence of the president, preside at all meetings of the shareholders and of the
Board of Directors. The chairman of the board shall have the authority to agree
upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation; and the chairman of the board shall
have such other powers and duties as designated in accordance with these Bylaws
and as from time to time may be assigned to the chairman of the board by the
Board of Directors.
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SECTION 3.5 PRESIDENT.
(a) The president shall be the chief executive of the Corporation
(and, in his discretion, may use either title), subject to the supervision
and control of the Board of Directors, and shall have general executive
charge, management and control over the properties, business and
operations of the Corporation with all such powers as may be reasonably
incident to such responsibilities. The president may agree upon and
execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation and may sign all certificates
for shares of stock of the Corporation; and shall have such other powers
and duties as designated in accordance with these Bylaws and as from time
to time may be assigned to the president by the Board of Directors.
(b) The president shall have full power and authority on behalf of
the Corporation to attend and to act and to vote, or designate such other
officer or agent of the Corporation to attend and to act and to vote, at
any meetings of the shareholders of any corporation in which the
Corporation may hold stock and, at any such meetings, shall possess and
may exercise any and all rights and powers incident to the ownership of
such stock. The Board of Directors, by resolution from time to time, may
confer like powers on any person or persons in place of the president to
exercise such powers for these purposes.
SECTION 3.6 VICE-PRESIDENTS. Each vice-president shall at all times
possess power to sign all certificates, contracts and other instruments of the
Corporation, except as otherwise limited in writing by the Board of Directors or
the president of the Corporation. Each vice-president shall have such other
powers and duties as from time to time may be assigned to such vice-president by
the Board of Directors or the president.
SECTION 3.7 SECRETARY. The secretary shall keep the minutes of all
meetings of the Board of Directors, committees of the Board of Directors and the
shareholders, in books provided for that purpose; shall attend to the giving and
serving of all notices; may in the name of the Corporation affix the seal of the
Corporation to all contracts and attest to the affixation of the seal of the
Corporation thereto; may sign with the other appointed officers all certificates
for shares of stock of the Corporation; shall have charge of the certificate
books, transfer books and stock ledgers, and such other books and papers as the
Board of Directors may direct, all of which shall at all reasonable times be
open to inspection of any director at the office of the Corporation during
business hours; shall have such other powers and duties as designated in these
Bylaws and as from time to time may be assigned to the secretary by the Board of
Directors or the president; and shall in general perform all acts incident to
the office of secretary, subject to the control of the Board of Directors or the
president.
SECTION 3.8 ASSISTANT SECRETARIES. Each assistant secretary shall have the
usual powers and duties pertaining to such offices, together with such other
powers and duties as designated in these Bylaws and as from time to time may be
assigned to an assistant secretary by the Board of Directors, the president or
the secretary. The assistant secretaries shall exercise the powers of the
secretary during that officer's absence or inability or refusal to act.
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SECTION 3.9 TREASURER.
(a) The treasurer shall be the chief financial officer of the
Corporation (and, in his discretion, may use either title), subject to the
supervision and control of the Board of Directors, and shall have custody
of all the funds and securities of the Corporation. When necessary or
proper, the treasurer shall endorse on behalf of the Corporation for
collection checks, notes, and other obligations, and shall deposit all
monies to the credit of the Corporation in such bank or banks or other
depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the Corporation. Unless
otherwise specified by the Board of Directors, the treasurer may sign with
the president all bills of exchange and promissory notes of the
Corporation, shall also have the care and custody of the stocks, bonds,
certificates, vouchers, evidence of debts, securities, and such other
property belonging to the Corporation as the Board of Directors shall
designate, and shall sign all papers required by law, by these Bylaws, or
by Board of Directors to be signed by the treasurer. The treasurer shall
enter, or cause to be entered, regularly in the financial records of the
Corporation, to be kept for that purpose, full and accurate accounts of
all monies received and paid on account of the Corporation and, whenever
required by the Board of Directors, the treasurer shall render a statement
of any or all accounts. The treasurer shall at all reasonable times
exhibit the books of account to any director of the Corporation and shall
perform all acts incident to the position of treasurer subject to the
control of the Board of Directors.
(b) The treasurer shall, if required by the Board of Directors, give
bond to the Corporation in such sum and with such security as shall be
approved by the Board of Directors for the faithful performance of all the
duties of treasurer and for restoration to the Corporation, in the event
of the treasurer=s death, resignation, retirement or removal from office,
of all books, records, papers, vouchers, money and other property in the
treasurer=s custody or control and belonging to the Corporation. The
expense of such bond shall be borne by the Corporation.
SECTION 3.10 ASSISTANT TREASURERS. The Board of Directors may appoint one
or more assistant treasurers who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the treasurer. The Board of
Directors may require an assistant treasurer to give a bond to the Corporation
in such sum and with such security as it may approve, for the faithful
performance of the duties of assistant treasurer, and for restoration to the
Corporation, in the event of the assistant treasurer=s death, resignation,
retirement or removal from office, of all books, records, papers, vouchers,
money and other property in the assistant treasurer=s custody or control and
belonging to the Corporation. The expense of such bond shall be borne by the
Corporation.
SECTION 3.11 COMPENSATION. The Board of Directors shall have the power to
fix the compensation of officers directly or by delegation of such authority
which may be either general or specific.
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ARTICLE IV
CAPITAL STOCK
SECTION 4.1 ISSUANCE. Shares of the Corporation's authorized stock shall,
subject to any provisions or limitations of the laws of the State of Nevada, the
Articles of Incorporation or any contracts or agreements to which the
Corporation may be a party, be issued in such manner, at such times, upon such
conditions and for such consideration as shall be prescribed by the Board of
Directors.
SECTION 4.2 CERTIFICATES. Ownership in the Corporation shall be evidenced
by certificates for shares of stock in such form as shall be prescribed by the
Board of Directors, shall be under the seal of the Corporation and shall be
manually signed by the president or a vice-president and also by the secretary
or an assistant secretary; provided, however, whenever any certificate is
countersigned or otherwise authenticated by a transfer agent or transfer clerk,
and by a registrar, then a facsimile of the signatures of said officers of the
Corporation may be printed or lithographed upon the certificate in lieu of the
actual signatures. If the Corporation uses facsimile signatures of its officers
on its stock certificates, it shall not act as registrar of its own stock, but
its transfer agent and registrar may be identical if the institution acting in
those dual capacities countersigns any stock certificates in both capacities.
Each certificate shall contain the name of the record holder, the number,
designation, if any, class or series of shares represented, a statement or
summary of any applicable rights, preferences, privileges or restrictions
thereon, and a statement, if applicable, that the shares are assessable. All
certificates shall be consecutively numbered. If provided by the shareholder,
the name, address and federal tax identification number of the shareholder, the
number of shares, and the date of issue shall be entered in the stock transfer
records of the Corporation.
SECTION 4.3 SURRENDERED, LOST OR DESTROYED CERTIFICATES. All certificates
surrendered to the Corporation, except those representing shares of treasury
stock, shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been canceled, except that in
case of a lost, stolen, destroyed or mutilated certificate, a new one may be
issued therefor. However, any shareholder applying for the issuance of a stock
certificate in lieu of one alleged to have been lost, stolen, destroyed or
mutilated shall, prior to the issuance of a replacement, provide the Corporation
with the shareholder=s affidavit of the facts surrounding the loss, theft,
destruction or mutilation and, if required by the Board of Directors, an
indemnity bond in an amount not less than twice the current market value of the
stock, and upon such terms as the treasurer or the Board of Directors shall
require, to indemnify the Corporation against any loss, damage, cost or
inconvenience arising as a consequence of the issuance of a replacement
certificate.
SECTION 4.4 REPLACEMENT CERTIFICATE. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the Corporation or it becomes
desirable for any reason, in the discretion of the Board of Directors,
including, without limitation, the merger of the Corporation with another
corporation or the reorganization of the Corporation, to cancel any outstanding
certificate for shares and issue a new certificate therefor conforming to the
rights of the holder, the Board of Directors may order any holders of
outstanding certificates for shares to surrender and exchange the same for new
certificates within a reasonable time to be fixed by the Board of Directors. The
order may provide that a holder of any certificate(s) ordered to be surrendered
shall not be entitled to vote, receive distributions or exercise any other
rights of shareholders of record until the holder has complied with the order,
but the order operates to suspend such rights only after notice and until
compliance.
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SECTION 4.5 TRANSFER OF SHARES. No transfer of stock shall be valid as
against the Corporation except on surrender and cancellation of the certificates
therefor accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer in the records of the
Corporation.
SECTION 4.6 TRANSFER AGENT; REGISTRARS. The Board of Directors may appoint
one or more transfer agents, transfer clerks and registrars of transfer and may
require all certificates for shares of stock to bear the signature of such
transfer agent, transfer clerk and/or registrar of transfer.
SECTION 4.7 MISCELLANEOUS. The Board of Directors shall have the power and
authority to make such rules and regulations not inconsistent herewith as it may
deem expedient concerning the issue, transfer, and registration of certificates
for shares of the Corporation's stock.
ARTICLE V
DISTRIBUTIONS
SECTION 5.1 Distributions may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of Directors
may fix in advance of a record date, as provided in Section l.6, prior to the
distribution for the purpose of determining shareholders entitled to receive any
distribution.
ARTICLE VI
RECORDS; REPORTS; SEAL; AND FINANCIAL MATTERS
SECTION 6.1 RECORDS. All original records of the Corporation shall be kept
by or under the direction of the secretary or at such places as may be
prescribed by the Board of Directors.
SECTION 6.2 DIRECTORS' AND OFFICERS' RIGHT OF INSPECTION. Every director
and officer shall have the absolute right at any reasonable time for a purpose
reasonably related to the exercise of such individual's duties to inspect and
copy all of the Corporation's books, records, and documents of every kind and to
inspect the physical properties of the Corporation and its subsidiary
corporations. Such inspection may be made in person or by agent or attorney.
SECTION 6.3 CORPORATE SEAL. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Use or non-use of a seal shall
not in any way affect the legality of any document.
SECTION 6.4 FISCAL YEAR-END. The fiscal year-end of the Corporation shall
be such date as may be fixed from time to time by resolution of the Board of
Directors.
SECTION 6.5 RESERVES. The Board of Directors may create, by resolution,
such reserves as the directors may, from time to time, in their discretion,
think proper to provide for contingencies, or to equalize distributions or to
repair or maintain any property of the Corporation, or for such other
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purpose as the Board of Directors may deem beneficial to the Corporation, and
the directors may modify or abolish any such reserves in the manner in which
they were created.
ARTICLE VII
INDEMNIFICATION, INSURANCE AND OTHER FINANCIAL ARRANGEMENTS
SECTION 7.1 INDEMNIFICATION.
(a) The Corporation shall indemnify any Director of the Corporation
who was or is a party (whether plaintiff, defendant or third party) or
witness, or is threatened to be made a party or witness to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the right of
the Corporation, by reason of the fact that the Director is or was a
director, officer, shareholder, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise (whether or not for profit), or by reason of anything done or
not done by the Director in any such capacity or capacities, against
expenses, including attorneys= fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by the Director in connection
with the action, suit or proceeding if the Director acted in good faith
and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or
her conduct was illegal. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, does not, of itself, create a presumption
that the person did not act in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation, and that, with respect to an criminal action or proceeding,
he or she had reasonable cause to believe that his or her conduct was
unlawful.
The Corporation shall indemnify any Director of the Corporation who
was or is a party (whether plaintiff, defendant or third party) or
witness, or is threatened to be made a party or witness to any threatened,
pending or completed action or suit by or in the right of the Corporation
to procure a judgment in its favor by reason of the fact that the Director
is or was a director, officer, shareholder, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise (whether or not for profit), or by reason of anything
done or not done by the Director in any such capacity or capacities,
against expenses, including amounts paid in settlement and attorneys= fees
actually and reasonably incurred by the Director in connection with the
defense or settlement of the action or suit if he or she acted in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation. Indemnification may not
be made for any claim, issue or matter as to which such a person has been
adjudged by a court of competent jurisdiction after exhaustion of all
appeals therefrom, to be liable to the Corporation or for amounts paid in
settlement to the Corporation, unless and only to the extent that the
court in which the action or suit was
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brought or other court of competent jurisdiction determines, upon
application, that in view of all of the circumstances of the case, the
person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
The expenses of Directors incurred in defending a civil or criminal
action, suit or proceeding shall be paid by the Corporation as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the Director
to repay the amount if it is ultimately determined by a court of competent
jurisdiction that the Director is not entitled to be indemnified by the
Corporation. The provisions of this paragraph do not affect any rights to
advancement of expenses to which corporate personnel other than Directors
may be entitled under any contract or otherwise by law.
The indemnification and advancement of expenses authorized by this
Article:
(i) Does not exclude any other rights to which a Director
seeking indemnification or advancement of expenses may be entitled
under any other Article of these Bylaws, the Articles of
Incorporation, agreement, vote of shareholders or disinterested
directors, insurance policy or otherwise, for either an action in
his or her official capacity or an action in another capacity while
holding his or her office, except that indemnification, unless
ordered by a court or for the advancement of expenses made pursuant
to this Article, may not be made to or on behalf of any Director if
a final adjudication establishes that his or her acts or omissions
involved intentional misconduct, fraud or a knowing violations of
the law and was material to the cause of action.
(ii) Continues for a person who has ceased to be a director or
officer and inures to the benefit of the estate, spouse, heirs,
executors, administrators and personal representatives of such a
person.
Any change or amendment in these Bylaws that would adversely affect
the rights granted to the indemnified person shall be prospective only and
shall not be operative to adversely affect any rights of any person
entitled to indemnification hereunder.
SECTION 7.2 INSURANCE. The Corporation shall use its best efforts to
purchase and maintain insurance or make other financial arrangements on behalf
of any Director who is or was a director, officer, shareholder, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise (whether or not for profit), or by reason of anything done or not
done by the Director in any such capacity or capacities, for any liability
asserted against him and liability and expenses incurred by him in his capacity
as a director, officer, shareholder, employee or agent, or arising out of his
status as such, whether or not the Corporation has the authority to indemnify
him against such liability and expenses.
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SECTION 7.3 OTHER FINANCIAL ARRANGEMENTS.
The other financial arrangements which may be made by the Corporation
pursuant to part (b) above may include, but are not limited to, the following:
(a) The creation of a trust fund;
(b) The establishment of a program of self-insurance;
(c) The securing of its obligations of indemnification by granting a
security interest or other lien on any assets of the Corporation; or
(d) The establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to this part (c) may provide
protection for a person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional misconduct,
fraud or a knowing violation of law, except with respect to the advancement of
expenses or indemnification ordered by a court.
Any insurance or other financial arrangement made on behalf of a person
pursuant to this Article may be provided by the Corporation or any other person
approved by the Board of Directors, even if all of the other person=s stock or
other securities is owned by the Corporation.
SECTION 7.4 GENERAL.
In the absence of intentional misconduct, fraud or a knowing violation of
law:
(a) The decision of the Board of Directors as to the propriety of
the terms and conditions of any insurance or other financial arrangement
made pursuant to parts (b) and (c) above and the choice of the person to
provide the insurance or other financial arrangement is conclusive; and
(b) The insurance or other financial arrangement:
(i) Is not void or voidable; and
(ii) Does not subject any director approving it to personal
liability for his or her action, even if a director approving the
insurance or other financial arrangement is a beneficiary of the
insurance or other financial arrangement.
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ARTICLE VIII
AMENDMENT OR REPEAL
SECTION 8.1 AMENDMENT. Except as otherwise restricted in the Articles
of Incorporation or these Bylaws:
(a) Subject to any Bylaws adopted by the shareholders of the
Corporation, any provision of these Bylaws may be altered, amended or
repealed at the annual or any regular meeting of the Board of Directors
without prior notice, or at any special meeting of the Board of Directors
if notice of such alteration, amendment or repeal is contained in the
notice of such special meeting.
(b) These Bylaws may also be altered, amended, or repealed at a duly
convened meeting of the shareholders by the affirmative vote of the
holders of a majority percent of the voting power of the Corporation
issued and outstanding and entitled to vote.
CERTIFICATION
The undersigned duly elected secretary of the Corporation does hereby
certify that the foregoing Bylaws were adopted by the Board of Directors on the
8th day of November, 1999.
/s/ JERRY M. CREWS
Jerry M. Crews, Secretary
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EXHIBIT 4.1
CERTIFICATE OF DESIGNATION
ESTABLISHING
SERIES A CONVERTIBLE PREFERRED STOCK
OF
TEXOIL, INC.
1. The name of the Corporation is Texoil, Inc., a Nevada corporation (the
"CORPORATION").
2. The Board of Directors of the Corporation duly adopted the following
resolutions by Unanimous Written Consent dated November 8, 1999:
WHEREAS, the Corporation's directors have reviewed and approved the
Designation of Preferences, Limitations and Rights of Series A Convertible
Preferred Stock of Texoil, Inc. ("CERTIFICATE"), attached hereto as EXHIBIT A
and incorporated herein by reference, delineating the number of shares, the
voting powers, designations, preferences and relative, participating, optional,
redemption, conversion, exchange, dividend or other special rights and
qualifications, limitations or restrictions of a series of Preferred Stock to be
issued by the Corporation and designated Series A Convertible Preferred Stock,
par value $0.01 per share (the "SERIES A PREFERRED STOCK");
RESOLVED, that 5,000,000 shares of authorized but unissued Preferred Stock
of the Corporation be designated Series A Preferred Stock and authorized for
issuance and that the Series A Preferred Stock have the rights, preferences,
limitations and restrictions set forth herein.
FURTHER RESOLVED, that the President or any Vice President of the
Corporation, individually or collectively, and the Secretary or Assistant
Secretary of the Corporation, individually or collectively, be, and such
officers hereby are, authorized and directed to execute, acknowledge, attest,
record and file with the Secretary of State of the State of Nevada a Certificate
of Designation in accordance with Section 78.1955 of the Nevada General
Corporation Law and to take all other actions that such officers deem necessary
to effectuate the Certificate of Designation and establish the Series A
Preferred Stock.
3. The authorized number of shares of Preferred Stock of the Corporation
is 10,000,000 and the number of shares of the Series A Preferred Stock, none of
which has been issued, is 5,000,000.
4. The resolutions set forth above have been duly adopted by all necessary
action on the part of the Corporation.
<PAGE>
IN WITNESS WHEREOF, Texoil, Inc. has caused this Certificate to be
executed by Frank A. Lodzinski, its President, and Jerry M. Crews, its
Secretary, this 8th day of November, 1999.
TEXOIL, INC.
By: /s/ FRANK A. LODZINSKI
Frank A. Lodzinski, President
ATTEST:
By: /s/ JERRY M. CREWS
Jerry M. Crews, Secretary
State of Texas )
)
County of Harris )
The foregoing instrument was acknowledged before me, on the 8th day of
November, 1999, by Frank A. Lodzinski, President, and Jerry M. Crews, Secretary
of Texoil, Inc., a Nevada corporation, on behalf of the corporation.
Given under my hand and official seal this 8th day of November, 1999.
/s/ TRACY L. DREWS
Notary Public in and for the
State of Texas
My Commission Expires:
03-15-2003
Seal
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EXHIBIT A
DESIGNATION OF PREFERENCES, LIMITATIONS AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
TEXOIL, INC.
1. SERIES A CONVERTIBLE PREFERRED STOCK. The Series A Convertible
Preferred Stock, par value $0.01 per share (the "SERIES A PREFERRED"), will
consist of 5,000,000 shares and will have the designations, preferences, voting
powers, relative, participating, optional or other special rights and
privileges, and the qualifications, limitations and restrictions set forth in
this Designation of Preferences, Limitations and Rights of Series A Convertible
Preferred Stock of Texoil, Inc. (the "CERTIFICATE").
2. DIVIDENDS AND DISTRIBUTIONS.
(A) The holders of record of shares of Series A Preferred (the
"HOLDERS") shall be entitled to receive dividends at a rate of nine percent (9%)
of the Conversion Value (as defined in SECTION 4(A) below) per annum per share
of Series A Preferred, out of funds legally available therefor, which shall be
fully cumulative, prior and in preference to any declaration or payment of any
dividend or other distribution on any other class or series of Preferred Stock
or Common Stock (excluding any stock subdivisions, combinations or
consolidations for which an adjustment is made under SECTION 4(D)(I) below and
subject to SECTION 2(B) below). The dividend(s) payable hereunder shall be
payable quarterly on March 31, June 30, September 30 and December 31 of each
year (each a "QUARTERLY DIVIDEND DATE"), commencing with December 31, 1999,
except that if any such date is a Saturday, Sunday or legal holiday then such
dividend shall be payable on the next day that is not a Saturday, Sunday or
legal holiday on which banks in the State of Texas are permitted to be closed (a
"BUSINESS DAY"), to Holders on the stock books of the Corporation 10 days
preceding the payment date for such dividends (the "RECORD DATE"). The foregoing
dividend on the Series A Preferred shall accrue from the date of issuance of
each share until the earlier of (i) the conversion of the Series A Preferred to
common shares, par value $0.01 per share ("COMMON STOCK") or Class B Common
Stock, par value $0.01 per share ("CLASS B COMMON STOCK") (Common Stock and
Class B Common Stock are sometimes collectively referred to in this Certificate
as "CONVERSION SHARES"), or (ii) the liquidation, distribution or winding up of
the Corporation. The dividends shall be payable in the manner set forth in
SECTION 2(B) below. The amount of dividends payable for any period that is
shorter or longer than a full quarter shall be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days elapsed
(including the first day but excluding the last day) occurring in the period for
which such amount is payable.
(B) All dividends payable on or before December 31, 2001 shall be
payable in shares of Series A Preferred (the "PAYMENTS-IN-KIND"), unless any
Holder elects to receive dividends payable in cash, which election must be made
in writing no later than ten (10) days after the original issuance of the shares
of Series A Preferred. Once a Holder elects to receive cash, it may not receive
Payments-in-Kind during such period. Dividends payable after December 31, 2001
shall be paid in the same form as previously paid to each Holder; provided that,
for each quarter, the Board of Directors may elect to pay the dividends in cash
by notifying the Holders of the Corporation's election to pay cash in lieu of
Payments-in-Kind for such Quarterly Dividend Date. Any such dividend election by
the Corporation for any particular
<PAGE>
Quarterly Dividend Date shall operate only for such Quarterly Dividend Date.
Each Payment-in-Kind shall be equal in amount to that number of shares of Series
A Preferred that is equal in number to the aggregate cash dividend that would be
payable on any such dividend date, assuming such dividend were being paid in
cash, divided by the Conversion Value (as defined in SECTION 4(A) below), and
shall be allocated on a pro rata basis to each Holder entitled to receive such
dividend. Certificates representing the shares of Series A Preferred issuable on
payment of any Payment-in-Kind shall be delivered to each Holder entitled to
receive such Payment-in-Kind (in appropriate denominations) promptly following
the Quarterly Dividend Date for which such Payment-in-Kind is to be made
hereunder.
(C) All cash dividends on shares of Series A Preferred shall be due
on the Quarterly Dividend Date. If cash dividends are not paid within ten (10)
days of the Quarterly Dividend Date, the unpaid dividend amount shall accrue
interest from and after each Quarterly Dividend Date at a rate of nine percent
(9%) per annum (compounded on a quarterly basis). All shares of Series A
Preferred to be issued as Payments-in-Kind that are not issued when due shall be
deemed for all purposes to have been issued on and to be outstanding from and
after the applicable Quarterly Dividend Date.
(D) If the Corporation pays any dividend on its Common Stock (other
than in shares of its Common Stock), the Corporation shall at the same time pay
a dividend on the Series A Preferred in an amount per share of Series A
Preferred equal to the amount of such dividend per share of Common Stock
multiplied by the number of shares of Common Stock into which each share of
Series A Preferred is then convertible.
3. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a
"Liquidation"), distributions shall be made to the Holders in respect of such
Series A Preferred before any amount shall be paid to the holders of any other
class or series of capital stock of the Corporation in the following manner:
(A) SERIES A PREFERRED. The Holders shall be entitled to be paid
first out of the assets of the Corporation available for distribution to holders
of its capital stock an amount per share equal to the greater of:
(I) the sum of (A) the Conversion Value, plus (B) all accrued
but unpaid dividends then owed (calculated through the date of
liquidation), plus any accrued and unpaid interest thereon, prior to any
distribution to the holders of any other Preferred Stock or Common Stock;
or
(II) the fair market value of the Corporation as determined by
an independent appraiser or investment banker experienced in the oil and
gas industry (an "INDEPENDENT EVALUATOR") selected by the Holders of at
least a majority of the then outstanding Series A Preferred (the
"REQUISITE INTEREST") and approved by the Board of Directors of the
Corporation, which approval shall not be unreasonably withheld, divided by
the total number of outstanding shares of Common Stock of the Corporation
(on a fully-diluted basis) and multiplied by the number of shares of
Common Stock into which each share of Series A Preferred is then
convertible.
If the proceeds from a Liquidation are not sufficient to pay to the
Holders at least the preference amount set forth in Section 3(a)(i), then such
Holders shall instead be entitled to receive the entire assets and funds of the
Corporation legally available for distribution to the
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holders of capital stock, which assets and funds shall be distributed ratably
among the Holders in proportion to the shares of Series A Preferred then held by
each of them.
(B) REMAINING ASSETS. After payment to the Holders of the amounts
set forth in SECTION 3(A) above, the entire remaining assets and funds of the
Corporation legally available for distribution, if any, shall be distributed
among the holders of Common Stock in proportion to the shares of Common Stock
then held by them.
(C) EVENTS DEEMED A LIQUIDATION. For purposes of this SECTION 3, the
Holders of a Requisite Interest may elect to have treated as a Liquidation (i)
the sale or other transfer in a single transaction or a series of related
transactions of all or substantially all of the assets of the Corporation, or
(ii) the sale of a majority of the Corporation's outstanding Common Stock in a
single transaction or a series of related transactions, or (iii) the merger,
consolidation or other reorganization of the Corporation with or into any other
entity unless the holders of the voting securities of the Corporation
outstanding immediately prior to such transaction continue to hold more than 50%
of the total voting securities of the surviving entity outstanding immediately
after such transaction. Upon the occurrence of any of the foregoing enumerated
events, the Corporation shall provide prompt written notice to the Holders, who
shall have ten (10) days to provide written notice to the Corporation of their
election under this SECTION 3(C).
(D) VALUATION OF SECURITIES AND PROPERTY. In the event the
Corporation proposes to distribute assets other than cash in connection with any
Liquidation, the value of the assets to be distributed to the Holders shall be
determined in good faith by the Board of Directors. The method of valuation of
securities subject to an investment letter or other restrictions on free
marketability shall be adjusted to make an appropriate discount to reflect the
fair market value thereof as determined in good faith by the Board of Directors.
The Holders of at least ten percent (10%) of the outstanding Series A Preferred
shall have the right to challenge any determination by the Board of Directors of
fair market value pursuant to this SECTION 3(D), in which case the determination
of fair market value shall be made by an Independent Evaluator selected jointly
by the Board of Directors and the challenging parties (or if they are unable to
agree, an Independent Evaluator selected by the American Arbitration
Association), the reasonable cost of such appraisal to be borne by the
Corporation.
4. CONVERSION. The Holders have conversion rights as follows (the
"CONVERSION RIGHTS"):
(A) RIGHT TO CONVERT. Each share of Series A Preferred shall
initially be convertible, at the option of the Holder thereof, at any time on or
after the date of issuance thereof, into the number of fully paid and
nonassessable shares of Common Stock which results from dividing the Conversion
Price (as hereinafter specified) per share in effect at the time of conversion
into the per share Conversion Value. The initial Conversion Price of the Series
A Preferred shall be $4.00 per share, and the Conversion Value of the Series A
Preferred shall be $8.00 per share. The initial Conversion Price of the Series A
Preferred shall be subject to adjustment from time to time as provided in
SECTION 4(D) hereof. The Conversion Value shall not be subject to adjustment.
Upon conversion, all accrued but unpaid dividends on a Holder's Series A
Preferred so converted, plus any accrued and unpaid interest thereon, shall, at
the option of such Holder, be paid in cash (to the extent permitted under
applicable corporate law) or converted into the number of fully paid and
nonassessable shares of Common Stock which results from dividing the Conversion
Price in effect at such time into the aggregate of all such accrued but unpaid
dividends and accrued and unpaid interest.
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(B) AUTOMATIC CONVERSION. At any time after December 31, 2002 that
(i) the Corporation's Net Equity Value equals or exceeds $121,500,000 and (ii)
the Corporation's Net Equity Value per share (Net Equity Value divided by the
number of shares of Common Stock outstanding on a fully-diluted basis) equals or
exceeds $10.00, each share of Series A Preferred shall automatically be
converted into the number of fully paid and nonassessable shares of Class B
Common Stock which results from dividing the Conversion Price per share in
effect at the time of conversion into the per share Conversion Value. For
purposes of this SECTION 4, "NET EQUITY VALUE" shall be determined as of each
March 31, June 30, September 30 and December 31 and shall equal the sum of (A)
95% of the present value, using a 10% discount rate, of the estimated future net
revenues from the Corporation's proved developed producing reserves, (B) 50% of
the present value, using a 10% discount rate, of the estimated future net
revenues from the Corporation's proved developed nonproducing reserves ("PDNP
VALUE"), (C) 25% of the present value, using a 10% discount rate, of the
estimated future net revenues from the Corporation's proved undeveloped reserves
("PUD VALUE"), and (D) the Corporation's current assets; LESS the sum of (Y) the
Corporation's current liabilities and (Z) the Corporation's long-term
liabilities (exclusive of deferred taxes); provided, however, that, for purposes
of determining Net Equity Value, the sum of the PDNP Value and the PUD Value
shall not exceed three-sevenths (3/7) of the value determined under clause (A)
of this sentence. In determining the value of the Corporation's oil and gas
reserves, (1) the definitions of reserve categories in the rules and regulations
of the Securities and Exchange Commission shall apply, (2) oil and gas prices
shall equal the futures prices quoted on the New York Mercantile Exchange for
the next succeeding 36 months from the date as of which the determination is
being made and then shall be held flat for periods thereafter and (3) operating
costs shall be escalated 2% per year for the next succeeding 3 years from the
date as of which the determination is being made and then shall be held flat for
periods thereafter. For purposes of determining Net Equity Value, the value of
the Corporation's proved oil and gas reserves shall be determined on the basis
set forth above as of each March 31, June 30 and September 30 by the Corporation
and as of each December 31 by an independent engineering firm approved by the
Board of Directors of the Corporation. If the Holders of a Requisite Interest
disagree with the Corporation's determination of Net Equity Value, then, within
30 days after receiving notice of the Corporation's determination, such Holders
shall give notice of such disagreement to the Corporation and shall determine
the Net Equity Value of the Corporation on the basis set forth above. The
Corporation will promptly furnish, or direct its independent engineering firm to
furnish, all information reasonably requested by such Holders. If the Net Equity
Value determined by such Holders is greater than or equal to 90% of the Net
Equity Value determined by the Corporation, then the Net Equity Value shall be
the average of the two valuations. If the Net Equity Value determined by such
Holders is less than 90% of the Net Equity Value determined by the Corporation,
then the Net Equity Value shall be determined by an Independent Evaluator
selected by such Holders and the Corporation (or if they are unable to agree, an
Independent Evaluator selected by the American Arbitration Association). The Net
Equity Value determined by the Independent Evaluator shall be final and binding
on the parties with respect to the valuation date in question. The reasonable
fees and expenses of the Independent Evaluator shall be borne by the
Corporation; otherwise, the Holders and the Corporation shall each bear their
own fees, costs and expenses (including fees and expenses of attorneys,
accountants and other professional advisors) incurred in connection with such
determination of Net Equity Value. Upon conversion, all accrued but unpaid
dividends (whether declared or undeclared) on a Holder's Series A Preferred,
plus any accrued and unpaid interest thereon shall, at the option of such
Holder, be paid in cash (to the extent permitted under applicable corporate law)
or converted into the number of fully paid and nonassessable shares of Class B
Common Stock which results from dividing the Conversion Price in effect at such
time into the aggregate of all such accrued but unpaid dividends and accrued and
unpaid interest.
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(C) MECHANICS OF CONVERSION. Before any Holder shall be entitled to
convert shares of Series A Preferred into shares of Common Stock and to receive
certificates therefor, such Holder shall surrender the certificate or
certificates therefor, duly endorsed, at the principal office of the Corporation
or of any transfer agent for the Series A Preferred, and shall give written
notice to the Corporation at such office that such Holder elects to convert the
same; PROVIDED, HOWEVER, that in the event of an automatic conversion pursuant
to SECTION 4(B) hereof, the outstanding shares of Series A Preferred shall be
converted automatically without any further action by the Holders and whether or
not the certificates representing such shares are surrendered to the Corporation
or its transfer agent; and provided further that the Corporation shall not be
obligated to issue certificates evidencing the shares of Class B Common Stock
issuable upon such automatic conversion unless and until the certificates
evidencing such shares of Series A Preferred are either delivered to the
Corporation or its transfer agent as provided above, or the Holder notifies the
Corporation or its transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement reasonably satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. The Corporation shall as soon as practicable
after such delivery, or after such agreement and indemnification, issue and
deliver at such office to such Holder a certificate or certificates for the
number of shares of Common Stock or Class B Common Stock, as the case may be, to
which it, he or she shall be entitled and, at the option of such Holder, either
a check payable to the Holder in the amount of any accrued but unpaid dividends
payable pursuant to SECTION 2 hereof, and any accrued and unpaid interest
thereon, or the number of fully paid and nonassessable shares of Common Stock or
Class B Common Stock, as the case may be, which results from dividing the
Conversion Price in effect at such time into the aggregate of all such accrued
but unpaid dividends and accrued and unpaid interest. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series A Preferred to be converted, or, in
the case of automatic conversion, simultaneously upon the occurrence of the
event leading to such automatic conversion, and the person or persons entitled
to receive the shares of Common Stock or Class B Common Stock, as the case may
be, issuable upon such conversion shall be treated for all purposes as the
holder or holders of such shares of Common Stock or Class B Common Stock, as the
case may be, on such date.
(D) ADJUSTMENTS TO CONVERSION PRICE.
(I) SPECIAL DEFINITIONS. For purposes of this SECTION 4(D),
the following definitions shall apply:
(1) "OPTIONS" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(2) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares or other securities convertible into or exchangeable
for Common Stock.
(3) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to SECTION 4(D)(III), deemed
to be issued) by the Corporation after the Original Issue Date, other than
shares of Common Stock issued or issuable:
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(A) upon conversion of shares of Series A
Preferred or Class B Common Stock;
(B) pursuant to a stock option or warrant
outstanding as of the Original Issue Date;
(C) as a dividend or distribution on shares of
Series A Preferred;
(D) in a transaction described in SECTION
4(D)(VI); or
(E) by way of dividend or other distribution on
shares of Common Stock excluded from the definition of
Additional Shares of Common Stock by the foregoing CLAUSES
(A), (B), (C), (D) or this CLAUSE (E).
(4) "ORIGINAL ISSUE DATE" shall mean the date on which
the first share of Series A Preferred was issued.
(II) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK. In the
event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix
a record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the exercise of
such Options or, in the case of Convertible Securities and Options
therefor, the exercise of such Options and conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date,
provided that Additional Shares of Common Stock shall not be deemed to
have been issued unless the consideration per share (determined pursuant
to SECTION 4(D)(IV) hereof) of such Additional Shares of Common Stock
would be less than the Conversion Price in effect immediately prior to
such issue or such record date, as the case may be, and provided further
that in any such case in which Additional Shares of Common Stock are
deemed to be issued:
(1) except as provided in SECTION 4(D)(II)(2), no
further adjustment in the Conversion Price of the Series A Preferred shall
be made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or exchange
of such Convertible Securities;
(2) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any change in
the consideration payable to the Corporation, or change in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof (other than under or by reason of provisions designed to protect
against dilution), the Conversion Price of the Series A Preferred computed
upon the original issue thereof (or upon the occurrence of a record date
with respect thereto) and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed to
reflect
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such increase or decrease insofar as it affects such Options or
the rights of conversion or exchange under such Convertible Securities;
and
(3) no readjustment pursuant to CLAUSE (2) above shall
have the effect of increasing the Conversion Price of the Series A
Preferred to an amount which exceeds the lower of (A) the Conversion Price
of the Series A Preferred on the original adjustment date related to such
Options or Convertible Securities or (B) the Conversion Price of the
Series A Preferred that would have resulted from any other issuance of
Additional Shares of Common Stock between the original adjustment date
related to such Options or Convertible Securities and such readjustment
date.
(III) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event the Corporation shall
issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to SECTION 4(D)(II)), then, and
in each such event, the Conversion Price in effect immediately prior to
such issue shall be adjusted to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be (1) the number of shares of Common Stock
outstanding immediately prior to such issue (determined on a fully diluted
basis) plus (2) (A) the aggregate consideration received by the
Corporation for the total number of Additional Shares of Common Stock
issued or deemed to be issued since the Original Issue Date divided by (B)
the Conversion Price in effect immediately prior to such issue, and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue (determined on a fully diluted
basis) plus the number of Additional Shares of Common Stock issued or
deemed to be issued since the Original Issue Date; provided that the
Conversion Price may never be adjusted to an amount greater than the
Conversion Price at the Original Issue Date as subsequently adjusted
pursuant to Sections 4(D)(V), (VI) and (VII) (without regard to any prior
or current adjustments pursuant to this Section 4(D)(III)).
(IV) DETERMINATION OF CONSIDERATION. For purposes of this
SECTION 4(D), the consideration received by the Corporation for the issue
of any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY: Such consideration shall be
computed as follows:
(A) insofar as it consists of cash, such
consideration shall be computed at the aggregate amount of
cash received by the Corporation;
(B) insofar as it consists of property other than
cash, such consideration shall be computed at the fair market
value thereof at the time of such issue, as determined by the
Board of Directors in the good faith exercise of its
reasonable business judgment; and
(C) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both,
such consideration shall be the proportion of such
consideration so received, computed as
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provided in CLAUSES (A) and (B) above, as determined by the
Board of Directors in the good faith exercise of its
reasonable business judgment.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares
of Common Stock deemed to have been issued pursuant to SECTION 4(D)(II),
relating to Options and Convertible Securities, shall be determined by
dividing
(A) the total amount, if any, received or
receivable by the Corporation as consideration for the issue
of such Options or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set forth in
the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities, by
(B) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities.
(3) FAIR MARKET VALUE. The Holders of a Requisite
Interest of the issued and outstanding Series A Preferred shall have the
right to challenge any determination by the Board of Directors of fair
market value pursuant to this SECTION 4(D), in which case such
determination of fair market value shall be made by an Independent
Evaluator selected jointly by the Board of Directors and the challenging
parties (or if they are unable to agree, an Independent Evaluator selected
by the American Arbitration Association), the reasonable cost of such
appraisal to be borne by the Corporation.
(V) SUBDIVISIONS, COMBINATIONS, OR CONSOLIDATION OF COMMON
STOCK. In the event the outstanding shares of Common Stock shall be
subdivided, combined or consolidated, by stock split, stock dividend,
combination or like event, into a greater or lesser number of shares of
Common Stock, the Conversion Price of the Series A Preferred in effect
immediately prior to such subdivision, combination or consolidation shall,
concurrently with the effectiveness of such subdivision, combination or
consolidation, be proportionately adjusted.
(VI) RECLASSIFICATIONS. In the case, at any time after the
date hereof, of any capital reorganization or any reclassification of the
stock of the Corporation (other than as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or
merger of the Corporation with or into another person (other than a
consolidation or merger (A) in which the Corporation is the continuing
entity and which does not result in any change in the Common Stock or (B)
which is treated as a liquidation pursuant to SECTION 3(C) above), the
shares of Series A Preferred shall, after such reorganization,
reclassification, consolidation or merger, be convertible into the kind
and number of shares of stock or other securities or property of the
surviving
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corporation or otherwise to which such Holder would have been
entitled if immediately prior to such reorganization, reclassification,
consolidation or merger such Holder had converted his shares of Series A
Preferred into Common Stock. In any such case, appropriate adjustment
shall be made in the application of the provisions of this SECTION 4 after
such reorganization, reclassification, consolidation or merger so that the
provisions of this SECTION 4 (including adjustments to the Conversion
Price) shall be applicable after such event and shall be as nearly
equivalent as practicable. The provisions of this SECTION 4(D)(VI) shall
similarly apply to successive reorganizations, reclassifications,
consolidations or mergers.
(VII) PREFERRED STOCK PURCHASE AGREEMENT. The Conversion Price
shall be adjusted as provided in the Preferred Stock Purchase Agreement
dated as of October 12, 1999 by and among the Corporation, Quantum Energy
Partners, LP, EnCap Equity 1996 Limited Partnership, Energy Capital
Investment Company PLC, V&C Energy Limited Partnership and the other
parties who are signatories thereto (the "PURCHASE AGREEMENT"), in the
event of any inaccuracy in or breach of the representations or warranties
made by the Corporation therein. A copy of the Purchase Agreement is
attached hereto as Annex 1 and incorporated herein by reference.
(E) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of the Series A Preferred
pursuant to this SECTION 4, the Corporation at its expense shall promptly
thereafter compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each Holder of Series A Preferred a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any Holder, furnish or cause to be furnished to
such Holder a like certificate setting forth (i) such adjustments and
readjustments, if any, (ii) the Conversion Price of the Series A Preferred at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of the Series A Preferred.
(F) STATUS OF CONVERTED STOCK. In case any shares of Series A
Preferred shall be converted pursuant to SECTION 4 hereof, the shares so
converted shall be canceled, shall not be reissuable as Series A Preferred and
shall become a part of the authorized, but unissued preferred stock of the
Corporation.
(G) FRACTIONAL SHARES. In lieu of any fractional shares in the
aggregate to which any Holder would otherwise be entitled upon conversion, the
Corporation shall pay cash equal to such fraction multiplied by the fair market
value of one share of Common Stock determined by the Board of Directors in the
good faith exercise of its reasonable business judgment.
(H) MISCELLANEOUS.
(I) All calculations under this SECTION 4 shall be made to the
nearest cent or to the nearest one hundredth (1/100) of a share, as the
case may be.
(II) No adjustment in the Conversion Price of the Series A
Preferred will be made if such adjustment would result in a change in such
Conversion Price of less than $0.01. Any adjustment of less than $0.01
which is not made shall be carried forward and shall be made at the time
of and together with any subsequent adjustment
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which, on a cumulative basis, amounts to an adjustment of $0.01 or more in
such Conversion Price.
(I) NO IMPAIRMENT. The Corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this SECTION 4 and in the
taking of all action as may be necessary or appropriate in order to protect the
conversion rights of the Holders against impairment.
(J) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock and Class B Common Stock, solely for the purpose of
effecting the conversion of the shares of Series A Preferred, such number of its
shares of Common Stock and Class B Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series A
Preferred. If at any time the number of authorized but unissued shares of Common
Stock or Class B Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of Series A Preferred, the Corporation will take
such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock or Class B Common Stock, as the case may be, to
such number of shares as shall be sufficient for such purpose.
5. VOTING RIGHTS.
(A) GENERAL. To the extent required by law or by SECTION 5(B) or
SECTION 9 hereof, the Holders will be entitled to vote on all matters as a
separate class or series. On all matters other than matters set forth in SECTION
5(B), the Holders of Series A Preferred will also vote together with the holders
of Common Stock as a single class and each share of Series A Preferred will
entitle the Holder to the number of votes per share equal to the full number of
shares of Common Stock into which each share of Series A Preferred is
convertible on the record date for such vote. The Holders of Series A Preferred
shall receive notice of and shall be entitled to attend in person or by proxy
any meeting of the holders of Common Stock.
(B) VOTING FOR DIRECTORS. For so long as at least the "Threshold
Amount" (as defined below) of Series A Preferred is outstanding, the Holders of
a Requisite Interest, voting as a separate class, shall be entitled to elect the
Class B directors to the Board of Directors of the Corporation in accordance
with the Corporation's Amended and Restated Articles of Incorporation (the
"ARTICLES OF INCORPORATION"). Any vacancies on the Board of Directors resulting
from the death, resignation, disqualification or removal of any Class B
director, and any vacancies resulting from an increase in the number of Class B
directors, may be filled by a majority of the remaining Class B directors,
though less than a quorum, or by the Holders of a Requisite Interest. Class B
directors may be removed from the Board of Directors at any time, with or
without cause, by the vote or consent of the Holders of not less than two-thirds
(2/3) of the voting power of the issued and outstanding Series A Preferred.
"THRESHOLD AMOUNT" shall mean at least ten percent (10%) of the sum of (a) the
shares of Series A Preferred issued on the Original Issue Date, and (b) the
number of additional shares of Series A Preferred issued to the Holders as
dividends or pursuant to other adjustments in accordance with the provisions of
this Certificate or the Purchase Agreement.
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(C) AMENDMENT. Any amendment to this Certificate may be made solely
by a vote of the Board of Directors of the Corporation and the Holders of at
least ninety percent (90%) of the then outstanding Series A Preferred (a
"SUPERMAJORITY INTEREST"), by duly called meeting or by written consent.
6. LIQUIDATION RIGHTS.
(A) RIGHT TO LIQUIDATION. At anytime after April 1, 2004, the
Holders of a Requisite Interest may elect to require the Corporation to use its
best efforts to liquidate (the "LIQUIDATION RIGHT") all or any portion of the
shares of Series A Preferred at a price per share equal to the Liquidation Price
(as defined herein). As used in this SECTION 6, the term "liquidation" refers to
the liquidation of the Series A Preferred held by the Holders either by
redemption by the Corporation or by sale by the Holders pursuant to a registered
public offering, in either case on the terms set forth herein, and not to a
liquidation of the Corporation. The Holders of a Requisite Interest may require
the Corporation to effect the Liquidation Right by giving written notice to the
Corporation of such election (a "LIQUIDATION NOTICE"). Upon receipt of a
Liquidation Notice, the Corporation will use its best efforts to liquidate the
shares of Series A Preferred specified in such Liquidation Notice as soon as
practicable and in all events within nine (9) months of the Corporation's
receipt of the Liquidation Notice. The Corporation shall give the Holders not
less than forty-five (45) days' notice of the date estimated for liquidation of
the Series A Preferred (the "LIQUIDATION DATE"). Upon the occurrence of a
"Trigger Event" (as defined in SECTION 6(G)), the Holders' sole remedy shall be
the right of increased voting power of the Class B directors elected by the
Holders, as set forth in the Articles of Incorporation; provided that the
limitation contained in this sentence shall not limit any other rights or
privileges the Holders may have under this Certificate, the Purchase Agreement
or any other agreement between the Corporation and a Holder.
(B) LIQUIDATION PRICE. The Holders shall be entitled to receive from
the Corporation an amount in cash for each share of Series A Preferred to be
liquidated (the "LIQUIDATION PRICE") equal to the greater of (i) the Fair Market
Value of the Corporation as of the Valuation Date (as hereinafter defined), as
determined in accordance with SECTION 6(C) hereof, divided by the total number
of outstanding shares of Common Stock of the Corporation (on a fully-diluted
basis) and multiplied by the number of shares of Common Stock into which each
share of Series A Preferred is convertible at the time the Liquidation Price is
paid or (ii) an amount per share of Series A Preferred equal to (A) the
Conversion Value plus (B) all accrued and unpaid dividends through the date of
liquidation plus any accrued and unpaid interest thereon ((A) and (B) in the
aggregate, the "REQUIRED RETURN"). The "VALUATION DATE " shall be the date 30
days prior to the Liquidation Date.
(C) FAIR MARKET VALUE. The "FAIR MARKET VALUE" of the Corporation
shall be determined as follows:
(I) Within 30 days after the date of the Corporation's notice
of the Liquidation Date, the Corporation, on the one hand, and the Holders
on the other hand, will independently determine the Fair Market Value of
the Corporation as of the Valuation Date and each shall provide a written
analysis of such value to the other party. The Corporation will promptly
furnish, or direct its independent engineering firm to furnish, all
information reasonably requested by the Holders. If the difference between
the two valuations is less than 10% of the lower valuation, the Fair
Market Value of the Corporation shall be the average of the two
valuations. If either party fails to deliver a written notice of valuation
to the other party within the 30-day period, such party shall be
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deemed to consent and agree to the valuation submitted by the other party,
which shall be the Fair Market Value of the Corporation for purposes of
this SECTION 6.
(II) If the difference between the two valuations is greater
than 10% of the lower valuation, the parties agree to engage an
Independent Evaluator mutually acceptable to each of them (or if they are
unable to agree, an Independent Evaluator selected by the American
Arbitration Association) to value the Corporation. The Independent
Evaluator shall review the valuations submitted by the Corporation and the
Holders in accordance with SECTION 6(C)(I) and shall consider such
valuations as well as any other information it deems relevant in order to
determine the Fair Market Value of the Corporation. The Fair Market Value
of the Corporation as established by the Independent Evaluator shall be
final and binding on the parties; provided that, if the Independent
Evaluator fails to determine the Fair Market Value of the Corporation
prior to the Liquidation Date, then, at the option of either the
Corporation or the Holders of a Requisite Interest, the Fair Market Value
of the Corporation shall be redetermined, in which case the Corporation
shall establish a new Liquidation Date by notice as provided in SECTION
6(A), the Valuation Date shall be changed correspondingly and the process
for determining the Fair Market Value of the Corporation pursuant to
SECTION 6(C) shall be repeated. The reasonable fees and expenses of the
Independent Evaluator shall be borne by the Corporation; otherwise, such
Holders and the Corporation shall each bear their own fees, costs and
expenses (including fees and expenses of attorneys, accountants and other
professional advisors) incurred in connection with the appraisal and the
liquidation of the Holders' Series A Preferred.
(III) In all cases, the determination of the Fair Market Value
of the Corporation shall be made on a basis that (y) assumes that all of
the debts and obligations of the Corporation have been or will be
satisfied in full, and (z) in the event that the Corporation is a public
company, meaning that it is a company required to file periodic reports
with the Securities and Exchange Commission, at such time, takes into
account not only the market price of the Corporation's equity securities,
but also the underlying net asset value of the Corporation's properties.
(D) DIVIDENDS; RIGHTS OF HOLDERS. No shares of Series A Preferred
are entitled to any dividends accruing after the date on which the Liquidation
Price of such shares of Series A Preferred is paid. On such date, all rights of
the Holders will cease, and such shares of Series A Preferred will be deemed not
to be outstanding.
(E) REISSUANCE; NEW CERTIFICATES. Any shares of Series A Preferred
which are redeemed in accordance with the Liquidation Rights herein granted or
otherwise acquired by the Corporation will be canceled and will not be reissued,
sold or transferred, but will become part of the authorized but unissued
preferred stock of the Corporation. If fewer than the total number of shares of
Series A Preferred represented by any certificate are redeemed, a new
certificate representing the number of unredeemed shares of Series A Preferred
will be issued to the Holder thereof without cost to such Holder within three
(3) business days after surrender of the certificate representing the redeemed
shares.
(F) RATABLE OFFERS. Neither the Corporation nor any subsidiary will
redeem, repurchase or otherwise acquire any shares of Series A Preferred
pursuant to this SECTION 6, except as expressly authorized herein or pursuant to
a purchase offer made pro rata to all Holders of shares of Series A Preferred on
the basis of the number of shares of Series A Preferred owned by each such
Holder.
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(G) TRIGGER EVENT. A "TRIGGER EVENT" shall be deemed to have
occurred if, within nine months after the Corporation's receipt of a Liquidation
Notice, the Corporation shall have failed to accomplish either of the following:
(i) the completion of a registered public offering of the Conversion Shares on
terms acceptable to the Holders of a Requisite Interest pursuant to which the
Holders have received net proceeds in an amount sufficient to achieve the
Required Return per share of Series A Preferred held immediately prior to the
public offering, or (ii) the redemption of all of the Series A Preferred at or
above the Liquidation Price.
7. NOTICES OF RECORD DATE. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, the Corporation shall mail to each Holder, at least
twenty (20) days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the anticipated amount and character of such
dividend, distribution or right.
8. NOTICES. Any notice required or permitted by the provisions of this
Certificate to be given to the Holders shall be deemed given when deposited in
the United States mail, postage prepaid, and addressed to each Holder of record
at such Holder's address appearing on the books of the Corporation. Any notice
required or permitted by the provisions of this Certificate to be given to the
Corporation shall be deemed given when deposited in the United States mail,
postage prepaid, and addressed to the Corporation at its registered office or
its principal place of business.
9. APPROVAL OF CERTAIN TRANSACTIONS WHILE SERIES A PREFERRED IS
OUTSTANDING.
(A) REQUISITE INTEREST. So long as at least the Threshold Amount of
Series A Preferred is outstanding, the Corporation shall not, without first
obtaining the written approval of the Holders of a Requisite Interest, voting as
a separate class, take any action to:
(I) create any new class or series of shares that has a
preference over or is on a parity with the Series A Preferred with respect to
voting, dividends, liquidation preferences or otherwise;
(II) issue any shares of capital stock of the Corporation,
including Common Stock and any series of Preferred Stock, whether now authorized
or not, or any rights, options or warrants to purchase shares of Common Stock or
Preferred Stock, or any securities of any type whatsoever that are, or may
become, convertible into or exchangeable for shares of Common stock or Preferred
Stock; PROVIDED, HOWEVER, that the Corporation may issue (i) shares of capital
stock to the Holders in connection with the conversion of the Series A Preferred
or as a dividend or distribution on the Series A Preferred; (ii) securities in
connection with stock options or warrants outstanding as of the date hereof;
(iii) stock issued in connection with any stock split, stock dividend or
recapitalization by the Corporation; and (iv) shares of Common Stock (not
including any rights, options, warrants or other securities convertible into or
exchangeable for Common Stock) at a purchase price per share of such Common
Stock for cash or other consideration the fair market value of which is greater
than or equal to 150% of the Conversion Price then in effect;
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(III) repurchase, redeem or retire any shares of capital stock
of the Corporation other than the repurchase of shares of Series A Preferred
pursuant to the terms thereof;
(IV) authorize or pay any dividend or other distribution
(other than a stock dividend) with respect to the Preferred Stock or the Common
Stock (other than the dividends payable to the Holders as provided in this
Certificate);
(V) undertake, enter into or consummate (A) a consolidation or
merger of the Corporation with or into any other corporation or business entity
in which the holders of the voting securities of the Corporation outstanding
immediately after the Original Issue Date do not continue to hold more than
fifty percent (50%) of the total voting securities of the surviving entity
outstanding immediately after such transaction, (B) the sale or other transfer
in a single transaction or a series of related transactions of all or
substantially all of the assets of the Corporation, or (C) the liquidation,
dissolution, winding-up or reorganization of the Corporation; or
(VI) enter into or modify any commodity hedge transaction at a
price below $17.50 per barrel for crude oil or $2.10 per MMBtu for natural gas.
For purposes of SECTION 9(A)(II), the fair market value of non-cash
consideration to be paid for Common Stock shall be determined by the Board of
Directors of the Corporation, provided that the Holders of a Requisite Interest
of the issued and outstanding Series A Preferred shall have the right to
challenge any determination by the Board of Directors of fair market value
pursuant to SECTION 9(A)(II), in which case such determination of fair market
value shall be made by an Independent Evaluator selected jointly by the Board of
Directors and the challenging parties (or if they are unable to agree, an
Independent Evaluator selected by the American Arbitration Association), the
reasonable cost of such appraisal to be borne by the Corporation.
(B) SUPERMAJORITY INTEREST. So long as at least the Threshold Amount
of Series A Preferred is outstanding, the Corporation shall not, without first
obtaining the written approval of the Holders of a Supermajority Interest,
voting as a separate class, take any action to:
(I) alter the rights, preferences or privileges of the
Series A Preferred; or
(II) alter or amend the Articles of Incorporation, this
Certificate or the bylaws of the Corporation.
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ANNEX 1
