U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
TATUM PETROLEUM CORPORATION
---------------------------------------------
(Name of small business issuer in its charter)
Delaware 33-0117736
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
667-E Lakeview Plaza Boulevard
Worthington, OH 43085
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (614) 888-3637
----------------
Securities to be registered under Section 12(b) of the Act: None
------
Securities registered under Section 12(g) of the Act:
Common Stock, $.01 par value
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PART I
Item 1. Description of Business.
The Registrant was incorporated under the laws of Delaware on July 10, 1985
and became actively engaged in the exploration for and acquisition, development
and production of oil and gas upon the acquisition of its predecessor entities,
Tatum Petroleum Corporation, a California corporation ("Tatum of California")
incorporated November 28, 1984, and Power Ventures, Inc., a Colorado
corporation (and its wholly-owned subsidiary, Midnight Oil Company, a Colorado
corporation) on June 30, 1986. Tatum of California was previously active in
the exploration for and the operation of oil and gas properties.
From 1986 to 1991, the Registrant's class of common stock was registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (No. 0-
14788). In 1991, the Registrant deregistered its securities under the
Securities Exchange Act of 1934.
From 1986 to date, the Registrant has continued exploring for oil and gas,
operating oil and gas producing properties, and arranging for the sale of
production at the wellhead. O.I. Pipeline's, a wholly-owned subsidiary of
Tatum of Delaware, financial results are included in the Consolidated Financial
Statements set forth under Part F/S of this registration statement.
Three purchasers each represent in excess of 10% of the Registrant's total
oil and gas revenue for the fiscal years ended March 31, 1996 and 1995. These
purchasers are Quaker State, Energy Marketing Services, Inc. and East Ohio Gas
Company. Prices of Registrant's gas are generally set unilaterally by
purchasers based upon prevailing prices paid to producers in the area.
Competition
The Registrant's success is dependent upon competitive conditions in the
oil and gas industry, namely, the payment of lease bonuses, delay rentals,
location or surface damage payments, royalty rates, and charges by drilling-
contractors for drilling and completion of oil and gas wells. Most, if not all,
of the Registrant's competitors have financial resources and exploration and
development budgets that are substantially greater than those of the
Registrant, which may adversely affect the Registrant's ability to compete.
Therefore, companies with greater financial resources, staff and labor forces,
equipment and experience than the Registrant may be in a better position than
the Registrant to compete for acquisition or development of oil and gas
properties.
Employees and Consultants
The Registrant currently employs 5 full time individuals including the
Company's president. Two of these employees are located at the Company
headquarters in Worthington, Ohio along with 1 part-time employee. The
remaining 3 full-time employees are responsible for field operations.
2
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Item 2. Management's Discussion and Analysis or Plan or Operations.
Year Ended March 31, 1996 vs. 1995
Results of Operations
The Company had net income for the year ended March 31, 1996 totaling
$476,000 or $.05 per share of common stock, compared to $145,000 or $.01 per
share for the prior year. The increased net income during the current year was
primarily a result of increased drilling success and higher gas prices.
Revenues
Oil and gas sales for the current fiscal year totaled $3,083,000 compared
to revenues of $2,270,000 for the prior year for an increase of $813,000 or
35.8%. Oil production decreased from 36,227 barrels to 34,615 barrels for a
net loss of 1,612 barrels or 4.5%. Gas production for the current year totaled
1,039,039 MCFs compared to 673,151 MCFs for the prior year, a net gain of
364,888 MCFs or 54.2%. The gas production increase was primarily a result of
new wells drilled by the company. In addition, one exceptional well, drilled
close to the prior year end, accounted for 32% of this year's gas production,
compared to 8% of the prior year production. It should be noted, however, that
this exceptional well is expected to have a short production life. One other
reason for the increase in revenue is due to the unusually high gas prices at
year end.
Drilling arrangement income for the current year totaled $95,000, a
decrease of 47.2% (or $85,000) from prior year revenues of $180,000. This
decrease was due to the decrease of outside investors participating in the
current year drilling programs.
Management fee income increased from $107,000 to $114,000, during the
current fiscal year, for a 6.5% increase or $7,000. The increase in revenue is
a result of the Company managing additional wells that were brought into
production during the current fiscal year.
Costs and Expenses
Oil and gas production costs for the current year totaled $536,000 for a
4% (or $23,000) decrease over prior year costs of $559,000. The decreased
costs were primarily a result of plugging under performing wells. In addition,
the majority of new wells drilled during the current year were gas producing
wells which require less maintenance than oil producing wells.
General and administrative expenses totaled $653,000 for the current year
as compared to $554,000 for the prior year for a total increase of 18%. Nine
percent of this increase was due to additional legal fees incurred with regard
to the Company's lawsuit with Columbia Gas and additional geology costs
associated with the Columbia Gas bankruptcy claim. Four percent was due to
salary increases and the remaining 5% was a combination of increased accounting
fees, taxes and other expenses.
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Depreciation, depletion and amortization costs for the current year totaled
$495,000 for an increase of $92,000 (or 22.8%) over prior year costs of
$403,000. This increase was due to an increase in depreciable assets owned by
the Company, offset by revisions of reserve quantity estimates, primarily due
to the increase in the price of gas at year end.
Exploration costs and dry hole costs decreased a total of 1.4% from
$908,000 in the prior year to $895,000 during the current year. The Company's
approach to exploration has not changed significantly from the prior year.
Other Income
Other income for the current year totaled $63,000, an increase of 425% (or
$51,000) from prior year revenues of $12,000. This increase was due to the
gain realized during the current year on the sale of two fully depreciated
assets, one well and one truck, and the sale of equipment inventory.
Liquidity and Capital Resources
During the fiscal year ended March 31, 1996, the Company experienced a
decrease in working capital from a deficiency of $(323,000) in the prior year
to $(411,000) in the current year. This decrease of $88,000 was due in general
to the increase in accounts payable at March 31, 1996, resulting from increased
drilling activity at year end. Cash as of March 31, 1996 was $416,000, a
$91,000 increase over the prior year of $325,000. This was primarily due to an
increase in cash provided by operations, which increased from $780,000 for the
year ended March 31, 1995 to $1,284,000 for the year ended March 31, 1996.
This was due primarily to the increased drilling success in the current year
and higher gas prices.
The Company used it's line-of-credit along with outside investors to
facilitate the drilling of 18 wells during fiscal year 1996. Four of these
wells were dry holes. Of the fourteen commercial wells, the Company retained
an average of 60.36% working interest.
The Company anticipates continuing the use of outside investors and bank
borrowings to facilitate its working capital needs and its drilling activities
for the next fiscal year.
Year Ended March 31, 1995 vs. 1994
Results of Operations
The Company had net income for the year ended March 31, 1995 totaling
$145,000 or $.01 per share of common stock, compared to net income of $585,000
or $.06 per share for the prior year. The decreased gain during the current
year was primarily a result of increased seismic costs and the drilling of
numerous dry holes.
Revenues
Oil and gas sales for the current fiscal year totaled $2,270,000 compared
to revenues of $1,899,200 for the prior fiscal year for an increase of $370,800
or 19.5%. Oil production increased from 27,973 barrels to 36,227 barrels for
a net increase of 8,254 barrels or 29.5%. Gas production for the current year
totaled 673,151 MCFs compared to 497,495 MCFs for the prior year, a net
increase of 175,656 MCFs or 35.3%. These increases in production were
primarily a result of new wells drilled by the Company.
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Drilling arrangement income for the current year totaled $180,000, an
increase of 11.1% (or $18,000) from prior year revenues of $162,000. This
increase was due to the increased number of drilling programs undertaken by the
Company during the current fiscal year.
Management fee income increased from $83,500 to $107,000, during the
current fiscal year, for a 28.1% increase or $23,500. The increase in revenue
is a result of the Company managing additional wells that were brought into
production during the current fiscal year and an increase in the monthly
management fees charged to other working interest owners.
Costs and Expenses
Oil and gas production costs for the current year totaled $559,000 for a
0.6% (or $3,900) decrease over prior year costs of $562,900. The Company re-
evaluated profitability of it's existing wells and shut-in or plugged and
abandoned several wells which were not operating as profitably as expected.
This practice resulted in costs remaining virtually the same in spite of
additional new wells coming on line.
General and administrative expenses totaled $554,000 for the current year
as compared to $564,000 for the prior year for a total decrease of 1.8%. These
costs remained fairly consistent as the Company made no meaningful changes in
day to day operations.
Depreciation, depletion and amortization costs for the current year totaled
$403,000 for an increase of $49,700 (or 14.1%) over prior year costs of
$353,300. This increase was due to an increase in depreciable assets owned by
the Company, in addition to recalculations of estimated reserve quantities.
Exploration and dry hole costs increased a total of 636.4% from $123,300
in the prior year to $908,000 during the current year. These costs increased
primarily due to the Company purchasing leases in two new areas of Ohio and
increasing its seismic study costs. In addition, a total of nine dry holes
were drilling during the current year, five of which were drilled in these two
areas in the Company s efforts to evaluate the new leases.
Other Income
Other income for the current year totaled $12,000, a decrease of 72,5% (or
$31,600) from the prior year of $43,600. This decrease was due to the gain
realized during the prior year on equipment sold from inventory and the sale of
two fully depreciated trucks.
Liquidity and Capital Resources
During the fiscal year ended March 31, 1995, the Company experienced a
decrease in working capital from $321,200 in the prior year to $(322,800) in
the current year. This decrease of $644,000 was due primarily to the following
changes: Fiscal year 1994 had no line-of-credit liability, had more cash and
inventory, and had no advances from working interest owners at year end.
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Cash as of March 31, 1995 was $325,400, a $133,600 decrease from the prior
year of $459,000. This was primarily due to timing of accounts payable
payments which were made prior to March 31, 1995 as opposed to payments made
shortly after the year end for fiscal 1994.
Cash provided by operations decreased from $792,400 for the year ended
March 31, 1994 to $780,000 for the year ended March 31, 1995. This 1.5% change
in cash was due to the offsetting balances of decreased net income with
increased DD&A, inventory and payables for fiscal year 1995.
The Company used it s line-of-credit along with outside investors to
facilitate the drilling of 20 wells during fiscal year 1995. Nine of these
wells were dry holes, however, of the eleven commercial wells, the Company
retained an average of 60.45% working interest.
The Company anticipates continuing the use of outside investors and bank
borrowings to facilitate its working capital needs and its drilling activities
for the next fiscal year.
Item 3. Description of Property.
Developed Acreage
The following summarizes the Registrants developed oil and gas acreage as
of March 31, 1996:
State Gross Acres (1) Net Acres (1)
----- --------------- -------------
Ohio 4,032.27 2,736.53
Undeveloped Acreage
The following summarizes the Registrant's undeveloped oil and gas acreage
as of March 31, 1996:
State Gross Acres (1) Net Acres (1)
----- --------------- -------------
Ohio 18,832.17 18,832.17
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Productive Wells
At March 31, 1996, the Registrant held an interest in the oil and gas wells
summarized below:
State Gross Wells (2) Net Wells (2)
----- --------------- -------------
Ohio 78 50.7
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(1) Gross Acres represents the total acreage under a lease. Net Acres
represents the aggregate of percentage interests owned by the Registrant
(i.e., a 50% working interest in a lease covering 320 Gross Acres is
equivalent to 160 Net Acres).
(2) A Gross Well exists where a partial or fractional working interest is
owned. The total of Gross Wells is that number of wells in which a working
interest is owned. A Net Well exists where the sum of fractional
ownerships in Gross Wells equals one.
Drilling Activity
The following sets forth the Registrant's drilling activity during the last
two fiscal years.
Wells Drilled 1996 1995
------------- ---- ----
Gross Net Gross Net
----- --- ----- ---
Ohio 18 11.42 20 13.25
Productive Wells
----------------
Ohio 14 8.45 11 6.65
Oil and Gas Reserves
Information relating to the Registrant's proved oil and gas reserves is
presented below. The reserve data represents estimates only and should not be
construed as being exact.
The Registrant's unaudited oil and gas reserve information was prepared in
1995 and 1996 by Robert Williams, P.P.E., an independent petroleum engineer.
See the Independent Auditor's Report under Item F/S hereof.
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production. Moreover,
the standardized measure of discounted future net cash flows should not be
construed as the current market value of the Registrant's oil and gas reserves.
A market value determination would include many additional factors, including:
(i) anticipated future increases or decreases in oil and gas prices and
production and development costs; (ii) an allowance for return on investment;
(iii) the value of additional reserves, including reserves not considered
proved at the present, which may be recovered as a result of further
exploration and development activities; and (iv) other business risks. All of
the Registrant's oil and gas reserves are located in the continental United
States.
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The following is a summary of changes in the Registrant's interest in
proved reserve quantities.
Petroleum
Liquids Natural
(Barrels) Gas (mcf)
--------- ---------
Proved Reserves (developed and
undeveloped), April 1, 1994 130,000 1,814,000
New discoveries 49,000 2,379,000
Production (35,000) (673,000)
Revisions in previous estimates (45,000) (302,000)
-------- ---------
Proved Reserves (developed and
undeveloped), March 31, 1995 99,000 3,218,000
New discoveries 26,000 773,000
Production (35,000) (1,039,000)
Revisions in previous estimates 7,000 260,000
-------- ----------
Proved Reserves (developed and
undeveloped), March 31, 1996 97,000 3,212,000
======== ==========
The Company has elected to disclose only proved developed reserves as the
ultimate recovery of proved undeveloped reserves is uncertain.
The standardized measure of discounted future net cash flows, and changes
therein, related to proved oil and gas reserves are as follows:
March 31,
------------------------
1996 1995
--------- --------
Future cash flows $16,638,000 $9,474,000
Future production costs (3,023,000) (2,338,000)
Future income tax expenses (4,046,000) (1,831,000)
----------- ----------
Future net cash flows 9,569,000 5,305,000
10% annual discount for estimated
timing of cash flows (3,862,000) (1,538,000)
----------- ----------
Standardized measure of discounted
future net cash flows $5,707,000 $3,767,000
=========== ==========
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Primary changes in the standardized measure of discounted future net cash
flows are as follows:
March 31,
1996
----------
Standardized measure,
beginning of year $3,767,000
Sales of oil and gas, net of
production costs (2,546,000)
Net change due to revisions in
quantity estimates 547,000
Net change due to changes in price
and production costs 2,620,000
Net change in income taxes (2,214,000)
Extensions and discoveries 3,155,000
Accretion of discount 378,000
----------
Standardized measure, end of year $5,707,000
==========
Estimated future cash inflows are computed by applying year-end prices of
oil and gas to year-end quantities of proved reserves. Future price changes
are considered only to the extent provided by contractual arrangements.
Estimated future production costs are determined by estimating the expenditures
to be incurred in producing the proved oil and gas reserves at the end of the
year, based on year-end costs and assuming continuation of existing economic
conditions. Estimated future income tax expenses are calculated by applying
year-end statutory tax rates (adjusted for permanent differences and tax
credits) to estimated future pre-tax net cash flows, less net operating loss
carryforwards related to proved oil and gas reserves, less the tax basis of the
properties involved.
It should be recognized that applying current costs and prices and a ten
percent standard discount rate allows for comparability but does not convey
absolute value. The discounted amounts arrived at are only one measure of the
value of proved reserves.
Regarding the information concerning estimated reserve quantities and
discounted future net cash flows, the Registrant has no long-term supply
contracts with foreign governments or any interest in equity affiliates
involved in oil and gas producing activities.
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Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a)(b) Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of March 28, 1996 the ownership of the
Registrant's Common Stock by (i) each Director of the Registrant, (ii) all
Executive Officers and Directors of the Registrant as a group, and (iii) all
persons known by the Registrant to own more than 5% of the Registrant's Common
Stock.
Beneficial Ownership (1)
------------------------
Name Number of Shares Percentage
---- ---------------- ----------
Zachary T. Tatum 5,566,622 (2) 53.0%
667-E Lakeview Plaza Blvd.
Worthington, OH 43085
John E. Reynolds 88,056 Nil
11711 Woodruff Ave.
Downey, CA 90241
Charles R. Tatum 1,087,190 10.0%
625 Hotel Circle
San Diego, CA 92108
Lori J. Powell 0 0
667-E Lakeview Plaza Blvd.
Worthington, OH 43085
All Directors and Officers 5,654,678 54.3%
as a Group (3 persons)
_________________________________
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934. Unless otherwise stated below, each such person has sole voting and
investment power with respect to all such shares. Under Rule 13d-3(d),
shares not outstanding which are subject to options, warrants, rights or
conversion privileges exercisable within 60 days are deemed outstanding for
the purpose of calculating the number and percentage owned by such person,
but are not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed.
(2) Includes 1,447,592 shares held by Tatum Petroleum Ohio, 356,872 shares held
by Energy Exploration Corporation, 490,959 shares held by Strata
Exploration Corporation and 13,781 shares held by Devonian Exploration,
Inc., all or which may be deemed to be beneficially owned by Zachary T.
Tatum.
(c) Changes in Control.
No understandings. arrangements or agreements are known by management at
this time which would result in a change in control of the Registrant.
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Item 5. Directors, Executive Officers, Promoters and Control Persons.
(a)(b) Identification of Directors, Executive Officers and Significant
Employees.
The following sets forth certain information with respect to the officers
and directors of the Registrant.
Name Age Position
Zachary T. Tatum 43 President, Chief Financial Officer, Chief
Executive Officer and a Director since 1985
Lori J. Powell 37 Secretary, Treasurer and
a Director since 1995
John E. Reynolds 61 Director since 1985
The directors of the Registrant are elected to hold office until the next
annual meeting of shareholders and until their respective successors have been
elected and qualified. Officers of the Registrant are elected by the Board of
Directors and hold office until their successors are elected and qualified.
The Registrant has no audit or compensation committee.
Biographical information concerning each director and executive officer,
including business experience for the past five years is as follows:
Zachary T. Tatum graduated from California State University at Fullerton
in 1975 with a degree in business/marketing. After graduation, he was employed
part-time by Allison Drilling Company and worked in Eastern Colorado. In 1977,
he acquired a producing property in the Pyramid Hills Oil Field, Kings County,
California, which he operated until the property was sold in May, 1985. From
1979 to the present, he has been involved in sponsoring limited partnerships
and joint ventures to drill oil and gas wells in the States of California, Ohio
and West Virginia. Mr. Tatum is also president and a director of Energy
Exploration Corp., a Nevada corporation, of Strata Exploration, Inc., an Ohio
corporation, and of Tatum Petroleum Ohio, Inc., an Ohio corporation.
Lori J. Powell has been the Registrant's controller since 1991 and a
Director since 1995. She is responsible for the Registrant's financial
statements, filings, contracts and day to day accounting matters. Ms. Powell
obtained a B.S. degree from Azusa Pacific University in 1983.
John E. Reynolds is the president of Keyline Sales, Inc., Downey,
California, which sells plumbing supplies to the wholesale trade. Mr. Reynolds
is also an investor in other oil and gas ventures.
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(c) Family Relationships.
There are no family relationships between or among any officer and
director.
(d) Involvement in Certain Legal Proceedings.
No officer, director, significant employee, promoter or control person of
the Registrant has been involved in any event of the type described in Item
401(d) of Regulation S-B during the past five years.
Item 6. Executive Compensation.
(a) General.
(b) Summary Compensation Table.
The following table sets forth certain information regarding the
compensation paid or accrued by the Registrant to or for the account of the
Chief Executive Officer and each of the Officers of the Registrant whose total
annual compensation exceeded $100,000 during the fiscal years ended March 31,
1994, 1995 and 1996:
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------ ----------------------------------------------------
Name and Restricted
Principal Other Annual Stock Options/ LTIP All Other
Position Year Salary Bonuses($) Compensation Awards SARS Payouts($) Compensation
-------- ---- ------ ---------- ------------ -------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Zachary T. Tatum 1996 $300,000 -0- $ -0- -0- -0- -0- -0-
President and 1995 $300,000 -0- $ -0- -0- -0- -0- -0-
Chief Executive 1994 $ 85,000 -0- $ -0- -0- -0- -0- -0-
Officer
</TABLE>
(c) Option/SAR Grants Table.
Not applicable.
(d) Aggregated Option/SAR Exercise and Fiscal Year-End Option/SAR Value
Table.
Not applicable.
(e) Term Incentive Plan ("LTIP") Awards Table.
Not applicable.
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(f) Compensation of Directors.
Standard Arrangements. The Registrant pays its directors $100 per
meeting of the Board of Directors attended. Directors also receive
reimbursement for out-of-pocket expenses incurred by them in connection with
the business of the Registrant.
Other Arrangements. The Registrant has no other arrangements pursuant to
which any director of the Registrant was compensated during the year ended
March 31, 1996, for services as a director.
(g) Employment Contracts and Termination of Employment and Change-in-
Control Arrangements.
None.
(h) Reporting on Repricing of Options/SARs.
Not Applicable.
Item 7. Certain Relationships and Related Transactions.
(a)(b) Transactions with Management and Others.
The Registrant transports a portion of its gas production over a gas
gathering system and a pipeline which are owned by SOL, Ltd., a company
affiliated with the Registrant's president. During the years ended March 31,
1996 and 1995, the Registrant paid approximately $226,000 and $159,000 in
gathering fees and $56,000 and $34,000 in compression fees for the Registrant's
share of gas transported over these lines to the entity.
On April 1, 1993, the Company sold its natural gas pipeline which is
separate from the gas gathering system and pipeline discussed above, to an
entity affiliated with the Company's President for $250,000. For financial
statement purposes, the Company realized a loss on this transaction of
approximately $86,000. Additional fees for Registrant gas transported over
this pipeline in the amount of $34,000 and 39,000 in 1996 and 1995,
respectively, have been forgiven for administration services the Registrant
provides the pipeline.
A party related to the Registrant provided seismic data with a value of
approximately $421,000 in return for a working interest ownership in certain
wells. The value was based on amounts paid by the related party to third
parties, and has been expensed in the Company s 1995 financial statements.
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(c) Parents of the Registrant.
Zachary T. Tatum may be deemed to be the parent of the Registrant. See
Item 4 above for information concerning the basis of control and percentage of
voting securities owned by Mr. Tatum.
(d) Transactions with Promoters.
Information required by Item 404 of Regulation S-B is not required to be
presented inasmuch as the Registrant has been organized for more than five
years.
Item 8. Description of Securities.
Common Stock
The Registrant is authorized to issue up to 15,000,000 shares of Common
Stock, $.01 par value. At March 31, 1996, there were 10,418,855 shares of
Common Stock issued and outstanding. All shares of Common Stock have equal
voting rights and, when validly issued and outstanding, have one vote per share
in all matters to be voted upon by shareholders. The shares of Common Stock
have no preemptive, subscription, conversion or redemption rights and may be
issued only as fully paid and non-assessable shares. Cumulative voting in the
election of directors is not allowed, which means that the holders of a
majority of the outstanding shares represented at any meeting at which a
quorum is present will be able to elect all of the directors if they choose to
do so and, in such event, the holders of the remaining shares will not be able
to elect any directors. On liquidation of the Registrant, each common
shareholder is entitled to receive a pro rata share of the Registrant's assets
available for distribution to common stockholders.
Dividend Policy
Dividends are payable on Common Stock when, as, and if declared by the
Board of Directors out of funds legally available to pay dividends, subject to
any preferences which may be given to holders of preferred stock. The
Registrant has paid no cash dividends to date and it does not anticipate
payment of cash dividends in the foreseeable future.
Stock Transfer Agent
American Securities Transfer and Trust, Denver, Colorado is the Transfer
Agent for the Common Stock.
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PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
(a) Market Information.
Since 1991, when the Registrant deregistered its securities with the
Securities and Exchange Commission, there has been no public market for the
Registrant's shares of common stock. Prior to 1991, the Registrants common
stock had traded only sporadically in the over-the-counter market. To the
Registrant's knowledge, such transactions as did occur may have been isolated
agency trades, or inter-dealer transactions, neither of which represent the
existence of a customary trading market.
(b) Holders.
The number of record holders of the Registrant's common stock on March 31,
1996 was 398.
(c) Dividends.
The Registrant has never paid dividends with respect to its common stock
and currently does not have any plans to pay cash dividends in the future as it
intends to retain future earnings to finance the growth of the business. There
are no contractual restrictions on the Registrant's present or future ability
to pay dividends. Future dividend policy is subject to the discretion of the
Board of Directors and is dependent upon a number of factors, including future
earnings, capital requirements and the financial condition of the Registrant.
Item 2. Legal Proceedings.
A lawsuit entitled Columbia Natural Resources, Inc. v. Tatum Petroleum
Corporation, et al., and assigned Case No. 5:93-CV-0234 in the United States
District Court for the Northern District of Ohio. The action involves claims
by Columbia Natural Resources that various leases were improperly acquired,
that its rights were defeated, and that the various defendants conspired to
defraud the plaintiff. Likewise, the defendants, including Tatum Petroleum
Corporation, have asserted a counterclaim against Columbia Natural Resources
for damages. The case and claims of Columbia Natural Resources had originally
been dismissed, but on appeal to the United States Court of Appeals the
decision was reversed and remanded for further proceedings. The prayer for
relief in the second amended complaint seeks an accounting, recovery of actual
and punitive damages, and RICO-enhanced damages. The prayer of the
counterclaim by Tatum Petroleum Corporation and others also seeks significant
damages against Columbia Natural Resources. It is the belief of counsel that
a reasonable chance exists for summary judgment on the complaint of Columbia
Natural Resources, and a dismissal of same, given the fact that the same Court
previously had dismissed the complaint of Columbia Natural Resources.
Litigation pending in the Holmes County, Ohio Common Pleas Court entitled
Yoder v. Stocker & Sitler Oil Co., et al., being Case No. 44-14987, in which a
third party complaint was filed against Tatum Petroleum Corporation and others
for indemnity. This case involves an original action by landowners to cancel
a lease, and the third party complaint for indemnity against Tatum Petroleum
Corporation and others, by Columbia, claims that the lease was defeated through
actions of Tatum. After trial, the landowner prevailed and obtained judgment
against Columbia and Stocker & Sitler, which was then appealed and has now been
settled. The third party action for indemnity against Tatum Petroleum
Corporation and others is still pending, scheduled for pretrial conference in
August and involves attempts by Columbia for reimbursement of the funds paid to
the plaintiffs and for its costs in defending the case. Counsel for Tatum
believes there is a reasonable opportunity to prevail in the third party
action, because Columbia voluntarily cancelled the lease in question, prior to
the original trial. Further, much of the judgment against Columbia was for
punitive damages, due to its own actions, which cannot be passed on through
third party action.
15
___________________________________________________________________________
<PAGE>
Item 3. Changes in and Disagreements with Accountants.
Since April 1987, the Registrant's independent accountants have not
resigned, been dismissed or declined to stand for reelection.
Item 4. Recent Sales of Unregistered Securities.
The Registrant has not sold any securities during the past three years.
Item 5. Indemnification of Directors and Officers.
Section 16 of the Registrant's Bylaws provides for the indemnification of
directors and officers of the Registrant as to all expenses incurred or imposed
upon them as a result of actions, suits or proceedings if they act in good
faith and in a manner they reasonably believe to be in or not opposed to the
best interests of the Registrant. The Securities and Exchange Commission does
not recognize any as limitations on management's liability to the extent any
such liability may arise from a violation of the federal securities laws.
16
____________________________________________________________________________
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . 2
Balance Sheet - March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . 3
Statement of Operations - For the Years Ended March 31, 1996 and 1995. . . . 4
Statement of Changes in Stockholders' Equity - For the Period from
April 1, 1994 to March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . 5
Statement of Cash Flows - For the Years Ended March 31, 1996 and 1995. . . . 6
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 7
-1-
____________________________________________________________________________
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Tatum Petroleumm Corporation
Worthington, Ohio
We have audited the accompanying balance sheet of Tatum Petroleum Corporation
as of March 31, 1996, and the related statements of operations, stockholders'
equity, and cash flows for the years ended March 31, 1996 and 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tatum Petroleum Corporation as
of March 31, 1996, and the results of its operations and its cash flows for the
years ended March 31, 1996 and 1995, in conformity with generally accepted
accounting principles.
Hein + Associates LLP
Denver, Colorado
June 18, 1996
____________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
BALANCE SHEET
MARCH 31, 1996
ASSETS
------
Current Assets:
Cash $ 416,000
Receivables:
Oil and gas 642,000
Joint interest owners 42,000
Inventory 19,000
------------
Total current assets 1,119,000
Property and Equipment, at cost:
Oil and gas producing properties (using the successful
efforts method of accounting):
Proved 6,135,000
Unproved 475,000
Other equipment 132,000
------------
6,742,000
Less accumulated depreciation, depletion, amortization
and impairment (3,464,000)
------------
3,278,000
Other Assets 20,000
------------
Total Assets $ 4,417,000
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Note payable $ 360,000
Accounts payable 230,000
Revenue and ad valorem taxes payable 515,000
Advances from working interest owners 322,000
Accrued liabilities 83,000
Income tax payable 20,000
------------
Total current liabilities 1,530,000
Deferred Tax Liability 280,000
Commitment and Contingencies (Note 4)
Stockholders' Equity:
Common stock, $.01 par value; authorized 15,000,000
shares, 10,418,855 shares issued and outstanding 104,000
Additional paid-in capital 4,877,000
Accumulated deficit (2,374,000)
------------
Total stockholders' equity 2,607,000
------------
Total Liabilities and Stockholders' Equity $ 4,417,000
============
See accompanying notes to these financial statements.
-3-
____________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
March 31,
---------------------------
1996 1995
-------- --------
Net Revenues:
Oil and gas sales $ 3,083,000 $ 2,270,000
Drilling arrangement income 95,000 180,000
Operating fees 114,000 107,000
------------ -----------
3,292,000 2,557,000
Costs and Expenses:
Oil and gas production costs 536,000 559,000
General and administrative expenses 653,000 554,000
Depreciation, depletion and amortization 495,000 403,000
Exploration costs 587,000 574,000
Dry hole costs 308,000 334,000
------------ -----------
2,579,000 2,424,000
------------ -----------
Other Income 63,000 12,000
------------ -----------
Income Before Income Taxes 776,000 145,000
------------ -----------
Income Tax Expense:
Current (20,000) -
Deferred (280,000) -
------------ -----------
(300,000) -
------------ -----------
Net Income $ 476,000 $ 145,000
============ ===========
Net Income Per Share $ .05 $ .01
============ ===========
Weighted Average Shares Outstanding 10,418,855 10,418,855
============ ===========
See accompanying notes to these financial statements.
-4-
____________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM APRIL 1, 1994 THROUGH MARCH 31, 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
-------- ------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balances, April 1, 1994 10,418,855 $ 104,000 $4,877,000 $(2,995,000) $1,986,000
Net income - - - 145,000 145,000
---------- ---------- ---------- ----------- ---------
Balances, March 31, 1995 10,418,855 104,000 4,877,000 (2,850,000) 2,131,000
Net income - - - 476,000 476,000
---------- ---------- ---------- ----------- ----------
Balances, March 31, 1996 10,418,855 $ 104,000 $4,877,000 $(2,374,000) $2,607,000
========== ========== ========== =========== ==========
</TABLE>
See accompanying notes to these financial statements.
-5-
____________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
STATEMENTS OF CASH FLOWS
March 31,
---------------------------
1996 1995
-------- --------
Cash Flows from Operating Activities:
Net income $ 476,000 $ 145,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and
amortization 495,000 403,000
Deferred income taxes 280,000 -
Gain on disposal of equipment (46,000) -
Changes in operating assets and
liabilities:
Receivables (317,000) (112,000)
Inventory (9,000) 92,000
Prepaid expenses and other - (24,000)
Payables 360,000 295,000
Accrued liabilities 45,000 (19,000)
---------- ----------
Net cash provided by operating
activities 1,284,000 780,000
Cash Flows from Investing Activities:
Purchases of property and equipment (1,370,000) (1,174,000)
Proceeds from sale of property and equipment 77,000 -
---------- ----------
Net cash used in investing activities (1,293,000) (1,174,000)
Cash Flows from Financing Activities:
Borrowings on line-of-credit 1,400,000 335,000
Repayments on line-of-credit (1,300,000) (75,000)
---------- ----------
Net cash provided by financing
activities 100,000 260,000
Net Increase (Decrease) in Cash 91,000 (134,000)
Cash, beginning of year 325,000 459,000
----------- ----------
Cash, end of year $ 416,000 $ 325,000
=========== ==========
Supplemental Cash Flow Information:
Cash paid for interest $ 19,000 $ 12,000
=========== ==========
Seismic data received for working
interest in producing properties $ - $ 421,000
=========== ==========
See accompanying notes to these financial statements.
-6-
____________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Nature of Operations - Tatum Petroleum Corporation (Tatum) was incorporated
in 1984, and is a Delaware corporation. The Company's principal operations
include the acquisition, exploration and development of oil and gas
properties.
Inventory - Inventory represents oil field equipment recorded at the lower
of cost or market, and valued using the specific identification method.
Oil and Gas Properties - The Company's investment in oil and gas properties
is accounted for under the successful efforts method of accounting. Under
this method all costs associated with property acquisition, successful
exploratory wells and all developmental wells are capitalized. Items
charged to expense include geological and geophysical costs, property
carrying costs, costs of unsuccessful exploratory wells and oil and gas
production costs. Oil and gas properties are assessed periodically by
management of the Company to determine whether impairment has occurred.
Capitalized costs of proved properties are amortized using the
unit-of-production method on the basis of estimated proved oil and gas
reserves. Costs of exploratory wells in progress are capitalized and
excluded from depletion until such time as proved reserves are established
or impairment is determined, generally not greater than one year from
completion of drilling. Gains on the sale of unproved properties and on
drilling arrangement income are recognized on the cost recovery method
whereby proceeds are first applied to recover all related property and
drilling costs before any gain is recognized. In addition, for exploratory
wells, a portion of the gain may be deferred to offset estimated future
drilling costs on an interest retained in the related property. Income
from drilling arrangements is recognized under the completed contract
method.
Environmental Costs - The Company believes that the cost to plug and
abandon its wells will be offset by the salvage value of the equipment on
those wells. Consequently, cost to plug and abandon wells are not accrued
for over the live of the related wells.
Other Property and Equipment - Depreciation of other equipment is computed
using the straight-line method over the estimated useful lives of the
assets of three to five years. Expenditures for maintenance and repairs are
expensed as incurred, whereas expenditures for improvements, replacements
and major renewals are capitalized. Gains and losses from retirement or
replacement of other property and equipment are included in operations.
Operating Fees - As operator of oil and gas properties, the Company
receives management fees from oil and gas partnerships for the service
provided. These fees are recorded as income when earned.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in these financial statements and the accompanying notes. The
actual results could differ from those estimates
-7-
____________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
The Company's provisions for depreciation and depletion of capitalized
costs of developed oil and gas properties is determined based upon the
estimated quantities of proved oil and gas reserves. The Company's reserve
estimates are determined by an independent petroleum engineering firm.
However, management emphasizes that reserve estimates are inherently
imprecise and that estimates of new discoveries are more imprecise than
those of producing oil and gas properties. Accordingly, these estimates
are expected to change as future information becomes available.
The Company periodically evaluates the carrying value of its developed oil
and has properties for impairment by comparison to the ceiling for such
properties. In addition to the uncertainties inherent in the reserve
estimation process, the ceiling is affected by historical and projected
prices for oil and natural gas which have typically been volatile.
It is reasonably possible that the Company's oil and gas reserve estimates
will change in the near term.
Fair Value of Financial Instruments - The estimated fair values of
financial instruments under SFAS No. 107, Disclosures About Fair Value of
Financial Instruments, are determined at discrete points in time based on
relevant market information. The Company believes that the fair value of
its financial instruments approximate the book value.
Impact of Recently Issued Accounting Standards - In March 1995, the
Financial Accounting Standards Board issued a new Statement titled
"Accounting for Impairment of Long-Lived Assets." This new standard is
effective for years beginning after December 15, 1995 and will change the
Company's method of determining impairment of proved oil and gas
properties. Management believes the adoption of the standard will not have
a material impact on the financial statements. The Company plans to adopt
the new standard in the first quarter of fiscal 1997.
In October 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Stock-Based Compensation" (SFAS 123). The
new statement is effective for fiscal years beginning after December 15,
1995. SFAS 123 encourages, but does not require, companies to recognize
compensation expense for grants of stock, stock options, and other equity
instruments to employees based on fair value. Companies that do not adopt
the fair value accounting rules must disclose the impact of adopting the
new method in the notes to the financial statements. Transactions in
equity instruments with non-employees for goods or services must be
accounted for on the fair value method. For transactions with employees,
the Company currently does not intend to adopt the fair value accounting
under SFAS 123, and will be subject only to the related disclosure
requirements.
Cash and Cash Equivalents - For purposes of the statements of cash flows,
the Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Earnings Per Share - Primary earnings per share is based on the weighted
average number of shares outstanding, including common stock equivalents
outstanding during the periods.
-8-
____________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
2. Income Taxes:
The Company follows the policy of expensing all intangible drilling and
development costs for income tax purposes, whereas such costs are
capitalized for successful wells for financial reporting purposes. Other
timing differences relate to depreciation and depletion methods used for
tax and financial reporting.
The Company has adopted the liability method of accounting for income taxes
as prescribed by Statement of Financial Accounting Standards No. 109 (SFAS
109). Under SFAS 109, the Company reports differences between book and tax
income as deferred tax assets or liabilities.
The Company has available, subject to applicable limitations, tax net
operating loss carryforwards (NOL's) of approximately $1,018,000 to reduce
future taxable income. These NOL's, if not utilized, will expire in the
years 2003 through 2010.
Deferred tax assets and liabilities consist of the following:
March 31,
----------
1996
----------
Deferred assets (liabilities):
Net operating loss carryforward $ 380,000
Property and equipment basis differences (660,000)
----------
Net deferred tax liability $ (280,000)
==========
At March 31, 1995, the Company had a valuation allowance of $45,000 which
offset a net deferred tax asset. Due to the use of net operating loss
carryforwards to offset current year taxable income, the valuation
allowance decreased by $45,000 in fiscal 1996.
Total income tax expense differed from the amounts computed by applying the
Federal statutory tax rates to pretax income as follows:
1996 1995
------ ------
Total expense computed by applying
the U.S. statutory rate 34% 34%
State taxes 4% -%
Use of net operating loss carryforwards (2)% (34)%
Effect of alternative minimum tax and other 3% -%
---- ----
39% $ -%
==== ====
-9-
______________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
3. Note Payable:
The Company has a line of credit for $400,000, subject to a borrowing base
equal to 75% of the Company's receivables which are less than 90 days past
due with interest at prime plus 1.5% (total of 9.75% at March 31, 1996).
As of March 31, 1996, there was $360,000 outstanding under the line-of-
credit. The line-of-credit expires in September 1996 and is secured by a
first lien on the accounts receivable of the borrower, and a negative
pledge covering all the Company's assets.
4. Commitment and Contingencies:
The Company leases its office space, which expires May 1997. Minimum
required future lease payments under this noncancellable lease for the
years ending March 31 are as follows:
1997 $ 18,000
1998 18,000
1999 3,000
---------
$ 39,000
=========
Total rental expense charged to operations was $16,400 and $15,800 for the
years ended March 31, 1996 and 1995, respectively.
Concentrations of Credit Risk - Credit risk represents the accounting loss
that would be recognized at the reporting date if counterparties failed
completely to perform as contracted. Concentrations of credit risk
(whether on or off balance sheet) that arise from financial instruments
exist for groups of customers or counterparties when they have similar
economic characteristics that would cause their ability to meet contractual
obligations to be similarly effected by changes in economic or other
conditions described below. In accordance with FASB Statement No. 105,
Disclosure of Information about Financial Instruments with Off-Balance-
Sheet Risk and Financial Instruments with Concentrations of Credit Risk,
the credit risk amounts shown do not take into account the value of any
collateral or security.
The Company operates in one industry segment, oil and gas. A geographic
concentration exists because the Company's customers are generally located
in the Eastern United States. Approximately 80% of the Company's 1996 oil
and gas revenues are from gas production, which is mostly purchased by two
customers. The Company does not believe it is dependent upon either
customer, due to the nature of it's production. Financial instruments that
subject the Company to credit risk consist principally of accounts
receivable.
During the year, the Company also maintained an uninsured money market
account with a financial institution. At year-end, the Company had
approximately $400,000 deposited in this account.
-10-
______________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
Litigation - The Company is currently involved in a lawsuit entitled
Columbia Natural Resources, Inc. v. Tatum Petroleum Corporation, et al. in
the United States District Court for the Northern District of Ohio. The
action involves claims by Columbia Natural Resources that various leases
were improperly acquired, that its rights were defeated, and that the
various defendants conspired to defraud the plaintiff. Likewise, the
defendants, including Tatum Petroleum Corporation, have asserted a
counterclaim against Columbia Natural Resources for damages. The case and
claims of Columbia Natural Resources had originally been dismissed, but on
appeal to the United States Court of Appeals the decision was reversed and
remanded for further proceedings. The prayer for relief in the second
amended complaint seeks an accounting, recovery of actual and punitive
damages, and RICO-enhanced damages. The prayer of the counterclaim by
Tatum Petroleum Corporation and others also seeks significant damages
against Columbia Natural Resources. It is the belief of counsel that a
reasonable chance exists for summary judgment on the complaint of Columbia
Natural Resources, and a dismissal of same, given the fact that the same
Court previously had dismissed the complaint of Columbia Natural Resources.
5. Related Party Transactions:
The Company transports a portion of its gas production over a gas gathering
system and a pipeline which are owned by an entity affiliated with the
president. During the years ended March 31, 1996 and 1995, the Company
paid approximately $226,000 and $159,000 in gathering fees and $56,000 and
$34,000 in compression fees for the Company's share of gas transported over
these lines to the entity. Additional fees for company gas transported
over another pipeline previously owned by the Company of approximately
$34,000 and $39,000 in 1996 and 1995, respectively, have been forgiven in
exchange for administration services the Company provides the pipeline.
In addition in 1995, a party related to the Company provided seismic data
with a value of approximately $421,000 in return for a working interest
ownership in certain wells. The value was based on amounts paid by the
related party to third parties, and has been expensed in the accompanying
financial statements.
-11-
______________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
6. Disclosures About Oil and Gas Producing Activities:
All oil and gas operations of the Company are conducted in the United
States. Capitalized costs relating to oil and gas producing activities are
as follows:
March 31,
-----------------------
1996 1995
-------- --------
Proved oil and gas producing properties $5,681,000 $5,286,000
Wells in progress 454,000 364,000
Unproved properties 475,000 376,000
---------- ----------
6,610,000 6,026,000
Accumulated depreciation, depletion
and amortization (3,400,000) (3,639,000)
---------- ----------
$3,210,000 $2,387,000
========== ==========
Costs incurred in oil and gas producing activities, whether capitalized or
expensed, during the three years ended December 31, 1996, 1995, and 1994 are
as follows:
1996 1995
-------- --------
Acquisition costs $ 148,000 $ 271,000
========== ==========
Exploration costs $1,863,000 $1,537,000
========== ==========
The Company had no development cost, as each new well was drilled on a new
reservoir.
Estimated Quantities of Proved Oil and Gas Reserves (Unaudited) - Proved
oil and gas reserves are the estimated quantities of crude oil, which
geological and engineering data demonstrate with reasonable certainty to
be recoverable in future years from known reservoirs under existing
economic and operating conditions. Proved developed oil and gas reserves
are those expected to be recovered through existing wells with existing
equipment and operating methods. However, reserve information should not
be construed as the current market value of the Company's oil and gas
reserves or the costs that would be incurred to obtain equivalent reserves.
Reserve calculations involve the estimation of future net recoverable
reserves of oil and gas and the timing and amount of future net revenues
to be received therefrom. These estimates are based on numerous factors,
many of which are variable and uncertain. Accordingly, it is common for
the actual production and revenues to vary from earlier estimates.
The Company has elected to disclose only proved developed reserves, as the
ultimate recovery of proved undeveloped reserves is uncertain.
-12-
______________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
Reserve estimates for recently drilled wells are subject to substantial
upward or downward revisions after production history obtained. Hence,
reserve estimates and estimates of future net revenues from production may
be subject to substantial revision from year to year. Reserve information
presented herein is based on reports prepared by independent petroleum
engineers for 1996 and 1995.
Set forth below is the unaudited summary of the changes in the net
quantities of the Company's proved oil and gas reserves (in equivalent
MCF's) as of March 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------------ ----------------
Oil Gas Oil Gas
----- ----- ----- -----
<S> <C> <C> <C> <C>
Proved developed reserves,
beginning of year 99,000 3,218,000 130,000 1,814,000
Production (35,000) (1,039,000) (35,000) (673,000)
Discoveries, extensions
and other additions 26,000 773,000 49,000 2,379,000
Revisions of previous
estimates 7,000 260,000 (45,000) (302,000)
------- --------- ------- ---------
Proved developed reserves,
end of year 97,000 3,212,000 99,000 3,218,000
======= ========= ======= =========
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows (Unaudited) -
Statement of Financial Accounting Standards No. 69 prescribes guidelines
for computing a standardized measure of future net cash flows and changes
therein relating to estimated proved reserves. The Company has followed
these guidelines which are briefly discussed below.
Future cash inflows and future production and development costs are
determined by applying year-end prices and costs to the estimated
quantities of oil and gas to be produced. As of year-end, the Company
believes gas prices were unusually high, which has increased the reserve
value for gas not under fixed price long-term contracts. Estimated future
income taxes are computed using current statutory income tax rates
including consideration for estimated future statutory depletion and tax
credits. The resulting future net cash flows are reduced to present value
amounts by applying a 10% annual discount factor.
The assumptions used to compute the standardized measure are those
prescribed by the Financial Accounting Standards Board and, as such, do not
necessarily reflect the Company's expectations for actual revenues to be
derived from those reserves nor their present worth. The limitations
inherent in the reserve quantity estimation process, as discussed
previously, are equally applicable to the standardized measure computations
since these estimates are the basis for the valuation process.
-13-
______________________________________________________________________________
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31,
------------------------
1996 1995
-------- --------
Future cash inflows $16,638,000 $9,474,000
Future production costs (3,023,000) (2,338,000)
Future income tax expense (4,046,000) (1,831,000)
----------- ----------
Future net cash flows 9,569,000 5,305,000
10% annual discount for estimated
timing of cash flows (3,862,000) (1,538,000)
----------- ----------
Standardized measure of discounted
future net cash flows $ 5,707,000 $3,767,000
=========== ==========
The following are the principal sources of change in the standardized measure
of discounted future net cash flows for the year ended March 31, 1996:
Standardized measure, March 31, 1995 $ 3,767,000
Sales of oil and gas, net of
production costs (2,546,000)
Extensions, discoveries and other, net 3,155,000
Net change due to revisions in
quantity estimates 547,000
Net change due to changes in prices
and production costs 2,620,000
Net change in income taxes (2,214,000)
Accretion of discount 378,000
-----------
Standardized measure, March 31, 1996 $ 5,707,000
===========
-14-
______________________________________________________________________________
<PAGE>
PART III
Items 1 and 2. Index and Description of Exhibits.
Number Description
- ------ -----------
2.1 Certificate of Incorporation, dated July 10, 1985
2.2 By-laws
____________________________________________________________________________
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
TATUM PETROLEUM CORPORATION
Date: July 19, 1996 By /s/ Zachary T. Tatum
------------------------------
Zachary T. Tatum, President,
Chief Executive Officer,
Principal Financial and
Accounting Officer
Date: July 19, 1996 By /s/ Lori Powell
------------------------------
Lori Powell, Controller
and Treasurer
CERTIFICATE OF INCORPORATION
OF
TATUM PETROLEUM CORPORATION
* * * * *
1. The name of the corporation is
TATUM PETROLEUM CORPORATION
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is one hundred million (100,000,000) and the par value of
each of such shares is One Cent ($.01) amounting in the aggregate to One
Million Dollars ($1,000,000).
5. The name and mailing address of each incorporator is as follows:
Name Mailing Address
---- ---------------
W. J. Reif Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
V. A. Brookens Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
J. L. Austin Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter or repeal
the by-laws of the corporation.
8. Elections of directors need not be by written ballot unless the by-
laws of the corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation.
Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may
be, and also on this corporation.
9. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation
Law of the State of Delaware, do make this certificate, hereby declaring and
certifying that this is our act and deed and the facts herein stated are true,
and accordingly have hereunto set our hands this 10th day of July, 1985.
W. J. Reif
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W. J. Reif
V. A. Brookens
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V. A. Brookens
J. L. Austin
------------------------------
J. L. Austin
BYLAWS
OF
TATUM PETROLEUM CORPORATION
A DELAWARE CORPORATION
Article I.
OFFICES
Section 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office
of the corporation shall be located at such place as the board of directors
shall from time to time determine.
Section 2. OTHER OFFICES. Other offices may at any time be
established by the board of directors or the chief executive officer at any
place or places where the corporation is qualified to do business.
Article II.
MEETING OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of shareholders shall be
at the principal executive office of the corporation or at any other place
within or without the State of Delaware which may be designated either by the
board of directors or by the shareholders in accordance with these Bylaws.
Section 2. ANNUAL MEETINGS. The annual meetings of shareholders shall
be held on that date which is 130 days from the last day of the corporation's
fiscal year, or if not a business day, the next following business day, at
10:00 A.M., or at such other date and time as shall be designated from time to
time by the board of directors or by the shareholders in accordance with these
Bylaws. If the date set forth in these Bylaws falls upon a legal holiday, then
such annual meeting of shareholders shall be held at the same time and place on
the next day thereafter ensuing which is not a legal holiday. At such annual
meetings, directors shall be elected, and any other business may be transacted
which is within the powers of the shareholders.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders,
for the purpose of taking any action which is within the powers of the
shareholders, may be called at any time by the chairman of the board, the
president, the board of directors, or by the holders of shares entitled to
cast not less than ten percent of the votes at the meeting. Upon request in
writing that a special meeting of shareholders be called for any proper
purpose, directed to the chairman of the board, president, vice-president or
secretary by any person (other than the board of directors) entitled to call a
special meeting of shareholders, the officer forthwith shall cause notice to
be given to the shareholders entitled to vote that a meeting will be held at a
time requested by the person or persons calling the meeting, not less than
thirty-five nor more than sixty days after receipt of the request.
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Section 4. NOTICE OF MEETING OF SHAREHOLDERS. Written notice of each
meeting of shareholders, whether annual or special, shall be given to each
shareholder entitled to vote thereat, either personally or by first-class mail
or other means or written communications, charges prepaid, addressed to such
shareholder at the address of such shareholder appearing on the books of the
corporation or given by such shareholder to the corporation for the purpose of
notice. If any notice addressed to the shareholder at the address of such
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
as such address, all future notices shall be deemed to have been duly given
without further mailing if the same shall be available for the shareholder upon
written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice
to all other shareholders. If no address appears on the books of the
corporation or is given by the shareholder to the corporation for the purpose
of notice, notice shall be deemed to have been given to such shareholder if
sent by mail or other means of written communication addressed to the place
where the principal executive office of the corporation is located, or if
published at least once in a newspaper of general circulation in the county in
which the principal executive office is located.
All such notices shall be given to each shareholder entitled thereto not
less than ten days nor more than sixty days before the meeting. Any such
notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of such notice in accordance with the
foregoing provisions, executed by the secretary, assistant secretary or any
transfer agent of the corporation shall be prima facie evidence of the giving
of the notice.
All such notices shall state the place, date and hour of such meeting. In
the case of a special meting such notice shall also state the general nature of
the business to be transacted at such meeting, and no other business may be
transacted thereat. In the case of an annual meeting, such notice shall also
state those matters which the board of directors at the time of the mailing of
the notice intends to present for action by the shareholders. Any proper
matter may be presented at an annual meeting of shareholders though not stated
in the notice, provided that unless the general nature of a proposal to be
approved by the shareholders relating to the following matters is stated in
the notice or a written waiver of notice, any such shareholder approval will
require approval by a quorum of all shareholders present personally or by
proxy and entitled to vote:
(a) A proposal to authorize, approve or ratify a contract or other
transaction between the corporation and one or more of its directors or any
corporation, firm or association in which one or more of its directors has a
material financial interest or is also a director;
2.
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(b) A proposal to amend the Articles of Incorporation;
(c) A proposal to approve the principal terms of a reorganization as
defined in Section 251 of the General Corporation Law;
(d) A proposal to wind up and dissolve the corporation under Section
271 of the General Corporation Law;
(e) If the corporation has preferred shares outstanding and the
corporation is in the process of winding up, a proposal to adopt a plan of
distribution of shares, obligations or securities of any other corporation or
assets other than money which is not in accordance with the liquidation rights
of the preferred shares.
The notice of any meeting at which directors are to be elected shall
include the names of nominees intended at the time of the notice to be
presented by the board of election.
Section 5. QUORUM. The presence in person or by proxy of the holders
of a majority of the shares entitled to vote at any meeting shall constitute a
quorum for the transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
Section 6. ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholders'
meeting, annual or special, whether or not a quorum is present, may be
adjourned from time to time by vote of a majority of the shares the holders of
which are either present in person or by proxy thereat, but in the absence of
a quorum, no other business may be transacted at any such meeting, except as
provided in Section 5 of this Article II.
When any shareholders' meeting, either annual or special, is adjourned for
forty-five days or more, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the adjourned meeting as in the
case of an original meeting. Except as set forth in this Section 6 of Article
II, it shall not be necessary to give any notice of an adjourned meeting, other
than by announcement of the time and place thereof at the meeting at which such
adjournment is taken.
3.
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Section 7. VOTING. All meetings of shareholders, every shareholder
entitled to vote shall have the right to vote in person or by proxy the number
of shares of each class of stock standing in the name of such shareholder on
the stock records of the corporation on the record date for such meeting.
Shares held by an administrator, executor, guardian, conservator, custodian,
trustee, receiver, pledgee, minor, corporation or fiduciary or held by this
corporation or a subsidiary of this corporation in a fiduciary capacity or by
two or more persons shall be voted in the manner set forth in Sections 217 and
218 of the General Corporation Law. Shares of this corporation owned by this
corporation or a subsidiary (except shares held in a fiduciary capacity) shall
not be entitled to vote. Unless a record date for voting purposes is fixed
pursuant to Section 1 of Article V of these bylaws, then only persons in whose
names shares entitled to vote stand on the stock records of the corporation 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 day on which the meeting is held, shall be
entitled to vote at such meeting, and such days shall be the record date for
such meeting. Votes at a meeting may be given by viva voce or by ballot;
provided, however, that all elections for directors must be by ballot upon
demand made by a shareholder at any election and before the voting begins. If
a quorum is present at the beginning of the meeting, except with respect to
the election of directors (and subject to the provisions of Section 5 of this
Article II should shareholders withdraw thereafter) the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
any matter shall be the act of the shareholders and shall decide any question
properly brought before the meeting, unless the vote of a greater number or
voting by classes is required by the General Corporation Law or the Articles
of Incorporation, in which case the vote so required shall govern and control
the decision of such question. There shall be no cumulative voting.
4.
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Section 8. WAIVER OF NOTICE AND CONSENT OF ABSENTEES. The proceedings
and transactions of any meeting of shareholders, either annual or special,
however, called and noticed and wherever held, shall be as valid as though had
at a meeting duly held after regular call and notice, if a quorum is present
either in person or by proxy, and if, either before or after the meeting, each
of the persons entitled to vote, not present in person or by proxy, signs a
written waiver of notice or a consent to the holding of such meeting, or an
approval of the minutes thereof. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person objects,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened and except that attendance at a
meeting is not a waiver of any right to object to the consideration of matters
required by law or these Bylaws to be included in the notice but which was not
so included, if such objection is expressly made at the meeting, provided
however, that any person making such objection at the beginning of the meeting
or to the consideration of matters required to be but not included in the
notice may orally withdraw such objection at the meeting or thereafter waive
such objection by signing a written waiver thereof or a consent to the holding
of the meeting or the consideration of the matter or an approval of the
minutes of the meeting. Neither the business to be transacted at nor the
purpose of any annual or special meeting of shareholders need be specified in
any written waiver of notice except that the general nature of the proposals
specified in subsections (a) through (e) of Section 4 of this Article II,
shall be so stated. All such waivers, consents or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
Section 9. ACTION WITHOUT A MEETING. Directors may be elected without
a meeting by a consent in writing, setting forth the action so taken, signed by
a majority of the persons who would be entitled to vote for the election of
directors, provided that, without notice except as hereinafter set forth, a
director may be elected at any time to fill a vacancy not filled by the
directors by the written consent of persons holding a majority of the
outstanding shares entitled to vote for the election of directors.
Any other action, which under any provision of the General Corporation Law
may be taken at any annual or special meeting of the shareholders, may be taken
without a meeting, and without notice except as hereinafter set forth, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which a
majority of shares entitled to vote thereon were present and voted. Unless the
consents of such majority of the shareholders entitled to vote have been
solicited in writing.
5.
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(a) Notice of any proposed shareholder approval of, (i) a contract
or other transaction between the corporation and one or more of its directors
or any corporation, firm or association in which one or more of its directors
has a material financial interest or is also a director, (ii) indemnification
of an agent of the corporation as authorized by Section 16, of Article III, of
these Bylaws, (iii) a reorganization of the corporation as defined in Section
251 of the General Corporation Law, or (iv) the distribution of shares,
obligations or securities of any other corporation or assets other than money
which is not in accordance with the liquidation rights of preferred shares if
the corporation is in the process of winding up, as defined in Section 271,
without a meeting by less than unanimous written consent, shall be given at
least ten days before the consummation of the action authorized by such
approval; and
(b) Prompt notice shall be given of the taking of any other
corporate action approved by shareholders without a meeting to those
shareholders entitled to vote who have not consented in writing. Such notices
shall be given in the manner and shall be deemed to have been given as
provided in Section 4 of Article II of these Bylaws.
Unless, as provided in Section 1 of Article V of these Bylaws, the board
of directors has fixed a record date for the determination of shareholders
entitled to notice of and to give such written consent, the record date for
such determination shall be the day on which the first written consent is
given. All such written consents shall be filed with the secretary of the
corporation.
Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares or a personal representative of the
shareholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the secretary of the corporation.
Section 10. PROXIES. Every person entitled to vote or execute consents
shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such person or the duly authorized
agent of such person and filed with the secretary of the corporation, or the
persons appointed as inspectors of election or such other person as may be
designated by the board of directors or the chief executive officer to receive
proxies; provided, that no such proxy shall be valid after the expiration of
eleven months from the date of its execution, unless the shareholder executing
it specifies therein the length of time for which such proxy is to continue in
force. Every proxy duly executed continues in full force and effect until
revoked by the person executing it prior to the vote pursuant thereto. Except
as otherwise provided by law, such revocation may be effected by attendance at
the meeting and voting in person by the person executing the proxy or by a
writing delivered to the corporation stating that the proxy is revoked or by a
proxy bearing a later date executed by the person executing the proxy and filed
with the secretary of the corporation or the persons appointed as inspectors of
election or such other persons as may be designated by the board of directors
or the chief executive officer to receive proxies.
6.
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Section 11. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the board of directors may appoint any persons as inspectors of
election to act at such meeting or any adjournment thereof. If inspectors of
election are not so appointed, or if any persons so appointed fail to appear or
refuse to act, the chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at the meeting. The
number of inspectors shall be either one or three. If appointed at a meeting
on the request of one or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one or three
inspectors are to be appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum and the authenticity, validity and effect
of proxies, receive votes, ballots or consents, hear and determine all
challenges and questions in any way arising in connection with the right to
vote, count and tabulate all votes or consents, determine when the polls shall
close, determine the result and do such acts as may be proper to conduct the
election or vote with fairness to all shareholders. In the determination of
the validity and effect of proxies the dates contained on the forms of proxy
shall presumptively determine the order of execution of the proxies,
regardless of the postmark dates on the envelopes in which they are mailed.
The inspectors of election shall perform their duties impartially, in good
faith, to the best of their ability and as expeditiously as is practical. If
there are three inspectors of election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. Any report or certificate made by the inspectors of election is prima
facie evidence of the facts stated therein.
7.
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Article III.
DIRECTORS
Section 1. POWERS. Subject to the General Corporation Law and any
limitations in the Articles of Incorporation relating to action requiring
shareholder approval, and subject to the duties of directors as prescribed by
the Bylaws, the business and affairs of the corporation shall be managed and
all corporate powers shall be exercised by or under the direction of the board
of directors.
Section 2. NUMBER AND QUALIFICATIONS OF DIRECTORS. The authorized
number of directors of the corporation shall be not less than five (5) nor more
than nine (9). The exact number of authorized directors shall be five (5) with
three (3) directors as a quorum until changed, within the limits specified
above, by a bylaw amending this Section 2, duly adopted by the Board of
Directors or by the shareholders. After the issuance of shares, a bylaw
changing the maximum or minimum number, or changing from a variable board to a
fixed board, may only be adopted by the vote or written consent of holders of
a majority of the outstanding shares entitled to vote; provided, however, that
an amendment changing the board to a fixed number of directors of less than
five (5) cannot be adopted if the votes cast against its adoption at a meeting
of the shareholders, or the shares not consenting in the case of action by
written consent, are equal to more than 16-2/3 percent of the outstanding
shares entitled to vote. No amendment may change the stated maximum number of
authorized directors to a number greater than two times the stated minimum
number of directors minus one.
Section 3. ELECTION AND TERM OF OFFICE. Directors shall be elected at
each annual meeting of shareholders to hold office until the next annual
meeting. Each director, including a director elected to fill a vacancy, shall
hold office until the expiration of the term for which elected and until a
successor has been elected and qualified. No reduction of the authorized
number of directors shall have the effect of removing any director before that
director's term of office expires.
8.
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Section 4. RESIGNATION AND REMOVAL OF DIRECTORS. Any director may
resign effective upon giving written notice to the chairman of the board, the
president, the secretary or the board of directors of the corporation, unless
the notice specifies a later time for the effectiveness of such resignation, in
which case such resignation shall be effective at the time specified. Unless
such resignation specifies otherwise, its acceptance by the corporation shall
not be necessary to make it effective. The board of directors may declare
vacant the office of a director who has been declared of unsound mind by an
order of court or convicted of a felony. Any or all of the directors may be
removed without cause if such removal is approved by the affirmative vote of
two-thirds (66-2/3%) of the outstanding shares entitled to vote provided that
no director may be removed (unless the entire board is removed) when the votes
cast against removal (or, if such action is taken by written consent, the
shares held by persons not consenting in writing to such removal) would be
equal to more than 16-2/3 percent of the outstanding shares entitled to vote.
When by the provisions of the Articles of Incorporation the holders of the
shares of any class or series, voting as a class or series, are entitled to
elect one or more directors, any director so elected may be removed only by
the applicable vote of the holders of the shares of that class or series.
Section 5. VACANCIES. Vacancies on the board of directors (except
vacancies created by the removal of a director) may be filled by a majority of
the directors then in office, whether or not less than a quorum, or by a sole
remaining director, and each director elected in this manner shall hold office
until the next annual meeting of shareholders and until a successor has been
elected and qualified or until his earlier resignation or removal of his office
has been declared vacant in the manner provided in these Bylaws. A vacancy or
vacancies on the board of directors shall exist on the death, resignation or
removal of any director, of the board declares vacant the office of a director
if he is declared of unsound mind by an order of court or is convicted of a
felony, or if the authorized number of directors is increased, or if the
shareholders fail to elect the full authorized number of directors to be voted
for at any shareholders meeting at which an election of directors is held. The
shareholders may elect a director at any time to fill any vacancy not filled by
the directors or which occurs by reason of the removal of a director. Any such
election by written consent of shareholders shall require the consent of a
majority of the outstanding shares entitled to vote. If the resignation of a
director states that it is to be effective at a future time, a successor may be
elected to take office when the resignation becomes effective.
9.
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Section 6. PLACE OF MEETINGS. Regular and special meetings of the
board of directors shall be held at any place within or without the State of
Delaware which has been designated in the notice or written waiver of notice of
the meeting, or, if not stated in the notice or waiver of notice or there is no
notice, designated by resolution of the board of directors or, either before or
after the meeting, consented to in writing by a majority of the members of the
board who were not present at the meeting. If the place of a regular or
special meeting is not designated in the notice or waiver of notice or fixed
by a resolution of the board or consented to in writing by a majority of the
members of the board not present at the meeting, it shall be held at the
corporation's principal executive office.
Section 7. REGULAR MEETINGS. Immediately following each annual
shareholders' meeting, the board of directors shall hold a regular meeting to
elect officers and transact other business. Such meeting shall be held at the
same place as the annual meeting or such other place as shall be fixed by the
board of directors. Other regular meetings of the board of directors shall be
held at such times and places as are fixed by the board. Call and notice of
regular meetings of the board of directors shall not be required and is hereby
dispensed with.
Section 8. SPECIAL MEETINGS. Special meetings of the board of
directors for any purpose or purposes may be called at any time by the chairman
of the board, the president, any vice president, the secretary, or any two
directors. Notice of the time and place of special meetings shall be delivered
personally or by telephone or telegraph or sent to the director by mail. In
case notice is given by mail or telegram, it shall be sent, charges prepaid,
addressed to the director at his address appearing on the corporate records, or
if it is not on these records or is not readily ascertainable, at the place
where the meetings of the directors are regularly held. If notice is delivered
personally or given by telephone or telegraph, it shall be given or delivered
to the telegraph office at least 48 hours before the meeting. If notice is
mailed, it shall be deposited in the United States mail at least four days
before the meeting. Such mailing, telegraphing or delivery, personally or by
telephone, as provided in this Section, shall be due, legal and personal notice
to such director.
Section 9. QUORUM. A majority of the authorized number of directors
shall constitute a quorum of the board for the transaction of business, except
to adjourn a meeting under Section 11. Every act or decision done or made by
a majority of the directors present at a meeting duly held at which a quorum is
present is the act of the board of directors, unless the vote of a greater
number or the same number after disqualifying one or more directors from
voting, is required by law, the articles of incorporation or these bylaws. A
meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, provided that any action
taken is approved by at least a majority of the required quorum for such
meeting.
10.
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Section 10. WAIVER OF NOTICE OR CONSENT. The transactions of any
meeting of the board of directors, however called and noticed or wherever held,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum is present and if, either before or after the meeting, each
of the directors not present or who, though present, has prior to the meeting
or at its commencement, protested the lack of proper notice to him, signs a
written waiver of notice, or a consent to holding the meeting, or an approval
of the minutes of the meeting. All such waivers, consents and approvals shall
be filed with the corporate records or made a part of the minutes of the
meeting. A notice or waiver of notice need not specify the purpose of any
regular or special meeting of the board of directors. Notice of a meeting need
not be given to any director who signs a waiver of notice, whether before or
after the meeting, or who attends the meeting without protesting, prior to or
at its commencement, the lack of notice to such director.
Section 11. ADJOURNMENT. A majority of the directors present, whether
or not a quorum is present, may adjourn any meeting to another time and place.
If the meeting is adjourned for more than 24 hours, notice of the adjournment
to another time or place shall be given prior to the time of the adjourned
meeting to the directors who were not present at the time of the adjournment.
Section 12. MEETINGS BY CONFERENCE TELEPHONE. Members of the board of
directors may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all members participating in such
meeting can hear one another. Participation by directors in a meeting in the
manner provided in this Section constitutes presence in person at such meeting.
Section 13. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken by the board of directors may be taken without a meeting, if all
members of the board shall individually or collectively consent in writing to
such action. Such written consent or consents shall be filed with the minutes
of the proceedings of the board. Such action by written consent shall have the
same force and effect as a unanimous vote of such directors.
Section 14. FEES AND COMPENSATION. Directors and members of committees
shall receive neither compensation for their services as directors or members
of committees or reimbursement for their expenses incurred as directors or
members of committees unless these payments are fixed by resolution of the
board. Directors and members of committees may receive compensation and
reimbursement for their expenses incurred as officers, agents or employees of
or for other services performed for the corporation as approved by the chief
executive officer without authorization, approval or ratification by the board.
11.
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Section 15. COMMITTEES. The board of directors may, at its discretion,
by resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each of which shall be composed of two or
more directors, to serve at the pleasure of the board. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent member at any meeting of the committee. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent member at any meeting of the committee. The board may
delegate to any such committee, to the extent provided in such resolution, any
of the board's powers and authority in the management of the corporation's
business and affairs, except with respect to:
(a) the approval of any action for which the General Corporation Law
or the articles of incorporation also requires approval by the shareholders or
approval of outstanding shares;
(b) the filing of vacancies on the board of directors of any
committee;
(c) the fixing of compensation of directors for serving on the board
or on any committee;
(d) the amendment or repeal of Bylaws or the adoption of new Bylaws;
(e) the amendment or repeal of any resolution of the board which by
its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at
a rate or in a periodic amount or within a price range determined by the board;
(g) the authorization of the issuance of shares; and
(h) the appointment of other committees of the board or the members
thereof.
The board may prescribe appropriate rules, not inconsistent with these
Bylaws, by which proceedings of any such committee shall be conducted. The
provisions of these Bylaws relating to the calling of meetings of the board,
notice of meetings of the board and waiver of such notice, adjournments of
meetings of the board, written consents to board meetings and approval of
minutes, action by the board by consent in writing without a meeting, the place
of holding such meetings, meetings by conference telephone or similar
communications equipment, the quorum for such meetings, the votes required at
such meetings and the withdrawal of directors after commencement of a meeting
shall apply to committees of the board and action by such committees. In
addition, any member of the committee designed by the board as the chairman or
as secretary of the committee or any two members of a committee may call
meetings of the committee. Regular meetings of any committee may be held
without notice if the time and place of such meetings are fixed by the board of
directors or the committee.
12.
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Section 16. INDEMNIFICATION OF AGENTS.
(a) For the purposes of this section, "agent" means any person who is
or was a director, officer, employee or other agent of this corporation, or is
or was serving at the request of this corporation as a director, officer,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, or was a director, officer, employee
or agent of a foreign or domestic corporation which was a predecessor
corporation of this corporation or of another enterprise at the request of
such predecessor corporation; "proceeding" means any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative; and "expenses" includes, without limitation, attorneys' fees
and any expenses of establishing a right to indemnification under subdivision
(d) or subdivision (e)(3) of this Section.
(b) This corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any proceeding (other than an action by
or in the right of this corporation) by reason of the fact that such person is
or was an agent of this corporation, against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with such proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in the best interests of this corporation and,
in the case of a criminal proceeding, had no reasonable cause to believe the
conduct of such person was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to
be in the best interest of this corporation or that the person had reasonable
cause to believe that the person's conduct was unlawful.
(c) This corporation shall indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action by or in the right of this corporation to procure a judgment
in its favor by reason of the fact that such person is or was an agent of this
corporation, against expenses actually and reasonably incurred by such person
in connection with the defense or settlement of such action if such person
acted in good faith, in a manner such person believed to be in the best
interests of this corporation and with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would use under
similar circumstances. No indemnification shall be made under this
subdivision (c):
(1) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to this corporation in the
performance of such person's duty to this corporation, unless and only to the
extent that the court in which such action was brought shall determine upon
application that, in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnify for the expenses which such court
shall determine;
13.
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(2) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or
(3) Of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court approval.
(d) To the extent that an agent of this corporation has been
successful on the merits in defense of any proceeding referred to in
subdivision (b) or (c) or in defense of any claim, issue or matter therein,
the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith.
(e) Except as provided in subdivision (d), any indemnification under
this Section shall be made by this corporation only if authorized in the
specific case, upon a determination that indemnification of the agent is proper
in the circumstances because the agent has met the applicable standard of
conduct set forth in subdivision (b) or (c), by:
(1) A majority vote of a quorum of the board of directors
consisting of directors who are not parties to such proceeding;
(2) Approval or ratification by the affirmative vote of a
majority of the shares of this corporation entitled to vote represented at a
duly held meeting at which a quorum is present or by the written consent of the
holders of a majority of the outstanding shares entitled to vote. For such
purpose, the shares owned by the person to be indemnified shall not be
considered outstanding or entitled to vote thereon; or
(3) The court in which such proceeding is or was pending, upon
application made by this corporation or the agent or the attorney or other
person rendering services in connection with the defense, whether or not such
application by the agent, attorney or other person is opposed by this
corporation.
(f) Expenses incurred in defending any proceeding may be advanced by
this corporation prior to the final disposition of such proceeding upon receipt
of an undertaking by or on behalf of the agent to repay such amount unless it
shall be determined ultimately that the agents is entitled to be indemnified as
authorized in this Section.
(g) Nothing contained in this Section shall affect any right to
indemnification to which persons other than directors and officers of this
corporation or any subsidiary hereof may be entitled by contract or otherwise.
(h) No indemnification or advance shall be made under this Section,
except as provided in subdivision (d) or subdivision (e)(3), in any
circumstance where it appears:
14.
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<PAGE>
(1) That it would be inconsistent with a provision of the
Articles of Incorporation, a resolution of the shareholders or an agreement in
effect at the time of the accrual of the alleged cause of action asserted in
the proceeding in which the expenses were incurred or other amounts were paid,
which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
(i) Upon and in the event of a determination by the board of
directors of this corporation to purchase such insurance, this corporation
shall purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
such capacity or arising out of the agent's status as such whether or not his
corporation would have the power to indemnify the agent against such liability
under the provisions of this Section.
Article IV.
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a
chairman of the board or a president, or both, a secretary and a chief
financial officer or treasurer. The corporation may also have, at the
discretion of the board of directors, one or more vice presidents, one or more
assistant secretaries, one or more assistant treasurers and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article IV. Any two or more offices may be held by the same person
except president and secretary.
Section 2. ELECTIONS. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article IV, shall be chosen annually by the board of
directors, and each such officer shall serve at the pleasure of the board of
directors until the regular meeting of the board of directors following the
annual meeting of shareholders and until his successor is elected and qualified
or until his earlier resignation or removal.
Section 3. OTHER OFFICERS. The board of directors may appoint, and
may empower the chairman of the board or the president or both of them to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority and
perform such duties as are provided in the bylaws or as the board of directors
may from time to time determine.
15.
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Section 4. REMOVAL AND RESIGNATION. Any officer may be removed with
or without cause either by the board of directors or, except for an officer
chosen by the board, by any officer upon whom the power of removal may be
conferred by the board (subject, in each case, to the rights, if any, of an
officer under any contract of employment). Any officer may resign at any time
upon written notice to the corporation (without prejudice however, to the
rights, if any, of the corporation under any contract to which the officer is
a party). Any such resignation shall take effect upon receipt of such notice
or at any later time specified therein. If the resignation is effective at a
future time, a successor may be elected to take office when the resignation
becomes effective. Unless a resignation specifies otherwise, its acceptance by
the corporation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in a
manner prescribed in the Bylaws for regular appointments to the office.
Section 6. CHAIRMAN OF THE BOARD. The board of directors may, in its
discretion, elect a chairman of the board, who, unless otherwise determined by
the board of directors, shall preside at all meetings of the board of directors
at which he is present and shall exercise and perform any other powers and
duties assigned to him by the board or prescribed by the Bylaws. If the office
of president is vacant, the chairman of the board shall be the general manager
and chief executive officer of the corporation and shall exercise the duties of
the president as set forth in Section 7.
Section 7. PRESIDENT. Subject to any supervisory powers, if any, that
may be given by the board of directors or by Bylaws to the chairman of the
board, if there be such an officer, the president shall be the corporation's
general manager and chief executive officer and shall, subject to the control
of the board of directors, have general supervision, direction and control of
the business, affairs and officers of the corporation. Unless otherwise
determined by the board of directors, he shall preside as chairman at all
meetings of the shareholders, and in the absence of the chairman of the board,
or if there be none, at all meetings of the board of directors. He shall have
the general powers and duties of management usually vested in the office of
president of a corporation; shall have any other powers and duties that are
prescribed by the board of directors or the Bylaws, and shall be primarily
responsible for carrying out all orders and resolutions of the board of
directors.
Section 8. VICE PRESIDENTS. In the absence or disability of the chief
executive officer, the vice presidents in order of their rank as fixed by the
board of directors, or if not ranked, the vice president designated by the
board of directors, or if there has been no such designation, the vice
president designated by the chief executive officer, shall perform all the
duties of the chief executive officer, and when so acting, shall have al the
powers of, and be subject to all the restrictions on, the chief executive
officer. Each vice president shall have any of the powers and perform any
other duties that from time to time may be prescribed for him by the board of
directors or the Bylaws or the chief executive officer.
16.
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Section 9. SECRETARY. The secretary shall keep or cause to be kept a
book of minutes of all meetings and actions by written consent of all
directors, shareholders and committees of the board of directors. The minutes
of each meeting shall state the time and place that it was held and such other
information as shall be necessary to determine whether the meeting was held in
accordance with law and these Bylaws and the actions taken thereat. The
secretary shall keep or cause to be kept at the corporation's principal
executive office, or at the office of its transfer agent or registrar, a record
of the shareholders and the number and class of shares held by each. The
secretary shall give, or cause to be given, notice of all meetings of
shareholders, directors and committees required to be given under these Bylaws
or by law, shall keep or cause the keeping of the corporate seal in safe
custody and shall have any other powers and perform any other duties that are
prescribed by the board of directors or the Bylaws or the chief executive
officer. If the secretary refuses or fails to give notice of any meeting
lawfully called, any other officer of the corporation may give notice of such
meeting. The assistant secretary, or if there be more than one, any assistant
secretary, may perform any or all of the duties and exercise any or all of the
powers of the secretary unless prohibited from doing so by the board of
directors, the chief executive officer or the secretary, and shall have such
other powers and perform any other duties as are prescribed for him by the
board of directors or the chief executive officer.
Section 10. CHIEF FINANCIAL OFFICER OR TREASURER. The chief financial
officer or treasurer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of account. The chief
financial officer or treasurer shall cause all money and other valuables in the
name and to the credit of the corporation to be deposited at the depositories
designated by the board of directors or any person authorized by the board of
directors to designate such depositories. He shall render to the chief
executive officer and board of directors, when either of them request it, an
account of all his transactions as chief financial officer and of the financial
condition of the corporation; and shall have any other powers and perform any
other duties that are prescribed by the board of directors or the Bylaws or the
chief executive officer. The assistant treasurer, or if there be more than
one, any assistant treasurer, may perform any or all of the duties and
exercise any or all of the powers of the chief financial officer unless
prohibited from doing so by the board of directors, the chief executive
officer or the chief financial officer, and shall have such other powers and
perform any other duties as are prescribed for him by the board of directors,
the chief executive officer or the chief financial officer.
17.
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Article V.
MISCELLANEOUS
Section 1. RECORD DATE. The board of directors may fix a time in the
future as a record date for the determination of the shareholders entitled to
notice of and to vote at any meeting of shareholders or entitled to give
consent to corporate action in writing without a meeting, to receive any
report, to receive payment of any dividend or other distribution, or allotment
of any rights, or to exercise rights in respect to any change, conversion, or
exchange of shares or any other lawful action. The record date so fixed shall
be not more than sixty days nor less than ten days prior to the date of such
meeting, nor more than sixty days prior to any other action for the purposes
of which it is fixed. When a record date is so fixed, only shareholders of
record on that date are entitled to notice of and to vote at any such meeting,
to give consent without a meeting, to receive any report, to receive a
dividend, distribution, or allotment of rights, or to exercise the rights, as
the case may be, notwithstanding any transfer of any shares on the books of
the corporation after the record date, except as otherwise provided in the
Articles of Incorporation or Bylaws.
Section 2. INSPECTION OF CORPORATE RECORDS. The books of account,
record of shareholders, and minutes of proceedings of the shareholders and the
board and committees of the board of this corporation shall be open to
inspection upon the written demand on the corporation of any shareholder or
holder of a voting trust certificate at any time during usual business hours,
for a purpose reasonably related to such holder's interests as a shareholder or
as the holder of such voting trust certificate. Such inspection by a
shareholder or holder of a voting trust certificate may be made in person or by
agent or attorney and the right of inspection includes the right to copy and
make extracts.
A shareholder or shareholders holding at least five percent in the
aggregate of the outstanding voting shares of the corporation or who hold at
least five percent of such voting shares and have filed a Schedule 14B with the
United States Securities and Exchange Commission relating to the election of
directors of the corporation shall have (in person or by agent or attorney) the
absolute right to inspect and copy the record of shareholders' names and
addresses and shareholdings during usual business hours upon five business
days' prior written demand upon the corporation and to obtain from the
transfer agent for the corporation, upon written demand and upon the tender of
its usual charges, a list of the shareholders' names and addresses, who are
entitled to vote for the election of directors, and their shareholdings, as of
the most recent record date for which it has been compiled or as of a date
specified by the shareholder subsequent to the date of demand. The list shall
be made available on or before the later of ten business days after the demand
is received or the date specified therein as the date as of which the list is
to be complied.
18.
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Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records and documents of every kind and to inspect
the physical properties of this corporation and any subsidiary of this
corporation. Such inspection by a director may be made in person or by agent
or attorney and the right of inspection includes the right to copy and make
extracts.
Section 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for payment of money, notes or other evidences of indebtedness, issued in the
name of or payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be
determined by resolution of the board of directors. The board of directors
may authorize one or more officers of the corporation to designate the person
or persons authorized to sign such documents and the manner in which such
documents shall be signed.
Section 4. ANNUAL AND OTHER REPORTS. The board of directors may, but
shall not be obligated to, until and unless there are 500 holders of record of
shares of this corporation, cause an annual report to be sent to the
shareholders not later than 130 days after the close of the fiscal year and at
least ten days prior to the annual meeting of shareholders to be held during
the next fiscal year. Such report shall contain a balance sheet as of the end
of such fiscal year and an income statement and statement of changes in
financial position for such fiscal year, accompanied by any report thereon of
independent accountants or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared
without audit from the books and records of the corporation.
A shareholder or shareholders holding at least five percent of the
outstanding shares of any class of the corporation may make a written request
to the corporation for an income statement of the corporation for the three-
month, six-month or nine-month period of the current fiscal year ended more
than thirty days prior to the date of the request and a balance sheet of the
corporation as of the end of such period and, in addition, if no annual report
for the last fiscal year has been sent to shareholders, the annual report for
the last fiscal year. The statements shall be delivered or mailed to the
person making the request within thirty days thereafter. A copy of such
statements shall be kept on file in the principal executive office of the
corporation for twelve months and they shall be exhibited at all reasonable
times to any shareholder demanding an examination of them or a copy shall be
mailed to such shareholder.
The corporation shall, upon the written request of any shareholder and
payment of a prescribed fee, mail to the shareholder a copy of the last annual,
semiannual or quarterly income statement which it has prepared and a balance
sheet as of the end of the period.
19.
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The quarterly income statements and balance sheets referred to in this
Section shall be accompanied by the report thereon, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that such financial statements were prepared without
audit from the books and records of the corporation.
Unless otherwise determined by the board of directors or the chief
executive officer, the chief financial officer and any assistant treasurer are
each authorized officers of the corporation to execute the certificate that the
annual report and quarterly income statements and balance sheets referred to in
this Section were prepared without audit from the books and records of the
corporation.
Any report sent to the shareholders shall be given personally or by mail
or other means of written communication, charges prepaid, addressed to such
shareholder at the address of such shareholder appearing on the books of the
corporation or given by such shareholder to the corporation for the purpose of
notice or set forth in the written request of the shareholder as provided in
this Section. If any report addressed to the shareholder at the address of
such shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the report to the shareholder
at such address, all future reports shall be deemed to have been duly given
without further mailing if the same shall be available for the shareholder upon
written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the report
to all other shareholders. If no address appears on the books of the
corporation or is given by the shareholder to the corporation for the purpose
of notice or is set forth in the written request of the shareholder as provided
in this Section, such report shall be deemed to have been given to such
shareholder if sent by mail or other means of written communication addressed
to the place where the principal executive office of the corporation is located
or if published at least once in a newspaper of general circulation in the
county in which the principal executive office is located. Any such report
shall be deemed to have been given at the time when delivered personally or
deposited in the mail or sent by other means of written communication. An
affidavit of mailing of any such report in accordance with the foregoing
provisions, executed by the secretary, assistant secretary or any transfer
agent of the corporation shall be prima facie evidence of the giving of the
report.
Section 5. CONTRACTS, ETC., HOW EXECUTED. The board of directors,
except as the Bylaws or Articles of Incorporation otherwise provide, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances.
20.
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Section 6. CERTIFICATE FOR SHARES. Every holder of shares in the
corporation shall be entitled to have a certificate or certificates signed in
the name of the corporation by the chairman or vice chairman of the board or
the president or a vice president and by the chief financial officer or an
assistant treasurer or the secretary or any assistant secretary, certifying
the number of shares and the class or series of shares owned by the
shareholder. Any or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
Any such certificate shall also contain such legend or other statement as
may be required by Section 202 of the General Corporation Law and any agreement
between the corporation and the issuee thereof, and may contain such legend or
other statement as may be required by any other applicable law or regulation or
agreement.
Certificates for shares may be issued prior to full payment thereof, under
such restrictions and for such purposes, as the board of directors or the
Bylaws may provide; provided, however, that any such certificates so issued
prior to full payment shall state the total amount of the consideration to be
paid therefor and the amount paid thereon.
No new certificate for shares shall be issued in place of any certificate
theretofore issued unless the latter is surrendered and cancelled at the same
time; provided, however, that a new certificate may be issued without the
surrender and cancellation of the old certificate if the certificate
theretofore issued is alleged to have been lost, stolen or destroyed. In case
of any such allegedly lost, stolen or destroyed certificate, the corporation
may require the owner thereof or the legal representative of such owner to
give the corporation a bond (or other adequate security) sufficient to
indemnify it against any claim that may be made against it (including any
expense or liability) on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
Section 7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. Unless the
board of directors shall otherwise determine, the chairman of the board, the
president, any vice president, the secretary and any assistant secretary of
this corporation are each authorized to vote, represent and exercise on behalf
of this corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this corporation. The
authority herein granted to such officers to vote or represent on behalf of
this corporation any and all shares held by this corporation in any other
corporation or corporations may be exercised either by such officers in person
or by any person authorized so to do by proxy or power of attorney or other
document duly executed by any such officer.
21.
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Section 8. EXCESSIVE COMPENSATION. If the Internal Revenue Service
disallows as a business deduction to the corporation any part of the salary or
other compensation paid by it to any officer, director, or employee, as being
excessive compensation, and if such determination is acceded to by the
corporation, or if the period for contesting and appealing such determination
has expired, or if no further avenue of appeal remains available to the
corporation, that part disallowed shall be repaid to the corporation by the
officer, director, or employee.
Section 9. INSPECTION OF BYLAWS. The corporation shall keep in its
principal executive office in California the original or a copy of the Bylaws
as amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours. It shall upon the written request and
payment of a prescribed fee, of any shareholder, furnish him a copy of the
Bylaws as amended to date.
Section 10. SEAL. The corporation shall have a common seal, and shall
have inscribed thereon the name of the corporation, the date of its
incorporation, and the words "INCORPORATED" and "DELAWARE", or "DELAWARE
CORPORATION".
Section 11. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the General Corporation Law shall govern the construction of these
Bylaws. Without limiting the generality of the foregoing, the masculine gender
includes the feminine and neuter, the singular number includes the plural and
the plural number includes the singular, and the term "person" includes a
corporation as well as a natural person.
Article VI.
AMENDMENTS
Section 1. POWER OF SHAREHOLDERS. New Bylaws may be adopted or these
Bylaws may be amended or repealed by the affirmative vote of a majority of the
outstanding shares entitled to vote, or by the written assent of shareholders
entitled to vote such shares, except as otherwise provided by law or by the
Articles of Incorporation.
22.
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Section 2. POWER OF DIRECTORS. Subject to the right of shareholders
as provided in Section 1 of this Article VI to adopt, amend or repeal Bylaws,
Bylaws other than a Bylaw or amendment thereof which, by law or any provision
of these Bylaws, must be adopted, amended or repealed by the shareholders, may
be adopted, amended or repealed by the board of directors.
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting secretary of TATUM PETROLEUM
CORPORATION, a Delaware corporation; and
(2) That the foregoing Bylaws, comprising of 23 pages, constitute the
Bylaws of such corporation as duly adopted by action of the Board of Directors
of the corporation duly taken on July 11, 1985.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of such corporation this 11th day of July 1985.
_____________________________
Frances Connell
Secretary
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