CONFORMED COPY
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
For the period ended June 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 of 15(d) of
the Securities and Exchange Act of 1934
For the transition period from to
Commission file number 0-7246
I.R.S. Employer Identification Number 95-2636730
PETROLEUM DEVELOPMENT CORPORATION
(A Nevada Corporation)
103 East Main Street
Bridgeport, WV 26330
Telephone: (304) 842-6256
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes XX No
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date: 10,485,753 shares of the
Company's Common Stock ($.01 par value) were outstanding as of June 30, 1997.<PAGE>
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Independent Auditors' Review Report 1
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 2
Condensed Consolidated Statements of Operations -
Three Months and Six Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Statement by Management Concerning Review of Interim
Financial Information by Independent Certified Public
Accountants 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
PART I - FINANCIAL INFORMATION
Independent Auditors' Review Report
The Board of Directors
Petroleum Development Corporation:
We have reviewed the accompanying condensed consolidated balance sheet
of Petroleum Development Corporation and subsidiaries as of June 30, 1997, and
the related condensed consolidated statements of operations for the three-month
and six-month periods ended June 30, 1997 and 1996 and the related condensed
consolidated statements of cash flows for the six-month periods ended June 30,
1997 and 1996. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Petroleum Development
Corporation and subsidiaries as of December 31, 1996 and the related
consolidated statements of operations, retained earnings, and cash flows for
the year then ended (not presented herein); and in our report dated March 13,
1997, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1996, is fairly
presented, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
August 5, 1997<PAGE>
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
<TABLE> <S> <S>
ASSETS
1997 1996
(Unaudited)
Current assets:
Cash and cash equivalents $ 8,461,600 $20,615,400
Accounts and notes receivable 4,851,800 6,696,000
Inventories 273,400 567,200
Prepaid expenses 813,100 740,900
Total current assets 14,399,900 28,619,500
Properties and equipment 58,423,800 56,962,000
Less accumulated depreciation, depletion,
and amortization 23,336,300 22,522,300
35,087,500 34,439,700
Other assets 592,500 545,000
$50,079,900 $63,604,200
</TABLE>
(Continued)
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<PAGE>
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, Continued
June 30, 1997 and December 31, 1996
<TABLE> <S> <S>
LIABILITIES AND
STOCKHOLDERS' EQUITY
1997 1996
(Unaudited)
Current liabilities:
Accounts payable and accrued expenses $ 9,714,200 $11,715,700
Advances for future drilling contracts 3,954,400 18,397,000
Funds held for future distribution 1,043,900 864,000
Total current liabilities 14,712,500 30,976,700
Long-term debt 3,695,000 5,320,000
Other liabilities 1,242,500 1,094,200
Deferred income taxes 3,419,900 3,140,800
Stockholders' equity:
Common stock 104,900 104,600
Additional paid-in capital 6,638,900 6,617,300
Retained earnings 20,336,900 16,427,400
Unamortized stock award (70,700) (76,800)
Total stockholders' equity 27,010,000 23,072,500
$50,079,900 $63,604,200
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three and Six Months ended June 30, 1997 and 1996
(Unaudited)
<TABLE> <S> <S> <S> <S>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues:
Oil and gas well
drilling operations $ 6,015,700 $2,745,700 $19,276,800 $10,732,600
Oil and gas sales 7,581,300 6,497,100 16,348,800 8,964,600
Well operations and
pipeline income 1,117,500 945,500 2,248,100 1,847,100
Other income 202,900 145,400 451,500 230,700
14,917,400 10,333,700 38,325,200 21,775,000
Costs and expenses:
Cost of oil and gas
well drilling
operations 4,439,400 2,267,900 15,758,800 8,770,200
Oil and gas purchases
and production costs 7,155,400 6,049,300 14,716,400 8,084,300
General and
administrative
expenses 592,900 570,100 1,091,500 1,111,900
Depreciation, depletion,
and amortization 610,200 541,700 1,220,400 1,207,400
Interest 101,900 67,300 204,500 139,400
12,899,800 9,496,300 32,991,600 19,313,200
Income before
income taxes 2,017,600 837,400 5,333,600 2,461,800
Income taxes 611,700 177,500 1,424,100 521,900
Net income $ 1,405,900 $ 659,900 $ 3,909,500 $ 1,939,900
Earnings per common and
common equivalent share $ .12 $ .06 $ .33 $ .17
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1997 and 1996
(Unaudited)
<TABLE> <S> <S>
1997 1996
Cash flows from operating activities:
Net income $ 3,909,500 1,939,900
Adjustments to net income
to reconcile to cash used in
operating activities:
Deferred federal income taxes 279,100 43,300
Depreciation, depletion & amortization 1,220,400 1,207,400
Leasehold acreage expired or surrendered 120,000 100,300
Employee compensation paid in stock 6,100 11,800
Gain on disposal of assets (58,800) (9,000)
Decrease in current assets 2,065,800 254,600
Increase in other assets (54,700) (144,500)
Decrease in current liabilities (16,264,200) (8,445,300)
Increase in other liabilities 148,300 143,500
Total adjustments (12,538,000) (6,837,900)
Net cash used in operating activities (8,628,500) (4,898,000)
Cash flows from investing activities:
Capital expenditures (2,711,500) (1,092,700)
Proceeds from sale of leases 729,000 327,100
Proceeds from sale of other assets 60,300 9,000
Net cash acquired from purchase of subsidiary - 1,450,000
Net cash (used in) provided by
investing activities (1,922,200) 693,400
Cash flows from financing activities:
Proceeds from borrowings - 1,000,000
Proceeds from sale of common stock 21,900 120,300
Purchase of treasury stock - (1,000,000)
Retirement of debt (1,625,000) (800,000)
Net cash used in financing activities (1,603,100) (679,700)
Net changes in cash and cash equivalents (12,153,800) (4,884,300)
Cash and cash equivalents, beginning of period 20,615,400 10,053,600
Cash and cash equivalents, end of period $ 8,461,600 $ 5,169,300
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-<PAGE>
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1997
(Unaudited)
1. Accounting Policies
Reference is hereby made to the Company's Annual Report on Form 10-K
for 1996, which contains a summary of major accounting policies followed by the
Company in the preparation of its consolidated financial statements. These
policies were also followed in preparing the quarterly report included herein.
2. Basis of Presentation
The Management of the Company believes that all adjustments (consisting
of only normal recurring accruals) necessary to a fair statement of the results
of such periods have been made. The results of operations for the six months
ended June 30, 1997 are not necessarily indicative of the results to be
expected for the full year.
3. Oil and Gas Properties
Oil and Gas Properties are reported on the successful efforts method.
4. Earnings Per Share
Computation of earnings per common and common equivalent share are as
follows for the six months ended June 30, 1997 and 1996:
<TABLE> <S> <S> <S> <S>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Weighted average common
shares outstanding 11,687,229 11,349,965 11,699,687 11,363,245
Net income $ 1,405,900 $ 659,900 $ 3,909,500 $1,939,900
Earnings per common and
common equivalent share $ .12 $ .06 $ .33 $ .17
</TABLE>
5. Commitments and Contingencies
The nature of the independent oil and gas industry involves a
dependence on outside investor drilling capital and involves a concentration
of gas sales to a few customers. The Company sells natural gas to various
public utilities and industrial customers. One customer, Hope Gas Inc., a
regulated public utility, accounted for 13.2% of total revenues in the first
six months of 1997.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Pending Adoption of New Accounting Principle
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings per
Share. SFAS No. 128 supersedes APB Opinion No. 15, Earnings per Share
("Opinion No. 15"), and requires the calculation and dual presentation of Basic
and Diluted earnings per share ("EPS"), replacing the measures of Primary and
Fully-diluted EPS as reported under Opinion No. 15. SFAS No. 128 is effective
for financial statements issued for periods ending after December 15, 1997;
earlier application is not permitted. Accordingly, EPS for the three and six
month periods ended June 30, 1997 and 1996 presented on the accompanying
statements of income are calculated under the guidance of Opinion 15.
Under SFAS No. 128, Basic EPS would have been $.37 and $.19 and Diluted
EPS would have been $.33 and $.17 per share for the six months ended June 30,
1997 and 1996, respectively. Also under SFAS No. 128, Basic EPS would have
been $.13 and $.06 and Diluted EPS would have been $.12 and $.06 per share
for the quarters ended June 30, 1997 and 1996, respectively.
Results of Operations
Three Months Ended June 30, 1997 Compared With June 30, 1996
Total revenues increased $4,583,700 in the second quarter of 1997
compared to the same period in 1996 as a result of increased drilling
activity and higher oil and gas sales. Drilling revenues increased 119.1%
as a result of higher volumes of drilling and completion activities, in the
second quarter of 1997 compared to the same period in 1996. Oil and gas
sales increased 16.7% due to an increase in gas marketing activities of Riley
Natural Gas Company (RNG) and higher gas production offset partially by lower
average sales prices during the second quarter from the Company's producing
properties. Well operations and pipeline income increased 18.2% as a result
of an increase in the number of wells operated by the Company in the second
quarter of 1997 compared to the same period in 1996.
Costs and expenses increased $3,403,500 as a result of increased well
drilling costs and increased oil and gas purchases and production costs during
the second quarter of 1997 compared to the same period in 1996. Oil and gas
well drilling costs increased 95.7% as a result of the increased drilling
activity referred to above. Oil and gas purchases and production costs
increased 18.3% as a result of higher purchases of gas for resale by RNG and
production costs from an increased number of wells operated by the Company.
The foregoing resulted in net income of $1,405,900 as compared to a net
income of $659,900 for the second quarter of 1996. The provision for income
taxes in 1997 consists of $466,400 of current taxes payable and $145,300 of
deferred income taxes. The provision for income taxes in 1996 consisted of
$162,800 of current taxes payable and $14,700 of deferred income taxes.
Six Months Ended June 30, 1997 Compared With June 30, 1996
Total revenues increased $16,550,200 during the first six months of
1997 compared to the same period in 1996 as a result of increased drilling
revenues and oil and gas sales. Drilling revenues increased $8,544,200
during the first six months of 1997 compared with the same period in 1996 as
a result of higher volumes of drilling and completion activities. Oil and
gas sales increased $7,384,200 primarily due to the gas marketing activities
of RNG ($6.9 million), a company acquired on April 1, 1996. Additionally,
oil and gas sales increased as a result of higher gas production offset
partially by lower average sales prices from the Company's producing
properties. Well operations and pipeline income increased 21.7% as a result
of an increase in the number of wells operated by the Company in the first
six months of 1997 compared to the same period in 1996. Other income
increased $220,800 during the first six months of 1997 compared to 1996 as a
result of interest earned on higher average bank balances along with a gain
on the sale of equipment.
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<PAGE>
Costs and expenses increased $13,678,400 as a result of the increased
well drilling costs and increased oil and gas purchases and production costs
during the first six months of 1997 compared to the same period in 1996. Oil
and gas well drilling costs increased 79.7% as a result of the increased
drilling activity referred to above. Oil and gas purchases and production
costs increased $6,632,100 primarily due to purchases of gas for resale by RNG.
The foregoing resulted in net income of $3,909,500 compared to a net
income of $1,939,900 for the first six months of 1996. The provision for
income taxes in 1997 consists of $1,145,000 of current taxes payable and
$279,100 of deferred income taxes. The provision for income taxes in 1996
Consisted of $478,600 current taxes payable and $43,300 of deferred income
taxes.
Liquidity and Capital Resources
Sales volumes of natural gas have continued to increase while natural
gas prices fluctuate monthly. The Company's gas sales prices are subject to
increase and decrease based on various market sensitive indices. A major factor
in the variability of these indices is the seasonal variation of demand for
natural gas, which typically peaks during the winter months. The volumes of
gas sales are expected to continue to increase as a result of continued
drilling activities. The Company utilizes commodity based derivative
instruments (natural gas futures contracts traded on the New York Mercantile
Exchange) as hedges to manage a portion of its exposure to this price
volatility. The futures contracts hedge committed and anticipated natural
gas purchases and sales, generally forecasted to occur within a 12 month
period. As of June 30, 1997, the Company had futures contracts for the sale
of $2,435,700 of natural gas. While these contracts have nominal carrying
value, their fair value, represented by the estimated amount that would be
received upon termination of the contracts, based on market quotes, was a net
value of $51,100 at June 30, 1997. The Company is required to maintain margin
deposits ($299,700 as of June 30, 1997) with brokers for outstanding futures
contracts.
The Company closed its first drilling program of 1997 in the second
quarter and has drilled the wells in the second and third quarters of 1997.
The Company will close its second drilling program of 1997 in September, 1997
and will drill the wells during the third and fourth quarters of 1997. The
Company's public drilling program continues to receive wide market
acceptance. The Company's first drilling program of 1997 closed
approximately 62% higher than the first program of 1996.
The acquisition of Riley Natural Gas Company (RNG) on April 1, 1996 in
a stock for stock exchange has, as expected, increased both oil and gas sales
revenues and oil and gas purchases. The RNG employees added to PDC's work
force have substantial experience in natural gas markets and natural gas
hedging transactions and have greatly expanded the Company's capabilities in
the gas marketing area.
On March 13, 1997 the Company executed an amendment to a bank credit
agreement which provides a borrowing base of $10,000,000 subject to adequate
oil and gas reserves, which at the request of the Company, the bank may
increase the borrowing base to $20,000,000. Interest accrues at prime with
LIBOR (London Interbank Market) rate alternatives available at the discretion
of the Company. No principal payments are required until the credit agreement
expires on December 31, 1999.
The Company continues to pursue capital investment opportunities in
producing gas properties along with its commitment to participate in its
sponsored gas drilling partnerships. Management believes that the Company
has adequate capital to meet its operating requirements and continues to
pursue opportunities for operating improvements and cost efficiencies.
-8-
<PAGE>
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
STATEMENT BY MANAGEMENT CONCERNING
REVIEW OF INTERIM FINANCIAL INFORMATION
BY INDEPENDENT AUDITORS
The June 30, 1997 and 1996 condensed consolidated financial statements included
in this filing on Form 10-Q have been reviewed by KPMG Peat Marwick LLP,
independent auditors, in accordance with established professional standards and
procedures for such reviews. The report of KPMG Peat Marwick LLP commenting
upon their review accompanies the condensed consolidated financial statements
included in Item 1 of Part I.
-9-
<PAGE>
CONFORMED COPY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any legal actions that would
materially affect the Company's operations or financial statements.
Item 6. Exhibits and Reports on Form 8-K
(a) None.
(b) No reports on Form 8-K have been filed during the quarter ended
June 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Petroleum Development Corporation
(Registrant)
Date: August 7, 1997 /s/ Steven R. Williams
Steven R. Williams
President
Date: August 7, 1997 /s/ Dale G. Rettinger
Dale G. Rettinger
Executive Vice President
and Treasurer
-10-
<PAGE>
BY-LAWS
OF
PETROLEUM DEVELOPMENT CORPORATION
(A Nevada Corporation)
ARTICLE I
OFFICES
1.01 Principal Offices. The Board of Directors shall fix
the location of the principal executive office of the Corporation
at any place within or outside the State of Nevada. If the
principal executive office is located outside the State and the
Corporation has no principal office in Nevada, the Board of
Directors shall fix and designate the office of its Agent for
service as its Nevada office.
1.02 Other Offices. The officers or the Board of Directors
may, at any time, establish branch or subordinate offices at any
place or places where the Corporation is qualified to do
business, and may change the location of any office of the
Corporation.
ARTICLE II
MEETING OF SHAREHOLDERS
2.01 Place of Meeting. Meetings of shareholders shall be
held at any place within or outside the State of Nevada
designated by the Board of Directors upon proper notice. In the
absence of any such designation, shareholders' meetings shall be
held at the principal executive office of the Corporation.
2.02 Annual Meetings. Unless held at a time and date
designated each year by the Board of Directors in accordance with
applicable law, an annual meeting of shareholders shall be held
on the last day of the week of July of each year at 10:00 o'clock
a.m. (L.T.), provided, however, that should such day fall upon a
legal holiday, then the annual meeting of shareholders shall be
held at the same time and place on the next day thereafter
ensuing which is a full business day. At the annual meeting,
Directors shall be elected and any other proper business may be
transacted.
2.03 Special Meetings.
(a) A special meeting of the shareholders may be called
at any time by the Board of Directors, or by the Chairman of the
Board, by the President, by one or more shareholders holding
shares which, in the aggregate, entitle them to cast not less
than ten percent (10%) of the votes at any such meeting.
(b) If a special meeting is called by any person or
persons other than the Board of Directors, the request shall be
in writing specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the Chairman of the Board, the
President, any Vice President, or the Secretary of the
Corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote,
in accordance with the provisions of paragraph 2.01, 2.04 and
2.05 of this Article II, that a meeting will be held at the time
requested by the person or persons calling the meeting, not less
than thirty five (35) nor more than sixty (60) days after the
receipt of the request. If the notice is not given within twenty
(20) days after the receipt of the request, the person or persons
requesting the meeting may give the notice. Nothing contained in
this paragraph 2.03 shall be construed as limiting, fixing or
affecting the time when a meeting of shareholders called by
action of the Board of Directors may be held.
2.04 Notice of Shareholders' Meetings.
(a) All notices of meetings of shareholders shall be sent
or otherwise given in accordance with paragraph 2.05 not less
than ten (10) nor more than sixty (60) days before the date of
the meeting being noticed. The notice shall specify the place,
date and hour of the meeting and (i) in the case of a special
meeting, the general nature of the business to be transacted, or
(ii) in the case of the annual meeting, those matters which the
Board of Directors or the other person or persons calling the
meeting, at the time of giving the notice, intend to present for
action by the shareholders. The notice of any meeting at which
Directors are to be elected shall include the names of any
nominees which, at the time of the notice, management intends to
present for election.
(b) If action is proposed to be taken at any meeting for
approval of (i) a contract or transaction in which a Director has
a direct or indirect financial interest, (ii) an amendment of the
Articles of Incorporation, (iii) a reorganization of the
Corporation, pursuant to, or (iv) a voluntary dissolution of the
Corporation as defined by the code of Nevada, the notice shall
also state the general nature of such proposals.
2.05 Manner of Giving Notice and Affidavit of Notice.
(a) Notice of any meeting of shareholders shall be given
either personally or by first class mail, telegraphic, express
mail, or other written communication, charges prepaid, addressed
to each shareholder at the address of such shareholder appearing
on the books of the Corporation or more recently given by the
shareholder to the Corporation for the purpose of notice. If no
such address appears on the Corporation's books or has been so
given, notice shall be deemed to have been properly given to such
shareholder if sent by first class mail or telegraphic or other
written communication to the Corporation's principal executive
office to the attention of such shareholder, or if published at
least once in a newspaper of general circulation in the county
where such office is located. Notice shall be deemed to have
been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written
communication.
(b) If any notice addressed to a 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 at
such address, all future notices or reports shall be deemed to
have been duly given without further mailing if the same shall be
available to the shareholder upon written demand of the
shareholder at the principal executive office of the Corporation
for a period of one (1) year from the date of the giving of such
notice.
(c) An affidavit of the mailing or other means of giving
any notice of any shareholders' meeting shall be executed by the
Secretary, Assistant Secretary or any transfer agent of the
Corporation giving such notice, and shall be filed and maintained
in the minute book of the Corporation.
2.06 Quorum. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at the
subject meeting of shareholders 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.
2.07 Adjourned Meeting and Notice Thereof.
(a) Any shareholders' meeting, annual or special, whether
or not a quorum is present, may be adjourned from time to time by
the vote of a majority of the shares represented at such meeting,
either in person or by proxy, but in the absence of a quorum, no
other business may be transacted at such meeting, except as
provided in paragraph 2.06.
(b) When any meeting of shareholders, either annual or
special, is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken,
unless a new record date for the adjourned meeting is fixed, or
unless the adjournment is for more than forty five (45) days from
the date set for the original meeting, in which case the Board of
Directors shall set a new record date. Notice of any such
adjourned meeting, if required, shall be given to each
shareholder of record entitled to vote at the adjourned meeting
in accordance with the provisions of paragraph 2.04 and 2.05. At
any adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting.
2.08 Voting.
(a) The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the
provisions of paragraph 2.11, subject to the provisions of the
Nevada Code (relating to voting shares held by a fiduciary, in
the name of the Corporation or in joint ownership). Such vote
may be by voice vote or by ballot; provided, however, that all
elections for Directors must be by ballot upon demand by a
shareholder at such election made before the voting begins. Any
shareholder entitled to vote on any matter (other than the
election of Directors) may vote part of the shares in favor of
the proposal and refrain from voting the remaining shares or vote
them against the proposal, but if the shareholder fails to
specify the number of shares such shareholder is voting
affirmatively, it will be conclusively presumed that the
shareholder's approving vote is with respect to all shares such
shareholder is entitled to vote. If a quorum is present, the
affirmative vote of a majority of the shares represented at the
meeting, entitled to vote and voting on any matter (other than
the election of Directors) shall be the act of the shareholders,
unless the vote of a greater number or voting by classes is
required by the Code or the Articles of Incorporation.
(b) At a shareholders' meeting involving the election of
Directors, no shareholder shall be entitled to cumulate votes
(i.e., cast for any candidate a number of votes greater than the
number of the shareholder's shares). The candidates receiving
the highest number of votes, up to the number of Directors to be
elected, shall be elected.
2.09 Waiver of Notice or Consent by Absent Shareholders.
(a) The transactions of any meeting of shareholders,
either annual or special, however called and noticed and wherever
held shall be a valid as though had at a meeting duly held after
regular call and notice, if a quorum be present either in person
or by proxy, and if, either before or after the meeting, each
person entitled to vote but not present in person or by proxy,
signs a written waiver of notice, a consent to the holding of the
meeting, or an approval of the minutes thereof. The waiver of
notice, consent or approval need not specify either the business
to be transacted or the purpose of any annual or special meeting
of shareholders, except that if action is taken or proposed to be
taken for approval of any of those matters specified in paragraph
2.04(b), the waiver of notice shall state the general nature of
such proposal. All such waivers, consents and approvals shall be
filed with the corporate records or made a part of the minutes of
the meeting.
(b) Attendance of a person at a meeting shall constitute
a waiver of notice and presence at such meeting unless such
person objects at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or
convened, except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by
the Code to be included in the notice of the meeting but not so
included if such objection is expressly made at the meeting.
2.10 Record Date for Shareholder Notice, Voting and Giving
Consents.
(a) For purposes of determining the shareholders entitled
to notice of any meeting, to vote, or to give consent to
corporate action without a meeting, the Board of Directors may
fix, in advance, a record date which shall not be more than sixty
(60) days nor less than ten (10) days prior to the date of any
such meeting, nor more than sixty (60) days prior to such action
without a meeting, and in such case, only shareholders of record
at the close of business on the date so fixed are entitled to
notice and to vote or to give consents, as the case may be,
notwithstanding any transfer of any shares on the books of the
Corporation after the record date fixed at aforesaid, except as
otherwise provided in a Nevada General Corporation Law.
(b) If the Board of Directors does not so fix a record
date:
(i) the record date for determining shareholders
entitled to notice of, or to vote at, a meeting of
shareholders shall be at the close of business on the
business day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is
held; and
(ii) the record date for determining shareholders
entitled to give consent to corporate action in writing
without a meeting, (A) when no prior action by the Board has
been taken, shall be the day on which the first written
consent is given, or (B) when prior action of the Board has
been taken, shall be at the close of business on the day on
which the Board adopts the resolution relating thereto, or
the sixtieth (60th) day prior to the date of such other
action, whichever is later.
2.11 Proxies. Every person entitled to vote for Directors
or on any other matter shall have the right to do so either in
person or by one or more agents authorized by a written proxy
signed by such person and filed with the Secretary of the
Corporation. A proxy shall be deemed signed if the shareholder's
name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the
shareholder or the shareholder's attorney-in-fact. A validly
executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the
person executing it, prior to the vote pursuant thereto, by a
writing delivered to the Corporation stating that the proxy is
revoked, or by a subsequent proxy executed by the person
executing the prior proxy and presented to the meeting, or by
such person's attendance at the meeting and voting in person; or
(ii) written notice of the death or incapacity of the maker of
such proxy is received by the Corporation before the vote
pursuant thereto is counted; provided, however, that no such
proxy shall be valid after the expiration of eleven (11) months
from the date of such proxy, unless otherwise provided in the
proxy.
2.12 Inspectors of Election.
(a) Before any meeting of shareholders, the Board of
Directors may appoint any persons other than nominees for office
to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are so appointed, the
chairman of the meeting may, and on the request of any
shareholder or a shareholder's proxy shall, appoint inspectors of
election at the meeting. The number of inspectors shall be
either one (1) or three (3). If inspectors are appointed at the
meeting on the request of one or more shareholders or proxies,
the holders of a majority of shares or their proxies present at
the meeting, shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as
inspector fails to appear or fails or refuses to act, the
chairman of the meeting may, and upon the request of any
shareholder or shareholder's proxy shall, appoint a person to
fill the vacancy.
(b) The inspectors shall:
(i) 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;
(ii) receive votes, ballots or consents;
(iii) hear and determine all challenges and questions
in any way arising in connection with the right to vote;
(iv) count and tabulate all votes or consents;
(v) determine when the polls shall close;
(vi) determine the result; and
(vii) do any other acts that may be proper to conduct
the election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.01 Powers.
(a) Subject to the provisions of the Nevada Code, any
limitations in the Articles of Incorporation, and these By-Laws
relating to action required to be approved by the shareholders or
by the outstanding shares, 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.
(b) Without prejudice to such general powers but subject
to the same limitations, it is hereby expressly declared that the
Directors shall have the power and authority to:
(i) select and remove all officers, agents and
employees of the Corporation, prescribe such powers and
duties for them as are not inconsistent with law, the
Articles of Incorporation, or these By-Laws, fix their
compensation, and require from them security for faithful
service;
(ii) change the principal executive office or the
principal business office of the Corporation from one
location to another; cause the Corporation to be qualified
to conduct or do business in any state, territory,
dependency, or foreign country; designate any place within
or without the State for the holding of any shareholders'
meeting or meetings, including annual meetings; adopt, make
or use a corporate seal, prescribe the forms of certificates
of stock, and alter the form of such seal and of such
certificates;
(iii) authorize the issuance of options and warrants
to purchase shares of stock of the Corporation, from time to
time, upon such terms as may be lawful, in consideration of
money paid, labor done, services actually rendered, debts or
securities cancelled, or tangible or intangible property
actually received; and
(iv) borrow money and incur indebtedness for the
purposes of the Corporation, and cause to be executed and
delivered therefor, in the corporate name, promissory notes,
bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, or other evidences of debt and securities
therefor.
3.02 Number and Qualifications of Directors. The
authorized number of Directors shall be seven (7) until changed
(increased or decreased) by a duly-adopted amendment to the By-
Laws of the Corporation adopted by the vote or written consent of
the Board of Directors at a meeting specially called for the
purpose. The Directors at any regularly called meeting held
pursuant to notice of the purpose of such meeting may amend these
By-Laws as provided by the laws of the State of Nevada, and
provide that the membership of the Board be divided into one (1),
two (2) or three (3) classes; the term of office of those of the
first (1st) class to expire at the annual meeting next ensuing;
the second (2nd) class one year thereafter; and the third (3rd)
class two (2) years thereafter; and at each annual election held
after such classification and election, Directors shall be chosen
for a full term, as the case may be, to succeed those whose terms
expire.
3.03 Election and Term of Office of Directors. Except as
otherwise provided in paragraph 3.02 Directors shall be elected
at each annual meeting of the 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.
3.04 Vacancies.
(a) Vacancies in the Board of Directors may be filled by
a majority of the remaining Directors, though less than a quorum,
or by a sole remaining Director, except that a vacancy created by
the removal of a Director by the vote or written consent of the
shareholders or by court order may be filled only by the vote of
a majority of the shares represented and voting at a duly held
meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required
quorum), or by the unanimous written consent of all shares
entitled to vote for the election of Directors. Each Director so
elected shall hold office until the next annual meeting of the
shareholders and until a successor has been elected and
qualified.
(b) A vacancy or vacancies in the Board of Directors shall
be deemed to exist in the case of the death, resignation or
removal of any Director, or if the Board of Directors, by
resolution, declares vacant the office of Director who has been
declared of unsound mind by an order of Court or convicted of a
felony, or if the authorized number of Directors is increased, or
if the shareholders fail, at any meeting of shareholders at which
any Director or Directors are elected, to elect the full
authorized number of Directors to be voted for at the meeting.
(c) The shareholders may elect a Director or Directors at
any time to fill any vacancy or vacancies not filled by the
Directors, but any such election by written consent, other than
to fill a vacancy created by removal, shall require the consent
of a majority of the outstanding shares entitled to vote.
(d) Any Director may resign upon giving written notice to
the Chairman of the Board, the President, the Secretary or the
Board of Directors. A resignation shall be effective upon the
giving of the notice, unless the notice specifies a later time
for its effectiveness. If the resignation of a Director is
effective at a future time, the Board of Directors may elect a
successor to take office when the resignation becomes effective.
(e) No reduction of the authorized number of Directors
shall have the effect of removing any Director prior to the
expiration of his term of office.
3.05 Place of Meeting and Telephonic Meetings. Regular
meetings of the Board of Directors may be held without notice at
any time and at any place within or outside the State of Nevada
that may be designated by these By-Laws, or from time to time by
resolution of the Board. In the absence of the designation of a
place, regular meetings shall be held at the principal executive
office of the Corporation. Special meetings of the Board shall
be held at any place that has been designated in the notice of
the meeting or, if not stated in the notice, at the principal
executive office of the Corporation. Any meeting, regular or
special, may be held by conference telephone or similar
communications equipment, so long as all Directors participating
in such meeting can hear one another, and all such Directors
shall be deemed to be present in person at such meeting.
3.06 Annual Meetings. Immediately following each annual
meeting of shareholders, the Board of Directors shall hold a
regular meeting for purposes of organization, any desired
election of officers, and the transaction of other business.
Notice of such meeting shall not be required.
3.07 Other Regular Meetings. Other regular meetings of the
Board of Directors may be held not less than quarterly as shall
from time to time be fixed by the Board of Directors. Such
regular meetings may be held without notice but provided notice
and an agenda shall be furnished to all Directors when time
permits.
3.08 Special Meetings.
(a) 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 (2) Directors.
(b) Notice of the time and place of special meetings shall
be delivered personally or by telephone to each Director or sent
by first class mail or telegram, charges prepaid, addressed to
each Director at his or her address as it is shown upon the
records of the Corporation. In case such notice is mailed, it
shall be deposited in the United States mail at least four (4)
days prior to the time of the holding of the meeting. In case
such notice is delivered personally, or by telephone or telegram,
it shall be deliver personally or by telephone or to the
telegraph company at least forty eight (48) hours prior to the
time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated to either the
Director or to a person at the office of the Director who the
person giving the notice has reason to believe will promptly
communicate it to the Director. The notice need not specify the
purpose of the meeting nor the place if the meeting is to be held
at the principal executive office of the Corporation.
3.09 Quorum. A majority of the authorized number of
Directors shall constitute a quorum for the transaction of
business, except to adjourn as hereinafter provided. 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 shall be
regarded as the act of the Board of Directors. A meeting at
which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of Directors, if any
action taken is approved at least a majority of the required
quorum for such meeting.
3.10 Waiver of Notice. The transactions of any meeting
of the Board of Directors, 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 and if,
either before or after the meeting, each of the Directors not
present signs a written waiver of notice thereof. The waiver of
notice or consent need not specify the purpose 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.
Notice of a meeting shall also be deemed given to any Director
who attends the meeting without protesting, prior thereto or at
its commencement, the lack of notice to such Director.
3.11 Adjournment. A majority of the Directors present,
whether or not constituting a quorum, may adjourn any meeting to
another time and place.
3.12 Notice of Adjournment. Notice of the time and place
of holding an adjourned meeting need not be given, unless the
meeting is adjourned for more than twenty four (24) hours, in
which case notice of such time and 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.
3.13 Action Without 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 action
by written consent shall have the same force and effect as a
unanimous vote of the Board of Directors. Such written consent
or consents shall be filed with the minutes of the proceedings of
the Board.
3.14 Fees and Compensation of Directors. Directors and
members of committees may receive such compensation, if any, for
their services, and such reimbursements of expenses as may be
fixed or determined by resolution of the Board of Directors.
Nothing herein contained shall be construed to preclude any
Director from serving the Corporation in any other capacity as an
officer, agent, employee, or otherwise, and receiving
compensation for such services.
ARTICLE IV
COMMITTEES
4.01 Committees of Directors. The Board of Directors may,
by resolution adopted by a majority of the authorized number of
Directors, designate one (1) or more committees, each consisting
of two (2) or more Directors, to serve at the pleasure of the
Board. The Board may designate one (1) or more Directors as
alternate members of any committee who may replace any absent
member or members at any meeting of the committee. The
appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of
Directors. Any such committee, to the extent provided in the
resolution of the Board, shall have all the authority of the
Board, except with respect to:
(a) the approval of any action which, under the Code,
also requires shareholders' approval or approval of the
outstanding shares;
(b) the filling of vacancies on the Board of
Directors or on any committee;
(c) the fixing of compensation of the Directors for
serving on the Board or on any committee;
(d) the amendment or repeal of by laws or the
adoption of new by laws;
(e) the amendment or repeal of any resolution of the
Board of Directors which, by its express terms, is not so
amendable or repealable;
(f) the appointment of any other committees of the
Board of Directors or the members thereof.
4.02 Meetings and Action of Committees. Meetings and
action of committees shall be governed by, and be held and taken
in accordance with, the provisions of Article III of these By-
Laws, paragraph 3.05 (place of meetings and telephonic meetings),
paragraph 3.07 (regular meetings), paragraph 3.08 (special
meetings and notice), paragraph 3.09 (quorum), paragraph 3.10
(waiver of notice), paragraph 3.11 (adjournment), paragraph 3.12
(notice of adjournment), and paragraph 3.13 (action without
meeting), with such changes in the context of those Sections as
are necessary to substitute the committee and its members for the
Board of Directors and its members, except that the time of
regular meetings of committees may be determined by resolution of
the Board of Directors as well as the committee, special meetings
of committees may also be called by resolution of the Board of
Directors, and notice of special meetings of committees shall
also be given to all alternate members who shall have the right
to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not
inconsistent with the provisions of these By-Laws.
ARTICLE V
OFFICERS
5.01 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. The Corporation may also have, at the
discretion of the Board of Directors, one or more Vice
Presidents, a Treasurer, one or more Assistant Secretaries, one
or more Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of paragraph 5.03 of
this Article V. Any number of officers may be held by the same
person.
5.02 Election of Officers. The officers of the
Corporation, except such officers as may be appointed in
accordance with the provisions of paragraph 5.03 or paragraph
5.05 of this Article V, shall be chosen by the Board of
Directors, and each shall serve at the pleasure of the Board,
subject to the rights, if any, of an officer under any contract
of employment.
5.03 Subordinate Officers, Etc. The Board of Directors may
appoint, and may empower the President 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 By-Laws or as the
Board of Directors may from time to time determine.
5.04 Removal and Resignation of Officers.
(a) Subject to the rights, if any, of an officer under any
contract of employment, any officer may be removed, either with
or without cause, by the Board of Directors, at any regular or
special meeting thereof, or, except in the case of an officer
chosen by the Board of Directors, by any officer upon whom such
power of removal may be conferred by the Board of Directors.
(b) Any officer may resign at any time by giving written
notice to the Corporation. Any such resignation shall take
effect upon the giving of such notice or at any later time
specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective. Any such resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which
the officer is a party.
5.05 Vacancies in Offices. A vacancy in any office because
of death, resignation, removal, disqualification or any other
cause shall be filled in the manner prescribed in these By-Laws
for regular appointments to such office.
5.06 Chairman of the Board. The Chairman of the Board, if
such an officer be elected, shall, if present, preside at all
meetings of the Board of Directors and exercise and perform such
other powers and duties as may be, from time to time, assigned to
him by the Board of Directors or prescribed by the By-Laws,
including, without limitation, the designation of Chief Executive
Officer ("CEO").
5.07 President. Subject to such supervisory powers, if
any, as may be given by the Board of Directors to the Chairman of
the Board, if there be such an officer, the President such be the
general manager and Chief Executive Officer of the Corporation
and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and
the officers of the Corporation. He shall preside 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 and shall have such other powers and duties as may be
prescribed by the Board of Directors or the By-Laws.
5.08 Vice Presidents. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as
fixed by the Board of Directors, or, if not ranked, a Vice
President designated by the Board of Directors, shall perform all
the duties of the President, and when so acting shall have all
the powers of, and be subject to, all the restrictions upon the
President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed
for them respectively by the Board of Directors, the By-Laws, or
the President, or Chairman of the Board if there is no President.
5.09 Secretary.
(a) The Secretary shall keep or cause to be kept at the
principal executive office, or such other place as the Board of
Directors may designate, a book of minutes of all meetings and
actions of Directors, committees of Directors, and shareholders,
with the time and place of holding, whether regular or special,
and, if special, how authorized, the notice thereof given, the
names of those present at Directors' and committee meetings, the
number of shares present or represented at shareholder's
meetings, and the proceedings thereof.
(b) The Secretary shall keep or cause to be kept at the
principal executive office, or at the office of the Corporation's
transfer agent or registrar, as determined by resolution of the
Board of Directors, a share register or a duplicate share
register showing the names of all shareholders and their
addresses, the number and classes of shares held by each, the
number and date of certificates issued for the same, and the
number and date of cancellation of every certificate surrendered
for cancellation.
(c) The Secretary shall give, or cause to be given, notice
of all meetings of the shareholders and of the Board of Directors
required by the By-Laws or by law to be given, and shall keep the
seal of the Corporation, if one be adopted, in safe custody, and
shall have such other powers and perform such other duties as may
be prescribed by the Board of Directors or by the By-Laws.
5.10 Treasurer and Chief Financial Officer.
(a) The Treasurer and Chief Financial Officer shall keep
and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and
business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings and shares. The book of accounts
shall be open at all reasonable times to inspection by any
Director.
(b) The Chief Financial Officer shall cause to be
deposited all moneys and other valuables in the name and to the
credit of the Corporation with such depositaries as may be
designated by the Board of Directors. He shall cause the funds
of the Corporation to be disbursed as he may be properly directed
from time to time, shall render to the President and Directors,
whenever they request it, an account of all his transactions as
Chief Financial Officer and of the financial condition of the
Corporation, and shall have other powers and perform such other
duties as may be prescribed by the Board of Directors or by By-
Laws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS
6.01 Agents, Proceedings and Expenses. For the purposes
of this Article, "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 other 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 paragraph 6.04 or
paragraph 6.05(c) of this Article VI.
6.02 Actions Other Than by the Corporation. 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 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,
judgements, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding, if that
person acted in good faith and in a manner that 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 that 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 interests of this Corporation or that the person had
reasonable cause to believe that the person's conduct was
unlawful.
6.03 Actions by the Corporation. 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 that person is or was an
agent of this Corporation, against expenses actually and
reasonably incurred by that person in connection with the defense
or settlement of that action if that person acted in good faith,
in a manner that 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 paragraph 6.03:
(a) in respect of any claim, issue or matter as to
which that person shall have been adjudged to be liable to
this Corporation in the performance of that person's duty to
this Corporation, unless and only to the extent that the
court in which that proceeding is or was pending shall
determine upon application that, in view of all the
circumstances of the case, that person is fairly and
reasonably entitled to indemnity for the expenses which the
court shall determine;
(b) of amounts paid in settling or otherwise
disposing of a threatened or pending action, with or without
court approval; or
(c) of expenses incurred in defending a threatened or
pending action which is settled or otherwise disposed of
without court approval.
6.04 Successful Defense by Agent. To the extent that an
agent of this Corporation has been successful on the merits in
defense of any proceeding referred to in paragraph 6.02 or 6.03
of this Article VI, 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.
6.05 Required Approval. Except as provided in paragraph
6.04 of this Article, any indemnification under this Article
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 paragraph 6.02 or
6.03 of this Article VI, by:
(a) a majority vote of a quorum consisting of
Directors who are not parties to the proceeding;
(b) approval by the affirmative vote of a majority of
the shares of this Corporation represented and voting at a
duly held meeting at which a quorum is present (which shares
voting affirmatively also constitute at least a majority of
the required quorum), or by the written consent of holders
of a majority of the outstanding shares entitled to vote
(for this purpose, the shares owned by the person to be
indemnified shall not be entitled to vote thereon); or
(c) the court in which the 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.
6.06 Advance of Expenses. Expenses incurred in defending
any proceeding may be advanced by this Corporation before the
final disposition of the proceeding upon receipt of an
undertaking by or on behalf of the agent to repay the amount of
the advance unless it shall be determined ultimately that the
agent is entitled to be indemnified as authorized in this Article
VI.
6.07 Other Contractual Rights. Nothing contained in this
Article VI 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.
6.08 Limitations. No indemnification or advance shall be
made under this Article VI, except as provided in paragraph 6.04
or paragraph 6.05(c), in any circumstance where it appears:
(a) that it would be inconsistent with a provision of
the Articles, these By-Laws, 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
(b) that it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
6.09 Insurance. This Corporation may, upon a determination
by the Board of Directors, purchase and maintain insurance on
behalf of any agent of the Corporation against any liability
which might be asserted against or incurred by the agent in such
capacity, or which might arise out of the agent's status as such,
whether or not this Corporation would have the power to indemnify
the agent against that liability under the provisions of this
Article VI.
6.10 Fiduciaries of Corporate Employee Benefit Plan. This
Article VI does not apply to any proceeding against any trustee,
investment manager, or other fiduciary of an employee benefit
plan in that person's capacity as such even though that person
may also be an agent of this Corporation as defined in paragraph
6.01 of this Article VI. This Corporation may, however, upon
approval in accordance with paragraph 6.05, indemnify and
purchase and maintain insurance on behalf of any fiduciary to the
extent permitted by the laws of the State of Nevada.
6.11 Amendment to Nevada Law. In the event that Nevada law
regarding indemnification of Directors, officers, employees and
other agents of corporations, as in effect at the time of
adoption of these By-Laws, is subsequently amended in any way
increase the scope of permissible indemnification beyond that set
forth herein, the indemnification authorized by this Article VI
shall be deemed to be coextensive with that afforded by the
Nevada law as so amended.
ARTICLE VII
CORPORATE LOANS AND GUARANTEES TO DIRECTORS, OFFICERS AND
EMPLOYEES
7.01 Limitation on Corporate Loans and Guarantees. Except
as provided in paragraph 7.02 of this Article VII this
Corporation shall not make any loan of money or property to, or
guarantee any obligation of:
(a) any Director or officer of the Corporation or of
its parent or any subsidiary, or
(b) any person, upon the security of shares of this
Corporation or of its parent, unless the loan or guaranty is
otherwise adequately secured,
except by the vote of the holders of a majority of the shares of
all classes, regardless of limitations or restrictions on voting
rights, other than shares held by the benefited Directors,
officer or person.
7.02 Permissible Corporate Loans and Guarantees. This
Corporation may lend money to, guarantee any obligation of, or
otherwise assist any officer or other employee of this
Corporation or of any subsidiary, including any Director, officer
or employee who is also a Director, pursuant to an employee
benefit plan (including, without limitation, any stock purchase
or stock option plan) available to executives or other employees,
whenever the Board determines that such loan or guaranty may
reasonably be expected to benefit the Corporation. Such loan,
guaranty or other assistance may be with or without interest and
may be unsecured or secured in such manner as the Board shall
approve, including, without limitation, a pledge of shares of the
Corporation. This Corporation may advance money to a Director,
officer or employee of the Corporation or of its parent or any
subsidiary for expenses reasonably anticipated to be incurred in
the performance of the duties of such Director, officer or
employee, provided that, in the absence of such advance, such
Director, officer or employee would be entitled to be reimbursed
for such expenses by such Corporation, its parent or any
subsidiary.
ARTICLE VIII
GENERAL CORPORATE MATTERS
8.01 Record Date for Purposes Other Than Notice and Voting.
(a) For purposes of determining the shareholders entitled
to receive payment of any dividend or other distribution or
allotment of any rights or entitled to exercise any rights in
respect of any other lawful action (other than for the purposes
prescribed by paragraph 2.11 of Article II of these By-Laws), the
Board of Directors may fix, in advance, a record date, which
shall not be more than sixty (60) days prior to any such action,
and in such case only shareholders of record at the close of
business on the date so fixed are entitled to receive the
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
fixed as aforesaid, except as otherwise provided in Nevada
General Corporation Law.
(b) If the Board of Directors does not so fix a record
date, the record date for determining shareholders for any such
purpose shall be at the close of business on the day on which the
Board adopts the resolution relating thereto, or the sixtieth
(60th) day prior to the date of such action, whichever is later.
8.02 Checks, Drafts, Evidences of Indebtedness. 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. Such
signature(s) or endorsement(s) may be by facsimile or printed
signature of the officer.
8.03 Corporate Contracts and Instruments; How Executed.
The Board of Directors, except as otherwise provided in these By-
Laws, may authorize any officer(s) or agent(s) 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; and, unless authorized or ratified by the
Board of Directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to
bind the Corporation by any contract or engagement, to pledge its
credit, or to render it liable for any purpose or to any amount.
8.04 Certificates for Shares. A certificate or
certificates for shares of the capital stock of the Corporation
shall be issued to each shareholder when any such shares are
fully paid, and the Board of Directors may authorize the issuance
of certificates for shares as partly paid, provided that such
certificates shall state the amount of the consideration to be
paid therefor and the amount paid thereon. All such statements
or references thereto appearing on the face of the certificate
shall be conspicuous. All certificates shall be signed in the
name of the Corporation by the Chairman of the Board, the
President, a Vice President, 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 an officer, transfer agent
or registrar at the date of issue.
8.05 Lost Certificates. Except as hereinafter provided in
this paragraph 8.05, no new certificate for shares shall be
issued in lieu of an old certificate unless the old certificate
is surrendered to the Corporation and cancelled at the same time
as such issuance. The Board of Directors may, if any share
certificate or certificate for any other security is lost, stolen
or destroyed, authorize the issuance of a new certificate in lieu
thereof, upon such terms and conditions as the Board may require,
including provision for indemnification of the Corporation
secured by a bond or other adequate security sufficient to
protect the Corporation against any claim that may be made
against it, including any expense or liability, on account of the
alleged loss, theft or destruction of such certificate or the
issuance of such new certificate.
8.06 Representation of Shares of Other Corporations. The
Chairman of the Board, the President, any Vice President, or any
other person authorized by resolution of the Board of Directors
or by any of the foregoing designated officers, is authorized to
vote on behalf of the Corporation any and all shares of any other
corporation or corporations, foreign or domestic, standing in the
name of the Corporation. The authority herein granted to said
officers to vote or represent, on behalf of the Corporation, any
and all shares held by the Corporation in any other corporation
or corporations may be exercised by any such officer in person or
by any person authorized to do so by proxy duly executed by said
officer.
8.07 Construction and Definitions. Unless the context
requires otherwise, the general provisions, rules of
construction, and definitions in the Nevada General Corporation
Law shall govern the construction of these By-Laws. Without
limiting the generality of the foregoing, the singular numbers
includes the plural, the plural number includes the singular, and
the term "person" includes both a corporation and a natural
person.
ARTICLE IX
RECORDS AND REPORTS
9.01 Maintenance and Inspection of Share Register.
(a) The Corporation shall keep at its principal executive
office, or at the office of its transfer agent or registrar if
one or the other has been appointed and as determined by
resolution of the Board of Directors, a record of its
shareholders, giving the names and addresses of all shareholders
and the number and class of shares held by each shareholder.
(b) A shareholder or shareholders of the Corporation
holding at least ten percent (10%), in the aggregate, of the
outstanding voting shares of the Corporation may (i) inspect and
copy the records of shareholders' names and addresses and
shareholdings during usual business hours upon five (5) business
days' prior written demand upon the Corporation, and/or (ii)
obtain from the transfer agent of the Corporation, upon written
demand and upon the tender of such transfer agent's usual charges
for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of
Directors, and their shareholdings as of the most recent record
date for which such list has been compiled, or as of a date
specified by the requesting shareholder or shareholders
subsequent to the date of demand. Such list shall be made
available to such shareholder or shareholders by the transfer
agent on or before the later of the fifth (5th) business day
after the demand is received or the date specified in the demand
as the date as of which the list is to be compiled. The record
of shareholders shall also be open to inspection upon the written
demand of any shareholder or holder of a voting trust 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 a
voting trust certificate. Any inspection and copying under this
paragraph 9.01 may be made in person or by an agent or attorney
of the shareholder or holder of a voting trust certificate making
such demand.
9.02 Maintenance and Inspection of By-Laws. The
Corporation shall keep at its principal executive office, or, if
its principal executive office is not in the State of Nevada, at
its principal business office in such State, if any, the original
or a copy of the By-Laws as amended to date, which shall be open
to inspection by any shareholder upon the written demand of any
such shareholder at all reasonable times during usual business
hours. If the principal executive office of the Corporation is
outside this state and the Corporation has no principal business
office in this state, the Secretary shall, upon the written
request of any shareholder, furnish to such shareholder a copy of
the By-Laws as amended to date.
9.03 Maintenance and Inspection of Other Corporate Records.
The accounting books, records, and minutes of proceedings of the
shareholders, the Board of Directors, and any committee or
committees of the Board of Directors shall be kept at such place
or places designated by the Board of Directors, or, in the
absence of such designation, at the principal executive office of
the Corporation. The minutes shall be kept in written form, and
the accounting books and records shall be kept either in written
form or in any other form capable of being converted into written
form. Such minutes, accounting books, and records shall be open
to inspection upon the written demand of any shareholder or
holder of a voting trust certificate, at any reasonable time
during usual business hours, for a purpose reasonably related to
such holder's interests as a shareholder or as the holder of a
voting trust certificate. Such inspection may be made in person
or by an agent or attorney, and shall include the right to copy
and made extracts. The foregoing rights of inspection shall
extend to the records of each subsidiary corporation of the
Corporation.
9.04 Inspection by Directors. Every Director shall have
the absolute right at any reasonable time to inspect all books,
records and documents of every kind and the physical properties
of the Corporation and each of its subsidiary corporations. Such
inspection by a Director may be made in person or by agent or
attorney, and the right of the inspection includes the right to
copy and make extracts.
9.05 Annual Report to Shareholders. The Chairman of the
Board or the President shall make an annual report to the
shareholders, but nothing herein shall be interpreted as
prohibiting the Board of Directors from issuing such annual or
other periodic reports to the shareholders of the Corporation as
they consider appropriate.
9.06 Financial Statements.
(a) A copy of any annual financial statement and any
income statement of the Corporation for each quarterly period of
each fiscal year, and any accompanying balance sheet of the
Corporation as of the end of each such period, which have been
prepared by the Corporation shall be kept on file in the
principal executive office of the Corporation for twelve (12)
months from their respective dates, and each such statement shall
be exhibited at all reasonable times to any shareholder
requesting an examination of any such statement or a copy thereof
shall be mailed to any such shareholder.
(b) If a shareholder or shareholders holding at least ten
percent (10%), in the aggregate, of the outstanding shares of any
class of stock of the Corporation make a written request to the
Corporation for an income statement of the Corporation for the
three (3) month, six (6) month, or nine (9) month period of the
current fiscal year having ended more than thirty (30) days prior
to the date of the request, and a balance sheet of the
Corporation as of the end of such period, the Chief Financial
Officer shall cause such statement to be prepared, if not already
prepared, in written form. Such minutes, accounting books, and
records shall be open to inspection upon the written demand of
any shareholder or holder of a voting trust certificate, at any
reasonable time during usual business hours, for a purpose of
reasonably related to such holder's interests as a shareholder or
as the holder of a voting trust certificate. Such inspection may
be made in person or by an agent or attorney, and shall include
the right to copy and make extracts. The foregoing rights of
inspection shall extend to the records of each subsidiary
corporation of the Corporation.
9.07 Annual Statement of General Information. The
Corporation shall each year during the calendar month in which
its Articles of Incorporation were originally filed with the
Nevada Secretary of State, or at any time during the immediately
preceding five (5) calendar months, file with the Secretary of
State of the State of Nevada, on the prescribed form, a statement
setting for the authorized number of Directors, the names and
complete business or residence addresses of all incumbent
Directors, the names and complete business or residence addresses
of the Chief Executive Officer, Secretary and Chief Financial
Officer, the street address of its principal executive office or
principal business office in this state (if any), and the general
type of business constituting the principal business activity of
the Corporation, together with a designation of the agent of the
Corporation for the purpose of service of process, as provided by
law.
ARTICLE X
AMENDMENTS
10.01 Amendment by Shareholders. New By-Laws may be adopted
or these By-Laws may be amended or repealed by the majority vote
of the holders of a majority of the outstanding shares entitled
to vote.
10.02 Amendment by Directors. Subject to the rights of the
shareholders as provided in paragraph 10.01 of this Article, the
Board of Directors may adopt, amend or repeal By-Laws, and By-
Laws may be adopted, amended or repealed by the Board of
Directors at any regular or special meeting of the Directors so
long as written notice is duly given to the Directors of the
proposed change as required hereby.
ARTICLE XI
REPEALER
By the adoption of these By-Laws, the Board of Directors
intends to and does hereby repeal the By-Laws adopted by this
Corporation dated July 15, 1997, and all amendments and
additions thereto.
CERTIFICATE OF SECRETARY
I, the undersigned, the duly elected and acting Secretary of
Petroleum Development Corporation, A Nevada Corporation, certify
that the foregoing By-Laws, consisting of eleven (11) Articles
and twenty two (22) pages, are the true and correct By-Laws of
said Corporation adopted by the Board of Directors thereof on
July 15, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name, this
15th day of July, 1997.
/s/ Roger J. Morgan
Secretary
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