COHEN BRAME & SMITH
Professional Corporation
One Norwest Center Suite 1800
1700 Lincoln Street
Denver, Colorado 80203
Telephone (303) 837-8800
Fax (303) 894-0475
June 12, 1998
Sonya Galindo
U.S. Securities and Exchange Commission
Washington, DC 20549
Re: Definitive Amended Proxy Statement Petro Union, Inc. d/b/a
Horizontal Ventures, Inc.
SEC File No. 0-20760
Dear Ms. Galindo:
Pursuant to our earlier telephone conference attached hereto please find
the company's above-referenced Schedule 14a Definitive Amended Proxy
Statement. We have sent by Federal Express a marked hard copy showing all
changes from the definitive proxy. We have also initiated the printing of the
"Revised" Proxy based on our earlier conversation. Please call me with any
questions or comments you may have.
Very truly yours,
/s/ Roger V. Davidson
Roger V. Davidson
Attachment
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement/Amended
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PETRO UNION INC., DBA HORIZONTAL VENTURES, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offs et as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
PETRO UNION, INC. d/b/a
HORIZONTAL VENTURES, INC.
575 Madison Ave., Suite 1006
New York, New York 10022
PROXY STATEMENT AND
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD July 2, 1998
To the shareholders of Petro Union, Inc.
An Annual Meeting of the shareholders of Petro Union, Inc. d/b/a Horizontal
Ventures, Inc. (the "Company") will be held at 4815 South Harvard, Suite
470, Tulsa, OK 74135, at 2:00 P.M. (EST) on Thursday, July 2, 1998, or
at any adjournment or postponement thereof, to act upon the following:
1. To elect five directors to serve during the ensuing year or if the
staggered terms proposal passes, until their successors are elected and
qualified;.
2. To consider and act upon the adoption of the Company's Amended and
Restated Articles of Incorporation, attached as Exhibit A, which contain
provisions:
a. Changing the name of the Company to Horizontal Ventures,
Inc.;
b. Providing for the number of Directors to be established by
the Bylaws and further providing for staggered terms for the Company's
Directors;
c. Authorizing the issuance of 50,000,000 shares of no par value
preferred stock with rights and preferences as the Board of Directors may
determine;
d. Changing voting requirements to:
(i) reduce the voting requirement for shareholder actions
initiated by the Board of Directors; and
(ii) increase the voting requirement for shareholder actions
not initiated by the Board of Directors; and
e. Reducing the quorum requirement from shares representing a
majority of the outstanding voting rights to shares representing one-third of
the outstanding voting rights.
3. To approve the Horizontal Ventures, Inc. Non Qualified Stock
Option Plan.
4. To consider and act upon a resolution authorizing the Board of
Directors to issue up to 1,000,000 shares of the Company's no par value common
or preferred stock for equity offerings both private and public and for the
acquisition of assets or businesses, and to transact any other business which
may properly come before the meeting at the time and place scheduled or,
should the meeting be adjourned, at such time and place as it may be resumed.
Details relating to these matters are set forth in the attached Proxy
Statement. All shareholders of record as of the close of business on
April 24, 1998 will be entitled to notice of, and to vote at, such
meeting or at any adjournment or postponement thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT
PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN, DATE AND PROMPTLY RETURN
THE ENCLOSED PROXY. A BUSINESS REPLY ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. THE DELIVERY OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Randeep S. Grewal
__________________________________
Randeep S. Grewal
Chairman of the Board
May 27, 1998
REVISED
PROXY STATEMENT
PETRO UNION, INC. d/b/a
HORIZONTAL VENTURES, INC.
575 Madison Ave., Suite 1006
New York, NY 10022
(212) 605-0470
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD July 2, 1998
============================================================================
This Proxy Statement is furnished in connection with the annual meeting (the
"Annual Meeting") of Petro Union, Inc. d/b/a Horizontal Ventures, Inc. (the
"Company"), a Colorado corporation, to be held at 2:00 P.M. on July 2, 1998 at
4815 South Harvard, Suite 470, Tulsa, OK 74135, or at any adjournment or
postponement thereof. The Company anticipates that this Proxy Statement will
be first mailed or given to all shareholders of the Company on or about June
1, 1998. The shares represented by all proxies that are properly executed and
submitted will be voted at the meeting in accordance with the instructions
indicated thereon. Unless otherwise directed, votes will be cast FOR the
proposals presented. Approval of each matter on the agenda requires the
affirmative vote of a majority of all issued and outstanding shares of no par
value common stock ("Common Stock"). Abstentions and broker non-votes will be
treated as negative votes.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by delivering written notice of such revocation to the Company, by
substituting a new proxy executed at a later date, or by requesting, in
person, at the Annual Meeting that the proxy be returned.
All of the expenses involved in preparing, assembling and mailing this Proxy
Statement and the materials enclosed herewith and all costs of soliciting
proxies will be paid by the Company. In addition to the solicitation by mail,
proxies may be solicited by Officers and regular employees of the Company by
telephone, telegraph or personal interview. Such persons will receive no
compensation for their services other than their regular salaries.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of the shares held on the record date, and the Company may reimburse
such persons for reasonable out-of-pocket expenses incurred by them in so
doing.
VOTING SECURITIES
The close of business on April 24, 1998, has been fixed by the Board of
Directors of the Company as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. At such
date, there were outstanding approximately 1,570,981 shares of the Common
Stock, each of which entitles the holder thereof to one vote per share on each
matter which may come before the meeting. The Company has no other class of
voting securities outstanding.
The presence in person or by proxy of a majority of the outstanding shares of
common stock is necessary to constitute a quorum at the meeting, but, if a
quorum should not be present, the meeting may be adjourned from time to time
until a quorum is obtained. If a quorum is present, the affirmative vote of a
majority of shares represented at the meeting in person or by proxy will be
required to approve the matters specified herein to be voted upon.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 24, 1998, the Common Stock
ownership of each person known by the Company to be the beneficial owner of
five percent or more of the Company's Common Stock ("Principal Shareholders"),
all Directors and Officers individually and all Directors and Officers of the
Company as a group. Except as noted, each person has sole voting and
investment power with respect to the shares shown. There are no contractual
arrangements or pledges of the Company's securities, known to the Company,
which may at a subsequent date result in a change of control of the Company.
<TABLE>
<CAPTION>
Amount of Beneficial
Ownership
________________________
<S> <C> <C>
Name and Address Common Percent of
of Beneficial Owner Stock(1) Class(2)
International Publishing 276,093 17.6%
Holdings, S.A. ("IPH")
Postbus 84019
2508 AA The Hague
The Netherlands
Randeep S. Grewal 70,000 4.5%
Chairman of the Board
Chief Executive Officer
10815 Briar Forest Drive
Houston, TX 77042/
575 Madison Avenue, Suite 1006
New York, NY 10022
Dr. Jan F. Holtrop 6,108 <1%
Director
Van Alkemadelaan
2596 AS The Hague
The Netherlands
Dirk Van Keulen -0- _____
Director
Heemraadslag 14
2805 DP Gauda
The Netherlands
Donald A. Christensen 60 <1%
Director
48 S. Evanston Way
Aurora, CO 80012
All directors and officers 76,108 4.8%
as a group (5 persons)
</TABLE>
__________________________
(1) Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
involving the determination of beneficial owners of securities, includes as
beneficial owners of securities, among others, any person who directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise has, or shares, voting power and/or investment power with respect to
such securities; and, any person who has the right to acquire beneficial
ownership of such security within sixty days through means, including but not
limited to, the exercise of any option, warrant or conversion of a security.
The Company has no options or warrants outstanding.
(2) Based upon 1,570,981 shares issued and outstanding.
NOMINEES FOR ELECTION AS DIRECTORS
Under the current charter documents, all directors of the Company are
elected annually unless no annual stockholders' meeting is held, in which
event the directors serve until their successors are duly elected and
qualified. However, if the staggered board of directors proposal to be voted
on at this Annual Meeting is approved, the directors will be divided into
three classes, Class A, Class B, and Class C, with each director serving for
three years and rotating the class up for election at each annual meeting.
The merits of this proposal are discussed in detail below. At this Annual
Meeting, five directors are to be elected to serve either for: (1) one year or
until their successors are duly elected and qualified if the staggered board
of directors proposal is not accepted or (2) if the staggered board proposal
is accepted, the initial Class A directors will be elected for three years,
the initial Class B director for two years and the initial Class C directors
for one year. In other words, Class A directors will serve until the third
annual meeting from this meeting, Class B will serve until the second annual
meeting from this meeting and Class C will serve until the first annual
meeting from this meeting. In subsequent meetings, each newly elected
director will serve three years from that election. The Company's nominees
for these directorships are identified below. Of the five persons nominated
by the Board of Directors to become directors of the Company, four are
currently serving in that capacity.
The proxies will be voted for such persons as the Company shall determine
unless a contrary specification is made in the proxy. All nominees have
indicated their willingness to serve as directors of the Company. However, if
any nominee is unable or should decline to serve as a director, it is the
intention of the persons named in the proxy to vote for such other person as
they in their discretion shall determine.
The Company does not currently have a standing nominating committee. The
audit committee is made up of Messrs. Grewal and Holtrop and the compensation
committee is made up of Messrs. Grewal, Holtrop and, if elected Andrews. The
Board selects director nominees and will consider suggestions by stockholders
for names of possible future nominees delivered in writing to the Secretary
of the Company on or before November 30 in any year.
During fiscal year 1997, the Board of Directors met six times. No
director attended less than 75% of the meetings.
There are no family relationships among the directors. There are no
arrangements or understandings between any director and any other person
pursuant to which that director was elected.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Date
Began With
Name Age Positions Company
______ _____ ____________ ____________
<S> <C> <C> <C>
Randeep S. Grewal (A) 33 Chief Executive September 1997 (1)
Officer, Chairman,
Director
Dr. Jan F. Holtrop (B) 62 Director September 1997(1)
George G. Andrews (B) 72 Director Nominee
Dirk Van Keulen (C) 39 Director September 1997(1)
Donald A. Christensen (C) 67 Director September 1997(1)
</TABLE>
__________________________________
(1) Directors were appointed on the effective date of the merger between
Petro Union, Inc and Horizontal Ventures, Inc.
(A) Class A Director as proposed in Staggered Board Proposal
(B) Class B Director as proposed in Staggered Board Proposal
(C) Class C Director as proposed in Staggered Board Proposal
Randeep S. Grewal - Chairman, Chief Executive Officer and Director. Mr.
Grewal most recently served as the corporate Vice President of the Rada Group.
His responsibilities within Rada were focused on a market penetration and
globalization of a new high-tech product resulting in the conversion of the
Rada Group from being primarily a defense contractor into a diversified
commercial industry. He has been involved in various joint ventures,
acquisitions, mergers and reorganizations since 1986 in the United States,
Europe and the Far East within diversified businesses. Mr. Grewal has a
Bachelor of Science degree in Mechanical Engineering from Northrop University.
Dr. Jan Fokke Holtrop - Director. Mr. Holtrop has been a senior
Production Technology professor at the Delft University of Technology within
the Faculty of Petroleum Engineering and Mining in The Hague, Netherlands
since 1989. Prior to the Delft University, he served in various positions
within the Shell Oil Company where he started his career in 1962. Mr. Holtrop
has almost forty (40) years of experience within the oil and gas exploration,
drilling and production industry with a global hands-on background. Mr.
Holtrop has a Ph.D and a MSC in Mining Engineering from the Delft University
of Technology.
George G. Andrews - Nominee Director. Mr. Andrews has been a consultant
and private investor since his retirement from the oil and gas industry in
1987. From 1982 until 1987 he was employed as corporate Vice President of
Intercontinental Energy Corporation of Englewood, Colorado directing the
company's land acquisition, lease and management operations. Between June
1981 and November 1982 Mr. Andrews was Vice President of Shelter Hydrocarbons,
Inc. of Denver, Colorado where he directed all land management and operation
procedures including contract systems and negotiations of acquisition
agreements. From 1979 to June of 1981 Mr. Andrews was Senior Landman for the
National Cooperative Refinery Association in Denver, Colorado where he was
responsible for negotiation and acquisition of oil and gas leases, certifying
title requirements and ongoing daily operations in his office. Mr. Andrews
obtained his B.S. degree from the University of Tulsa, Tulsa, Oklahoma in 1947
where he majored in Economics.
Dirk Van Keulen - Director. Mr. Van Keulen has served since January 1996
as a Director of Horizontal Ventures, Inc., which was one of the first
licensees of the Amoco technology and is currently Petro Union's core
business. He served as a tax official in the Dutch Ministry of Finance from
1979 through 1987 and then as a tax consultant with Koolman & Co., until 1989.
Since 1984 Mr. Van Keulen has been actively involved in various investment
activities. He studied higher education in fiscal law and accounting under
the Dutch Ministry of Finance.
Donald A. Christensen - Director. Mr. Christensen has been a business
and financial consultant since 1988, prior to which he served as the President
of Titan Construction Company since 1970. He has been a Professor of
Engineering at the University of Colorado and a guest lecturer at the
University of Denver. Mr. Christensen has a Bachelor of Civil Engineering
degree from the University of Missouri.
During the past five years, there have been no petitions under the
Bankruptcy Act or any state insolvency law filed by or against, nor have there
been any receivers, fiscal agents, or similar officers appointed by any court
for the business or property of any of the Registrant's incumbent directors or
executive officers, or any partnership in which any such person was a general
partner within two years before the time of such filing, or any corporation or
business association of which any such director or executive officer was an
executive officer within two years before the time of such filing.
During the past five years, no incumbent director or executive officer of
the Registrant has been convicted of any criminal proceeding (excluding
traffic violations and other minor offenses) and no such person is the subject
of a criminal prosecution which is presently pending.
Compliance With Section 16(a) Under the Securities Exchange Act of 1934
Based solely on a review of reports filed with the Company, all Directors
and Executive Officers timely filed all reports regarding transactions in the
Company's securities required to be filed during the last fiscal year by
Section 16(a) under the Securities Exchange Act of 1934.
Summary Compensation Table
The following summary compensation table sets forth in summary form the
compensation received during each of the Company's last two completed fiscal
years by the Registrant's Executive Officers.
(a) Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
Year Salary Bonus(2) Awards
Stock Awards Options
Name/Position
<S> <C> <C> <C> <C> <C>
Randeep Grewal 1997 $120,000 0 70,000(3) 150,000(4)
CEO
Richard Wedel, 1997 $ 90,000 0 70,000(3)
COO 1996 90,000(1) 0
Resigned 3/12/98
</TABLE>
(1) Salaries were accrued, but not paid in cash. A total of 2,273 shares of
Common Stock were issued to Mr. Wedel in 1996 as payment in full for the
$90,000 of salary accrued in 1995.
(2) During the period covered by the Table, the Company did not pay its
executive officers any bonuses or other compensation.
(3) Stock grants approved as part of the Company's bankruptcy reorganization
plan.
(4) Subject to shareholder approval of the Non-Qualified Stock Option Plan.
No other officer, director or employee of the Company or its subsidiaries
received total compensation in excess of $100,000 during the last two fiscal
years. The Company has an employment agreement with Randeep Grewal. No other
form of compensation was paid during 1997.
(b) Option and Long-Term Compensation Tables
<TABLE>
<CAPTION>
Long Term Compensation
Awards Payouts
Restricted Securities LTIP
Stock award(s) Underlying payouts
($) Options/SARs (#) ($)
Name/Position
<S> <C> <C> <C> <C>
Randeep Grewal 1997 70,000 $80,000(1)
CEO
Richard Wedel, 1997 70,000
COO, CEO 1996
Resigned 3/12/98
</TABLE>
(1) Includes 150,000 stock options and a 30,000 share deferred stock grant
both issued as part of the bankruptcy reorganization.
(c) Options and Stock Appreciation Rights
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
(Individual Grants)
Number of
Securities Percent of Total Exercise
Underlying options/SARs or base
options/SARs granted to employees price Expiration
Name granted (#) in fiscal year ($/Sh) date
<S> <C> <C> <C> <C>
Randeep S. Grewal 150,000 100% $5.00 9/7/07
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
<TABLE>
<CAPTION>
Value of
Unexercised
Number of in-the-
unexercised money
Options SARs at Options/SARs
Shares FY-end (#) At FY-end ($)
Acquired on Value exercisable/un- exercisable/
Name Exercise (#) realized exercisable unexercisable
<S> <C> <C> <C> <C>
Randeep S. Grewal --- --- 0/150,000 0/$975,000
</TABLE>
____________________________________
The Company has not granted any options or stock appreciation rights to any
of its directors or executive
officers.
(d) Employment Contracts and Termination Agreements
On September 9, 1997, the Company entered into an employment agreement with
Mr. Grewal for a five-year term. His current salary is $120,000 per year.
Compensation is reviewed annually. Mr. Grewal participates in the Company's
benefit plans and is entitled to bonuses and incentive compensation as
determined by the Board of Directors of the Company. The agreement is
terminable for Cause or by the death or disability of Mr. Grewal. Upon
termination of the agreement by the Company for any reason other than for
Cause, death or disability, the Company is obligated to pay within 30 days
after the date of termination (1) Mr. Grewal's Base Salary through the date of
the Severance Period, (2) Mr. Grewal's base salary for the balance of the term
of the agreement if the Date of Termination is within the first three years of
the Employment Agreement (Base Salary is the rate in effect at the Date of
Termination), (3) the Annual Bonus paid to Mr. Grewal for the last full fiscal
year during the Employment Period and (4) all amounts of deferred
compensation, if any. The agreement allows Mr. Grewal to receive an
assignment of 2% overriding royalty of all oil and gas production received by
the Company.
On March 12, 1998, the Company entered into a Confidential Termination and
Settlement Agreement and Complete Release with Mr. Wedel relating to his
resignation as an executive of the Company and as a member of the Board of
Directors. Mr. Wedel will receive a $50,000 one-time severance payment.
Additionally, the Company agreed to loan to Mr. Wedel $100,000 with interest
payable at the prime rate as established by the Wall Street Journal secured by
a stock pledge agreement and 10,000 shares of the Company's common stock. The
Company agreed to maintain Mr. Wedel's medical insurance coverage as currently
in effect through July 31, 1998. In exchange for the above consideration, Mr.
Wedel agreed not to compete with the Company and specifically with the
Company's Amoco technology based horizontal drilling business for a period of
three years after his date of termination. Mr. Wedel also agreed not to
disclose any confidential information of the Company which he acquired as a
result of his employment. The Company and Mr. Wedel agreed to mutually
release the other from any claim or action arising from Mr. Wedel's Executive
Employment Agreement with the Company.
(e) Director Compensation
Each director who is not an employee of the Company (the "Outside
Directors") will be reimbursed for expenses incurred in attending meetings of
the Board of Directors and related committees. As of the date of this Proxy,
the Registrant has three Outside Directors. No compensation was paid to any
Outside Director during fiscal 1997 and is none is planned for the immediate
future.
The Company has no knowledge of any arrangement or understanding in
existence between any executive officer named above and any other person
pursuant to which any such executive officer was or is to be elected to such
office or offices. All officers of the Registrant serve at the pleasure of
the Board of Directors. No family relationship exists among the directors or
executive officers of the Registrant. All Officers of the Registrant will
hold office until the next Annual Meeting of the Registrant. There is no
person who is not a designated Officer who is expected to make any significant
contribution to the business of the Registrant. The executive officers of the
Company serve at the pleasure of the Board of Directors and do not have fixed
terms. Any officer or agent elected or appointed by the Board of Directors
may be removed by the Board whenever in its judgment the best interests of the
Company will be served thereby without prejudice, however, to contractual
rights, if any, of the person so removed.
Working Interests
There are no agreements in which any employee of the Company receives a
working interest in the Company's oil and gas properties.
Overriding Royalty Income
The Registrant has historically assigned overriding royalty interests to
certain of its employees. Employees own overriding royalty interests on oil
and gas wells invested in by the Registrant. Conflicts of interest may arise
between employees owning overriding royalty interests in Registrant-operated
locations and the Registrant.
As part of Mr. Grewal's employment agreement, he is to receive a two percent
(2%) overriding royalty of all oil and gas production received by the Company.
Josh Stark, Vice President of Exploitation and Exploration will receive 2%
override on the Ohio and Reo oil prospects should they be developed.
Future Transactions
All transactions between the Registrant and an officer, director, principal
stockholder or affiliate of the Registrant will be approved by a majority of
the uninterested directors, only if they have determined that the transaction
is fair to the Registrant and its stockholders and that the terms of such
transaction are no less favorable to the Registrant than could be obtained
from unaffiliated parties.
AMENDMENTS TO CORPORATE CHARTER
CHANGE OF COMPANY NAME
The Board of Directors has determined that the name of the Company should be
changed to Horizontal Ventures, Inc. to better identify the Company's
principal business of exploiting oil and gas production by utilizing its
horizontal drilling know how. The Company has been using this name as an
assumed trade name since September 10, 1997. This amendment to the Company's
Articles of Incorporation should not have any negative effect on the
shareholders of the Company.
STAGGERED BOARD OF DIRECTORS TERMS
The Company's current Restated Articles of Incorporation fix the number of
directors at five. The election and removal of Directors is governed by the
Company's Bylaws, which provide that each Director serves until the next
annual meeting of shareholders or until his successor has been elected or
appointed. Additionally, a Director may be removed with or without cause by a
majority vote of the shareholders at a meeting called for such purpose or by a
sufficient number of other candidates receiving more votes than the Director
at the next annual meeting. Because the Directors will be directly affected
by the Staggered Board proposal, they may be deemed to have an interest in the
outcome of such proposal.
The Board has proposed to institute a staggered Board of Directors (the
"Staggered Board") consisting of three classes of Directors. The number of
Directors will initially be five, but may be changed by the Board of Directors
through amendment of the Bylaws without shareholder consent. Each class must
contain one-third of the total number of Directors, or as near thereto as
possible. The initial Class A will consist of one Director designated as
Chairman of the Board, the initial Class B will consist of two Directors, one
of whom will be the Vice Chairman of the Board, and the initial Class C will
consist of the two Directors. The Directors proposed to be in each class are
identified in the Nominees for Election of Directors section of this Proxy
Statement. The terms of the Class C directors will expire at the next annual
meeting of shareholders. The terms of the Class B directors will expire at
the second annual meeting following adoption of the Staggered Board and the
term of the Class A director will expire at the third annual meeting following
adoption of the Staggered Board. Following the expiration of their initial
terms, Directors will be elected for terms of three years to succeed those
whose terms expire.
The overall effect of the Staggered Board would be to render more difficult
the accomplishment of certain acquisitions of control by hostile third
parties. At the same time, such amendment would make more difficult the
removal of current management and the Board and may have other antitakeover
effects, both favorable and unfavorable, to Company shareholders.
The full text of the Staggered Board proposal is set forth in Article Fifth of
Exhibit A attached to this Proxy Statement.
Considerations in Support of the Staggered Board Proposal
The Board believes that the Staggered Board proposal will enhance its ability
to protect shareholders against attempts to acquire control of the Company by
means of unfair or abusive tactics that exist in many unsolicited takeover
attempts. The Staggered Board proposal would encourage persons seeking to
acquire control of the Company to engage in good faith, arms-length
negotiations with the Board regarding the structure of their proposal, rather
than waging a hostile proxy contest, and would permit the Board to engage in
such negotiations from a stronger position. In addition, the Staggered Board
proposal would facilitate the Company's attracting and retaining qualified
Board members and hiring and retaining competent management personnel by
increasing the likelihood of a stable employment environment. The Company
also believes that ensuring continuity of service among the Board members and
three-year commitments for Board service is desirable.
Other Considerations
The Staggered Board proposal could have the effect of deterring certain third
parties from initiating proxy contests or from acquiring substantial blocks of
the Company's shares. Such proxy contests and acquisitions of substantial
blocks of shares tend to increase, at least temporarily, market prices for the
Company's stock. Consequently, if the Staggered Board proposal is approved,
Company shareholders could be deprived of temporary opportunities to sell
their shares at higher market prices. Moreover, by possibly deterring proxy
contests or acquisitions of substantial blocks of the Common Stock, the
Staggered Board proposal might have the incidental effect of inhibiting
certain changes in incumbent management, some or all of whom may be replaced
in the course of a change in control.
AUTHORIZATION OF PREFERRED STOCK
The Board of Directors has determined that the Company's Articles of
Incorporation should be amended to authorize the Company to issue up to
50,000,000 shares of no par value preferred stock ("Preferred Stock") with such
rights and preferences as the Board may determine. As a result of the
amendments provided for by the Plan, the Company is not currently authorized
to issue Preferred Stock.
The shares of Preferred Stock will be available for issuance from time to time
for such purposes and consideration as the Board may approve. No further vote
of the shareholders of the Company will be required, except as provided under
Colorado law or as may be required by NASDAQ or any other exchange on which
the Company's securities might trade. The availability of Preferred Stock for
issuance without the delay and expense of obtaining the approval of
shareholders at a annual meeting could afford the Company a means of raising
additional capital. Furthermore, the Preferred Stock could be utilized by the
Board for purposes of defending against any potential hostile or abusive
takeover threats.
The Preferred Stock will be "blank check" preferred stock and may have such
terms, including dividend or interest rates, conversion prices, voting rights,
redemption prices, maturity dates and other rights, preferences and
limitations, as determined by the unanimous approval of the Board of Directors
in its sole discretion. The authorization of the Preferred Stock is set
forth in Article Fourth of Exhibit A attached to this Proxy Statement.
The Board has no present intention of issuing any shares of Preferred Stock.
None of the Directors or Officers of the Company has any financial or other
personal interest in this proposal.
CHANGES IN VOTING REQUIREMENTS
The current Restated Articles of Incorporation provide that the affirmative
vote of the holders of a majority of the shares of each voting group entitled
to vote is required for all shareholder actions. The Company has only one
voting group consisting of the holders of Common Stock. The Board of
Directors has determined that it is in the best interests of the Company to
reduce this voting requirement in certain circumstances and increase this
voting requirement in other circumstances. The proposed voting requirements
are set forth in Article Fourth, subparagraph (d) of Exhibit A attached to
this Proxy Statement.
Reduction in Voting Requirement and Considerations in Support Thereof
The Board has proposed that the Amended and Restated Articles of Incorporation
require that except as otherwise required by Colorado law, matters initiated
by the Board of Directors and put to a shareholder vote will require for
approval that the number of votes cast in favor of the matter exceeds the
number of votes cast against the matter at a meeting at which a quorum is
present. This differs from the current voting requirement in that (I)
abstentions will be treated as non-votes rather than as negative votes and
(ii) if fewer than all of the outstanding shares are represented at a meeting
at which a quorum is present, the number of affirmative votes required will be
less than an absolute majority of all outstanding votes. Pursuant to Colorado
law, shareholder approval of a plan of merger or share exchange, the sale or
other disposition of all or substantially all of the property of the Company
or the dissolution or revocation of dissolution of the Company will continue
to require the affirmative vote of the holders of a majority of all votes
entitled to be cast.
The result of this change in voting requirement will be to make it easier for
the Board of Directors to obtain shareholder approval for most matters
initiated by the Board of Directors. This will in turn (I) give the Company
more flexibility to adapt its business structure to changing needs and
business strategies over time and (ii) reduce the time and costs associated
with proxy solicitation.
Increase in Voting Requirement and Considerations in Support Thereof
The Board has determined that the Company's Articles of Incorporation should
require that with the exception of shareholder initiated motions to remove
members of the Board of Directors, matters not initiated by the Board will
require for approval the affirmative vote of two-thirds of all votes entitled
to be cast within each voting group ("Supermajority").
The overall effect of the Supermajority requirement would be to render more
difficult the accomplishment of certain mergers or other assumptions of
control by hostile third parties and may have other antitakeover effects,
both favorable and unfavorable, to Company shareholders.
The Board believes that the Supermajority requirement will enhance its ability
to protect shareholders against attempts to acquire control of the Company by
means of unfair or abusive tactics that exist in many unsolicited takeover
attempts. The Supermajority requirement would encourage persons seeking to
acquire control of the Company to engage in good faith, arms-length
negotiations with the Board regarding the structure of their proposal and
would permit the Board to engage in such negotiations from a stronger
position. The Board believes that the Supermajority requirement would help
ensure that adequate consideration is received by the shareholders in the
event that the Company is ultimately acquired by a third party. In addition,
the adoption of the Supermajority requirement would facilitate the Company's
hiring and retention of competent management personnel by increasing the
likelihood of a stable employment environment.
The Supermajority requirement could have the effect of deterring certain third
parties from proposing mergers with the Company, initiating proxy contests, or
from acquiring substantial blocks of the Company's shares. Such merger
proposals, proxy contests and acquisitions of substantial blocks of shares
tend to increase, at least temporarily, market prices for a company's stock.
Consequently, if the Supermajority requirement is approved, Company
shareholders could be deprived of temporary opportunities to sell their shares
at higher market prices. Moreover, by possibly deterring proxy contests,
merger proposals or acquisitions of substantial blocks of the Common Stock,
the Supermajority Requirement might have the incidental effect of inhibiting
certain changes in incumbent management, some or all of whom may be replaced
in the course of a change in control.
The Supermajority requirement could also be viewed as transferring a certain
degree of control of the Company's destiny from the shareholders to the Board.
Because certain members of Company management are also Board members, the
interest of each Board member may not always be identical to that of the
Company's shareholders. Other than the potential antitakeover effects just
discussed, none of the Directors or Officers of the Company has any financial
or other personal interest in the adoption of the Supermajority requirement.
REDUCTION OF QUORUM REQUIREMENT
At the present time, the Company's Restated Articles of Incorporation require
that at least a majority of the number of shares entitled to vote at a meeting
be present in person or by proxy to constitute a quorum. The Board has
recommended that the quorum requirement be reduced to one-third of those
shares entitled to vote at a meeting in order to simplify the process of
carrying on business that requires shareholder approval. The one-third quorum
requirement is the standard established by the corporate governance
requirements of the Nasdaq stock market and other stock exchanges in the
United States. It is also the minimum required under Colorado law. Reducing
the quorum would simplify the election process and reduce the cost to the
Company of holding shareholder meetings as it should eliminate the need to a
large extent for hiring proxy solicitation firms to assist the Company in
obtaining proxy responses. Reducing the quorum requirement could have the
effect of allowing a minority of the total outstanding votes to approve a
corporation action, although all shareholders will be given a opportunity to
vote on all corporate actions. The full text of this proposed amendment is
set forth in Article Fourth, subparagraph (c) of Exhibit A attached to this
Proxy Statement.
Management recommends a vote FOR this proposal to approve the Company's
Amended and Restated Articles of Incorporation set forth in Exhibit A to this
Proxy Statement.
APPROVAL OF THE 1998 NON QUALIFIED STOCK OPTION PLAN
The Board has proposed that the Registrant establish a stock option plan which
shall be known as Horizontal Ventures, Inc. Non Qualified STOCK OPTION PLAN
(the "Plan") whereby key employees, consultants and members of the Board of
Directors of the company or of a subsidiary of the Company, providing material
services to the Company, at the Board's discretion shall be eligible for stock
options. At the discretion of the Board of Directors the Stock Option Plan
may be administered by a Committee of two or more non-employee Directors
appointed by the Board. The members of the Committee may be Directors who are
eligible to receive Options under the Plan, but Options may be granted to such
persons only by action of the full Board and not by action of the Committee.
Subject to the provisions of the Plan, the Board or Committee shall have
complete discretion in determining the terms and conditions and number of
Options granted under the Plan. The purpose of the Plan is to enhance
shareholder value by attracting, retaining and motivating key employees,
consultants and members of the Board of Directors of the Company and of a
subsidiary of the Company by providing them with a means to acquire a
proprietary interest in the Company's success.
The total number of shares of Common Stock of the Company available and
reserved for issuance under the plan upon exercise of Options shall be 400,000
shares, subject to appropriate adjustment for stock dividend or split,
recapitalization, reclassification, or other similar capital change. The term
of the option is for ten years from the date of grant and shall vest on a
schedule determined by the Board of Directors. No option granted pursuant to
the Plan shall have an Option price that is less than the fair market value of
the Common Stock on the date the option is granted, as determined by the
Board. Payment for all shares of Common Stock shall be made at the time that
an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Each Option under the Plan shall
be evidenced by a written option agreement that specifies the exercise price,
the duration of the Option, the number of shares of stock to which the Option
applies, and such vesting or exercisability restrictions and other terms and
conditions which the Board or Committee may impose.
The Board may grant Stock Appreciation Rights to Plan participants at the same
time as such participants are awarded Options under the Plan. Such Stock
Appreciation Rights shall be evidenced by agreements in such form as the Board
shall from time to time approve. Each Stock Appreciation Right shall relate
to a specific Option under the Plan and shall be awarded to a participant
concurrently with the grant of such Option. A participant shall exercise
Stock Appreciation Rights by giving written notice of such exercise to the
Company. The date upon which such written notice is received by the Company
shall be the exercise date for the Stock Appreciation Rights.
Nothing in the Plan shall interfere with or limit in any way the right of the
Company or a subsidiary corporation to terminate any employee's or
consultant's employment at any time, nor confer upon any employee or
consultant any right to continue in the employ of the Company or a subsidiary
corporation.
At any time, the Board may terminate the Plan and from time to time may amend
or modify the Plan.
The principal federal income tax consequences of the grant and exercise of
options under the Stock Option Plan are, in general, as follows:
1. Options granted under the Stock Option Plan are not intended to
qualify as "incentive stock options" under the Internal Revenue Code.
2. Upon the grant of an option under the Stock Option Plan, the
optionee will have no taxable income and the Company will have no tax
deduction.
3. Upon exercise of an option under the Stock Option Plan, the
optionee will realize ordinary taxable income in an amount equal to the excess
of the fair market value of the underlying shares of Common Stock at the time
the option is exercised over the exercise price of the option for such shares.
4. The amount of income recognized by the optionee will be deductible
by the Company as compensation in the year in which ordinary income is
recognized by the optionee by reason of exercise of options under the Stock
Option Plan.
5. An optionee's basis for the shares of Common Stock acquired
pursuant to the exercise of options under the Stock Option Plan will be the
option exercise price plus any amount recognized as ordinary income by reason
of the exercise of the options.
6. Upon the sale of the Common Stock acquired pursuant to the
exercise of options under the Stock Option Plan, capital gain or loss will be
realized by the optionee in the amount by which the sales price is greater or
less than the basis of such stock. Such gain or loss will be long-term or
short-term depending on whether the shares were held for more than eighteen
months after the option was exercised.
7. Exercise of an option by exchanging previously acquired shares of
the Company's Common Stock will not result in taxable gain or loss on the
exchanged shares, but the optionee's tax basis for an equal number of acquired
shares will be the same as the optionee's tax basis for the exchanged shares.
The remaining acquired shares will have an original tax basis equal to the sum
of the amount paid in cash, if any, plus any amount which the optionee is
required to recognize as income as a result of the exercise of the option.
Since the Board of Directors believes that the Stock Option Plan will
attract, retain and motivate key employees, consultants and members of the
Board of Directors of the Company and of any subsidiary of the Company by
providing them with a means to acquire a proprietary interest in the Company's
success, the Board of Directors recommends that the Shareholders vote FOR the
approval of the Stock Option Plan.
AUTHORIZING THE ISSUANCE OF UP TO 1,000,000 SHARES OF THE COMPANY'S
COMMON AND/OR PREFERRED STOCK
The Board has determined that the best interest of the Company and its
shareholders will be served by authorizing the Board to issue up to an
additional 1,000,000 shares of its Common and/or Preferred Stock to raise
capital in private or public offerings and/or to be used to acquire drilling
properties and oil and gas production. Since emergence from bankruptcy, the
Company has spent a majority of its time analyzing oil and gas properties that
could benefit from reentry into pay zones utilizing the Company's horizontal
drilling technology. The Company's horizontal drilling technology is
principally utilized to stimulate production in known pay zones of developed
properties thereby improving production and the value of those properties. To
date, the Company has raised approximately $5.9 million by the sale of its
Common Stock to acquire a producing property in Santa Barbara County,
California and to acquire additional properties as they are identified. The
new Nasdaq corporate governance requirements require shareholder approval of
certain offerings, including private placements under certain circumstances
and the issuance of stock in exchange for other assets, should the number of
shares issued total twenty percent or more of the outstanding shares of the
Company. To eliminate the need to have several sequential meetings of
shareholders, the Board of Directors is seeking shareholder approval of its
proposed expansion plan as part of this Annual Meeting. Management will use
its best judgment to determine whether the shareholders would benefit more by
the issuance of shares in a private or public offering for cash or whether
exchanging the Company's shares for properties would be more expeditious and
economical under the circumstances. Management recommends a vote FOR this
proposal.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Bateman & Company as the independent
certified public accountants to audit the books, records and accounts of the
Company for its 1997 fiscal year. Clint Bateman has served as the Company's
independent accountants since 1996 as part of Bateman Blomstrom & Co. and is,
therefore, familiar with the business and financial procedures of the Company.
To the knowledge of management, neither such firm nor any of its members has
any direct or material indirect financial interest in the Company nor any
connection with the Company in any capacity otherwise than as independent
accountants.
A representative of Bateman & Company is expected to be present at the
Annual Meeting of Stockholders to answer proper questions and will be afforded
an opportunity to make a statement regarding the financial statements.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders must be received by the Company on or before November
30, 1998, in order to be eligible for inclusion in the Company's proxy
statement and form of proxy. To be so included, a proposal must also comply
with all applicable provisions of Rule 14a-8 under the Securities Exchange Act
of 1934.
OTHER MATTERS
Management does not know of any other matters to be brought before the
Annual Meeting. If any other matters not mentioned in this proxy statement
are properly brought before the meeting, the individuals named in the enclosed
proxy intend to vote such proxy in accordance with their best judgment on such
matters.
By Order of the Board of Directors
/s/ Randeep S. Grewal
Randeep S. Grewal
Chairman
June 11, 1998
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
OF
HORIZONTAL VENTURES, INC.
FIRST: The name of the corporation is Horizontal Ventures, Inc.
SECOND: The corporation shall have perpetual existence.
THIRD: (a) Purposes. The nature, objects and purposes of the
business to be transacted shall be to transact all lawful business for which
corporations may be incorporated pursuant to the Colorado Business Corporation
Act.
(b) Powers. In furtherance of the foregoing purposes, the
corporation shall have and may exercise all of the rights, powers and
privileges now or thereafter conferred upon corporations organized under the
laws of Colorado. In addition, it may do everything necessary, suitable or
proper for the accomplishment of any of its corporation purposes.
FOURTH:(a) The aggregate number of shares which the corporation shall
have authority to issue is 50,000,000 shares of common stock having no par
value and 50,000,000 shares of preferred stock having no par value. The
shares of common stock shall have unlimited voting rights and shall constitute
the sole voting group of the corporation, except to the extent any additional
voting group or groups may hereafter be established in accordance with the
Colorado Business Corporation Act. The board of directors of the corporation,
by way of a unanimous vote, is authorized, subject to limitations prescribed by
law and the provisions of these Restated Articles of Incorporation, to provide
for the issuance of the shares of preferred stock in classes or series, to
establish or change the number of shares to be included in each class or
series, and to fix the designation, relative rights and preferences and
limitations of the shares of each class or series.
(b) Each shareholder of record shall have one vote for each
share of stock standing in his name on the books of the corporation and
entitled to vote, except that in the election of directors, each shareholder
shall have as many votes for each share held by him as there are directors to
be elected and for whose election the shareholder has the right to vote.
Cumulative voting shall not be permitted in the election of directors or
otherwise.
(c) At all meetings of shareholders, one-third of the shares
of a voting group entitled to vote at such meeting, represented in person or
by proxy, shall constitute a quorum of that voting group.
(d) Except as otherwise required by law, matters initiated by
the board of directors shall require for approval that the votes cast in favor
of the matter within each voting group exceed the votes cast against the
matter at a meeting in which a quorum is present. Except as otherwise
required by law, matters not initiated by the board of directors shall require
for approval the affirmative vote of two thirds of all votes entitled to be
cast within each voting group except that a shareholder initiative to
remove a director shall require only a simple majority vote of those
shareholders present in person or by proxy assuming there is a quorum.
(e) No shareholder of the corporation shall have any
preemptive or other right to subscribe for any additional unissued or treasury
shares of stock or for other securities of any class, or for rights, warrants
or options to purchase stock, or for scrip, or for securities of any kind
convertible into stock or carrying stock purchase warrants or privileges.
FIFTH: (a) The number of directors of the corporation shall be fixed
by the bylaws and shall be divided into three groups with staggered terms.
Each group shall contain one-third the total number of directors, as near as
may be. The initial board of directors upon filing these Restated Articles of
Incorporation with the Secretary of State of Colorado shall consist of four
directors divided into three groups as follows: Class A shall consist of one
director designated as the Chairman of the Board; Class B shall consist of two
directors, including the director designated as the Vice Chairman of the
Board; Class C shall consist of the remaining two directors. The terms of the
Class C directors expire at the first annual shareholders meeting after their
election. The terms of the Class B directors expire at the second annual
shareholders meeting after their election. The term of the Class C director
expires at the third annual shareholders meeting after his election.
Following the expiration of their initial terms, directors shall be elected
for terms of three years to succeed those whose terms expire.
(b) The initial directors in each class shall be as follows:
Class A
Randeep S. Grewal 10815 Briar Forest Drive
Houston, Texas 77042
Class B
Dr. Jan F. Holtrop Van Alkemadelaan
2596 AS The Hague
The Netherlands
George Andrews 7899 West Frost Drive
Littleton, CO 80123
Class C
Dirk Van Keulen Heemraadslag 14
2805 DP Gouda
The Netherlands
Donald A. Christensen 48 South Evanston Way
Aurora, Colorado 80012
(c) One or more directors may be removed by the shareholders
with or without cause in the manner provided by the Colorado Business
Corporation Act.
SIXTH: The address of the initial registered office of the
corporation is 1700 Lincoln Street, Suite 1800, Denver, Colorado 80203. The
name of its initial registered agent at such address is Roger V. Davidson,
Esq. The corporation may conduct part or all of its business in any other
part of Colorado, of the United States or of the world. It may hold,
purchase, mortgage, lease and convey real and personal property in any of such
places.
SEVENTH: The address of the principal office of the corporation is
575 Madison Ave., Suite 1006, New York, New York 10022.
EIGHTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the corporation, and the
same are in furtherance of and not in limitation or exclusion of the powers
conferred by law.
(a) Conflicting Interest Transactions. As used in this
paragraph, "conflicting interest transaction" means any of the following: (I)
a loan or other assistance by the corporation to a director of the corporation
or to an entity in which a director of the corporation is a director or
officer or has a financial interest; (ii) a guaranty by the corporation of an
obligation of a director of the corporation or of an obligation of an entity
in which a director of the corporation is a director or officer or has a
financial interest; or (iii) a contract or transaction between the corporation
and a director of the corporation or between the corporation and an entity in
which a director of the corporation is a director or officer or has a
financial interest. No conflicting interest transaction shall be void or
voidable, be enjoined, be set aside or give rise to an award of damages or
other sanctions in a proceeding by a shareholder or by or in the right of the
corporation, solely because the conflicting interest transaction involves a
director of the corporation or an entity in which a director of the
corporation is a director or officer or has a financial interest, or solely
because the director is present at or participates in the meeting of the
corporation's board of directors or of the committee of the board of directors
which authorizes, approves or ratifies a conflicting interest transaction, or
solely because the director's vote is counted for such purpose if: (A) the
material facts as to the director's relationship or interest and as to the
conflicting interest transaction are disclosed or are known to the board of
directors or the committee, and the board of directors or committee in good
faith authorizes, approves or ratifies the conflicting interest transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors are less than a quorum; or (B) the material facts
as to the director's relationship or interest and as to the conflicting
interest transaction are disclosed or are known to the shareholders entitled
to vote thereon, and the conflicting interest transaction is specifically
authorized, approved or ratified in good faith by a vote of the shareholders;
or (C) a conflicting interest transaction is fair as to the corporation as of
the time it is authorized, approved or ratified by the board of directors, a
committee thereof or the shareholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes, approves or ratifies the
conflicting interest transaction.
(b) Loans and Guaranties for the Benefit of Directors.
Neither the board of directors nor any committee thereof shall authorize a
loan by the corporation to a director of the corporation or to an entity in
which a director of the corporation is a director or officer or has a
financial interest, or a guaranty by the corporation of an obligation of a
director of the corporation or of an obligation of an entity in which a
director of the corporation is a director or officer or has a financial
interest, until at least ten days after written notice of the proposed
authorization of the loan or guaranty has been given to the shareholders who
would be entitled to vote thereon if the issue of the loan or guaranty were
submitted to a vote of the shareholders. The requirements of this paragraph
(b) are in addition to, and not in substitution for, the provisions of
paragraph (a) of Article EIGHTH.
(c) Indemnification. The corporation shall indemnify, to the
maximum extent permitted by law, any person who is or was a director, officer,
agent, fiduciary or employee of the corporation against any claim, liability
or expense arising against or incurred by such person made party to a
proceeding because he is or was a director, officer, agent, fiduciary or
employee of the corporation or because he is or was serving another entity as
a director, officer, partner, trustee, employee, fiduciary or agent at the
corporation's request. The corporation shall further have the authority to
the maximum extent permitted by law to purchase and maintain insurance
providing such indemnification.
(d) Limitation on Director's Liability. No director of this
corporation shall have any personal liability for monetary damages to the
corporation or its shareholders for breach of his fiduciary duty as a
director, except that this provision shall not eliminate or limit the personal
liability of a director to the corporation or its shareholders for monetary
damages for: (I) any breach of the director's duty of loyalty to the
corporation or its shareholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
voting for or assenting to a distribution in violation of Colorado Revised
Statutes section 7-106-401 or these Restated Articles of Incorporation if it
is established that the director did not perform his duties in compliance with
Colorado Revised Statutes section 7-108-401, provided that the personal
liability of a director in this circumstance shall be limited to the amount of
the distribution which exceeds what could have been distributed without
violation of Colorado Revised Statutes section 7-106-401 or these Restated
Articles of Incorporation; or (iv) any transaction from which the director
directly or indirectly derives an improper personal benefit. Nothing
contained herein will be construed to deprive any director of his right to all
defenses ordinarily available to a director nor will anything herein be
construed to deprive any director of any right he may have for contribution
from any other director or other person.
(e) Negation of Equitable Interests in Shares or Rights.
Unless a person is recognized as a shareholder through procedures established
by the corporation pursuant to Colorado Revised Statutes section 7-107-204 or
any similar law, the corporation shall be entitled to treat the registered
holder of any shares of the corporation as the owner thereof for all purposes
permitted by the Colorado Business Corporation Act including without
limitation all rights deriving from such shares, and the corporation shall not
be bound to recognize any equitable or other claim to or interest in such
shares or rights deriving from such shares on the part of any other person,
including without limitation a purchaser, assignee or transferee of such
shares, unless and until such other person becomes the registered holder of
such shares or is recognized as such, whether or not the corporation shall
have either actual or constructive notice of the claimed interest of such
other person. By way of example and not of limitation, until such other
person has become the registered holder of such shares or is recognized
pursuant to Colorado Revised Statutes section 7-107-204 or any similar
applicable law, he shall not be entitled: (I) to receive notice of the
meetings of the shareholders; (ii) to vote at such meetings; (iii) to examine
a list of the shareholders; (iv) to be paid dividends or other distributions
payable to shareholders; or (v) to own, enjoy and exercise any other rights
deriving from such shares against the corporation. Nothing contained herein
will be construed to deprive any beneficial shareholder, as defined in
Colorado Revised Statutes section 7-113-101(1), of any right he may have
pursuant to Article 113 of the Colorado Business Corporation Act or any
subsequent law.
DATED the ___th day of _____________, 1998.
