FIRST AMENDMENT TO MERGER AGREEMENT
This first amendment (the "Amendment") to the Merger Agreement is entered
into on this 3rd day of January, 2000, by and among ▇▇▇▇▇ Oil and Gas Company, a
Nevada corporation ("▇▇▇▇▇"), its wholly owned Delaware subsidiary CPI
Acquisition Corp. ("CPI Acquisition") and Carpatsky Petroleum Inc., an Alberta
corporation ("Carpatsky"), and evidences the following:
WHEREAS, ▇▇▇▇▇, CPI Acquisition and Carpatsky have entered into an
Agreement and Plan of Merger ("Merger Agreement"), dated August 31, 1999,
providing for, among other things, the continuance of Carpatsky into a newly
formed Delaware corporation ("New Carpatsky"), and the merger of CPI Acquisition
with and into New Carpatsky;
WHEREAS, capitalized terms used herein have the meaning given to them in
the Merger Agreement, unless otherwise provided herein;
WHEREAS, Carpatsky and Bellwether Exploration Company, a Delaware
corporation ("Bellwether"), have entered into a Securities Purchase Agreement,
of even date herewith, ("the "Purchase Agreement"), pursuant to which Bellwether
has agreed to purchase, and Carpatsky has agreed to issue and sell, a newly
created series of Carpatsky convertible preferred shares (the "Carpatsky
Preferred Shares"), having the rights, preferences and privileges as set forth
in the Articles of Amendment attached as Exhibit A to the Purchase Agreement;
WHEREAS, among other things, the Carpatsky Preferred Shares will grant to
Bellwether the right to cast a majority of the votes cast at a meeting of
Carpatsky shareholders;
WHEREAS, in connection with the issuance of such Carpatsky Preferred
Shares, (i) the parties to the Merger Agreement desire to make certain changes
to the Merger Agreement to provide for the treatment of the Carpatsky Preferred
Shares in the Redomestication and Merger and (ii) ▇▇▇▇▇ desires to consent to
the issuance of the Carpatsky Preferred Stock as required by the Merger
Agreement;
NOW, THEREFORE, the parties hereto, for good and valuable consideration,
the receipt and sufficiency of which is acknowledged, and desiring to be legally
bound, do hereby agree as follows:
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ARTICLE I. CONSENT TO PURCHASE AGREEMENT
Section 1.1 Consent of ▇▇▇▇▇ and CPI Acquisition. ▇▇▇▇▇ and CPI Acquisition
acknowledge receipt of a copy of the Purchase Agreement and hereby consent to
the issuance of the Carpatsky Preferred Stock and the other transactions
contemplated by the Purchase Agreement. The issuance of the Preferred Stock
pursuant to and other transactions contemplated by the Purchase Agreement shall
not be a "Competing Transaction" as defined in the Merger Agreement.
ARTICLE II. AMENDMENTS TO MERGER AGREEMENT
Section 2.1 Amendment to Recitals of the Merger Agreement. The Section of
the Merger Agreement entitled "RECITALS" is hereby amended to read in its
entirety as follows:
RECITALS
A. Upon the terms and subject to the conditions of this Agreement, on the
Effective Time (as hereinafter defined) and in accordance with the Business
Corporations Act (Alberta) ("ABCA") and the General Corporation Law of the State
of Delaware ("Delaware Law"), Carpatsky will effect a continuance into Delaware
by filing with the Secretary of State of Delaware a Certificate of Domestication
and a Certificate of Incorporation in accordance with Section 388 of the
Delaware Law (the "Redomestication"), subject to the right of holders of common
shares, without par value ("Old Carpatsky Common Stock") and the holders of
convertible preferred shares, series A, without par value ("Old Carpatsky
Preferred Shares") (each such dissenting holder, a "Dissenting Old Carpatsky
Stockholder") to seek an appraisal of the fair value thereof as provided in
Section 184 of the ABCA, and
(i) each share of Old Carpatsky Common Stock, issued and outstanding
prior to the effective time of the Redomestication not owned by Carpatsky
or any subsidiary of Carpatsky, will be converted into one share of common
stock, $.01 par value ("New Carpatsky Common Stock"), of Carpatsky
Petroleum, Inc., a corporation redomesticated in the State of Delaware
("New Carpatsky") (Old Carpatsky Common Stock and New Carpatsky Common
Stock are sometimes referred to herein collectively as "Carpatsky Common
Stock");
(ii) each Old Carpatsky Preferred Share, issued and outstanding prior
to the effective time of the Redomestication not owned by Carpatsky or any
subsidiary of Carpatsky, will be converted into 1.073 shares of convertible
preferred stock, series A, $.01 par value ("New Carpatsky Preferred
Stock"), of New Carpatsky having the rights, preferences and privileges set
forth in the certificate of designation attached to the First Amendment to
Merger Agreement dated December 30, 1999 (the "First Amendment to Merger
Agreement") as Exhibit A (Old Carpatsky Preferred Shares and New Carpatsky
Preferred Stock are sometimes referred to herein collectively as "Carpatsky
Preferred Stock"); and
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(iii) each outstanding warrant, option or other right to acquire Old
Carpatsky Common Stock shall be converted into an equivalent right to
acquire New Carpatsky Common Stock on the terms and conditions provided for
in such warrant, option or other right.
B. Concurrently with the Redomestication, Acquisition Corp., upon the terms
and subject to the conditions of this Agreement and in accordance with the
Delaware Law, will merge with and into New Carpatsky (the "Merger"), and
pursuant thereto, each share of New Carpatsky Common Stock, issued and
outstanding immediately prior to the Effective Time (as defined herein) of the
Merger, not owned directly or indirectly by Carpatsky or ▇▇▇▇▇ or their
respective subsidiaries, will be converted at the Effective Time into the right
to receive 0.57842 shares of common stock, par value $.01 per share of ▇▇▇▇▇
("▇▇▇▇▇ Common Stock"), and each share of New Carpatsky Preferred Stock will be
converted into one share of convertible preferred stock, series A, par value
$0.01 per share of ▇▇▇▇▇ ("New ▇▇▇▇▇ Preferred Stock") having the rights,
preferences and privileges set forth in Exhibit B to the First Amendment to
Merger Agreement, subject to the right of holders of such shares of New
Carpatsky Common Stock and New Carpatsky Preferred Stock (each, a "Dissenting
New Carpatsky Stockholder" and together with the Dissenting Old Carpatsky
Stockholders, collectively, the "Dissenting Carpatsky Stockholders") to seek an
appraisal of the fair value thereof as provided in Section 262 of Delaware Law,
and each share of common stock, $.01 per share par value, of Acquisition Corp.
("Acquisition Corp. Common Stock") issued and outstanding immediately prior the
Effective Time, will be converted at the Effective Time into one share of New
Carpatsky Common Stock.
C. Pursuant to the provisions of those certain letter agreements by and
between ▇▇▇▇▇ and the holders (the "▇▇▇▇▇ Preferred Stockholders") of all of the
issued and outstanding shares of Series B 5% PIK Cumulative Convertible
Preferred Stock, par value $.01 per share ("▇▇▇▇▇ Preferred Stock"), of even
date herewith in substantially the form of Exhibit A hereto (the "▇▇▇▇▇
Preferred Stockholder Agreements"), at the Effective Time and subject to the
provisions of Article II hereof, each share of ▇▇▇▇▇ Preferred Stock issued and
outstanding immediately prior to the Effective Time (excluding any ▇▇▇▇▇
Preferred Stock held in treasury or owned by ▇▇▇▇▇ or any direct or indirect
subsidiary of ▇▇▇▇▇ immediately prior to the Effective Time which shall be
canceled and extinguished) shall be exchanged (the "Exchange") into the right to
receive 8,865,665 shares of ▇▇▇▇▇ Common Stock (the "▇▇▇▇▇ Preferred Stock
Exchange Ratio").
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D. Following the consummation of the Merger, the fully diluted ownership of
the common stock of the Surviving Corporation will be:
Number Percent
------ -------
▇▇▇▇▇ Common Stockholders 1,688,698 1.65%
▇▇▇▇▇ Preferred Stockholders 8,865,665 8.66%
▇▇▇▇▇ Option and Warrant holders 393,811 .38%
Carpatsky Common Stockholders 44,959,557 43.91%
Carpatsky Preferred Stockholders 28,920,984 28.25%
Carpatsky Warrant holders 17,448,263 17.04%
Carpatsky Option holders 115,684 .11%
----------- ------
102,392,662 100.0%
E. In the Purchase Agreement (as defined in the Amendment) Bellwether has
agreed to vote for the Redomestication and Merger, subject to the terms and
conditions of the Merger Agreement, and when Bellwether votes for the
Redomestication and Merger it will no longer be able to exercise its dissenters
rights of appraisal;
F. The Board of Directors of ▇▇▇▇▇ has determined that the Exchange and the
Merger, as amended by the First Amendment to Merger Agreement, are consistent
with and in furtherance of the long-term business strategy of ▇▇▇▇▇ and are fair
to, and in the best interests of, ▇▇▇▇▇ and its stockholders and has approved
and adopted this Agreement, including the issuance of ▇▇▇▇▇ Common Stock, and
the other transactions contemplated hereby.
G. The Board of Directors of Carpatsky has determined that the
Redomestication and Merger, as amended by the First Amendment to Merger
Agreement, are consistent with and in furtherance of the long-term business
strategy of Carpatsky and are fair to, and in the best interests of, Carpatsky
and its stockholders and has approved and adopted this Agreement and the
transactions contemplated hereby.
H. For federal income tax purposes, it is intended that the
Redomestication, the Exchange and the Merger qualify as a tax-free
reorganizations under the relevant provisions of the United States Internal
Revenue Code of 1986, as amended (the "Code").
Section 2.2 Amendment to Article II of the Merger Agreement. Article II of
the Merger Agreement entitled "CONVERSION OF SECURITIES; EXCHANGE OF
CERTIFICATES" is hereby amended to read in its entirety as follows:
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01 Merger Consideration; Conversion and Cancellation of
Securities. At the Effective Time, by virtue of the Redomestication and Merger
and without any action on the part of Carpatsky, New Carpatsky, ▇▇▇▇▇,
Acquisition Corp. or their respective stockholders:
(a) Subject to the other provisions of this Article II,
(i) each share of New Carpatsky Common Stock issued and
outstanding immediately prior to the Effective Time (excluding any
Carpatsky Common Stock described in Section 2.01(c) of this Agreement
and shares held by Dissenting Carpatsky Stockholders) shall be
converted into the right to receive 0.57842 shares of ▇▇▇▇▇ Common
Stock (the "Carpatsky Common Stock Exchange Ratio");
(ii) each share of New Carpatsky Preferred Stock issued and
outstanding immediately prior to the Effective Time (excluding any
Carpatsky Preferred Stock described in Section 2.01(c) of this
Agreement and shares held by Dissenting Carpatsky Stockholders) shall
be converted into the right to receive one share of New ▇▇▇▇▇
Preferred Stock (the "Carpatsky Preferred Stock Exchange Ratio"); and
(iii) each share of Acquisition Corp. Common Stock issued and
outstanding at the Effective Time shall be converted into the right to
receive one share of New Carpatsky Common Stock. The Carpatsky Common
Stock Exchange Ratio, the Carpatsky Preferred Stock Exchange Ratio and
the ▇▇▇▇▇ Preferred Stock Exchange Ratio are referred to herein
collectively as the "Exchange Ratios".
Notwithstanding the foregoing, except as contemplated by this Agreement, if
between the date of this Agreement and the Effective Time the outstanding shares
of Old or New Carpatsky Common Stock, Old Carpatsky Preferred Shares, New
Carpatsky Preferred Stock or ▇▇▇▇▇ Common Stock or ▇▇▇▇▇ Preferred Stock shall
have been changed into a different number of shares or a different class, by
reason of any stock dividend, subdivision, reclassification, conversion,
recapitalization, split, combination or exchange of shares, the Exchange Ratios
shall be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, conversion, recapitalization, split, combination or exchange
of shares.
(b) Subject to the other provisions of this Article II, the rights to
acquire shares of Carpatsky Common Stock previously granted and to be granted
pursuant to the Carpatsky Options (as hereinafter defined) and the Carpatsky
Warrants (as hereinafter defined) and to certain other persons and in the
amounts identified in Schedule 4.03(b)(i) of the Carpatsky Disclosure Schedule
(as hereinafter defined) shall be adjusted as of and at the Effective Time, in
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accordance with the provisions of such agreements, to reflect the Carpatsky
Common Stock Exchange Ratio.
(c) Notwithstanding any provision of this Agreement to the contrary,
each share of Carpatsky Common Stock or Carpatsky Preferred Stock held in the
treasury of Carpatsky and each share of Carpatsky Common Stock or Carpatsky
Preferred Stock owned by ▇▇▇▇▇ or Acquisition Corp., respectively, or any direct
or indirect wholly owned subsidiary of Carpatsky or of ▇▇▇▇▇, immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
(d) Subject to the provisions of Section 2.01(f), all shares of
Carpatsky Common Stock (other than shares of New Carpatsky Common Stock held by
▇▇▇▇▇ at the Effective Time), Carpatsky Preferred Stock, ▇▇▇▇▇ Preferred Stock
and Acquisition Corp. Common Stock shall cease to be outstanding and shall
automatically be canceled and retired, and each certificate previously
evidencing Carpatsky Common Stock, Carpatsky Preferred Stock and ▇▇▇▇▇ Preferred
Stock immediately prior to the Effective Time (the "Converted Shares" or
"Converted Share Certificates," as the case may be) shall thereafter represent
the right to receive, subject to Section 2.02(g) of this Agreement, that number
of shares of ▇▇▇▇▇ Common Stock or New ▇▇▇▇▇ Preferred Stock determined pursuant
to Section 2.01(a) hereof or, if applicable, cash pursuant to Sections 2.01(f)
or 2.02(f) of this Agreement (the "Merger Consideration"). The holders of
Converted Share Certificates shall cease to have any rights with respect to such
Converted Shares except as otherwise provided herein or by law. Such Converted
Share Certificates shall be exchanged for certificates evidencing whole shares
of ▇▇▇▇▇ Common Stock or New ▇▇▇▇▇ Preferred Stock upon the surrender of such
Converted Share Certificates in accordance with the provisions of Section 2.02
of this Agreement, without interest. No fractional shares of ▇▇▇▇▇ Common Stock
or New ▇▇▇▇▇ Preferred Stock shall be issued in connection with the Merger and,
in lieu thereof, a cash payment shall be made pursuant to Section 2.02(f) of
this Agreement. Each share of Acquisition Corp. Common Stock shall be
automatically converted into one share of New Carpatsky Common Stock.
(e) All shares of ▇▇▇▇▇ Common Stock and New ▇▇▇▇▇ Preferred Stock
issued to the former holders of Carpatsky Common Stock, Carpatsky Preferred
Stock and ▇▇▇▇▇ Preferred Stock in the Merger shall be registered under the
Securities Act of 1933, as amended (the "Securities Act").
(f) Notwithstanding anything in this Agreement to the contrary, any
issued and outstanding shares of capital stock of Carpatsky held by a Dissenting
Carpatsky Stockholder who has not voted in favor of nor consented to the
Redomestication or the Merger and who complies with all the provisions of the
ABCA or Delaware Law concerning the right of holders of such stock to dissent
from the Redomestication or the Merger and to require appraisal of their shares,
shall not be converted as described in Section 2.01(a) but shall become, at the
Effective Time, by virtue of the Merger and without any further action, the
right to receive such consideration as may be determined to be due to such
Dissenting Carpatsky Stockholder pursuant to the ABCA or Delaware Law, as the
case may be; provided, however, that shares of Carpatsky Common Stock or
Carpatsky Preferred Stock outstanding immediately prior to the Effective Time
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and held by a Dissenting Carpatsky Stockholder who shall, after the Effective
Time, withdraw his demand for appraisal or lose his right of appraisal, in
either case pursuant to the ABCA or Delaware Law, as the case may be, shall be
deemed to be converted as of the Effective Time, into the right to receive ▇▇▇▇▇
Common Stock or New ▇▇▇▇▇ Preferred Stock, respectively.
Section 2.02 Exchange and Surrender of Certificates.
(a) Subject to Section 2.02(h) below, as of the Effective Time, ▇▇▇▇▇
shall deposit, or shall cause to be deposited with American Securities Transfer
& Trust, Inc., ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "US Exchange
Agent") and, if required by regulatory authorities, CIBC Mellon Trust Company
(the "Canadian Exchange Agent"; the US Exchange and the Canadian Exchange Agent
are collectively referred to herein as the "Exchange Agents"), for the benefit
of the holders of Converted Share Certificates, for exchange in accordance with
this Article II, the Merger Consideration, together with any dividends,
distributions or payments pursuant to Section 2.02(e) with respect thereto
(hereinafter referred to as the "Exchange Fund").
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agents shall mail to each holder of record of shares of Carpatsky
Common Stock, Carpatsky Preferred Stock and ▇▇▇▇▇ Preferred Stock who have not
exchanged their Converted Share Certificates as contemplated by Section 2.02(h),
immediately prior to the Effective Time a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Converted Share Certificates shall pass, only upon delivery of the Converted
Share Certificates to the Exchange Agents, and which shall be in such form and
have such other provisions as ▇▇▇▇▇ may reasonably specify) and instructions for
use in effecting the surrender of the Converted Share Certificates in exchange
for certificates representing shares of ▇▇▇▇▇ Common Stock or New ▇▇▇▇▇
Preferred Stock issuable pursuant to Section 2.01 in exchange for such Converted
Share Certificates. Upon surrender of a Converted Share Certificate for
cancellation to the Exchange Agents, together with such letter of transmittal,
duly executed, the holder of such Converted Share Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of ▇▇▇▇▇ Common Stock or New ▇▇▇▇▇ Preferred Stock (as the case may be)
which such holder has the right to receive in exchange for the Converted Share
Certificate surrendered pursuant to the provisions of this Article II (after
taking into account all Converted Shares then held by such holder), and the
Converted Share Certificates so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of Carpatsky Common Stock, Carpatsky Preferred
Stock or ▇▇▇▇▇ Preferred Stock which is not registered in the transfer records
of Carpatsky or ▇▇▇▇▇ as the case may be, a certificate representing the proper
number of shares of ▇▇▇▇▇ Common Stock or New ▇▇▇▇▇ Preferred Stock may be
issued to a transferee if the Converted Share Certificate representing such
Carpatsky Common Stock, Carpatsky Preferred Stock or ▇▇▇▇▇ Preferred Stock is
presented to the Exchange Agents, accompanied by all documents required to
7
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.02, each Converted Share Certificate shall be deemed at any time after the
Effective Time to represent only the ▇▇▇▇▇ Common Stock or New ▇▇▇▇▇ Preferred
Stock into which the Converted Shares represented by such Converted Share
Certificate have been converted as provided in this Article II and the right to
receive upon such surrender cash in lieu of any fractional shares of ▇▇▇▇▇
Common Stock or New ▇▇▇▇▇ Preferred Stock as contemplated by Section 2.02(f).
(c) After the Effective Time, there shall be no further registration
of transfers of Carpatsky Common Stock, Carpatsky Preferred Stock or ▇▇▇▇▇
Preferred Stock. If, after the Effective Time, certificates representing shares
of Carpatsky Common Stock, Carpatsky Preferred Stock or ▇▇▇▇▇ Preferred Stock
are presented to ▇▇▇▇▇ or the Exchange Agents, they shall be canceled and
exchanged for the Merger Consideration provided for in this Agreement in
accordance with the procedures set forth herein.
(d) Any portion of the Merger Consideration or the Exchange Fund made
available to the Exchange Agents pursuant to Section 2.02(a) that remains
unclaimed by the holders of shares of Carpatsky Common Stock, Carpatsky
Preferred Stock or ▇▇▇▇▇ Preferred Stock one year after the Effective Time shall
be returned to ▇▇▇▇▇ upon demand, and any such holder who has not exchanged its
shares of Carpatsky Common Stock, Carpatsky Preferred Stock or ▇▇▇▇▇ Preferred
Stock in accordance with this Section 2.02 prior to that time shall thereafter
look only to ▇▇▇▇▇ for payment of the Merger Consideration in respect of its
shares of Carpatsky Common Stock, Carpatsky Preferred Stock or ▇▇▇▇▇ Preferred
Stock. Notwithstanding the foregoing, ▇▇▇▇▇ shall not be liable to any holder of
Converted Shares for any amount paid to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(e) No dividends, interest or other distributions with respect to
shares of ▇▇▇▇▇ Common Stock or New ▇▇▇▇▇ Preferred Stock shall be paid to the
holder of any unsurrendered Converted Share Certificates unless and until such
Converted Share Certificates are surrendered as provided in this Section 2.02.
Upon such surrender, ▇▇▇▇▇ shall pay, without interest, all dividends and other
distributions payable in respect of such shares of ▇▇▇▇▇ Common Stock or New
▇▇▇▇▇ Preferred Stock on a date subsequent to, and in respect of a record date
after, the Effective Time.
(f) No certificates or scrip evidencing fractional shares of ▇▇▇▇▇
Common Stock or New ▇▇▇▇▇ Preferred Stock shall be issued upon the surrender for
exchange of Converted Share Certificates, and such fractional share interests
shall not entitle the owner thereof to any rights as a stockholder of ▇▇▇▇▇. In
lieu of any such fractional interests, each holder of a Converted Share
Certificate shall, upon surrender of such certificate for exchange pursuant to
this Article II, be paid an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying the last sale price of the ▇▇▇▇▇ Common
Stock in the Over-the-Counter market prior to the Closing Date by the fractional
share of ▇▇▇▇▇ Common Stock or New ▇▇▇▇▇ Preferred Stock (on an as converted
basis) to which such holder would otherwise be entitled (after taking into
account all Converted Shares held of record by such holder at the Effective
Time).
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(g) ▇▇▇▇▇ shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any former holder
of Carpatsky Common Stock, Carpatsky Preferred Stock or ▇▇▇▇▇ Preferred Stock
such amounts as ▇▇▇▇▇ (or any affiliate thereof) is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by ▇▇▇▇▇, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the former holder of the Carpatsky Common
Stock, Carpatsky Preferred Stock or ▇▇▇▇▇ Preferred Stock in respect of which
such deduction and withholding was made. In the event the amount withheld is
insufficient so to satisfy the withholding obligations of ▇▇▇▇▇, (or any
affiliate thereof), such former stockholder shall reimburse ▇▇▇▇▇ (or such
affiliate), at its request, the amount of any such insufficiency.
Notwithstanding the foregoing, no such withholding shall be required with
respect to any shares of Carpatsky Preferred Stock or New ▇▇▇▇▇ Preferred Stock
issued or issuable in the Merger to Bellwether Exploration Company
("Bellwether").
(h) Bellwether shall be entitled, at its election, to attend the
Closing of the Merger and to tender at such Closing to ▇▇▇▇▇ the Converted Share
Certificates held by Bellwether duly endorsed for transfer to New Carpatsky, and
shall be entitled to receive certificates registered in Bellwether's name
representing the number of shares of ▇▇▇▇▇ Common Stock and New ▇▇▇▇▇ Preferred
Stock to which Bellwether is entitled under this Agreement.
Section 2.03 Amendment to Article III. The following amendments are hereby
made to the Sections of Article III of the Merger Agreement as indicated:
(a) Section 3.03(d) is amended to add the words "and New ▇▇▇▇▇
Preferred Stock" after the words "▇▇▇▇▇ Common Stock" in the first sentence
thereof.
(b) Section 3.04 is amended to add the words "and New ▇▇▇▇▇ Preferred
Stock" after the words "▇▇▇▇▇ Common Stock" in the first and second sentence
thereof.
(c) Section 3.12(b) is amended to add the words "or New ▇▇▇▇▇
Preferred Stock" after the words "▇▇▇▇▇ Common Stock."
Section 2.04 Amendment to Article IV. The following amendments are hereby
made to the Sections of Article IV of the Merger Agreement as indicated:
(a) Section 4.03(a) is amended to replace the number 77,728,263 for
40,796,246; and to add the words ", and an unlimited number of shares of Old
Carpatsky Preferred Stock" after the words "issued and outstanding".
9
(b) Section 4.03(b) is amended to add the words "or Preferred Stock"
after the words "Common Stock" in the second sentence thereof.
(c) Section 4.04 is amended to add the words "and Preferred Stock"
after the words "Common Stock" in the second sentence thereof.
(d) Section 4.11(c) is amended to add the words "and Old Carpatsky
Preferred Shares" after the words "Old Carpatsky Common Stock" in the two
locations where such words appear, to add the words "and New ▇▇▇▇▇ Preferred
Stock" after the words "▇▇▇▇▇ Common Stock" in the two locations where such
words appear and to add the words "and Preferred Stock" after the words "Common
Stock" in the two locations where such words appear in the parenthetical to such
sentence.
(e) Section 4.12 is amended to add the words "and Preferred Shares
voting together as a class" after "Old Carpatsky Common Stock" in clause (i) and
to add the words "and Preferred Stock voting together as a class" after the
words "New Carpatsky Common Stock" in clause (ii).
Section 2.05 Amendment to Article VI. Section 6.02(a) of Article VI of the
Merger Agreement is hereby amended to add the words "and New ▇▇▇▇▇ Preferred
Stock" after the words "▇▇▇▇▇ Common Stock" in the first and second sentences
thereof.
Section 2.06 Amendment to Article VII. The following amendments are hereby
made to the Sections of Article VII the Merger Agreement as indicated.
(a) The first sentence of Section 7.01(b) is amended to read as
follows:
"(b) Stockholder Approval. The Amendment, this Agreement and the issuance
of the ▇▇▇▇▇ shares described in this Agreement in connection with the
Merger shall have been approved and adopted by the requisite vote of the
stockholders of ▇▇▇▇▇, and the Redomestication, this Agreement and the
Merger shall have been approved and adopted by the requisite vote of the
stockholders of Carpatsky."
(b) Section 7.02(e)(2) is amended to read in its entirety as follows:
"(2) Carpatsky shall have received the written opinion of Messrs. Feleski
▇▇▇▇▇, Calgary, Alberta dated the Closing Date, the effect that the tax
consequences to Canadian stockholder of Carpatsky under Canadian income tax
laws shall be consistent with the description thereof included in Form S-4
at the time the Form S-4 is declared effective."
(c) Section 7.02(h) and 7.03(g), requiring "comfort letters" from
auditors of ▇▇▇▇▇ and Carpatsky, are deleted.
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(d) Section 7.03(h) is amended to add the words "and Preferred Stock"
after the words "Carpatsky Common Stock" in the two places where such words
appear.
(e) Section 7.03(l) is amended to read in its entirety as follows:
"(l) Carpatsky Financial Statements. Carpatsky shall have completed and
obtained audits of its financial statements for the years ended December
31, 1997 and 1998 and completed its financial statements for the fiscal
periods ended September 30, 1998 and 1999, all by December 31, 1999.
Assuming such financial statements have accounted for the Ukrainian joint
ventures using proportionate consolidation, they shall reflect the
following (to the extent provided below):
(i) A working capital deficit for Carpatsky, on a proportionately
consolidated basis, as of September 30, 1999 no greater than
$5,000,000. For purposes of this calculation, any amount received
under Carpatsky's $1.0 private placement of securities may be added to
current assets as at September 30, 1999 and debt actually converted
into equity may be deleted as at September 30, 1999, on a pro forma
basis.
(ii) Total long term liabilities, on a proportionately
consolidated basis, as at September 30, 1999 shall not exceed $550,000
(excluding accrued interest payable).
(iii) The balance due to the joint account as at September 30,
1999 for Carpatsky's working interest in the RC Field in the Ukraine
does not exceed $6.75 million.
(iv) Carpatsky's net revenue interest in the RC Field shall not
be less than 19.7% on October 1, 1999.
(v) Carpatsky or its subsidiaries is delivering gas for sale by
Closing of the Merger under such reasonable gas sales arrangements as
▇▇▇▇▇ shall have approved in writing, which approval shall not be
unreasonably withheld.
(vi) Carpatsky, its subsidiaries or Ukrainian joint ventures have
commenced receiving payment for at least 90% of the gas sold pursuant
to 7.03(l)(v) above by the Closing of the Merger and that reasonable
assurance can be given that future payments will continue to be
received.
(vii) [This subsection has been deleted.]"
Section 2.07 Amendment to Section 8.01 of Article VIII. Section 8.01 is
amended by changing the words "December 31, 1999" to "March 31, 2000" and
changing the words "March 31, 2000" to "April 30, 2000" and the last clause of
such section, ("to receive . . . merger") shall be deleted.
11
ARTICLE III. AMENDMENTS TO EXHIBITS AND SCHEDULES
Section 3.1 Amendments to Exhibits. The following Exhibits to the Merger
Agreement are added or amended as indicated below:
(a) The following Exhibits to are added to the Merger Agreement in the
form attached to this Amendment:
Exhibit A Preferred Stock Designation for New Carpatsky
Exhibit B Preferred Stock Designation for ▇▇▇▇▇
(b) The following amendments are made to the Exhibits attached to the
Merger Agreement:
Exhibit A to the Merger Agreement (changes to ▇▇▇▇▇ preferred
stockholder agreements) is amended as reflected on the attachment hereto.
Exhibit B-4 is amended to read in its entirety as Exhibit B-4
attached hereto.
Section 3.2 Amendment to Schedules. The following Schedules to the Merger
Agreement are hereby amended as follows:
(a) Schedule 1.05 is amended to read in its entirety as Schedule 1.05
attached hereto.
(b) Schedules 4.01, 4.03(b)(iii), 4.07(ii), 4.08, 4.11, 4.17 and 4.19
are amended to add the following language: "The letter from ▇▇▇▇ & ▇▇▇▇▇, LLC
addressed to the ▇▇▇▇▇ Board of Directors, dated August 19, 1999, is
incorporated into this Schedule and the entire text of such letter is deemed to
be included herein."
(c) Schedules 4.01(c), 4.03(b)(iii), 4.03(c)B (regarding Melman
Shares), 4.08 and 4.11 (regarding taxes), 4.19(A) are modified or replaced as
reflected on the attachments to this Amendment:
ARTICLE IV. GENERAL PROVISIONS
Section 4.1 No Other Changes. Except as otherwise changed by this
Amendment, the Merger Agreement shall remain in full force and effect, unaltered
by this Amendment.
12
Section 4.2 Multiple Counterparts. This Amendment may be executed in
multiple counterparts, each of which shall be an original, and all of which
taken together shall be one instrument.
IN WITNESS WHEREOF, this Amendment was executed as of the date above first
written.
▇▇▇▇▇ OIL AND GAS COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
CPI ACQUISISTION CORP.
By: /s/
---------------------------------
Name:
Title:
CARPATSKY PETROLEUM, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Ttile: Chief Corporate Officer
13
Schedule 1.05
Directors of ▇▇▇▇▇ (Radiant Energy)
----------------------------------
▇.▇. ▇▇▇▇▇
▇▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ Texas
▇▇▇▇▇ ▇▇▇▇▇
2 other nominees to be identified by Bellwether in writing prior to the Closing
Directors of Surviving Corporation
----------------------------------
▇.▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
1 other nominee to be identified by Bellwether in writing prior to the Closing
Officers of ▇▇▇▇▇ (Radiant Energy) and the Surviving Corporation
----------------------------------------------------------------
▇.▇. ▇▇▇▇▇ Chief Executive Officer
▇▇▇▇▇▇ Texas President
▇▇▇▇▇▇ ▇▇▇▇▇ Vice President
Additional Officers
-------------------
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
14
Schedule 4.01
C. Carpatsky, through the Joint Activity Agreement No. 410/95 dated
September 15, 1995, revised on October 15, 1996 and amended on December 25, 1997
and again on August 26, 1998, owns an interest for the purpose of investment,
exploration and operation of the Rudovsko-Chervonozavodsky field, located in the
Poltava district of eastern Ukraine (this contract, as amended, is referred to
collectively herein as the "Joint Activity Agreement"). The Joint Activity
Agreement is sometimes referred to as the Carpatsky-Poltavaneftagaz Joint
Activity, which essentially acts as, and is referred to as, a Ukrainian Joint
Venture. Pursuant to the terms of the Joint Activity Agreement, Carpatsky has
the right, not the obligation, to own up to a 45% net revenue interest
(representing a 50% working interest) in the Joint Activity. The net revenue
interest is determined by: a.) dividing Carpatsky's total capital contributions,
as defined in the Joint Activity Agreement, by the total capital contributions
of the Joint Activity; and b.) multiplying this percentage by 90%. The Joint
Activity Agreement is unclear whether or not the working interest decreases
proportionately should Carpatsky's total contributions, as compared to the total
contributions of the Joint Activity, fall below 50%. However, it is Carpatsky's
representation to ▇▇▇▇▇ that the working interest, and corresponding obligations
to the Joint Account, would be proportionately reduced under such circumstances.
As of September 30, 1999, Carpatsky's net revenue interest in the Joint Activity
was 41.68% (representing a presumed working interest of 46.31%). On October 1,
1999, Carpatsky's net revenue interest was effectively reduced to 31.98% when
its Ukrainian partner increased their equity position through an additional
capital contribution to the Joint Account. The Ukrainian partner has advised
Carpatsky that it has until December 31, 1999 to make an additional capital
contribution of approximately $2.9 million. A failure to do so may dilute
Carpatsky's interest in the RC field even further and will preclude Carpatsky
from participating in at least the next two ▇▇▇▇▇ that will be drilled.
Carpatsky's rights and obligations are subject to all terms and conditions of
the Joint Activity Agreement, as amended.
15
Schedule 4.03(b)(iii)
As discussed in Schedule 4.01 C, Carpatsky's net revenue interest as of
October 1, 1999 in the Carpatsky-Poltavaneftagaz Joint Activity is 31.98%.
Pursuant to the terms of the Joint Activity Agreement, as amended, as of
September 30, 1999, Carpatsky has the right to increase its net revenue interest
percentage to 45% by contributing, or repaying, approximately $2.9 million to
the Joint Account, or its partners. The terms of the Joint Activity Agreement
contemplate that Carpatsky will be a 50/50 partner on all expenditures subject
to the Joint Activity. The Joint Activity Agreement also contemplates that from
time-to-time the respective partners may not contribute at the contemplated
50/50 levels and has certain provisions that deal with these imbalances.
However, it is unclear as to whether or not Carpatsky's right to increase its
net revenue interest percentage to 45% will or can be honored by its partners
indefinitely.
16
Schedule 4.03(c)
B. Carpatsky Stock Awards
1. As previously disclosed in Schedule 4.03(b)(i)C, item 5, Torch
Energy Advisors Incorporated will receive 1,200,000 Carpatsky shares in
settlement of a payable due Torch for services performed for $150,000,
2. As previously disclosed in Schedule 4.03(b)(i)C, item 4, Proteus
International has been offered 720,000 Carpatsky shares and warrants to purchase
435,000 Carpatsky common shares in settlement of a $90,000 claim for services.
As previously disclosed, the warrants will be exercisable at US $0.20 per share
and will expire on December 31, 2000.
3. As previously disclosed in Schedule 4.03(b)(i)C, item 6, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ will receive 953,333 common shares of Carpatsky and warrants to purchase
357,000 Carpatsky common shares in connection with financial services rendered
in a US $1,000,000 private placement. As previously disclosed, the warrants will
be exercisable at US $0.20 per share and will expire on December 31, 2000.
4. In connection with the contemplated merger with ▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ will receive 2.0 million shares of Carpatsky (to be issued prior to the
Effective Time of the merger) as compensation for services rendered.
17
Schedule 4.08
As of September 30, 1999, the Carpatsky-Poltavaneftagaz Joint Activity had
incurred a Corporate Profits Liability in UAH of 2,899,558 (US equivalent is
$648,714 using September 30, 1999 exchange rates). This liability is past due
and incurring interest at a annual rate of 45% (the discount rate in UAH of the
National Bank of Ukraine). Using Carpatsky's presumed working interest of 46.31%
at September 30, 1999, our proportionate share is approximately US $300,419,
excluding interest. However, as discussed in Schedule 4.01C, the wording of the
Carpatsky-Poltavaneftagaz Joint Activity Agreement leaves the issue of the
adjustable working interest unclear. Accordingly, if the working interest is
50%, Carpatsky's proportionate share could be as high as US$324,357, excluding
interest.
18
Schedule 4.11
B. As disclosed in Schedule 4.08, as of September 30, 1999 the
Carpatsky-Poltavaneftagaz Joint Activity had incurred a Corporate Profits
Liability in UAH of $2,899,558 (US equivalent is $648,714 using September 30,
1999 exchange rates). This liability is past due and incurring interest at an
annual rate of 45% (the discount rate in UAH of the National Bank of Ukraine).
Using Carpatsky's presumed working interest of 46.31% at September 30, 1999, our
proportionate share is approximately US $300,419, excluding interest. However,
because it is unclear whether the working interest could arguably be 50%
Carpatsky proportionate share could be as high as US$324,357, excluding
interest.
19
Schedule 4.19
The following are Carpatsky's contractual commitments in excess of $10,000
over 12 months as of June 30, 1999:
A As discussed in Schedule 4.01 C and disclosed in Schedule 4.03(b)(iii),
Carpatsky's working interest as of October 1, 1999 in the
Carpatsky-Poltavaneftagaz Joint Activity is 31.98%. Pursuant to the terms of the
Joint Activity Agreement, as amended, as of September 30, 1999, Carpatsky has
the right to increase its working interest percentage to 50% by contributing, or
repaying, approximately $2.9 million to the Joint Account, or its partners by
December 31, 1999. A failure to do so may dilute Carpatsky's interest in the RC
field even further and will preclude Carpatsky from participating in at least
the next two ▇▇▇▇▇ that will be drilled. The terms of the Joint Activity
Agreement contemplate that Carpatsky will be a 50/50 partner on all expenditures
subject to the Joint Activity. The Joint Activity Agreement also contemplates
that from time-to-time the respective partners may not contribute at the
contemplated 50/50 levels and has certain provisions that deal with these
imbalances. However, it is unclear as to whether or not Carpatsky's right to
increase its working interest percentage to 50% will or can be honored by its
partners indefinitely.
20
Exhibit A
to
First Amendment to Merger Agreement
dated December 30, 1999
[NEW CARPATSKY PETROLEUM, INC.]
CERTIFICATE OF DESIGNATION
OF CONVERTIBLE PREFERRED STOCK,
SERIES A SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF
SUCH PREFERRED STOCK
Pursuant to the Delaware General Corporation Law, [NEW CARPATSKY PETROLEUM,
INC.], a Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of the
Corporation by the Articles of Incorporation of the Corporation (the "Charter"),
the Board of Directors of the Corporation on [ ], 2000 duly adopted the
following resolution creating a series of Preferred Stock designated as
Convertible Preferred Stock, Series A and such resolution has not been modified
and is in full force and effect on the date hereof:
RESOLVED that, pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the provisions of the Charter, a series of
authorized Preferred Stock, without par value, of the Corporation are hereby
created and that the designation and number of shares thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series of Preferred Stock, and the qualifications,
limitations and restrictions thereof are as follows:
Section 1. Designation and Number.
(a) The shares of such series of Preferred Stock shall be designated as
"Convertible Preferred Stock, Series A" ("Preferred Stock"). The number of
shares initially constituting the Preferred Stock shall be 102,410,000 shares,
which number may be increased or decreased by the Board of Directors without a
vote of stockholders; provided, however, that such number may not be decreased
below the number of then outstanding shares of such series of Preferred Stock.
(b) The Preferred Stock shall, with respect to rights on liquidation,
dissolution or winding up, rank prior to all other classes and series of Junior
Stock of the Corporation now or hereafter authorized including, without
limitation, the Common Stock.
1
(c) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in Section 10 below.
Section 2. Dividends and Distributions.
In the event that the Corporation shall declare a cash dividend to holders
of Common Stock, then the Board of Directors shall declare, and the holder of
each share of Preferred Stock shall be entitled to receive, a dividend in an
amount equal to the amount of such dividend received by a holder of the number
of shares of Common Stock for which such share of Preferred Stock is convertible
on the record date for such dividend. Any such amount shall be paid to the
holders of shares of Preferred Stock at the same time such dividend is made to
holders of Common Stock.
The holders of shares of Preferred Stock shall not be entitled to receive
any dividends or other distributions except as provided herein.
Section 3. Voting Rights.
In addition to any voting rights provided by law and except where only a
specified class or series of shares is entitled to vote, the holders of shares
of Preferred Stock shall have the following voting rights:
(a) Except as otherwise required by applicable law and so long as the
Preferred Stock is outstanding, each share of Preferred Stock shall entitle the
holder thereof to vote, in person or by proxy or written consent, at a special
or annual meeting of stockholders or in connection with any stockholder action
taken in lieu of a meeting of stockholders, on all matters voted on by holders
of Common Stock, including the election of directors, voting together as a
single class with all other shares entitled to vote thereon. With respect to any
such vote, each share of Preferred Stock shall entitle the holder thereof to
cast one vote for each share of Preferred Stock standing in his or her name on
the transfer books of the Corporation as of the record date for determining the
stockholders of the Corporation eligible to vote on any such matters.
(b) Unless the consent or approval of a greater number of shares shall then
be required by law, the affirmative vote of the holders of at least 66-2/3% of
the outstanding shares of Preferred Stock, voting separately as a single class,
in person or by proxy, at a special or annual meeting of stockholders called for
the purpose, shall be necessary to (i) authorize, adopt or approve an amendment
to the Charter that would increase or decrease the par value of the shares of
Preferred Stock, or alter or change the powers, preferences or special rights of
the shares of Preferred Stock, (ii) amend, alter or repeal the Charter so as to
affect the shares of Preferred Stock adversely, including, without limitation,
by granting any voting right to any holder of notes, bonds, debentures or other
debt obligations of the Corporation, or (iii) authorize, increase the authorized
2
number of shares of, or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification) any additional
shares of Preferred Stock except under Section 9.
(c) For so long as the shares of Preferred Stock are outstanding, the
Corporation shall not issue any capital stock entitling the holder thereof to
vote generally under ordinary circumstances in the election of directors, other
than (i) Common Stock and (ii) Preferred Stock issued pursuant to Section 9.
Section 4. Redemption.
The Corporation shall not have any right to redeem any shares of Preferred
Stock.
Section 5. Reacquired Shares.
Any shares of Preferred Stock converted, exchanged, redeemed, purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares of
Preferred Stock shall upon their cancellation become authorized but unissued
shares of preferred stock.
3
Section 6. Liquidation, Dissolution or Winding Up.
(a) If the Corporation shall commence a voluntary case under the United
States bankruptcy laws or any applicable bankruptcy, insolvency or similar law
of any other country, or consent to the entry of an order for relief in an
involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due (any such event, a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, the holders of the
Preferred Stock shall be entitled to receive the Liquidation Amount prior to any
payment being made or any property of the Corporation being distributed to the
holders of the Common Stock or the holders of any Junior Stock. After payment to
the holders of the Preferred Stock of the Liquidation Amount, the holders of the
Preferred Stock shall be entitled to receive (rateably with the holders of the
Common Shares) for each share of Preferred Stock held, the amount which would
have been received by the Holder of such Preferred Stock if on the record date
for such distribution, the holder of such Preferred Stock had converted such
Preferred Stock into the number of shares of Common Stock into which such
Preferred Stock was convertible on the record date for such distribution.
(b) Neither the consolidation or merger of the Corporation with or into any
other Person nor the sale or other distribution to another Person of all or
substantially all the assets, property or business of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 6.
Section 7. Conversion.
(a) Subject to the terms and conditions set forth herein, each share of
Preferred Stock shall be convertible into a number of fully paid and
non-assessable shares of Common Stock as is equal, subject to Section 7(g), to a
fraction, the numerator of which shall be the Common Stock Conversion Number and
the denominator of which shall be the number of shares of Preferred Stock issued
and outstanding on the date of conversion. The Common Stock Conversion Number
shall initially be 50,000,000, and shall be subject to adjustment as set forth
in this Section. Such conversion right may only be exercised by the holders of a
majority of the outstanding shares of Preferred Stock surrendering certificates
("Surrendered Certificates") representing a majority of the outstanding shares
of Preferred Stock to the Corporation at any time during usual business hours at
4
its principal place of business to be maintained by it, accompanied by written
notice that the holders of a majority of the outstanding shares of Preferred
Stock elect to convert such shares and specifying the name or names (with
address) in which a certificate or certificates for shares of Common Stock are
to be issued and (if so required by the Corporation) by a written instrument or
instruments of transfer in form reasonably satisfactory to the Corporation duly
executed by the holder or its duly authorized legal representative and transfer
tax stamps or funds therefor, if required pursuant to Section 7(j). Upon such
surrender, all shares of Preferred Stock shall automatically be converted into
Common Stock as provided in this Section. Notwithstanding the foregoing
provisions or anything set forth herein or in the Certificate, any shares of
Preferred Stock remaining outstanding on December 28, 2004 shall be and be
deemed to have been converted into Common Stock at the Conversion Number then in
effect.
(b) As promptly as practicable after the surrender, as herein provided, of
shares of Preferred Stock for conversion pursuant to Section 7(a), the
Corporation shall deliver to all holders of Preferred Stock a written notice
informing such holders (i) that the holders of a majority of the outstanding
shares of Preferred Stock have delivered their certificates for such shares to
the Corporation in satisfactory form for conversion into Common Shares pursuant
to the requirements of this Section 7, (ii) that, as result of such delivery,
all outstanding Preferred Stock has been converted into the right to receive
Common Stock and (iii) of the Common Stock Conversion Number and instructing
such holders to surrender the certificates representing their Preferred Stock to
the Corporation in the manner specified in Section 7(a) above in order to
receive certificates representing the Common Stock deliverable upon the
conversion of their Preferred Stock. As promptly as practicable after the
surrender of any certificates representing Preferred Stock in accordance with
the requirements of this Section 7, the Corporation shall deliver to or upon the
written order of the holder of such shares so surrendered a certificate or
certificates representing the number of fully paid and non-assessable shares of
Common Stock into which such shares of Preferred Stock may be or have been
converted in accordance with the provisions of this Section 7. Subject to the
following provisions of this paragraph and of Section 7(d), such conversion
shall be deemed to have been made immediately prior to the close of business on
the date that such shares of Preferred Stock shall have been surrendered in
satisfactory form for conversion, and the Person or Persons entitled to receive
the Common Stock deliverable upon conversion of such shares of Preferred Stock
shall be treated for all purposes as having become the record holder or holders
of such Common Stock at such appropriate time, and such conversion shall be
based on the Common Stock Conversion Number in effect at such time; provided,
however, that no surrender shall be effective to constitute the Person or
Persons entitled to receive the Common Stock deliverable upon such conversion as
the record holder or holders of such Common Stock while the share transfer books
of the Corporation shall be closed (but not for any period in excess of five
days), but such surrender shall be effective to constitute the Person or Persons
entitled to receive such Common Stock as the record holder or holders thereof
for all purposes immediately prior to the close of business on the next
5
succeeding day on which such share transfer books are open, and such conversion
shall be deemed to have been made at, and shall be based on the Common Stock
Conversion Number in effect at, such time on such next succeeding day.
(c) To the extent permitted by law, when shares of Preferred Stock are
converted, all dividends declared and unpaid on the Preferred Stock so converted
to the date of conversion shall be immediately due and payable and must
accompany the shares of Common Stock issued upon such conversion.
(d) The Common Stock Conversion Number shall be subject to adjustment as
follows:
(i) In case the Corporation shall at any time or from time to time (A)
pay a dividend or make a distribution on the outstanding shares of Common
Stock in capital stock (which, for purposes of this Section 7(d) shall
include, without limitation, any dividends or distributions in the form of
options, warrants or other rights to acquire capital stock) of the
Corporation, (B) subdivide the outstanding shares of Common Stock into a
larger number of shares, (C) combine the outstanding shares of Common Stock
into a smaller number of shares, or (D) issue any shares of its capital
stock in a reclassification of the Common Stock then, and in each such
case, the Common Stock Conversion Number in effect immediately prior to
such event shall be adjusted to equal the Common Stock Conversion Number in
effect immediately prior to such action multiplied by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
after the action described in clauses (A) through (D) and the denominator
of which is the number of shares of Common Stock outstanding immediately
prior to such action. An adjustment made pursuant to this Section 7(d)(i)
shall become effective retroactively (A) in the case of any such dividend
or distribution, to a date immediately following the close of business on
the record date for the determination of holders of Common Stock entitled
to receive such dividend or distribution or (B) in the case of any such
subdivision, combination or reclassification, to the close of business on
the day upon which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or from time to time
issue shares of Common Stock (or securities convertible into or
exchangeable for Common Stock, or any options, warrants or other rights to
acquire shares of Common Stock) for a consideration per share less than the
Current Market Price per share of Common Stock then in effect at the record
date or issuance date, as the case may be (the "Date"), referred to in the
following sentence (treating the consideration per share of any security
convertible or exchangeable or exercisable into Common Stock as equal to
(A) the sum of the price for such security convertible, exchangeable or
exercisable into Common Stock plus any additional consideration payable
(without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security into Common Stock divided by (B) the
number of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security), then, and in each such case, the
6
Common Stock Conversion Number in effect shall be adjusted by multiplying
the Common Stock Conversion Number in effect on the day immediately prior
to the Date by a fraction (x) the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on the Date plus the
number of additional shares of Common Stock issued or to be issued (or the
maximum number into which such convertible or exchangeable securities
initially may convert or exchange or for which such options, warrants or
other rights initially may be exercised) and (y) the denominator of which
shall be the sum of the number of shares of Common Stock outstanding on the
Date plus the number of shares of Common Stock which the aggregate
consideration for the total number of such additional shares of Common
Stock (or securities convertible into or exchangeable for Common Stock, or
any options, warrants or other rights to acquire shares of Common Stock)
plus the aggregate amount of any additional consideration initially payable
(without regard to any anti-dilution adjustments) upon such conversion,
exchange or exercise of such security into Common Stock would purchase at
the Current Market Price per share of Common Stock on the Date. Such
adjustment shall be made whenever such shares, securities, options,
warrants or other rights are issued, and shall become effective
retroactively to a date immediately following the close of business (i) in
the case of issuance to stockholders of the Corporation, as such, on the
record date for the determination of stockholders entitled to receive such
shares, securities, options, warrants or other rights and (ii) in all other
cases, on the date ("issuance date") of such issuance; provided that: (A)
the determination as to whether an adjustment is required to be made
pursuant to this Section 7(d)(ii) shall be made upon the issuance of such
shares or such convertible or exchangeable securities, options, warrants or
other rights; (B) if any convertible or exchangeable securities, options,
warrants or other rights (or any portions thereof) which shall have given
rise to an adjustment pursuant to this Section 7(d)(ii) shall have expired
or terminated without the exercise thereof and/or if by reason of the terms
of such convertible or exchangeable securities, options, warrants or other
rights there shall have been an increase or increases or decrease or
decreases, with the passage of time or otherwise, in the price payable upon
the exercise or conversion thereof, then the Common Stock Conversion Number
hereunder shall be readjusted (but to no greater extent than originally
adjusted) on the basis of (x) eliminating from the computation any
additional shares of Common Stock corresponding to such convertible or
exchangeable securities, options, warrants or other rights as shall have
expired or terminated, (y) treating the additional shares of Common Stock,
if any, actually issued or issuable pursuant to the previous exercise of
such convertible or exchangeable securities, options, warrants or other
rights as having been issued for the consideration actually received and
receivable therefor and (z) treating any of such convertible or
7
exchangeable securities, options, warrants or other rights which remain
outstanding as being subject to exercise or conversion on the basis of such
exercise or conversion price as shall be in effect at the time of
adjustment; and (C) no adjustment in the Common Stock Conversion Number
shall be made pursuant to this Section 7(d)(ii) as a result of any issuance
of securities by the Corporation in respect of which an adjustment to the
Common Stock Conversion Number is made pursuant to Section 7(d)(i).
(iii) In the case the Corporation, at any time or from time to time,
shall take any action affecting its Common Stock similar to or having an
effect similar to any of the actions described in any of Section 7(d)(i)
and Section 7(d)(ii), or Section 7(h) (but not including any action
described in any such Section) and the Board of Directors of the
Corporation in good faith determines that it would be equitable in the
circumstances to adjust the Common Stock Conversion Number as a result of
such action, then, and in each such case, the Common Stock Conversion
Number shall be adjusted in such manner and at such time as the Board of
Directors of the Corporation in good faith determines would be equitable in
the circumstances (such determination to be evidenced in a resolution, a
certified copy of which shall be mailed to the holders of the Preferred
Stock).
(iv) Notwithstanding anything herein to the contrary, no adjustment
under this Section 7(d) shall be made upon the grant of options to
employees or directors of the Corporation pursuant to benefit plans
approved by the Board of Directors of the Corporation or upon the issuance
of shares of Common Stock upon exercise of such options if the exercise
price thereof was not less than the Market Price of the Common Stock on the
date such options were granted.
(e) If the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Common Stock Conversion
Number then in effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Common Stock Conversion Number,
then, and in each such case, the Corporation promptly shall deliver to each
registered holder of Preferred Stock at least 10 Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice-President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased Common
Stock Conversion Number then in effect following such adjustment.
(g) No fractional shares or scrip representing fractional shares shall be
issued upon the conversion of any shares of Preferred Stock. If more than one
share of Preferred Stock shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock issuable upon conversion
8
thereof shall be computed on the basis of the aggregate number of shares of
Preferred Stock so surrendered. If the conversion of any share or shares of
Preferred Stock results in a fraction, an amount equal to such fraction
multiplied by the Current Market Price of the Common Stock on the Business Day
preceding the day of conversion shall be paid to such holder in cash by the
Corporation.
(h) In case of any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value), or in
case of any consolidation or merger of the Corporation with or into another
Person (other than a consolidation or merger in which the Corporation is the
resulting or surviving Person and which does not result in any reclassification
or change of outstanding Common Stock), or in case of any sale or other
disposition to another Person of all or substantially all of the assets of the
Corporation (any of the foregoing, a "Transaction"), the Corporation, or such
successor or purchasing Person, as the case may be, shall execute and deliver to
each holder of Preferred Stock at least 10 Business Days prior to effecting any
of the foregoing Transactions a certificate that the holder of each share of
Preferred Stock then outstanding shall have the right thereafter to convert such
share of Preferred Stock into the kind and amount of shares of stock or other
securities (of the Corporation or another issuer, the "Other Securities")) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Common Stock into which such share of Preferred Stock could have been
converted immediately prior to such Transaction. Such certificate shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. If, in the case of any such
Transaction, the Other Securities, cash or property receivable thereupon by a
holder of Common Stock includes shares of stock or other securities of a Person
other than the successor or purchasing Person and other than the Corporation,
which controls or is controlled by the successor or purchasing Person or which,
in connection with such Transaction, issues Other Securities, other property or
cash to holders of Common Stock, then such certificate also shall be executed by
such Person, and such Person shall, in such certificate, specifically
acknowledge the obligations of such successor or purchasing Person and
acknowledge its obligations to issue such Other Securities, other property or
cash to the holders of Preferred Stock upon conversion of the shares of
Preferred Stock as provided above. The provisions of this Section 7(h) and any
equivalent thereof in any such certificate similarly shall apply to successive
Transactions.
(i) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Preferred Stock, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Preferred
Stock, and shall take all action required to increase the authorized number of
shares of Common Stock if at any time there shall be insufficient authorized but
unissued shares of Common Stock to permit such reservation or to permit the
conversion of all outstanding shares of Preferred Stock.
9
(j) The issuance or delivery of certificates for Common Stock upon the
conversion of shares of Preferred Stock shall be made without charge to the
converting holder of shares of Preferred Stock for such certificates or for any
tax in respect of the issuance or delivery of such certificates or the
securities represented thereby, and such certificates shall be issued or
delivered in the respective names of, or (subject to compliance with the
applicable provisions of federal and state securities laws) in such names as may
be directed by, the holders of the shares of Preferred Stock converted;
provided, however, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate in a name other than that of the holder of the
shares of Preferred Stock converted, and the Corporation shall not be required
to issue or deliver such certificate unless or until the Person or Persons
requesting the issuance or delivery thereof shall have paid to the Corporation
the amount of such tax or shall have established to the reasonable satisfaction
of the Corporation that such tax has been paid.
(k) If an offer is made to purchase Common Stock and the offer must, by
reason of applicable securities legislation or the requirements of a stock
exchange on which the Common Stock is listed, be made to all or substantially
all holders of Common Stock located in a province of Canada in which the
requirement applies, the holders of Preferred Stock shall be given the
opportunity to participate in the offer through conversion of the Preferred
Stock into Common Stock; unless
(i) an identical offer (in terms of price per security and percentage
of outstanding securities to be taken upon, exclusive of securities owned
immediately prior to the bid by the offeror, or associates or affiliates of
the offeror, and in all other material respects) is made concurrently to
purchase Preferred Stock, which offer has no condition attached other than
the right not to take up and pay for securities tendered if no securities
are purchased pursuant to the offer for Common Stock; or
(ii) less than 50% of the Common Stock outstanding immediately prior
to the offer, other than Common Stock owned by the offeror, or associates
or affiliates of the offeror, are deposited pursuant to the offer.
Section 8. Certain Remedies.
Any registered holder of Preferred Stock shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Certificate of
Designation and to enforce specifically the terms and provisions of this
Certificate of Designation in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
such holder may be entitled at law or in equity.
10
Section 9. Additional Shares of Preferred Stock.
While any shares of Preferred Stock are outstanding, the Corporation shall
not issue any additional shares of Common Stock or convertible securities,
rights, warrants, options or other commitments to issue Common Stock unless,
prior to such issuance, the Corporation declares and pays a dividend on the
Preferred Stock of a number of shares of Preferred Stock equal to the number of
shares of Common Stock being issued or the maximum number of shares of Common
Stock which may be issued pursuant to such convertible securities, rights,
warrants, options or commitments; provided, however, the Corporation shall not
be required to issue additional shares of Preferred Stock in connection with the
issuance of Common Stock pursuant to agreements described in a Schedule to the
Purchase Agreement.
Section 10. Definitions.
For the purposes of this Certificate of Designation of Preferred Stock, the
following terms shall have the meanings indicated:
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law or executive order to close.
"Common Stock" shall mean and include the Common Stock, without par value,
of the Corporation and each other class of capital stock of the Corporation that
does not have a preference over any other class of capital stock of the
Corporation as to dividends or upon liquidation, dissolution or winding up of
the Corporation and, in each case, shall include any other class of capital
stock of the Corporation into which such stock is reclassified or reconstituted.
"Current Market Price" per share shall mean, on any date specified herein
for the determination thereof, (a) the average daily Market Price of the Common
Stock for those days during the period of 20 days, ending on such date, which
are Trading Days, and (b) if the Common Stock is not then listed or admitted to
trading on any national securities exchange or quoted in the over-the-counter
market, the Market Price on such date.
"Junior Stock" shall mean any capital stock of the Corporation ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Preferred Stock including, without limitation, the Common Stock.
"Liquidation Amount" with respect to a share of Preferred Stock shall mean
the sum of (a) all declared and unpaid dividends on such Preferred Stock, and
(b) the sum of $10.00 divided by the number of shares of Preferred Stock
outstanding on the applicable date.
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"Market Price" shall mean, per share of Common Stock on any date specified
herein: (a) the closing price per share of the Common Stock on the Alberta Stock
Exchange or other principal Canadian stock exchange on which the Common Stock is
traded, stated in U.S. dollars at the then current exchange ratio of Canadian
dollars into U.S. dollars or (b) if there shall have been no trading on such
date or if the Common Stock is not so designated, the average of the reported
closing bid and asked prices of the Common Stock on such date as shown by any
reputable dealer in Common Stock as selected by the Board of Directors of the
Corporation. If none of (a) or (b) is applicable, Market Price shall mean a
market price per share determined at the Corporation's expense by an appraiser
chosen by the holders of a majority of the shares of Preferred Stock or, if no
such appraiser is so chosen more than twenty business days after notice of the
necessity of such calculation shall have been delivered by the Corporation to
the holders of Preferred Stock, then by an appraiser chosen by the Corporation.
"Person" shall mean any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind, and shall include any successor (by
merger) of such entity.
"Purchase Agreement" shall mean the Securities Purchase Agreement, dated
December 30, 1999, between the Corporation and Bellwether Exploration Company.
"Trading Day" shall mean a day on which the national securities exchanges
are open for trading.
IN WITNESS WHEREOF, CARPATSKY PETROLEUM, INC. has caused this Certificate
to be duly executed in its corporate name on this [ ]th day of [ ], 2000.
[NEW CARPATSKY PETROLEUM, INC.]
By
----------------------------------------
Name:
-------------------------------------
Title: President
------------------------------------
ATTEST:
By
-------------------------------------
Name:
---------------------------------
Title: Secretary
--------------------------------
12
Exhibit B
to
First Amendment to Merger Agreement
dated December 30, 1999
[▇▇▇▇▇ OIL AND GAS COMPANY]
CERTIFICATE OF DESIGNATION
OF CONVERTIBLE PREFERRED STOCK,
SERIES A SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF
SUCH PREFERRED STOCK
Pursuant to the Nevada Business Corporations Act, [▇▇▇▇▇ OIL AND GAS
COMPANY], a Nevada corporation (the "Corporation"), DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of the
Corporation by the Articles of Incorporation of the Corporation (the "Charter"),
the Board of Directors of the Corporation on [ ], 2000 duly adopted the
following resolution creating a series of Preferred Stock designated as
Convertible Preferred Stock, Series A and such resolution has not been modified
and is in full force and effect on the date hereof:
RESOLVED that, pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the provisions of the Charter, a series of
authorized Preferred Stock, without par value, of the Corporation are hereby
created and that the designation and number of shares thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series of Preferred Stock, and the qualifications,
limitations and restrictions thereof are as follows:
Section 1. Designation and Number.
(a) The shares of such series of Preferred Stock shall be designated as
"Convertible Preferred Stock, Series A" ("Preferred Stock"). The number of
shares initially constituting the Preferred Stock shall be 102,410,000 shares,
which number may be increased or decreased by the Board of Directors without a
vote of stockholders; provided, however, that such number may not be decreased
below the number of then outstanding shares of such series of Preferred Stock.
(b) The Preferred Stock shall, with respect to rights on liquidation,
dissolution or winding up, rank prior to all other classes and series of Junior
Stock of the Corporation now or hereafter authorized including, without
limitation, the Common Stock.
1
(c) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in Section 10 below.
Section 2. Dividends and Distributions.
In the event that the Corporation shall declare a cash dividend to holders
of Common Stock, then the Board of Directors shall declare, and the holder of
each share of Preferred Stock shall be entitled to receive, a dividend in an
amount equal to the amount of such dividend received by a holder of the number
of shares of Common Stock for which such share of Preferred Stock is convertible
on the record date for such dividend. Any such amount shall be paid to the
holders of shares of Preferred Stock at the same time such dividend is made to
holders of Common Stock.
The holders of shares of Preferred Stock shall not be entitled to receive
any dividends or other distributions except as provided herein.
Section 3. Voting Rights.
In addition to any voting rights provided by law and except where only a
specified class or series of shares is entitled to vote, the holders of shares
of Preferred Stock shall have the following voting rights:
(a) Except as otherwise required by applicable law and so long as the
Preferred Stock is outstanding, each share of Preferred Stock shall entitle the
holder thereof to vote, in person or by proxy or written consent, at a special
or annual meeting of stockholders or in connection with any stockholder action
taken in lieu of a meeting of stockholders, on all matters voted on by holders
of Common Stock, including the election of directors, voting together as a
single class with all other shares entitled to vote thereon. With respect to any
such vote, each share of Preferred Stock shall entitle the holder thereof to
cast one vote for each share of Preferred Stock standing in his or her name on
the transfer books of the Corporation as of the record date for determining the
stockholders of the Corporation eligible to vote on any such matters.
(b) Unless the consent or approval of a greater number of shares shall then
be required by law, the affirmative vote of the holders of at least 66-2/3% of
the outstanding shares of Preferred Stock, voting separately as a single class,
in person or by proxy, at a special or annual meeting of stockholders called for
the purpose, shall be necessary to (i) authorize, adopt or approve an amendment
to the Charter that would increase or decrease the par value of the shares of
Preferred Stock, or alter or change the powers, preferences or special rights of
the shares of Preferred Stock, (ii) amend, alter or repeal the Charter so as to
affect the shares of Preferred Stock adversely, including, without limitation,
by granting any voting right to any holder of notes, bonds, debentures or other
debt obligations of the Corporation, or (iii) authorize, increase the authorized
2
number of shares of, or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification) any additional
shares of Preferred Stock except under Section 9.
(c) For so long as the shares of Preferred Stock are outstanding, the
Corporation shall not issue any capital stock entitling the holder thereof to
vote generally under ordinary circumstances in the election of directors, other
than (i) Common Stock and (ii) Preferred Stock issued pursuant to Section 9.
Section 4. Redemption.
The Corporation shall not have any right to redeem any shares of Preferred
Stock.
Section 5. Reacquired Shares.
Any shares of Preferred Stock converted, exchanged, redeemed, purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares of
Preferred Stock shall upon their cancellation become authorized but unissued
shares of preferred stock.
3
Section 6. Liquidation, Dissolution or Winding Up.
(a) If the Corporation shall commence a voluntary case under the United
States bankruptcy laws or any applicable bankruptcy, insolvency or similar law
of any other country, or consent to the entry of an order for relief in an
involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due (any such event, a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, the holders of the
Preferred Stock shall be entitled to receive the Liquidation Amount prior to any
payment being made or any property of the Corporation being distributed to the
holders of the Common Stock or the holders of any Junior Stock. After payment to
the holders of the Preferred Stock of the Liquidation Amount, the holders of the
Preferred Stock shall be entitled to receive (rateably with the holders of the
Common Shares) for each share of Preferred Stock held, the amount which would
have been received by the Holder of such Preferred Stock if on the record date
for such distribution, the holder of such Preferred Stock had converted such
Preferred Stock into the number of shares of Common Stock into which such
Preferred Stock was convertible on the record date for such distribution.
(b) Neither the consolidation or merger of the Corporation with or into any
other Person nor the sale or other distribution to another Person of all or
substantially all the assets, property or business of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 6.
Section 7. Conversion.
(a) Subject to the terms and conditions set forth herein, each share of
Preferred Stock shall be convertible into a number of fully paid and
non-assessable shares of Common Stock as is equal, subject to Section 7(g), to a
fraction, the numerator of which shall be the Common Stock Conversion Number and
the denominator of which shall be the number of shares of Preferred Stock issued
and outstanding on the date of conversion. The Common Stock Conversion Number
shall initially be 50,000,000, and shall be subject to adjustment as set forth
in this Section. Such conversion right may only be exercised by the holders of a
majority of the outstanding shares of Preferred Stock surrendering certificates
("Surrendered Certificates") representing a majority of the outstanding shares
of Preferred Stock to the Corporation at any time during usual business hours at
4
its principal place of business to be maintained by it, accompanied by written
notice that the holders of a majority of the outstanding shares of Preferred
Stock elect to convert such shares and specifying the name or names (with
address) in which a certificate or certificates for shares of Common Stock are
to be issued and (if so required by the Corporation) by a written instrument or
instruments of transfer in form reasonably satisfactory to the Corporation duly
executed by the holder or its duly authorized legal representative and transfer
tax stamps or funds therefor, if required pursuant to Section 7(j). Upon such
surrender, all shares of Preferred Stock shall automatically be converted into
Common Stock as provided in this Section. Notwithstanding the foregoing
provisions or anything set forth herein or in the Certificate, any shares of
Preferred Stock remaining outstanding on December 28, 2004 shall be and be
deemed to have been converted into Common Stock at the Conversion Number then in
effect.
(b) As promptly as practicable after the surrender, as herein provided, of
shares of Preferred Stock for conversion pursuant to Section 7(a), the
Corporation shall deliver to all holders of Preferred Stock a written notice
informing such holders (i) that the holders of a majority of the outstanding
shares of Preferred Stock have delivered their certificates for such shares to
the Corporation in satisfactory form for conversion into Common Shares pursuant
to the requirements of this Section 7, (ii) that, as result of such delivery,
all outstanding Preferred Stock has been converted into the right to receive
Common Stock and (iii) of the Common Stock Conversion Number and instructing
such holders to surrender the certificates representing their Preferred Stock to
the Corporation in the manner specified in Section 7(a) above in order to
receive certificates representing the Common Stock deliverable upon the
conversion of their Preferred Stock. As promptly as practicable after the
surrender of any certificates representing Preferred Stock in accordance with
the requirements of this Section 7, the Corporation shall deliver to or upon the
written order of the holder of such shares so surrendered a certificate or
certificates representing the number of fully paid and non-assessable shares of
Common Stock into which such shares of Preferred Stock may be or have been
converted in accordance with the provisions of this Section 7. Subject to the
following provisions of this paragraph and of Section 7(d), such conversion
shall be deemed to have been made immediately prior to the close of business on
the date that such shares of Preferred Stock shall have been surrendered in
satisfactory form for conversion, and the Person or Persons entitled to receive
the Common Stock deliverable upon conversion of such shares of Preferred Stock
shall be treated for all purposes as having become the record holder or holders
of such Common Stock at such appropriate time, and such conversion shall be
based on the Common Stock Conversion Number in effect at such time; provided,
however, that no surrender shall be effective to constitute the Person or
Persons entitled to receive the Common Stock deliverable upon such conversion as
the record holder or holders of such Common Stock while the share transfer books
of the Corporation shall be closed (but not for any period in excess of five
days), but such surrender shall be effective to constitute the Person or Persons
entitled to receive such Common Stock as the record holder or holders thereof
for all purposes immediately prior to the close of business on the next
5
succeeding day on which such share transfer books are open, and such conversion
shall be deemed to have been made at, and shall be based on the Common Stock
Conversion Number in effect at, such time on such next succeeding day.
(c) To the extent permitted by law, when shares of Preferred Stock are
converted, all dividends declared and unpaid on the Preferred Stock so converted
to the date of conversion shall be immediately due and payable and must
accompany the shares of Common Stock issued upon such conversion.
(d) The Common Stock Conversion Number shall be subject to adjustment
as follows:
(i) In case the Corporation shall at any time or from time to time (A)
pay a dividend or make a distribution on the outstanding shares of Common
Stock in capital stock (which, for purposes of this Section 7(d) shall
include, without limitation, any dividends or distributions in the form of
options, warrants or other rights to acquire capital stock) of the
Corporation, (B) subdivide the outstanding shares of Common Stock into a
larger number of shares, (C) combine the outstanding shares of Common Stock
into a smaller number of shares, or (D) issue any shares of its capital
stock in a reclassification of the Common Stock then, and in each such
case, the Common Stock Conversion Number in effect immediately prior to
such event shall be adjusted to equal the Common Stock Conversion Number in
effect immediately prior to such action multiplied by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
after the action described in clauses (A) through (D) and the denominator
of which is the number of shares of Common Stock outstanding immediately
prior to such action. An adjustment made pursuant to this Section 7(d)(i)
shall become effective retroactively (A) in the case of any such dividend
or distribution, to a date immediately following the close of business on
the record date for the determination of holders of Common Stock entitled
to receive such dividend or distribution or (B) in the case of any such
subdivision, combination or reclassification, to the close of business on
the day upon which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or from time to time
issue shares of Common Stock (or securities convertible into or
exchangeable for Common Stock, or any options, warrants or other rights to
acquire shares of Common Stock) for a consideration per share less than the
Current Market Price per share of Common Stock then in effect at the record
date or issuance date, as the case may be (the "Date"), referred to in the
following sentence (treating the consideration per share of any security
convertible or exchangeable or exercisable into Common Stock as equal to
(A) the sum of the price for such security convertible, exchangeable or
exercisable into Common Stock plus any additional consideration payable
(without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security into Common Stock divided by (B) the
number of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security), then, and in each such case, the
6
Common Stock Conversion Number in effect shall be adjusted by multiplying
the Common Stock Conversion Number in effect on the day immediately prior
to the Date by a fraction (x) the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on the Date plus the
number of additional shares of Common Stock issued or to be issued (or the
maximum number into which such convertible or exchangeable securities
initially may convert or exchange or for which such options, warrants or
other rights initially may be exercised) and (y) the denominator of which
shall be the sum of the number of shares of Common Stock outstanding on the
Date plus the number of shares of Common Stock which the aggregate
consideration for the total number of such additional shares of Common
Stock (or securities convertible into or exchangeable for Common Stock, or
any options, warrants or other rights to acquire shares of Common Stock)
plus the aggregate amount of any additional consideration initially payable
(without regard to any anti-dilution adjustments) upon such conversion,
exchange or exercise of such security into Common Stock would purchase at
the Current Market Price per share of Common Stock on the Date. Such
adjustment shall be made whenever such shares, securities, options,
warrants or other rights are issued, and shall become effective
retroactively to a date immediately following the close of business (i) in
the case of issuance to stockholders of the Corporation, as such, on the
record date for the determination of stockholders entitled to receive such
shares, securities, options, warrants or other rights and (ii) in all other
cases, on the date ("issuance date") of such issuance; provided that: (A)
the determination as to whether an adjustment is required to be made
pursuant to this Section 7(d)(ii) shall be made upon the issuance of such
shares or such convertible or exchangeable securities, options, warrants or
other rights; (B) if any convertible or exchangeable securities, options,
warrants or other rights (or any portions thereof) which shall have given
rise to an adjustment pursuant to this Section 7(d)(ii) shall have expired
or terminated without the exercise thereof and/or if by reason of the terms
of such convertible or exchangeable securities, options, warrants or other
rights there shall have been an increase or increases or decrease or
decreases, with the passage of time or otherwise, in the price payable upon
the exercise or conversion thereof, then the Common Stock Conversion Number
hereunder shall be readjusted (but to no greater extent than originally
adjusted) on the basis of (x) eliminating from the computation any
additional shares of Common Stock corresponding to such convertible or
exchangeable securities, options, warrants or other rights as shall have
expired or terminated, (y) treating the additional shares of Common Stock,
if any, actually issued or issuable pursuant to the previous exercise of
such convertible or exchangeable securities, options, warrants or other
rights as having been issued for the consideration actually received and
receivable therefor and (z) treating any of such convertible or
7
exchangeable securities, options, warrants or other rights which remain
outstanding as being subject to exercise or conversion on the basis of such
exercise or conversion price as shall be in effect at the time of
adjustment; and (C) no adjustment in the Common Stock Conversion Number
shall be made pursuant to this Section 7(d)(ii) as a result of any issuance
of securities by the Corporation in respect of which an adjustment to the
Common Stock Conversion Number is made pursuant to Section 7(d)(i).
(iii) In the case the Corporation, at any time or from time to time,
shall take any action affecting its Common Stock similar to or having an
effect similar to any of the actions described in any of Section 7(d)(i)
and Section 7(d)(ii), or Section 7(h) (but not including any action
described in any such Section) and the Board of Directors of the
Corporation in good faith determines that it would be equitable in the
circumstances to adjust the Common Stock Conversion Number as a result of
such action, then, and in each such case, the Common Stock Conversion
Number shall be adjusted in such manner and at such time as the Board of
Directors of the Corporation in good faith determines would be equitable in
the circumstances (such determination to be evidenced in a resolution, a
certified copy of which shall be mailed to the holders of the Preferred
Stock).
(iv) Notwithstanding anything herein to the contrary, no adjustment
under this Section 7(d) shall be made upon the grant of options to
employees or directors of the Corporation pursuant to benefit plans
approved by the Board of Directors of the Corporation or upon the issuance
of shares of Common Stock upon exercise of such options if the exercise
price thereof was not less than the Market Price of the Common Stock on the
date such options were granted.
(e) If the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Common Stock Conversion
Number then in effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Common Stock Conversion Number,
then, and in each such case, the Corporation promptly shall deliver to each
registered holder of Preferred Stock at least 10 Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice-President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased Common
Stock Conversion Number then in effect following such adjustment.
(g) No fractional shares or scrip representing fractional shares shall be
issued upon the conversion of any shares of Preferred Stock. If more than one
share of Preferred Stock shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock issuable upon conversion
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thereof shall be computed on the basis of the aggregate number of shares of
Preferred Stock so surrendered. If the conversion of any share or shares of
Preferred Stock results in a fraction, an amount equal to such fraction
multiplied by the Current Market Price of the Common Stock on the Business Day
preceding the day of conversion shall be paid to such holder in cash by the
Corporation.
(h) In case of any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value), or in
case of any consolidation or merger of the Corporation with or into another
Person (other than a consolidation or merger in which the Corporation is the
resulting or surviving Person and which does not result in any reclassification
or change of outstanding Common Stock), or in case of any sale or other
disposition to another Person of all or substantially all of the assets of the
Corporation (any of the foregoing, a "Transaction"), the Corporation, or such
successor or purchasing Person, as the case may be, shall execute and deliver to
each holder of Preferred Stock at least 10 Business Days prior to effecting any
of the foregoing Transactions a certificate that the holder of each share of
Preferred Stock then outstanding shall have the right thereafter to convert such
share of Preferred Stock into the kind and amount of shares of stock or other
securities (of the Corporation or another issuer, the "Other Securities")) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Common Stock into which such share of Preferred Stock could have been
converted immediately prior to such Transaction. Such certificate shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. If, in the case of any such
Transaction, the Other Securities, cash or property receivable thereupon by a
holder of Common Stock includes shares of stock or other securities of a Person
other than the successor or purchasing Person and other than the Corporation,
which controls or is controlled by the successor or purchasing Person or which,
in connection with such Transaction, issues Other Securities, other property or
cash to holders of Common Stock, then such certificate also shall be executed by
such Person, and such Person shall, in such certificate, specifically
acknowledge the obligations of such successor or purchasing Person and
acknowledge its obligations to issue such Other Securities, other property or
cash to the holders of Preferred Stock upon conversion of the shares of
Preferred Stock as provided above. The provisions of this Section 7(h) and any
equivalent thereof in any such certificate similarly shall apply to successive
Transactions.
(i) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Preferred Stock, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Preferred
Stock, and shall take all action required to increase the authorized number of
shares of Common Stock if at any time there shall be insufficient authorized but
unissued shares of Common Stock to permit such reservation or to permit the
conversion of all outstanding shares of Preferred Stock.
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(j) The issuance or delivery of certificates for Common Stock upon the
conversion of shares of Preferred Stock shall be made without charge to the
converting holder of shares of Preferred Stock for such certificates or for any
tax in respect of the issuance or delivery of such certificates or the
securities represented thereby, and such certificates shall be issued or
delivered in the respective names of, or (subject to compliance with the
applicable provisions of federal and state securities laws) in such names as may
be directed by, the holders of the shares of Preferred Stock converted;
provided, however, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate in a name other than that of the holder of the
shares of Preferred Stock converted, and the Corporation shall not be required
to issue or deliver such certificate unless or until the Person or Persons
requesting the issuance or delivery thereof shall have paid to the Corporation
the amount of such tax or shall have established to the reasonable satisfaction
of the Corporation that such tax has been paid.
(k) If an offer is made to purchase Common Stock and the offer must, by
reason of applicable securities legislation or the requirements of a stock
exchange on which the Common Stock is listed, be made to all or substantially
all holders of Common Stock located in a province of Canada in which the
requirement applies, the holders of Preferred Stock shall be given the
opportunity to participate in the offer through conversion of the Preferred
Stock into Common Stock; unless
(i) an identical offer (in terms of price per security and percentage
of outstanding securities to be taken upon, exclusive of securities owned
immediately prior to the bid by the offeror, or associates or affiliates of
the offeror, and in all other material respects) is made concurrently to
purchase Preferred Stock, which offer has no condition attached other than
the right not to take up and pay for securities tendered if no securities
are purchased pursuant to the offer for Common Stock; or
(ii) less than 50% of the Common Stock outstanding immediately prior
to the offer, other than Common Stock owned by the offeror, or associates
or affiliates of the offeror, are deposited pursuant to the offer.
Section 8. Certain Remedies.
Any registered holder of Preferred Stock shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Certificate of
Designation and to enforce specifically the terms and provisions of this
Certificate of Designation in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
such holder may be entitled at law or in equity.
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Section 9. Additional Shares of Preferred Stock.
While any shares of Preferred Stock are outstanding, the Corporation shall
not issue any additional shares of Common Stock or convertible securities,
rights, warrants, options or other commitments to issue Common Stock unless,
prior to such issuance, the Corporation declares and pays a dividend on the
Preferred Stock of a number of shares of Preferred Stock equal to the number of
shares of Common Stock being issued or the maximum number of shares of Common
Stock which may be issued pursuant to such convertible securities, rights,
warrants, options or commitments; provided, however, the Corporation shall not
be required to issue additional shares of Preferred Stock in connection with the
issuance of Common Stock pursuant to agreements described in a Schedule to the
Purchase Agreement.
Section 10. Definitions.
For the purposes of this Certificate of Designation of Preferred Stock, the
following terms shall have the meanings indicated:
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law or executive order to close.
"Common Stock" shall mean and include the Common Stock, without par value,
of the Corporation and each other class of capital stock of the Corporation that
does not have a preference over any other class of capital stock of the
Corporation as to dividends or upon liquidation, dissolution or winding up of
the Corporation and, in each case, shall include any other class of capital
stock of the Corporation into which such stock is reclassified or reconstituted.
"Current Market Price" per share shall mean, on any date specified herein
for the determination thereof, (a) the average daily Market Price of the Common
Stock for those days during the period of 20 days, ending on such date, which
are Trading Days, and (b) if the Common Stock is not then listed or admitted to
trading on any national securities exchange or quoted in the over-the-counter
market, the Market Price on such date.
"Junior Stock" shall mean any capital stock of the Corporation ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Preferred Stock including, without limitation, the Common Stock.
"Liquidation Amount" with respect to a share of Preferred Stock shall mean
the sum of (a) all declared and unpaid dividends on such Preferred Stock, and
(b) the sum of $10.00 divided by the number of shares of Preferred Stock
outstanding on the applicable date.
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"Market Price" shall mean, per share of Common Stock on any date specified
herein: (a) the closing price per share of the Common Stock on the Alberta Stock
Exchange or other principal Canadian stock exchange on which the Common Stock is
traded, stated in U.S. dollars at the then current exchange ratio of Canadian
dollars into U.S. dollars or (b) if there shall have been no trading on such
date or if the Common Stock is not so designated, the average of the reported
closing bid and asked prices of the Common Stock on such date as shown by any
reputable dealer in Common Stock as selected by the Board of Directors of the
Corporation. If none of (a) or (b) is applicable, Market Price shall mean a
market price per share determined at the Corporation's expense by an appraiser
chosen by the holders of a majority of the shares of Preferred Stock or, if no
such appraiser is so chosen more than twenty business days after notice of the
necessity of such calculation shall have been delivered by the Corporation to
the holders of Preferred Stock, then by an appraiser chosen by the Corporation.
"Person" shall mean any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind, and shall include any successor (by
merger) of such entity.
"Purchase Agreement" shall mean the Securities Purchase Agreement, dated
December 30, 1999, between the Corporation and Bellwether Exploration Company.
"Trading Day" shall mean a day on which the national securities exchanges
are open for trading.
IN WITNESS WHEREOF, ▇▇▇▇▇ OIL AND GAS COMPANY has caused this Certificate
to be duly executed in its corporate name on this [ ]th day of [ ], 2000.
[▇▇▇▇▇ OIL AND GAS COMPANY]
By
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Name:
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Title: President
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ATTEST:
By
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Name:
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Title: Secretary
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