FORELAND CORPORATION
DESIGNATION OF RIGHTS, PRIVILEGES, AND PREFERENCES OF
1996-2 SERIES 6% CONVERTIBLE PREFERRED STOCK
Pursuant to the provisions of Nevada Revised Statutes, section 78.195, of
the corporation laws of the state of Nevada, the undersigned corporation,
Foreland Corporation (the "Corporation"), hereby adopts the following
Designation of Rights, Privileges, and Preferences of 1996-2 Series 6%
Convertible Preferred Stock (the "Designation"):
FIRST: The name of the Corporation is Foreland Corporation.
SECOND: The following resolution establishing a series of preferred stock
designated as the "1996-2 Series 6% Convertible Preferred Stock" consisting of
10,000 shares, par value $0.001, was duly adopted by the board of directors of
the Corporation on April 30, 1996, in accordance with the articles of
incorporation of the Corporation and the corporation laws of the state of
Nevada:
RESOLVED, there is hereby created a series of preferred stock of the
Corporation to be designated as the "1996-2 Series 6% Convertible
Preferred Stock" consisting of 10,000 shares, par value $0.001
(referred to herein as the "Preferred Stock"), with the following
powers, preferences, rights, qualifications, limitations, and
restrictions:
1. Dividends.
1.01 The Corporation shall pay dividends to the holders of the
Preferred Stock at the times and in the amounts provided for in this
section 1.
1.02 The dividend rate for each share of the Preferred Stock shall be
6% per annum of the $1,000 price at which the share was originally issued
by the Corporation, payable in shares of common stock of the Corporation,
par value $0.001 per share (the "Common Stock"), upon the conversion of the
Preferred Stock in accordance with section 3 below or in cash upon the
liquidation of the Company prior to conversion of the Preferred Stock in
accordance with section 2 below. Such dividends shall be cumulative from
the date of initial issuance of such share of Preferred Stock and shall be
payable to holders of record as their names appear on the stock transfer
books of the Corporation on the record date of payment, not more than 60
days preceding the dividend payment date, as shall be fixed by the board of
directors of the Corporation. Dividends payable for any partial dividend
period shall be computed on the basis of the actual number of days elapsed
over a 365 day year. The Preferred Stock shall be nonparticipating, and
holders thereof shall not be entitled to receive any dividends thereon
other than the dividends referred to in this section 1.
1.03 No dividend or other distribution shall be declared or paid or
set apart for payment on any stock ranking, as to dividends or upon
liquidation, junior to the Preferred Stock, including, without limitation,
the shares of the Corporation's common stock, for any period unless the
holders of the Preferred Stock shall have then been or contemporaneously
are paid (or declared and a sum sufficient for the payment thereof set
apart for such payment) all dividends for all dividend payment periods
terminating on or prior to the date of payment of the distribution on such
junior stock. No dividends shall be declared on any class or series of
stock ranking on a parity with the Preferred Stock as to dividends in
respect of any dividend period unless there shall otherwise be or have been
declared on the Preferred Stock like dividends for all annual periods
coinciding with or ending before such annual period, ratably in proportion
to the respective annual dividend rates fixed therefor. If the Corporation
is in default with respect to any dividends payable on, or any obligation
to retire shares of, the Preferred Stock, the Corporation shall not declare
or pay (or set apart a sum for such payment) any dividends or make any
distribution in cash or other property on, or redeem, purchase, or
otherwise acquire, any other class or series of stock ranking junior to the
Preferred Stock either as to dividends or upon liquidation.
1.04 Any payment of cash dividends declared and due under this section
1 with respect to any shares of Preferred Stock shall be made by means of a
check drawn on funds immediately available for the payment thereof to the
order of, and any payment of in-kind dividends declared and due under this
section 1 with respect to any shares of Preferred Stock shall be made by
means of a certificate representing shares of Common Stock in the name of,
the record holder of the share with respect to which such dividends are
paid at the address for such record holder shown on the stock records
maintained by or for the Corporation, which check or certificate
representing shares of Preferred Stock shall be mailed by United States
first class mail, postage prepaid. Any such payment shall be deemed to
have been paid by the Corporation on the date that such payment is
deposited in the United States mail as provided above; provided, that in
the event the check or other medium by which any payment shall be made
shall prove not to be immediately collectible on the date of payment, such
payment shall not be deemed to have been made until cash in the amount of
such payment shall actually be received by the person entitled to receive
such payment.
1.05 Registration of transfer of any share of Preferred Stock on the
stock records maintained by or for the Corporation to a person other than
the transferor shall constitute a transfer of any right which the
transferor may have had to receive any accrued but unpaid dividends as of
the date of transfer, whether declared or undeclared, and the Corporation
shall have no further obligation to the transferor with respect to such
accrued and unpaid dividends. Any shares of Preferred Stock represented by
a new certificate issued to a new holder shall continue to accrue dividends
as provided in this section 1.
2. Liquidation.
2.01 In the event of any voluntary or involuntary liquidation (whether
complete or partial), dissolution, or winding up of the Corporation, the
holders of the Preferred Stock shall be entitled to be paid out of the
assets of the Corporation available for distribution to its shareholders,
whether from capital, surplus, or earnings, an amount per share in cash
equal to $1,000 per share, plus all amounts to which the holders of the
Preferred Stock are entitled for unpaid dividends in accordance with
section 1 above, whether or not previously declared, accrued thereon to the
date of final distribution subject to the priority distribution required
respecting any issued and outstanding shares of any series of preferred
stock authorized prior to the date hereof. No distribution shall be made
on any common stock or other subsequent series of preferred stock of the
Corporation by reason of any voluntary or involuntary liquidation (whether
complete or partial), dissolution, or winding up of the Corporation unless
each holder of any Preferred Stock shall have received all amounts to which
such holder shall be entitled under this subsection 2.01.
2.02 If on any liquidation (whether complete or partial), dissolution,
or winding up of the Corporation, the assets of the Corporation available
for distribution to holders of Preferred Stock and any other stock ranking
as to any such distribution on a parity with the Preferred Stock shall be
insufficient to pay the holders of outstanding Preferred Stock or such
other stock the full amounts to which they otherwise would be entitled
under subsection 2.01, the assets of the Corporation available for
distribution to holders of Preferred Stock or such other stock shall be
distributed to them pro rata on the basis of the full respective
preferential amounts to which they are entitled.
3. Conversion.
3.01 Each share of Preferred Stock is convertible into shares of
Common Stock at the times, in the manner, and subject to the conditions
provided in this section 3.
3.02 One-third of the shares of Preferred Stock issued by the Company
to each original holder thereof may be converted at any time after the
issuance thereof at the election of the holder on the presentation and
surrender at the principal office of the Corporation of the certificate
representing the shares, duly endorsed, with written instructions
specifying the number of shares of Preferred Stock to be converted and the
name and address of the person to whom certificate(s) representing the
Common Stock issuable on conversion are to be issued. Notwithstanding the
foregoing, all of the shares of Preferred Stock shall be automatically
converted without any further action by any person on the date that is six
months from the initial issuance thereof.
3.03 Each share of Preferred Stock shall be convertible into Common
Stock at the rate equal to that number of shares of Common Stock as shall
equal the quotient of (i) $1,000 divided by (ii) the lesser of (x) 75% of
closing bid price of the Common Stock as reported by the Nasdaq Stock
Market, or such other inter-dealer quotation system as may then list the
Common Stock, for the trading day of the closing pursuant to which such
shares of Preferred Stock were issued; or (y) 65% of the average closing
bid price of the Common Stock as reported by the Nasdaq Stock Market, or
such other inter-dealer quotation system as may then list the Common Stock,
for the five (5) trading days immediately preceding the date of conversion
(the "Conversion Rate"). The date of conversion shall be the date of
receipt by the Corporation of a facsimile copy of the duly executed
conversion certificate(s), provided the stock certificate(s) is delivered
to the Corporation within three business days thereafter. The Corporation
shall, within five business days after the date of conversion, deliver or
cause to be delivered a stock certificate representing the number of shares
of Common Stock into which shares of Preferred Stock were converted in
accordance herewith. The Conversion Rate shall be subject to adjustment
pursuant to subsection 3.04.
3.04 In order to prevent dilution of the rights granted hereunder, the
Conversion Rate shall be subject to adjustment from time to time in
accordance with this subsection 3.04.
(a) In the event the Corporation shall declare a stock dividend
or make any other distribution on any capital stock of the Corporation
payable in Common Stock, options to purchase Common Stock, or
securities convertible into Common Stock or the Corporation shall at
any time subdivide (other than by means of a dividend payable in
Common Stock) its outstanding shares of Common Stock into a greater
number of shares or combine such outstanding stock into a smaller
number of shares, then in each such event, the Conversion Rate in
effect immediately prior to such combination shall be adjusted so that
the holders of the Preferred Stock shall be entitled to receive the
kind and number of shares of Common Stock or other securities of the
Corporation which they would have owned or had been entitled to
receive after the happening of any of the events described above, had
such shares of Preferred Stock been converted immediately prior to the
happening of such event or any record date with respect thereto; an
adjustment made pursuant to this paragraph (a) shall become effective
immediately after the effective date of such event retroactive to the
record date for such event.
(b) If any capital reorganization or reclassification of the
capital stock of the Corporation, consolidation or merger of the
Corporation with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be
effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities, or assets with respect to or in exchange
for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger, or sale, lawful adequate
provisions shall be made whereby the holders of the Preferred Stock
shall thereafter have the right to acquire and receive on conversion
of the Preferred Stock such shares of stock, securities, or assets as
would have been issuable or payable (as part of the reorganization,
reclassification, consolidation, merger, or sale) with respect to or
in exchange for such number of outstanding shares of Common Stock as
would have been received on conversion of the Preferred Stock
immediately before such reorganization, reclassification,
consolidation, merger, or sale. In any such case, appropriate
provision shall be made with respect to the rights and interests of
the holders of the Preferred Stock to the end that the provisions
hereof (including without limitations provisions for adjustments of
the Conversion Rate and for the number of shares issuable on
conversion of the Preferred Stock) shall thereafter be applicable in
relation to any shares of stock, securities, or assets thereafter
deliverable on the conversion of the Preferred Stock. In the event of
a merger or consolidation of the Corporation with or into another
corporation or the sale of all or substantially all of its assets as a
result of which a number of shares of Common Stock of the surviving or
purchasing corporation greater or lesser than the number of shares of
Common Stock outstanding immediately prior to such merger,
consolidation, or purchase are issuable to holders of Common Stock,
then the Conversion Rate in effect immediately prior to such merger,
consolidation, or purchase shall be adjusted in the same manner as
though there was a subdivision or combination of the outstanding
shares of Common Stock. The Corporation will not effect any such
consolidation, merger, or sale unless prior to the consummation
thereof the successor corporation resulting from such consolidation or
merger or the corporation purchasing such assets shall assume by
written instrument mailed or delivered to the holders of the Preferred
Stock at the last address of each such holder appearing on the books
of the Corporation, the obligation to deliver to each such holder such
shares of stock, securities, or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire on
conversion of Preferred Stock.
(c) No adjustment shall be made in the Conversion Rate of the
number of shares of Common Stock issuable on conversion of Preferred
Stock:
(i) In connection with the offer and sale of any shares of
Preferred Stock;
(ii) In connection with the issuance of any Common Stock,
securities, or assets on conversion or redemption of shares of
Preferred Stock;
(iii) In connection with the issuance of any shares of
Common Stock, securities, or assets on account of the
antidilution provisions set forth in this subsection 3.04;
(iv) In connection with the purchase or other acquisition by
the Corporation of any capital stock, evidence of its
indebtedness, or other securities of the Corporation; or
(v) In connection with the sale or exchange by the
Corporation for cash or other property of any Common Stock,
evidence of its indebtedness, or other securities of the
Corporation, including securities containing the right to
subscribe for or purchase Common Stock or preferred stock of the
Corporation.
3.05 The Corporation covenants and agrees that:
(a) The shares of Common Stock, securities, or assets issuable
on any conversion of any shares of Preferred Stock shall have been
deemed to have been issued to the person on the Conversion Date, and
on the Conversion Date, such person shall be deemed for all purposes
to have become the record holder of such Common Stock, securities, or
assets.
(b) All shares of Common Stock or other securities which may be
issued on any conversion of the Preferred Stock will, on issuance, be
fully paid and nonassessable and free from all taxes, liens, and
charges with respect to the issue thereof. Without limiting the
generality of the foregoing, the Corporation will from time to time
take all such action as may be requisite to assure that the par value
of the unissued Common Stock or other securities acquirable on any
conversion of the Preferred Stock is at all times sufficient to render
the Common Stock issued upon conversion as fully paid and non-
assessable.
(c) The issuance of certificates for Common Stock or other
securities on conversion of the Preferred Stock shall be made without
charge to the registered holder thereof for any issuance tax in
respect thereof or other costs incurred by the Corporation in
connection with the conversion of the Preferred Stock and the related
issuance of Common Stock or other securities.
4. Voting Rights. Except as provided herein, the Preferred Stock shall
not be entitled to vote except to the extent that the consent of the holders of
the Preferred Stock are specifically required by the provisions of the
corporation laws of the state of Nevada, as now existing or as hereafter
amended. Notwithstanding the foregoing, the holders of the Preferred Stock
shall vote as a separate class on any resolution proposed for adoption by the
stockholders of the Corporation which seeks to (i) authorize, create or issue,
or increase the authorized or issued amount, of any class or series of stock
ranking senior to the Preferred Stock with respect to the payment of dividends
or the distribution of assets upon dissolution, liquidation or winding up of the
Corporation or which may be convertible into any class of shares ranking senior
to the Preferred Stock as regards to participation in dividends or the
distribution of assets on dissolution, liquidation or winding up; or (ii) amend,
alter or repeal the provisions of the Corporations articles of incorporation or
this Designation, so as to adversely affect any right, preference, privilege or
voting power of the Preferred Stock or the holders thereof. In addition,
without the approval of holders of at least a majority of the issued and
outstanding shares of Preferred Stock, the Corporation shall not become subject
to any restriction on the Preferred Stock other than restrictions arising under
the general corporation laws of the state of Nevada or existing under the
articles of incorporation of the Corporation as in effect on April 30, 1996.
Whenever the holders of the Preferred Stock shall have the right to vote as
provided herein, each holder of Preferred Stock shall be entitled to one vote
for each share of such stock held by him.
5. Additional Provisions
5.01 No change in the provisions of the Preferred Stock set forth in
this Designation affecting any interests of the holders of any shares of
Preferred Stock shall be binding or effective unless such change shall have
been approved or consented to by the holders of a majority of the Preferred
Stock in the manner provided in the corporation laws of the state of
Nevada, as the same may be amended from time to time.
5.02 A share of Preferred Stock shall be transferable only on the
books of the Corporation maintained at its principal office, on delivery
thereof duly endorsed by the holder or by his duly authorized attorney or
representative or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases of transfer by an attorney, the
original letter of attorney, duly approved, or an official copy thereof,
duly certified, shall be deposited and remain with the Corporation. In
case of transfer by executors, administrators, guardians, or other legal
representatives, duly authenticated evidence of their authority shall be
produced and may be required to be deposited and remain with the
Corporation in its discretion. On any registration or transfer, the
Corporation shall deliver a new certificate representing the share of
Preferred Stock so transferred to the person entitled thereto.
5.03 The Corporation shall not be required to issue any fractional
shares of Common Stock on the conversion or redemption of any share of
Preferred Stock. If any fraction of a share of Common Stock would, except
for the provisions of this subsection 5.03, be issuable on the conversion
or redemption of any share of Preferred Stock, the Corporation shall pay an
amount in cash equal to the current value of such fraction computed on the
basis of the closing bid price of the Common Stock as reported by the
Nasdaq Stock Market on the last business day prior to the date of
conversion or redemption, or if not so reported as determined by any
reasonable means.
5.04 Any notice required or permitted to be given to the holders of
the Preferred Stock under this Designation shall be deemed to have been
duly given if mailed by first class mail, postage prepared to such holders
at their respective addresses appearing on the stock records maintained by
or for the Corporation and shall be deemed to have been given as of the
date deposited in the United States mail.
IN WITNESS WHEREOF, the foregoing Designation of Rights, Privileges, and
Preferences of 1996-2 Series 6% Convertible Preferred Stock of the Corporation
has been executed this 30th day of April, 1996.
ATTEST: FORELAND CORPORATION
By /s/ Dennis J. Gustafson By /s/ N. Thomas Steele
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Dennis J. Gustafson, Secretary N. Thomas Steele, President
STATE OF COLORADO )
: ss
COUNTY OF )
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On May 1, 1996, before me, the undersigned, a notary public in and for the
above county and state, personally appeared N. Thomas Steele and Dennis J.
Gustafson, who being by me duly sworn, did state, each for themselves, that he,
N. Thomas Steele, is the president, and that he, Dennis J. Gustafson, is the
secretary, of Foreland Corporation, a Nevada corporation, and that the foregoing
Designation of Rights, Privileges, and Preferences of 1996-2 Series 6%
Convertible Preferred Stock of Foreland Corporation was signed on behalf of such
corporation by authority of a resolution of its board of directors, and that the
statements contained therein are true.
WITNESS MY HAND AND OFFICIAL SEAL.
/s/ Don W. Treece
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Notary Public
Address: 9862 Carmel Ct.
Littleton, Co. 80124
My commission expires:
September 8,1998