FORELAND CORPORATION
DESIGNATION OF RIGHTS, PRIVILEGES, AND PREFERENCES OF
1996-3 SERIES 8% 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 1996-3 Series 8%
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 "1996-3 Series 8% Convertible Preferred Stock" consisting of
6,000 shares, par value $0.001, was duly adopted by the board of directors of
the Corporation on June 18, 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 "1996-3 Series 8% Convertible
Preferred Stock" consisting of 6,000 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
8% 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. Such dividends shall be
cumulative from the date of initial issuance of such share of Preferred
Stock and is hereby declared to be payable, to holders of record as their
names then appear on the stock transfer books of the Corporation, on the
date of conversion of the Preferred Stock into shares of Common Stock.
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 Any payment of dividends 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
shares of Preferred Stock 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 or at such address as such record holder shall
direct on the date of conversion, which Common Stock certificate shall be
delivered to such record holder together with the Common Stock delivered
upon conversion as hereinafter provided in section 3.
1.04 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 or existing 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 Each share of Preferred Stock issued by the Company to each
original holder thereof may be converted at any time after forty-five (45)
days following the issuance thereof at the election of the holder on the
presentation and surrender at the principal office of the Corporation's
transfer agent (the "Transfer Agent"), with a courtesy copy to the
Corporation, of the certificate representing the shares of Preferred Stock,
duly endorsed, together with a duly executed and completed conversion
certificate in the form of Exhibit 1 attached hereto (the "Conversion
Certificate"). 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 two (2) years 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) 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 the closing pursuant to which such shares of Preferred Stock were
issued; or (y) 70% 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 (the "Conversion Date") shall be the date of receipt by
the Transfer Agent of a facsimile copy of the duly executed Conversion
Certificate(s), provided the stock certificate(s) representing the shares
of Preferred Stock being converted is delivered to the Transfer Agent
within three business days thereafter; otherwise the Conversion Date shall
be that date on which the Transfer Agent receives such stock certificate(s)
and Conversion Certificate(s). The Transfer Agent shall, within three
business days after the Conversion Date, deliver or cause to be delivered
by overnight courier a stock certificate representing the number of shares
of Common Stock into which shares of Preferred Stock were converted in
accordance herewith together with a certificate representing the remaining
number of shares of Preferred Stock not being converted thereby, if any.
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 solely as a result of:
(i) The offer and sale of any shares of Preferred Stock;
(ii) The issuance of any Common Stock, securities, or assets
on conversion or redemption of shares of Preferred Stock;
(iii)The issuance of any shares of Common Stock,
securities, or assets on account of the antidilution provisions
set forth in this subsection 3.04, other than as heretofore
provided in this subsection 3.04;
(iv) The purchase or other acquisition by the Corporation of
any capital stock, evidence of its indebtedness, or other
securities of the Corporation; or
(v) 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.
(d) The number of shares of Common Stock issuable upon
conversion of the Preferred Stock hereunder shall at all times and
under all circumstances be fully and validly reserved from the
Corporation's authorized and unissued shares of Common Stock for
issuance therefor, and from time to time, as may be needed, the
adequacy of such reservation shall be reviewed and increased;
provided, however, that in no event shall such reservation consist of
less than 3,000 shares of Common Stock for each share of Preferred
Stock outstanding.
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 Corporation's 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 May 31, 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 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 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 Conversion Date 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 1996-3 Series 8% Convertible Preferred Stock of the Corporation
has been executed this 26th day of June, 1996.
ATTEST: FORELAND CORPORATION
By /s/ Kenneth Ransom By /s/ N. Thomas Steele
Kenneth Ransom, Secretary N. Thomas Steele, President
STATE OF COLORADO )
:ss
COUNTY OF JEFFERSON )
On June 26, 1996, before me, the undersigned, a notary public in and for
the above county and state, personally appeared N. Thomas Steele and Kenneth L.
Ransom, who being by me duly sworn, did state, each for themselves, that he, N.
Thomas Steele, is the president, and that he, Kenneth L. Ransom, is the
secretary, of Foreland Corporation, a Nevada corporation, and that the foregoing
Designation of Rights, Privileges, and Preferences of 1996-3 Series 8%
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
Notary Public
Address: 9862 Carmel Court
Littleton, Colorado 80124
My commission expires:
9/8/98