AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION, PREFERENCES
RIGHTS AND LIMITATIONS OF
CLASS A PREFERRED STOCK, SERIES I
OF
BENZ ENERGY INC.
WHEREAS, Benz Energy Inc., a corporation (the "Corporation"), organized and
existing under the General Corporation Law of the State of Delaware (the
"DGCL"), was formerly a corporation governed under the laws of the Business
Corporations Act (Yukon) (the "Yukon Act") and operating as Benz Energy Ltd.;
WHEREAS, on the date hereof, pursuant to Section 388 of the DGCL, Benz
Energy Ltd. filed a Certificate of Domestication and Certificate of
Incorporation with the Secretary of State of the State of Delaware and now
operates as "Benz Energy Inc."
WHEREAS, Benz Energy Ltd. previously had 9,488,140 shares of Class A
Preferred Stock, Series I outstanding under the Yukon Act;
WHEREAS, upon domestication in Delaware, the Corporation had 100,000,000
shares of Class A Preferred Stock authorized;
WHEREAS, the Board of Directors of Benz Energy Ltd., at a meeting duly held
on June 2, 1999, duly ratified resolutions providing for the designation and
issuance of 9,488,140 shares of Class A Preferred Stock, Series I, par value
$1.00 per share, upon domestication in the state of Delaware which resolution is
and reads as follows:
RESOLVED, that upon domestication, and pursuant to the powers granted
the board of directors by the provisions of the Certificate of
Incorporation, as amended, a series of the Preferred Stock, par value $1.00
per share, be, and it hereby is, established;
RESOLVED FURTHER, that the said series of Preferred Stock of the
Corporation be, and it hereby is, given the distinctive designation of
"Preferred Stock, Series I;" and
RESOLVED FURTHER, that the Class A Preferred Stock, Series I shall
consist of 9,488,140 shares.
WHEREAS, the Board of Directors of Benz Energy Ltd. by unanimous written
consent dated June 18, 1999, which was filed with the minutes of the Board of
Directors, duly adopted resolutions providing for the amendment and restatement
of the Certificate of Designation, Preferences, Rights and Limitations of Class
A Preferred Stock, par value $1.00 per share, which resolutions are and read as
set forth below; and
WHEREAS, the holders of the common stock of the Corporation and the holders
of the Class A Preferred Stock, Series I of the Corporation, both by written
consent of the necessary number of shares as required by statute, dated
September 21, 1999, approved the resolutions providing for the amendment and
restatement of the Certificate of Designation, Preferences, Rights and
Limitations of Class A Preferred Stock, which resolutions are and read as
follows:
WHEREAS, the Corporation's directors have recommended amending and
changing the Certificate of Designation, Preferences, Rights and
Limitations of the Class A Preferred Stock, substantially in the form
attached hereto as EXHIBIT A.
NOW, THEREFORE, BE IT RESOLVED, that the Certificate of Designation,
Preferences, Rights and Limitations of the Class A Preferred Stock be
changed and amended, substantially in the form attached hereto as EXHIBIT A
and the appropriate documents be executed, certified and filed with the
Secretary of the State of Delaware.
NOW THEREFORE, BENZ ENERGY INC. DOES HEREBY CERTIFY that pursuant to the
authority conferred upon the Board of Directors by the Certificate of
Incorporation, as amended, and pursuant to Section 151, 242, 141 and 228 of the
DGCL, that the Class A Preferred Stock, Series I shall have the powers and
preferences, and the relative, participating, optional and other rights, and the
qualifications, limitations and restrictions thereon set forth below:
"CLASS A PREFERRED SHARES
Section 1.1 Directors' Authority to Issue in One or More Series
The board of directors of the Corporation may issue the Class A Preferred
shares at any time and from time to time in one or more series. Before the
first shares of a particular series are issued, the board of directors of the
Corporation shall fix the number of shares in such series and shall determine,
subject to the limitations set out in the articles, the designation, rights,
privileges, restrictions and conditions to be attached to the shares of such
series including, without limitation, the rate of rates, amount or method or
methods of calculation of dividends thereon, the time and place of payment of
dividends, whether cumulative or non-cumulative or partially cumulative and
whether such rate, amount or method of calculation shall be subject to change or
adjustment in the future, the currency or currencies of payment of dividends,
the consideration and the terms and conditions of any purchase for cancellation,
retraction or redemption (if any), the conversion, exchange or reclassification
rights attached thereto (if any), the voting rights attached thereto (if any),
the terms and conditions of any share purchase plan or sinking fund with respect
thereto, and any other terms not inconsistent with these provisions. Before the
issue of the first shares of a series, the board of directors of the Corporation
shall execute, acknowledge, file and cause to become effective, in accordance
with Section 103 of DGCL, a certificate of designation setting forth a copy of
such resolution or resolutions adopted by the Board of Directors and the number
of shares of stock of such series as to which the resolution or resolutions
apply containing a description of such series including the designation, rights,
privileges, restrictions and conditions determined by the Board of Directors of
the Corporation.
2
Section 1.2 RANKING OF CLASS A PREFERRED SHARES
No rights, privileges, restrictions or conditions attached to a series of
Class A Preferred shares shall confer upon a series a priority in respect of
dividends or return of capital over any other series of Class A Preferred shares
then outstanding. The Class A Preferred shares shall be entitled to priority
over the common shares of the Corporation and over any other shares of the
Corporation ranking junior to the Class A Preferred shares with respect to
priority in the payment of dividends and the distribution of assets in the event
of the liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or any other distribution of the assets of the
Corporation among its shareholders for the purpose of winding-up its affairs.
If any cumulative dividends or amounts payable on a return of capital in respect
of a series of Class A Preferred shares are not paid in full, the Class A
Preferred shares of all series shall participate rateably in respect of such
dividends, including accumulations, if any, in accordance with the sums that
would be payable on such shares if all such dividends were declared and paid in
full, and in respect of any repayment of capital in accordance with the sums
that would be payable on such repayment of capital if all sums so payable were
paid in full; provided however, that in the event of there being insufficient
assets to satisfy in full all such claims to dividends and return of capital,
the claims of the holders of the Class A Preferred shares with respect to
repayment of capital shall first be paid and satisfied and any assets remaining
thereafter shall be applied towards the payment and satisfaction of claims in
respect of dividends. The Class A Preferred shares of any series may also be
given each other preferences, not inconsistent with sections 1.1 to 1.4 hereof,
over the common shares and over any other shares ranking junior to the Class A
Preferred shares as may be determined in the case of such series of Class A
Preferred shares.
Section 1.3 VOTING RIGHTS
Except as hereinafter referred to or as otherwise required by law or in
accordance with any voting rights which may from time to time be attached to any
series of Class A Preferred shares, the holders of the Class A Preferred shares
as a class shall not be entitled as such to receive notice of, to attend or to
vote at any meeting of the shareholders of the Corporation.
Section 1.4 APPROVAL OF HOLDERS OF CLASS A PREFERRED SHARES
The rights, privileges, restrictions and conditions attaching to the Class
A Preferred shares as a class may be added to, changed or removed but only with
the approval of the holders of the Class A Preferred shares given as hereinafter
specified.
The approval of the holders of Class A Preferred shares to add to, change
or remove any right, privilege, restriction or condition attaching to the Class
A Preferred shares as a class or to any other matter requiring the consent of
the holders of the Class A Preferred shares as a class may be given in such
manner as may then be required by law, subject to a minimum requirement that
such approval shall be given by resolution passed by the affirmative voice of at
least two-thirds of the votes cast at a meeting of the holders of Class A
Preferred shares duly called for that purpose. The formalities to be observed
in respect of the giving of notice of any such meeting or any adjourned meeting
and the conduct thereof shall be these from time to time required by the DGCL
and prescribed in the by-laws of the Corporation with respect to meetings of
shareholders. On every poll taken at a meeting of holders of Class A Preferred
shares as a class, each holder entitled to vote thereat shall have one vote
3
in respect of each $1.00 of stated capital added to the appropriate stated
capital account of the Corporation in respect of the issue of each such share
held by the holder.
CLASS A PREFERRED SHARES, SERIES I
The Class A Preferred shares, Series, I, as a series, shall have attached
thereto the following rights, privileges, restrictions and conditions:
Section 2.1 Dividends
The holders of the Class A Preferred Shares, Series I will be entitled to
receive dividends at the Designated Rate (as defined below) of the aggregate
price paid or deemed to be paid for the outstanding Class A Preferred shares,
Series I (the "Purchase Price"). Such dividends will be prior and in preference
to any declaration or payment of any dividends paid on the Junior Stock.
Dividends on the Class A Preferred shares, Series I will be cumulative and will
accrue whether or not declared and whether or not there will be funds legally
available for the payment thereof. Except as provided below, the dividends will
be payable in cash. The dividends shall be payable quarterly on March 31, June
30, September 30 and December 31 of each year commencing January 23, 1998 (the
"Quarterly Dividend Date"), except that if any such date is not a Business Day
(as defined below), then such dividend shall be payable on the first Business
Day immediately thereafter to holders of record as they appear on the stock
register of the Corporation on the applicable record date, which shall not be
more than 50 nor less than 10 days preceding the payment date for such
dividends, as fixed by the Board of Directors of the Corporation. As used
above, "Business Day" shall mean a day, other than a Saturday or a Sunday, on
which commercial banks are open for business with the public in Houston, Texas.
The dividend shall be payable in cash, except as otherwise provided in the next
paragraph. Dividends payable on the Class A Preferred Shares, Series I for each
full quarterly dividends period shall be computed by dividing the annual rate by
four. Dividends payable on the Class A Preferred Shares, Series I for any
period that is shorter or longer than a full quarterly dividend period shall be
computed on the basis of a 360-day year of four 90-day quarters. All dividends
payable on the Class A Preferred Shares, Series I shall be net of withholding
taxes, if any, under applicable Delaware and federal law (including applicable
income tax treaties). As used above, the term "Designated Rate" shall mean 10%
per annum; provided, that upon the occurrence and during the continuance of a
Voting Event, Designated Rate shall mean 14% per annum.
With respect to the first eight quarterly dividends payable hereunder
commencing with the first Quarterly Dividend Date (but subject to the last
sentence of this paragraph), the Board of Directors of the Corporation may, at
least 30 days prior to the subject Quarterly Dividend Date, elect to pay the
cash dividend in common shares (if paid prior to May 20, 1999) or in the
Corporation's common stock, U.S. $.01 par value ("Common Stock") (if paid after
May 20, 1999) (a "Payment in Kind"). If such an election is made, the
Corporation shall promptly notify the holders of record of the Class A Preferred
Shares, Series I entitled to such quarterly dividend of the election to make a
Payment in Kind in lieu of a payment in cash for the subject Quarterly Dividend
Date. An election for any particular Quarterly Dividend Date shall operate only
for such Quarterly Dividend Date. Each Payment in Kind shall be payable as of
the Quarterly Dividend Date for which the election to make such Payment in Kind
was made, except that if such Quarterly Dividend Date is not a Business Day,
then such Payment in Kind shall be on the first Business Day immediately
thereafter to holders of
4
record as they appear on the stock register on the applicable record date.
Each Payment in Kind shall be equal to that number of common shares or Common
Stock (as applicable) that is equal in number to the aggregate cash dividend
payable on the subject Quarterly Dividend Date (net of withholding taxes, if
any, under applicable Canadian laws (including applicable income tax
treaties) divided by the Average Closing Price and shall be allocated on a
pro rata basis to each holder entitled to receive such dividend. Certificates
representing the common shares issuable on payment of any Payment in Kind
shall be delivered to each holder entitled to such Payment in Kind on or
before 30 days following the Quarterly Dividend Date for which such Payment
in Kind is elected to be made hereunder. The "Average Closing Price" shall
be equal to the average of the last reported sales price for the common
shares or Common Stock (as applicable) for the 30 consecutive Trading Days
immediately preceding the subject Quarterly Dividend Date (converted to U.S.
Dollars). The last reported sales price for each day shall be the last
reported sales price for the common shares or Common Stock (as applicable) on
such date on the exchange on which the common shares or Common Stock (as
applicable) are primarily traded. "Trading Days" shall mean, with respect to
the exchange on which the common shares or Common Stock (as applicable) are
primarily traded, the days on which such securities exchange is open for
business.
With respect to all quarterly dividends subsequent to the eighth
quarterly dividend payable hereunder, a holder of Class A Preferred Shares,
Series I may, at least 30 days prior to the subject Quarterly Dividend Date
by notice in writing to the Corporation, elect, only if offered by the
Corporation, to receive a Payment in Kind in lieu of payment in cash for the
subject Quarterly Dividend Date; provided, a holder of Class A Preferred
Shares, Series I may elect to receive a Payment in Kind in lieu of payment in
cash for the subject Quarterly Dividend Date if the Corporation is in default
with respect to such payment and such default has continued for more than ten
days. An election for any particular Quarterly Dividend Date shall operate
only for such Quarterly Dividend Date. Each Payment in Kind shall be payable
as of the Quarterly Dividend Date for which the election to make such Payment
in Kind was made, except that if such Quarterly Dividend Date is not a
Business Day, then such Payment in Kind shall be on the first Business Day
immediately thereafter to holders of record as they appear on the stock
register on the applicable record date. A Payment in Kind under this
paragraph shall be equal to that number of shares of Common Stock that is
equal to the aggregate cash dividend payable to such electing holder on the
subject Quarterly Dividend Date (net of withholding taxes, if any, under
applicable Canadian laws (including applicable income tax treaties)) divided
by the Average Closing Price. Certificates representing the Common Stock
issuable on payment of any Payment in Kind under this paragraph shall be
delivered to each electing holder entitled to such Payment in Kind on or
before 30 days following the Quarterly Dividend Date for which such Payment
in Kind is elected to be made under this paragraph.
Section 2.2 LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the
Corporation, voluntary or involuntary, the holders of the Class A Preferred
Shares, Series I will be entitled to receive in preference to the holders of the
Junior Stock a cash amount equal to the Purchase Price plus any dividends
cumulated on the Class A Preferred Shares, Series I but not paid (the
"Liquidation Amount"). A consolidation or merger other than an Exempted Merger,
as defined below, of the Corporation with or into any other entity or a sale or
transfer in a single transaction or series of related transactions of all or
substantially all of the assets of the Corporation shall be deemed to be
5
a liquidation for purposes hereof. For the purposes hereof, an "Exempted
Merger" shall mean a merger by the Corporation with a U.S. corporation that
is effected for the primary purpose of enabling the Corporation to list its
common shares on the NASDAQ or similar system or American Stock Exchange,
provided that the holders of a majority of the Class A Preferred Shares,
Series I then outstanding give their prior written approval to such a merger,
which approval will not be unreasonably withheld.
Section 2.3 OPTIONAL REDEMPTION
The Corporation shall have the option to redeem any or all of the Class
A Preferred Shares, Series I at any time at a cash redemption price per share
equal to the Liquidation Amount divided by the number of Class A Preferred
Shares, Series I originally issued. If the Corporation so elects to effect
such a redemption, it shall give notice of same to the holders of the Class A
Preferred Shares, Series I not less than five Business Days prior to the date
on which such redemption is to be made (the "Optional Redemption Date"). A
redemption under this paragraph shall be herein called an "Optional
Redemption".
Section 2.4 PUT REDEMPTION
If a Qualified Public Offering of the Corporation's common shares is not
consummated within the three-year period commencing on January 23, 1998, the
holders of a majority of the Class A Preferred Shares, Series I then
outstanding may, upon notice to the Corporation no later than 90-days after
the expiration of such three-year period, elect to cause the Corporation to
redeem all of the Class A Preferred Shares, Series I at a cash redemption
price per share equal to the Liquidation Amount divided by the number of
Class A Preferred Shares, Series I originally issued. The Corporation shall
effect the redemption of the Class A Preferred Shares, Series I on the date
which is fifteen days after receipt of the above notice, or if such date is
not a Business Day, on the Next Business Day immediately thereafter (the "Put
Redemption Date"). As used above, the term "Qualified Public Offering" shall
mean one or more public offerings of the Corporation's Common Stock in which
the Corporation receives aggregate sales proceeds, net of commissions and
underwriting discounts, of not less than $25,000,000. A redemption under
this paragraph shall be herein called a "Put Redemption."
Section 2.5 MANDATORY REDEMPTION
On the fifth anniversary date of the Closing Date (the "Mandatory
Redemption Date") and provided the Class A Preferred Shares. Series I have not
been previously redeemed as set forth above, the Corporation shall be required
to redeem all of the Class A Preferred Shares, Series I at a cash redemption
price per share equal to the Liquidation Amount divided by the number of Class A
Preferred Shares, Series I originally issued. A redemption under this paragraph
shall be herein called the "Mandatory Redemption."
To the extent that the Corporation may not at any of the dates set forth
above legally redeem the Class A Preferred Shares, Series I, such redemption
will take place as soon as legally permitted.
Section 2.6 VOTING RIGHTS
6
Except with respect to such matters with respect to which the Class A
Preferred Shares, Series I are entitled vote under the Delaware General
Corporation Law or other applicable law, and except as provided below, holders
of Class A Preferred Shares, Series I will have no voting rights.
Upon the occurrence of a Voting Event, the holders of the Class A Preferred
Shares, Series I, voting as a single Class A Preferred Shares, Series I, shall
be entitled to elect (i) two directors to the Board of Directors of the
Corporation, if at the time of the Voting Event such holders hold Class A
Preferred Shares, Series I in excess of 1,200,000 Class A Preferred Shares,
Series I or (ii) one director to the Board of Directors of the Corporation, if
at the time of the Voting Event such holders hold 1,200,000 or less Class A
Preferred Shares, Series I. The director(s) which the holders of Class A
Preferred Shares, Series I shall be entitled to elect to the Board of Directors
of the Corporation shall be called the "Preferred Share Directors," whether one
or two. In the event that the holders of the Class A Preferred Shares, Series I
shall become so entitled to elect the Preferred Share Directors, a special
meeting of the holders of the Class A Preferred Shares, Series I shall be called
in the manner provided below, and the holders of the Class A Preferred Shares,
Series I, voting as a single Class A Preferred Shares, Series I, shall elect
such Preferred Share Directors. Thereafter, at each annual meeting of the
stockholders of the Corporation, until divested as hereinafter provided of their
right to elect the Preferred Share Directors, the holders of the Class A
Preferred Shares, Series I, voting as a single series, shall elect the Preferred
Share Directors. At any special meeting of the holders of the Class A Preferred
Shares, Series I or at any annual meeting of the stockholders at which the
holders of the Class A Preferred Shares, Series I, voting as a single series,
shall be entitled to elect the Preferred Share Directors, such members shall be
elected by the affirmative vote of the holder or holders of a majority of the
Class A Preferred Shares, Series I then outstanding.
In no event shall the number of persons serving on the Board of Directors
of the Corporation exceed eight. If, as a result of the election of the
Preferred Share Directors, the number of persons serving on the Board of
Directors of the Corporation would exceed eight, the Corporation shall take all
actions available to it to permit the Preferred Share Directors to serve on the
Board of Directors, including (without limitation) effecting the removal of a
director or directors then serving on the Board of Directors of the Corporation.
The Preferred Share Directors will serve until all Voting Events have
ceased to be continuing, at which time the term of office of the Preferred Share
Directors will terminate.
At any time when such special voting power shall have vested in the holders
of the Class A Preferred Shares, Series I as provided above, the holders of at
least five percent (5%) of the Class A Preferred Shares, Series I then
outstanding may, by written notice personally delivered or mailed to all holders
of the Class A Preferred Shares, Series I at their last known address and to the
president and the secretary of the Corporation at the last known address of the
Corporation, call a special meeting of the holders of the Class A Preferred
Shares, Series I for the election of the Preferred Share Directors as herein
above provided. Such election shall be held not less than twenty-one nor more
than thirty days after the giving of the notice thereof in and at any time and
place within the State of Texas as may be specified in such notice. In lieu of
a special meeting, the holders of the Class A Preferred Shares, Series I may
elect the Preferred Share Directors as herein provided, without a vote, if a
consent or consents in writing, setting forth the election of the Preferred
Share Directors, shall be signed by all of the holders of the Class A Preferred
Shares, Series I and shall be delivered to the
7
Corporation by delivery to the Corporation's registered office in the State
of Texas or the Corporation's principal place of business. Delivery shall be
made by hand or by certified registered mail return receipt requested.
Any Preferred Share Director, whether elected by the holders of the Class A
Preferred Shares, Series I as provided above or replaced as provided below, may
be removed from office only by vote of the holders of a majority of the Class A
Preferred Shares, Series I then outstanding, which removal may be with or
without cause. A special meeting of the holders of the Class A Preferred
Shares, Series I may be called, by written notice personally delivered or mailed
to all holders of the Class A Preferred Shares, Series I at their last known
addresses and to the president and the secretary of the Corporation at the last
known address of the Corporation, by any holder or holders of at least 15% or
more of the Class A Preferred Shares, Series I then outstanding for the purpose
of removing any of such directors. Such meeting shall be held not less than
twenty-one nor more than thirty days after the giving of the notice thereof in
and at any time and place within the State of Texas as may be specified in such
notice. In lieu of a special meeting, the holders of the Class A Preferred
Shares, Series I may remove a Preferred Share Director as herein provided,
without a vote, if a consent or consents in writing, setting forth the removal
of the Preferred Share Director, shall be signed by all of the holders of the
Class A Preferred Shares, Series I, and shall be delivered to the Corporation by
delivery to the Corporation's registered office in the State of Texas or the
Corporation's principal place of business. Delivery shall be made by hand or by
certified registered mail return receipt requested.
If during the continuation of any Voting Event, a vacancy shall occur in
the number of Preferred Share Directors by reason of death, resignation, removal
or otherwise, then such vacancy in the Preferred Share Director may be filled by
the vote of the holders of a majority of the Class A Preferred Shares, Series I
the outstanding at any special meeting of the holders of the Class A Preferred
Shares, Series I A Preferred Shares, Series I called for in the manner provided
in the immediately preceding paragraph.
A. "Voting Event" shall include:
(i) the failure of the Corporation to pay at least two
dividends on the Class A Preferred Shares, Series I as they become due and
payable:
(ii) in the event of a Put Redemption, the failure of the
Corporation to redeem the Class A Preferred Shares, Series I on the Put
Redemption Date:
(iii) in the event of a Mandatory Redemption, the failure
of the Corporation to redeem the Class A Preferred Shares, Series I on the
Mandatory Redemption Date; or
(iv) the Corporation or any Material Subsidiary thereof;
(A) suffers the entry against it of a judgment, decree or order for relief
by a Tribunal of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar Law
of any jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it which remains
8
undismissed for a period of thirty days; (B) commences a voluntary case
under any applicable bankruptcy, insolvency or similar Law now or hereafter
in effect, including the federal Bankruptcy Code, as from time to time
amended; or applies for or consents to the entry of an order for relief in
an involuntary case under any such Law; or makes a general assignment for
the benefit of creditors; or fails generally to pay (or admits in writing
its inability to pay) its debts as such debts become due; or takes
corporate or other action to authorize any of the foregoing; (C) suffers
the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of all or a
substantial part of its assets in a proceeding brought against or
initiated by it, and such appointment or taking possession is neither made
ineffective nor discharged within thirty days after the making thereof, or
such appointment or taking possession is at any time consented to,
requested by, or acquired to by it; (D) suffers the entry against it of a
final judgment for the payment of money in excess of $500,000 (not covered
by insurance satisfactory to the holders of a majority of the Class A
Preferred Shares, Series I then outstanding in their discretion), unless
the same is discharged within thirty days after the date of entry thereof
or an appeal or appropriate proceeding for review thereof is taken within
such period and a stay of execution pending such appeal is obtained; or
(E) suffers a writ or warrant of attachment or any similar process to be
issued by any Tribunal against all or any substantial part of its assets,
and such writ or warranty of attachment or any similar process is not
stayed or released within thirty days after the entry or levy thereof or
after any stay is vacated or set aside.
As used above in the definition of "Voting Events":
"Consolidated" shall refer to the consolidation of any Persons, in
accordance with GAAP, with its properly consolidated subsidiaries. References
to a Person's Consolidated Financial Statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board in the United States (or any generally recognized successor) and which, in
the case of the Corporation and its Consolidated subsidiaries, are applied for
all periods after January 23, 1998 in a manner consistent with the manner in
which such principles and practices were applied to the audited Initial
Financial Statements; provided, that with respect to the Corporation, "GAAP"
means such generally accepted accounting principles and practices as recognized
by the Canadian financial accounting standard board equivalent. If any change
in any accounting principle or practice is required by the Financial Accounting
Standard Board in the United States or Canadian financial accounting standards
board equivalent (or any such successor) in order for such principle or practice
to continue as a generally accepted accounting principle or practice, all
reports and financial statements required hereunder with respect to the
Corporation and its Consolidated subsidiaries may be prepared in accordance with
such change, but all calculations and determinations to be made hereunder may be
made in accordance with such change only after notice of such change is given to
the holders of the Class A Preferred Shares, Series I and the holders of a
majority of the Class A Preferred Shares, Series I then outstanding agrees to
such change insofar as it affects the accounting of the Corporation and its
Consolidated subsidiaries.
9
"Initial Financial Statements" shall mean (a) the audited annual
Consolidated financial statements of the Corporation, dated as of August 31,
1997 and (b) the unaudited quarterly Consolidated financial statements of the
Corporation dated as of November 30, 1997.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, providence or
other political subdivision thereof.
"Material Subsidiary" shall mean (i) Texstar Petroleum, Inc. and (ii) any
other Subsidiary of the Corporation which has assets the value of which
constitute in excess of 25% of the value of the Consolidated assets of the
Corporation as determined in accordance with GAAP.
"Person" shall mean an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture, or any
other legally recognizable entity.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"Tribunal" means any government, any arbitration panel, any court or any
governmental department, commission, board, bureau, agency or instrumentality of
the United States of America or any state, province, commonwealth, national,
territory, possession, county, parish, town, township, village or municipality,
whether now or hereafter constituted and/or existing.
So long as any of the Class A Preferred Shares, Series I remain
outstanding, the consent of the holders of at least a majority of the Class A
Preferred Shares, Series I outstanding at the time, given in person or by proxy
either in writing (as permitted by law and the Certificate of Incorporation and
Bylaws of the Corporation) or at any special or annual meeting, shall be
necessary to permit, effect or validate any one or more of the following:
(a) the payment or setting aside of funds for such payment of
dividends on any Junior Stock during any period in which the full
cumulative dividends due with respect to the Class A Preferred Shares,
Series I are not fully current, except dividends on Junior Stock payable in
additional shares of Junior Stock (it being agreed that "Junior Stock"
shall mean any class of Common Stock and any other class of preferred stock
hereafter established by the Board of Directors of the Corporation, the
terms of which expressly provide that it ranks junior to the Class A
Preferred Shares, Series I as to dividend rights and rights on
liquidation, winding-up and dissolution of the Corporation). Further, no
Junior Stock or any other series of Class A Preferred shares or any class
of preferred stock hereafter established by the Board of Directors of the
the terms of which expressly provide that such class or series will rank on
a parity with the Class A Preferred Shares, Series I as to dividend rights
and rights on liquidation, winding-up and dissolution (collectively
referred to as "Parity Stock") may be repurchased or otherwise retired nor
may funds be set apart for payment with respect thereto, if cumulative
dividends have not been paid (or deemed paid) in full on the Class A
Preferred Shares, Series I in cash. In addition,
10
the Corporation shall not make payment on account of the purchase or other
retirement of any Parity Stock or Junior Stock, and shall not permit any
corporation or other entity directly or indirectly controlled by the
Corporation to purchase any Parity Stock or Junior Stock or any warrants,
rights, calls or options unless full cumulative dividends determined in
accordance herewith on the Class A Preferred Shares, Series I have been
paid (or are deemed paid) in full; provided that the foregoing shall not
prohibit any officer or director of the Corporation or any Subsidiary from
purchasing or selling any Parity Stock, Junior Stock, warrants, rights,
calls or options in the ordinary course of his or her ordinary investment
activities;
(b) the creation, authorization, issuance or reclassification of any
additional capital stock of the Corporation or any Subsidiary or the
creation, authorization or issuance of any obligation or security
convertible or exchangeable into or evidencing a right to purchase any
share of capital stock of the Corporation or any Subsidiary ranking senior
to the Class A Preferred Shares, Series I as to dividends or the
distribution of assets upon liquidation, dissolution or winding up of the
Corporation.
(c) the creation, authorization, issuance or reclassification of any
additional Class A Preferred Shares, Series I; provided, however, the
foregoing shall not apply to the issuance of additional Class A Preferred
Shares, Series I in connection with (i) the refinancing of that certain
U.S. $2,200,000 of indebtedness entered by Texstar Petroleum, Inc. on
December 31, 1998, with RP&C International Inc. ("RP&C") and other lenders
identified by RP&C and the reacquisition of the mineral interests granted
in connection with the foregoing and (ii) the investment of funds managed
by EnCap Investments L.C.
(d) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Certificate of
Incorporation or the Bylaws of the Corporation or the undertaking of any
other action that could in any event materially adversely affect (i) the
ability of the Corporation to perform its obligations with respect to the
Class A Preferred Shares, Series I or (ii) the relative rights,
preferences, qualifications, limitations or restrictions of the Class A
Preferred Shares, Series I or of the holders thereof; or
(e) any amendment or modification to the terms and conditions of the
Class A Preferred Shares, Series I, which amends or modifies the terms of
this Section 2.6 or may have a materially adverse impact on (i) the ability
of the Corporation to perform its obligations with respect to the Class A
Preferred Shares, Series I or (ii) the relative rights, preferences,
qualifications, limitations or restrictions of the Class A Preferred
Shares, Series I or of the holders thereof; or
(f) any amendment or modification to the terms and conditions of the
Class A Preferred Shares, Series II ("Series II"), which may have a
material adverse impact on the Class A Preferred Shares, Series I; or
(g) the setting aside of funds for the purpose of redeeming,
repurchasing or otherwise retiring the Series II, unless the Corporation
has first offered the holders of the Class A Preferred Shares, Series I the
option of redeeming their shares in cash, as provided herein,
contemporaneously with the redemption of the Series II.
11
Section 2.7 PAYMENTS
All cash payments shall be by wire transfer in lawful money of the United
States of America to an account or accounts designated in writing by the holders
of the Class A Preferred Shares, Series I.
Section 2.8 NOTICES
Any notice required by the provisions hereof to be given to the holders of
the Class A Preferred Shares, Series I shall be deemed given when deposited in
the United States Mail, postage prepaid, and addressed to each holder of record
at his or her address appearing on the books of the Corporation."
[SIGNATURE PAGE FOLLOWS]
12
IN WITNESS WHEREOF, Benz Energy Inc. has caused this Certificate to be
signed by a duly authorized officer, this 27th day of September, 1999.
BENZ ENERGY INC.
By: /s/ ROBERT S. HERLIN
-------------------------------------------------
Robert S. Herlin
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
13