-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E36ClaYoi9VUv2shK5c3SUpQePFzqgqp8ssbEstsgcJi7aTKiq80tAlOhOivjdaM uuyKKjtofPVbSX4dVFpi7w== 0000950134-96-006563.txt : 19961202 0000950134-96-006563.hdr.sgml : 19961202 ACCESSION NUMBER: 0000950134-96-006563 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19961126 EFFECTIVENESS DATE: 19961126 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXPLORATION CO CENTRAL INDEX KEY: 0000313395 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTOMOTIVE REPAIR, SERVICES & PARKING [7500] IRS NUMBER: 840793089 STATE OF INCORPORATION: CO FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-16789 FILM NUMBER: 96672300 BUSINESS ADDRESS: STREET 1: 500 N LOOP 1604 E STE 250 CITY: SAN ANTONIO STATE: TX ZIP: 78232 BUSINESS PHONE: 2104965300 MAIL ADDRESS: STREET 1: 500 N LOOP 1604 E STREET 2: SUITE 250 CITY: SAN ANTONIO STATE: TX ZIP: 78232 S-8 1 FORM S-8 1 As Filed with the Securities Registration No.333-_____ and Exchange Commission on November 25, 1996. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------------- F O R M S - 8 REGISTRATION STATEMENT Under the Securities Act of 1933 The Exploration Company ----------------------------------------------------------------- (Exact name of issuer as specified in its charter) Colorado 84-0793089 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 500 North Loop 1604 East, Suite 250, San Antonio, Texas 78232 - -------------------------------------------------------------------------------- (Address of Principal Executive Office) (Zip Code) 1995 Flexible Incentive Plan - -------------------------------------------------------------------------------- (Full title of the Plan) James E. Sigmon 500 North Loop 1604 East, Suite 250, San Antonio, Texas 78232 - -------------------------------------------------------------------------------- (Name and address of agent for service) (210) 496-5300 - -------------------------------------------------------------------------------- (Telephone number, including area code, of agent for service) Calculation of Registration Fee ================================================================================ Proposed Title of Proposed maximum securities Amount maximum aggregate Amount of to be to be offering price offering registration registered registered per unit price fee - -------------------------------------------------------------------------------- Common Stock $.01 par value (1) $400,000 (2) $2.38 (2) $952,000 (2) $288.48 - -------------------------------------------------------------------------------- (1) This Registration Statement also covers such additional number of shares, presently undeterminable, as may become issuable under the Plan in the event of Common Stock dividends, Common Stock splits, mergers, reorganizations, split- ups, combinations, recapitalizations or other changes in Common Stock. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(h). 2 PART I INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS Item 1. Plan Information Omitted pursuant to Rule 424 promulgated by the Securities and Exchange Commission (the "Commission") pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"). Item 2. Registrant Information and Employee Plan Annual Information Omitted pursuant to Rule 424 promulgated by the Commission pursuant to the 1934 Act. I-1 3 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Documents by Reference The following documents filed by The Exploration Company (hereinafter the "Company" or the "Registrant") with the Commission are incorporated in and made a part of this Registration Statement by reference: Item 2, "Description of Registrant's Securities to be Registered," on Form 8-A dated February 1, 1980; Annual Report on Form 10-K for the fiscal year ended August 31, 1995; Quarterly Report on Form 10-Q for the quarter ended November 30, 1995; Quarterly Report on Form 10-Q for the quarter ended February 29, 1996; Quarterly Report on Form 10-Q for the quarter ended May 31, 1996; and Current Report on Form 8-K dated May 31, 1996; and Current Report on Form 8-K dated September 4, 1996. All documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14, and 15(d) of the 1934 Act after the date of this Registration Statement, and prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part thereof from the date of the filing of such documents. Item 4. Description of Securities Non-applicable. Item 5. Interests of Named Experts and Counsel Non-applicable. Item 6. Indemnification of Directors and Officers The Company shall indemnify its directors, officers, employees and agents to the fullest extent permitted by the Colorado Business Corporation Act and its Certificate of Incorporation. The Company's Certificate of Incorporation eliminates liability of the Company's directors for monetary damages for breaches of their fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 403 of the Colorado Business Corporation Act, as the same exists or hereafter may be amended, or (iv) for any transaction from which the director derived an improper personal benefit. If the Colorado Business Corporation Act hereafter is amended to authorize the further elimination or limitation on personal liability of directors, then the liability of a director of the Company, in addition to the limitation on II-1 4 personal liability provided herein, shall be limited to the fullest extent permitted by the amended Colorado Business Corporation Act. Any repeal or modification of this paragraph by the stockholders of the Company shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Company existing at the time of such repeal or modification. The Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Colorado Business Corporation Act Law. Item 7. Exemption from Registration Claimed Non-applicable. Item 8. Exhibits 4.1 The Company's Certificate of Incorporation. 4.2 The Company's Bylaws. 4.3 The 1995 Flexible Incentive Plan. 5.1 Opinion of Small, Craig & Werkenthin, P.C. 23.1 Consent of Akin, Doherty, Klein & Fuege, P.C. 23.2 Consent of Small, Craig & Werkenthin, P.C., is included in their opinion filed as Exhibit 5.1 of this Registration Statement. - ------------------------
Item 9. Undertakings (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the "1933 Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represents a fundamental change in the information set forth in the registration statement; II-2 5 (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply if the registration statement is on Form S-3 or Form S-8 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registration pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the 1933 Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the 1934 Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) The undersigned Registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each employee to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14(a)-3 or Rule 14(c)-3 under the 1934 Act; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sooner given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. (d) Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing II-3 6 provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by director, officer or controlling person of the Registrant the successful defense of any action, suit or proceeding) as asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel, the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against the public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. SIGNATURES The Registrant. Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on November 7, 1996. REGISTRANT: THE EXPLORATION COMPANY By: /s/ James E. Sigmon ---------------------------- Name: James E. Sigmon -------------------------- Title: President ------------------------- Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated. 11-8-96 /s/ Stephen M. Gose, Jr. - ------------ ------------------------------- Date Stephen M. Gose, Jr., Chairman of the Board II-4 7 11-7-96 /s/ James E. Sigmon - ------------ ------------------------------- Date James E. Sigmon, President and Director 11-7-96 /s/ Thomas H. Gose - ------------ ------------------------------- Date Thomas H. Gose, Secretary and Director 11-7-96 /s/ Roberto R. Thomae - ------------ ------------------------------- Date Roberto R. Thomae, Principal Financial Officer, Controller or Principal Accounting Officer II-5 8 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION ------- ----------- 4.1 The Company's Certificate of Incorporation. 4.2 The Company's Bylaws. 4.3 The 1995 Flexible Incentive Plan. 5.1 Opinion of Small, Craig & Werkenthin, P.C. 23.1 Consent of Akin, Doherty, Klein & Fuege, P.C. 23.2 Consent of Small, Craig & Werkenthin, P.C., is included in their opinion filed as Exhibit 5.1 of this Registration Statement.
EX-4.1 2 CERTIFICATE OF INCORPORATION 1 EXHIBIT 4.1 ARTICLES OF INCORPORATION OF THE EXPLORATION COMPANY The undersigned natural person, being more than eighteen years of age, hereby establishes a corporation pursuant to the statutes of Colorado and adopts the following articles of incorporation: FIRST: The name of the corporation is The Exploration Company. SECOND: The corporation shall have perpetual existence. THIRD: (a) The purpose for which the corporation is organized shall be the transaction of any and all lawful business for which corporations may be incorporated under the laws of Colorado. (b) The corporation shall have and may exercise all of the rights, powers and privileges now or hereafter conferred upon corporations organized under the laws of Colorado and may do everything necessary, suitable or proper for the accomplishment of any of its corporate purposes. FOURTH: (a) The aggregate number of shares which the corporation shall have authority to issue is 20,000,000 shares of common stock, each having a par value of $.01. (b) Each shareholder of record shall have one vote for each share of stock standing in his name on the books of the corporation and entitled to vote, except that in the election of directors he shall have the right to vote such number of shares for as many persons as there are directors to be elected. Cumulative 2 voting shall not be allowed in the election of directors or for any other purpose. (c) At all meetings of shareholders, one-third of the shares entitled to vote at such meeting represented in person or by proxy, shall constitute a quorum, and at any meeting at which a quorum is present the affirmative vote of a majority of the shares represented at such meeting and entitled to vote on the subject matter shall be the act of the shareholders; except that the following actions shall require the affirmative vote or concurrence of a majority of all of the outstanding shares of the corporation entitled to vote thereon: (1) adopting an amendment or amendments to these articles of incorporation, (2) lending money to, guaranteeing the obligations of or otherwise assisting any of the directors of the corporation, (3) authorizing the sale, lease, exchange or other disposition of all or substantially all of the property and assets of the corporation, with or without its goodwill, not in the usual and regular course of business, (4) approving a plan of merger or consolidation, (5) adopting a resolution submitted by the board of directors to dissolve the corporation, and (6) adopting a resolution submitted by the board of directors to revoke voluntary dissolution proceedings. (d) No shareholder of the corporation shall have any pre-emptive or similar right to acquire or subscribe for any additional unissued or treasury shares of stock, or other securities of any class, or rights, warrants or options to purchase stock or scrip, or securities of any kind convertible into stock or 2 3 carrying stock purchase warrants or privileges. (e) The board of directors may from time to time distribute to the shareholders in partial liquidation, out of either stated capital or capital surplus of the corporation, a portion of its assets, in cash or property, subject to the limitations contained in the statutes of Colorado. FIFTH: The corporation shall have the right to indemnify any person to the fullest extent allowed by the laws of Colorado, except as limited by the bylaws of the corporation from time to time in effect. SIXTH: Three directors shall constitute the initial board and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and have qualified are Edward A. Kearney 5777 South Shasta Circle Littleton, Colorado 80123 Jerry D. Armstrong Suite 3300 555-17th Street Denver, Colorado 80202 H. K. Keesee Suite 400 5407 North Interstate 35 Austin, Texas 78723 SEVENTH: The address of the initial registered office of the corporation is Suite 2010, Energy Center One, 717-17th Street, Denver, Colorado 80202. The name of its initial registered agent at such address is Edward A. Kearney. 3 4 EIGHTH: The name and address of the incorporator is Nancy Andreas 1700 Broadway, Suite 1800 Denver, Colorado 80290 Dated: May 14, 1979 /s/ Nancy Andreas ---------------------- VERIFICATION STATE OF COLORADO ) ) CITY AND COUNTY OF DENVER ) I, Mary Kay Rohrer, a notary public, hereby certify that on the 14th day of May, 1979, personally appeared before me NANCY ANDREAS, who being by me first duly sworn declared that she was the person who signed the foregoing document as incorporator and that the statements therein contained are true. /s/ Mary Kay Rohrer ------------------- Notary Public My commission expires: 12/9/81 4 5 EXHIBIT 4.1 (CONT.) MAIL TO: COLORADO SECRETARY OF STATE CORPORATIONS OFFICE 1575 SHERMAN ST., 2ND FLOOR DENVER, COLORADO 80203 (303) 866-2361 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION Pursuant to the provisions of the Colorado Corporation Code, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: FIRST: The name of the corporation is (NOTE 3) THE EXPLORATION COMPANY. SECOND: The following amendment was adopted by the shareholders of the corporation on July 8, 1983, in the manner prescribed by the Colorado Corporation Code: Paragraph (a) of Article FOURTH of the Articles of Incorporation is amended to read as follows: FOURTH: (a) The aggregate number of shares which the corporation shall have the authority to issue is 50,000,000 shares of common stock, each having a par value of $.01. THIRD: The number of shares of the corporation outstanding at the time of such adoption was 6,353,650, and the number of shares entitled to vote thereon was 6,350,650. FOURTH: The designation and number of outstanding shares of each class entitled to vote thereon as a class were as follows: CLASS (NOTE 1) NUMBER OF SHARES FIFTH: The number of shares voted for such amendment was 3,415,224; and the number of shares voted against such amendment was 84,293. SIXTH: The number of shares of each class entitled to vote thereon as a class voted for and against such amendment, respectively, was: CLASS (NOTE 1) NUMBER OF SHARES VOTED NONE FOR AGAINST 6 SEVENTH: The manner, if not set forth in such amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the amendment shall be effected, is as follows: (NOTE 2) No change EIGHTH: The manner in which such amendment effects a change in the amount of stated capital, and the amount of stated capital as changed by such amendment, are as follows: (NOTE 2) No change The Exploration Company (Note 3) By /s/ --------------------- Its President (Note 4) and /s/ -------------------- Its Secretary Subscribed and sworn to before me this 27th day of July, 1984. My commission expires 12/19/87. /s/ Wanda England --------------------------------- Notary Public 1700 Broadway, Denver, CO 80290 --------------------------------- Address NOTES: 1. If inapplicable, insert "NONE." 2. If inapplicable, insert "NO CHANGE." 3. Exact corporate name of corporation adopting the Articles of Amendment. (If this is a change of name amendment, the name before the amendment is filed.) 4. Signatures and titles of officers signing for the corporation. 7 EXHIBIT 4.1 (CONT.) ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE EXPLORATION COMPANY Pursuant to the provisions of the Colorado Corporation Act, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: FIRST: The name of the corporation is THE EXPLORATION COMPANY. SECOND: The following amendment of the Articles of Incorporation was adopted by the shareholders of the corporation on April 2, 1985, in the manner prescribed by the Colorado Corporation Act: (INSERT AMENDMENT) Paragraph (a) of Article FOURTH of the Articles of Incorporation is amended to read as follows: FOURTH: (a) The aggregate number of shares which the corporation shall have authority to issue is 200,000,000 shares of common stock, each having a par value of $.01. THIRD: The number of shares of the corporation outstanding at the time of such adoption was 48,366,443; and the number of shares entitled to vote thereon was 48,366,443. FOURTH: The designation and number of outstanding shares of each class entitled to vote thereon as class were as follows: Number of Class Shares ----- --------- (Note 1) NONE FIFTH: The number of shares voted for such amendment was 43,699,662; and the number of shares voted against such amendment was 104,735. SIXTH: The number of shares of each class entitled to vote thereon as a class voted for and against such amendment, respectively, was: 8 Class Number of Shares Voted ----- ---------------------- (Note 1) For Against --- ------- NONE SEVENTH: The manner, if not set forth in such amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the amendment shall be effected, is as follows: (Note 2) NO CHANGE EIGHTH: The manner in which such amendment effects a change in the amount of stated capital, and the amount of stated capital as changed by such amendment, are as follows: (Note 2) NO CHANGE Dated April 2, 1985 THE EXPLORATION COMPANY (Note 3) By /s/ James E. Sigmon ------------------------ Its President (Note 4) JAMES E. SIGMON and /s/ Barry Bailey ----------------------- Its Secretary (Note 4) BARRY BAILEY STATE OF TEXAS ) ) COUNTY OF BEXAR ) Before me, Rebecca M. Lee, a Notary Public in and for the said County and State, personally appeared James E. Sigmon who acknowledged before me that he is the President of The Exploration Company, a Colorado corporation and that he signed the foregoing Articles of Amendment as his free and voluntary act and deed for the uses and purposes therein set forth. In witness whereof I have hereunto set my hand and seal this 2nd day of April, A.D. 1985. My Commission expires July 8, 1985 /s/ Rebecca M. Lee ---------------------- Notary Public Notes: 1. If inapplicable, insert "None." 2. If inapplicable, insert "No change." 3. Exact corporate name of corporation adopting the Articles of Amendment. 4. Signatures and titles of officers signing for the corporation. 9 EXHIBIT 4.1 (CONT.) MAIL TO: COLORADO SECRETARY OF STATE CORPORATIONS OFFICE 1560 BROADWAY, SUITE 200 DENVER, COLORADO 80202 (303) 894-2251 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION Pursuant to the provisions of the Colorado Corporation Code, the undersigned corporation adopts the following Articles of Amendments to its Articles of Incorporation: FIRST: The name of the corporation is (note 1) THE EXPLORATION COMPANY. SECOND: The following amendment to the Articles of Incorporation was adopted on April 6, 1990, as prescribed by the Colorado Corporation Code, in the manner marked X below: Such amendment was adopted by the board of directors where no ----- shares have been issued. X Such amendment was adopted by a vote of the shareholders. The ----- number of shares voted for the amendment was sufficient for approval. Article FIFTH of the Article of Incorporation is amended to read as follows: The Corporation shall have the right to indemnify any person to the fullest extent allowed by the laws of Colorado, except as limited by the bylaws of the corporation from time to time in effect. The personal liability of each director of the Company shall be eliminated and limited to the full extent permitted by the laws of the State of Colorado including without limitation as permitted by the provisions of Section 7-3-10(1)(u) of the Colorado Corporation Code (Title 7 of the Colorado Revised Statutes) and any successor provision, as amended. THIRD: The manner, if not set forth in such amendment, in which any exchange, reclassification or cancellation of issued shares provided for in the amendment shall be effected, is as follows: No Change 10 FOURTH: The manner in which such amendment effects a change in the amount of stated capital, and the amount of stated capital as changed by such amendment, are as follows: No Change THE EXPLORATION COMPANY (Note 1) By /s/ James E. Sigmon ----------------------- Its President and /s/ Barry D. Bailey ---------------------- Its Secretary (Note 2) /s/ James E. Sigmon ---------------------- Its Director (Note 3) NOTES: 1. Exact corporate name of corporation adopting the Articles of Amendments. (If this is a change of name amendment the name before this amendment is filed) 2. Signatures and titles of officers signing for the corporation. 3. Where no shares have been issued, signature of a director. EX-4.2 3 BY-LAWS OF THE REGISTRANT 1 EXHIBIT 4.2 TABLE OF CONTENTS ARTICLE I. Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1. Business Offices . . . . . . . . . . . . . . . . . . . 3 Section 2. Registered Office . . . . . . . . . . . . . . . . . . . 3 ARTICLE II. Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1. Annual Meeting . . . . . . . . . . . . . . . . . . . . 3 Section 2. Special Meeting . . . . . . . . . . . . . . . . . . . 3 Section 3. Place of Meeting . . . . . . . . . . . . . . . . . . . 4 Section 4. Notice of Meeting . . . . . . . . . . . . . . . . . . 4 Section 5. Closing of Transfer Books or Fixing of Record Date . . . . . . . . . . . . . 4 Section 6. Voting Record . . . . . . . . . . . . . . . . . . . . 5 Section 7. Proxies . . . . . . . . . . . . . . . . . . . . . . . 5 Section 8. Quorum . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 9. Voting of Shares . . . . . . . . . . . . . . . . . . . 5 Section 10. Voting of Shares by Certain Holders . . . . . . . . . 6 Section 11. Conduct of Meetings . . . . . . . . . . . . . . . . . 6 ARTICLE III. Board of Directors . . . . . . . . . . . . . . . . . . . . . . 7 Section 1. General Powers . . . . . . . . . . . . . . . . . . . . 7 Section 2. Number, Tenure and Qualifications . . . . . . . . . . 7 Section 3. Vacancies . . . . . . . . . . . . . . . . . . . . . . 7 Section 4. Regular Meetings . . . . . . . . . . . . . . . . . . . 8 Section 5. Special Meetings . . . . . . . . . . . . . . . . . . . 8 Section 6. Notice . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 7. Presumption of Assent . . . . . . . . . . . . . . . . 8 Section 8. Quorum and Voting . . . . . . . . . . . . . . . . . . 9 Section 9. Compensation . . . . . . . . . . . . . . . . . . . . . 9 Section 10. Executive and Other Committees . . . . . . . . . . . . 9 Section 11. Meetings by Telephone . . . . . . . . . . . . . . . . 9 Section 12. Action Without a Meeting . . . . . . . . . . . . . . . 9 ARTICLE IV. Officers and Agents . . . . . . . . . . . . . . . . . . . . . . 10 Section 1. Number and Qualifications . . . . . . . . . . . . . . 10 Section 2. Election and Term of Office . . . . . . . . . . . . . 10 Section 3. Salaries . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. Removal . . . . . . . . . . . . . . . . . . . . . . . 10 Section 5. Vacancies . . . . . . . . . . . . . . . . . . . . . . 10 Section 6. Authority and Duties of Officers . . . . . . . . . . . 10 (a) Chairman of the Board . . . . . . . . . . . . . . 11 (b) President . . . . . . . . . . . . . . . . . . . . 11 (c) Vice-Presidents . . . . . . . . . . . . . . . . . 11 (d) Secretary . . . . . . . . . . . . . . . . . . . . 11 (e) Treasurer . . . . . . . . . . . . . . . . . . . . 11 ARTICLE V. Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 1. Issuance of Shares . . . . . . . . . . . . . . . . . . 12 Section 2. Certificates . . . . . . . . . . . . . . . . . . . . . 12
2 Section 3. Consideration for Shares . . . . . . . . . . . . . . . 12 Section 4. Lost Certificates . . . . . . . . . . . . . . . . . . 13 Section 5. Transfer of Shares . . . . . . . . . . . . . . . . . . 13 Section 6. Holders of Record . . . . . . . . . . . . . . . . . . 13 Section 7. Transfer Agents, Registrars and Paying Agents . . . . . . . . . . . . . . . 13 ARTICLE VI. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . 13 (a) Action . . . . . . . . . . . . . . . . . . . . . . . . 13 (b) Derivative Action . . . . . . . . . . . . . . . . . . 14 (c) Third Party Action . . . . . . . . . . . . . . . . . . 14 (d) Indemnified Party . . . . . . . . . . . . . . . . . . 14 Section 2. Third Party Actions . . . . . . . . . . . . . . . . . 14 Section 3. Derivative Actions . . . . . . . . . . . . . . . . . . 14 Section 4. Success on Merits or Otherwise . . . . . . . . . . . . 15 Section 5. Determination . . . . . . . . . . . . . . . . . . . . 15 Section 6. Payment in Advance . . . . . . . . . . . . . . . . . . 15 Section 7. Other Indemnification . . . . . . . . . . . . . . . . 15 Section 8. Period of Indemnification . . . . . . . . . . . . . . 16 Section 9. Insurance . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. Right to Impose Conditions to Indemnification . . . . . . . . . . . . . . . . 16 ARTICLE VII. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 1. Waivers of Notice . . . . . . . . . . . . . . . . . . 17 Section 2. Voting of Securities by the Corporation . . . . . . . 17 Section 3. Seal . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 4. Fiscal Year . . . . . . . . . . . . . . . . . . . . . 17 Section 5. Amendments . . . . . . . . . . . . . . . . . . . . . . 17
3 BYLAWS OF THE EXPLORATION COMPANY ARTICLE I. Offices Section 1. Business Offices. The principal office of the corporation shall be maintained in any location selected by the Board of Directors. The corporation may have such other offices, either within or outside Colorado, as the board of directors may designate or as the business of the corporation may require from time to time. Section 2. Registered Office. The registered office of the corporation required by the Colorado Corporation Code to be maintained in Colorado may be, but need not be, identical with the principal office if in Colorado, and the address of the registered office may be changed from time to time by the board of directors. ARTICLE II. Shareholders Section 1. Annual Meeting. An annual meeting of the shareholders shall be held on such date as may be determined by the board of directors for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the election of directors shall not be held on the day designated by the Board of Directors for any annual meeting of the shareholders, or at any adjournment thereof, the board of directors shall cause the election to be held at a meeting of the shareholders as soon thereafter as conveniently may be held. Failure to hold an annual meeting as required by these bylaws shall not invalidate any action taken by the board of directors or officers of the corporation. Section 2. Special Meeting. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the chairman of the board, the president or the board of directors, and shall be called by the president at the request of the holders of not less than one-tenth of all the outstanding shares of the corporation entitled to vote at the meeting. Business transacted at special meetings shall be confined to the purposes stated in the notice of the meeting. 4 Section 3. Place of Meeting. Each meeting of the shareholders shall be held at such place, either within or outside Colorado, as may be designated in the notice of meeting, or, if no place is designated in the notice, at the principal office of the corporation. Section 4. Notice of Meeting. Except as otherwise prescribed by statute, written notice of each meeting of the shareholders stating the place, day and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, or the secretary, or the officer or person calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, addressed to each shareholder at his or her address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, but if three successive notices mailed to the last-known address of any shareholder of record are returned as undeliverable, no further notices to such shareholder shall be necessary until another address for such shareholder is made known to the corporation. If requested by a person or persons, other than the corporation, lawfully calling a meeting, the secretary shall give notice of such meeting at corporate expense. Section 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors may provide that the stock transfer books shall be closed for any stated period not exceeding fifty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of the shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the stock transfer books the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than fifty days, and, in the case of a meeting of the shareholders, not less than ten days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of the shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of 4 5 shareholders entitled to vote at any meeting of the shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof except where the determination has been made through the closing of the stock transfer books and the stated period of the closing has expired. Section 6. Voting Record. The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten days before each meeting of the shareholders, a complete record of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each. For a period of ten days before such meeting, this record shall be kept on file at the principal office of the corporation, whether within or outside Colorado, and shall be subject to inspection by any shareholder for any purpose germane to the meeting at any time during usual business hours. Such record shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder for any purpose germane to the meeting during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such record or transfer books or to vote at any meeting of the shareholders. Section 7. Proxies. At each meeting of the shareholders, a shareholder may vote by proxy executed in writing by the shareholder or his or her duly authorized attorney in fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Section 8. Quorum. Except as otherwise required by the laws of Colorado or the articles of incorporation, a majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at each meeting of the shareholders, and the affirmative vote of a majority of the shares represented at a meeting at which a quorum is present and entitled to vote on the subject matter shall be the act of the shareholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time for a period not to exceed sixty days at any one adjournment without further notice other than an announcement at the meeting. At such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 9. Voting of Shares. Each outstanding share of record, regardless of class, is entitled to one vote, and each fractional share is entitled to a corresponding fractional vote, on each matter submitted to a vote of the shareholders either at a 5 6 meeting thereof or pursuant to Section 11 of this Article, except to the extent that the voting rights of the shares of any class or classes are limited or denied by the articles of incorporation as permitted by the Colorado Corporation Code. In the election of directors each record holder of stock entitled to vote at such election shall have the right to vote the number of shares owned by him for as many persons as there are directors to be elected, and for whose election he or she has the right to vote. Cumulative voting shall not be allowed. Section 10. Voting of Shares by Certain Holders. Neither treasury shares nor shares held by another corporation if a majority of the shares entitled to vote for the election of directors of such other corporation is held by this corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by it, either in person or by proxy, without a transfer of such shares into its name. Shares standing in the name of a trustee may be voted by it, either in person or by proxy, but no trustee shall be entitled to vote shares held by it without a transfer of such shares into its name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into its name if authority so to do is contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Section 11. Conduct of Meetings. The chairman of the annual or any special meeting of the shareholders shall be the chairman of the board of the corporation (or in his or her absence, the president or any person designated by the board of directors), unless and until a different person is elected by a majority of the shares entitled to vote at such meeting. Meetings of shareholders shall be conducted in accordance with the following rules: (a) The chairman of the meeting shall have absolute authority over matters of procedure and there shall be no appeal from the 6 7 ruling of the chairman. (b) If disorder should arise which prevents continuation of the legitimate business of the meeting, the chairman may quit the chair and announce the adjournment of the meeting; and upon his or her so doing, the meeting is immediately adjourned. (c) The chairman may ask or require that anyone not a bona fide shareholder or proxy leave the meeting. (d) A resolution or motion shall be considered for vote only if proposed by a shareholder or a duly authorized proxy and seconded by an individual, who is a shareholder or a duly authorized proxy, other than the individual who proposed the resolution or motion. ARTICLE III. Board of Directors Section 1. General Powers. The business and affairs of the corporation shall be managed by its board of directors, except as otherwise provided in the Colorado Corporation Code, the articles of incorporation or these bylaws. Section 2. Number, Tenure and Qualifications. The number of directors of the Corporation shall be not less than three (3) nor more than ten (10) as fixed by the Board of Directors. The number of directors may be increased or decreased from time to time by resolution of the Board of Directors, but no decrease shall have the effect of reducing the term of any incumbent director. Directors shall be elected at the annual meetings of the shareholders, except as provided in Section 3 of this Article, and each Director shall hold office until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal. Directors need not be shareholders of the Corporation or residents of the State of Colorado, but they must be eighteen (18) years of age. Section 3. Vacancies. Any director may resign at any time by giving written notice- to the chairman of the board, the president or to the secretary of the corporation. A director's resignation shall take effect at the time specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office. Any directorship to be filled by reason of an increase in the number of directors shall be filled by the affirmative vote of a majority of the directors then in office or by an election at a meeting of the 7 8 shareholders called for that purpose, and a director so chosen shall hold office for the term specified in Section 2 above. Section 4. Regular Meetings. A regular meeting of the board of directors shall be held immediately after and at the same place as the annual meeting of the shareholders, or as soon as practicable thereafter at the time and place, either within or outside Colorado, determined by the board, for the transaction of such business as may come before the meeting. The board of directors may provide by resolution the time and place, either within or outside Colorado, for the holding of additional regular meetings. Section 5. Special Meetings. Special meetings of the board of directors may be called by or at the request of the chairman of the board, the president or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place as the place, either within or outside Colorado, for holding any special meeting of the board called by them. Section 6. Notice. Notice of each meeting of the board of directors stating the Place, day and hour of the meeting shall be given to each director at least two days prior thereto by the mailing of written notice, or at least two days prior thereto by personal delivery of written notice or by telephonic or telegraphic notice, except that in the case of a meeting to be held pursuant to Section 11 of this Article telephone notice may be given one day prior thereto. (The method of notice need not be the same to each director.) Notice shall be deemed to be given, if mailed, when deposited in the United States mail, with postage thereon prepaid, addressed to the director at his or her business or residence address; if personally delivered, when delivered to the director; if telegraphed, when the telegram is delivered to the telegraph company; if telephoned, when communicated to the director. Any director may waive notice of any meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the board of directors need be specified in the notice or waiver of notice of such meeting unless otherwise required by statute. Section 7. Presumption of Assent. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the 8 9 adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Section 8. Quorum and Voting. A majority of the number of directors present in person shall constitute a quorum for the transaction of business at any meeting of the board of directors, and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. If less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than an announcement at the meeting, until a quorum shall be present. No director may vote or act by proxy at any meeting of directors. Section 9. Compensation. By resolution of the board of directors, any director may be paid any one or more of the following: his or her expenses, if any, of attendance at meetings; a fixed sum for attendance at such meeting; stock options for shares of common stock of the corporation; or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 10. Executive and Other Committees. By one or more resolutions, the board of directors may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in the resolution establishing such committee, shall have and may exercise all of the authority of the board of directors, except as prohibited by statute. The delegation of authority to any committee shall not operate to relieve the board of directors or any member of the board from any responsibility imposed by law. Rules governing procedures for meetings of any committee of the board shall be as established by the committee, or in the absence thereof by the board of directors. Section 11. Meetings by Telephone. Unless otherwise provided by the articles of incorporation, members of the board of directors or any committee thereof may participate in a meeting of the board or committee by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at the meeting. Section 12. Action Without a Meeting. Any action required or permitted to be taken at a meeting of the directors or any committee thereof may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors or committee members entitled to vote with respect to the subject matter thereof. Such consent (which may be signed in counterparts) shall have the same force and effect as a unanimous vote of the directors or committee members, and may be 9 10 stated as such in any articles or documents filed with the office of the Secretary of State of Colorado under the Colorado Corporation Code, or other governmental agency. ARTICLE IV. Officers and Agents Section 1. Number and Qualifications. The officers of the corporation shall be a chairman of the board, a president, a secretary and a treasurer. The board of directors may also elect or appoint such other officers, assistant officers and agents, including one or more vice chairmen, vice presidents, a controller, assistant secretaries and assistant treasurers, as it may consider necessary. One person may hold more than one office, except that no person may simultaneously hold the offices of president and secretary. All officers must be at least eighteen years old. Section 2. Election and Term of Office. The officers of the corporation shall be elected by the board of directors, and such election may be held at any meeting thereof. Each officer shall hold office until his or her successor shall have been duly elected and shall have been qualified, or until his or her earlier death, resignation or removal. Section 3. Salaries. The salaries of the officers shall be as fixed from time to time by the board of directors, and no officer shall be prevented from receiving a salary by reason of the fact that he or she is also a director of the corporation. Section 4. Removal. Any officer or agent may be removed by the board of directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not in itself create contract rights. Section 5. Vacancies. Any officer may resign at any time, subject to any rights or obligations under any existing contracts between the officer and the corporation, by giving written notice to the chairman of the board or to the board of directors. An officer's resignation shall take effect at the time specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 6. Authority and Duties of Officers. The officers of the corporation shall have the authority and shall exercise the powers and perform the duties specified below and as may be additionally specified by the chairman of the board, the board of directors or these bylaws, except that in any event each officer shall exercise such powers and perform such duties as may be required by law: 10 11 (a) Chairman of the Board. The chairman of the board shall, subject to the direction and supervision of the board of directors, (i) preside at all meetings of the corporation's shareholders and board of directors and (ii) perform such other duties as may be assigned to him or her from time to time by the board of directors. (b) President. The president, subject to the direction and supervision of the board of directors, shall (i) supervise the day-to-day operations of the corporation; (ii) in the absence of the chairman of the board, preside at all meetings of the shareholders and board of directors; (iii) be the chief executive officer of the corporation and perform the duties of and have all of the powers of and be subject to all of the restrictions upon the chairman of the board in the event of the chairman's absence, refusal or inability to act or during a vacancy in the office of the chairman of the board; and (iv) perform all other duties incident to the office of president and as from time to time may be assigned to him or her by the chairman of the board or by the board of directors. (c) Vice-Presidents. The vice-president, if any, (or if there is more than one, then each vice-president) shall assist the president and shall perform such duties as may be assigned to him or her by the president, the chairman of the board or the board of directors. The vice-president, if there is one (or if there is more than one, then the vice-president designated by the board of directors, or if there by no such designation then the vice-presidents in order of their election), shall, at the request of the president, or in his or her absence or inability or refusal to act, perform the duties of the president, and when so acting have all of the powers of and be subject to all of the restrictions upon the president. (d) Secretary. The secretary shall: (i) keep the minutes of the proceedings of the shareholders, the board of directors and any committees of the board,- (ii) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (iii) be custodian of the corporate records and of the seal of the corporation; (iv) keep at the corporation's registered office or principal place of business within or outside Colorado a record containing the names and addresses of all shareholders and the number and class of shares held by each, unless such a record shall be kept at the office of the corporation's transfer agent or registrar; (v) have general charge of the stock books of the corporation, unless the corporation has a transfer agent; and (vi) in general, perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him or her by the chairman of the board or by the board of directors. Assistant secretaries, if any, shall have the same duties and powers, subject to supervision by the secretary. (e) Treasurer. The treasurer shall: (i) be the principal financial officer of the corporation and have the care and custody 11 12 of all its funds, securities, evidences of indebtedness and other personal property and deposit the same in accordance with the instructions of the board of directors; (ii) receive and give receipts and acquittances for moneys paid in on account of the corporation, and pay out of the funds on hand all bills, payrolls and other just debts of the corporation of whatever nature upon maturity; (iii) unless there is a controller, be the principal accounting officer of the corporation and as such prescribe and maintain the methods and systems of accounting to be followed, keep complete books and records of account, prepare and file all local, state and federal tax returns, prescribe and maintain an adequate system of internal audit, and prepare and furnish to the chairman of the board and the board of directors statements of account showing the financial position of the corporation and the results of its operations; (iv) upon request of the board, make such reports to it as may be required at any time; and (v) perform all other duties incident to the office of treasurer and such other duties as from time to time may be assigned to him or her by the chairman of the board or by the board of directors. Assistant treasurers, if any, shall have the same powers and duties, subject to the supervision by the treasurer. ARTICLE V Stock Section 1. Issuance of Shares. The issuance or sale by the corporation of any shares of its authorized capital stock of any class, including treasury shares, shall be made only upon authorization by the board of directors, except as otherwise may be provided by statute. Section 2. Certificates. The shares of stock of the corporation shall be represented by consecutively numbered certificates signed in the name of the corporation by its president or a vice-president and the secretary or an assistant secretary, and shall be sealed with the seal of the corporation, or with a facsimile thereof. The signatures of the corporation's officers on any certificate may also be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer at the date of its issue. Certificates of stock shall be in such form consistent with law as shall be prescribed by the board of directors. No certificate shall be issued until the shares represented thereby are fully paid. Section 3. Consideration for Shares. Shares shall be issued for such consideration expressed in dollars (but not less than the 12 13 par value thereof) as shall be fixed from time to time by the board of directors. Treasury shares shall be disposed of for such consideration expressed in dollars as may be fixed from time to time by the board. Such consideration may consist, in whole or in part, of money, other property, tangible or intangible, or labor or services actually performed for the corporation, but neither promissory notes nor future services shall constitute payment or part payment for shares. Section 4. Lost Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock the board of directors may direct the issuance of a new certificate in lieu thereof upon such terms and conditions in conformity with law as it may prescribe. The board of directors may in its discretion require a bond, in such form and amount and with such surety as it may determine, before issuing a new certificate. Section 5. Transfer of Shares. Upon surrender to the corporation or to a transfer agent of the corporation of a certificate of stock duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, and cancel the old certificate. Every such transfer of stock shall be entered on the stock books of the corporation. Section 6. Holders of Record. The corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as may be required by the laws of Colorado. Section 7. Transfer Agents, Registrars and Paying Agents. The board directors may at its discretion appoint one or more transfer agents, registrars or agents for making payment upon any class of stock, bond, debenture or other security of the corporation. Such agents and registrars may be located either within or outside Colorado. They shall have such rights and duties and shall be entitled to such compensation as may be agreed. ARTICLE VI. Indemnification Section 1. Definitions. For purposes of this Article VI, the following terms shall have the meanings set forth below: (a) Action - Any threatened, pending or completed action, suit or proceeding , whether civil, criminal, administrative, 13 14 arbitrative or investigative; (b) Derivative Action- Any Action by or in the right of the corporation to procure a judgment in its favor; (c) Third Party Action - Any Action other than a Derivative Action; and (d) Indemnified Party - Any person who is or was a party or is threatened to be made a party to any Action by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including without limitation any employee benefit plan of the corporation for which any such person is or was serving as trustee, plan administrator or other fiduciary. Section 2. Third Party Actions. The corporation shall indemnify any Indemnified Party against expenses (including attorneys' fees), judgments, fines, excise taxes, and amounts paid in settlement actually and reasonably incurred by him or her in connection with any Third Party Action if, as determined pursuant to Section 5 below, he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal Action, had no reasonable cause to believe his or her conduct was unlawful. The termination of any Third Party Action by judgment, order, settlement, conviction or upon a plea of nolo contenders or its equivalent, shall not of itself create either a presumption that the Indemnified Party did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation or, with respect to any criminal Action, a presumption that the Indemnified Party had reasonable cause to believe that his or her conduct was unlawful. Section 3. Derivative Actions. The corporation shall indemnify any Indemnified Party against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of any Derivative Action if, as determined pursuant to Section 5 below, he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person is or has been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation unless and only to the extent that the court in which such Action was brought determines upon application that, despite the adjudication of liability and in view of all circumstances of the case, such Indemnified Party is fairly and reasonably entitled to indemnification for such expenses which such court deems proper. If any claim that may be made by or in the 14 15 right of the corporation against any person who may seek indemnification under this Article VI is Joined with any claim by any other party against such person in a single Action, the claim by or in the right of the corporation (and all expenses related thereto) shall nevertheless be deemed the subject of a separate and distinct Derivative Action for purposes of this Article VI. Section 4. Success on Merits or Otherwise. If and to the extent that any Indemnified Party has been successful on the merits or otherwise in defense of any Action referred to in Section 2 or 3 of this Article VI, or in defense of any claim, issue, or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith without the necessity of any determination that he or she has met the applicable standards of conduct set forth in Section 2 or 3 of this Article VI. Section 5. Determination. Except as provided in Section 4, any indemnification under Section 2 or 3 of this Article VI (unless ordered by a court) shall be made by the corporation only upon determination that indemnification of the Indemnified Party is proper in the circumstances because he or she has met the applicable standards of conduct set forth in said Section 2 or 3. Any indemnification under Section 4 of this Article VI (unless ordered by a court) shall be made by the corporation only upon a determination by the corporation of the extent to which the Indemnified Party has been or would have been successful on the merits or otherwise. Any such determination shall be made (a) by a majority vote of a quorum of the whole board of directors consisting of directors who are not or were not parties to the subject Action or (b) upon the request of a majority of the directors who are not or were not parties to such Action, or if there be none, upon the request of a majority of a quorum of the whole board of directors, by independent legal counsel (which counsel shall not be the counsel generally employed by the corporation in connection with its corporate affairs) in a written opinion, or (c) by the shareholders of the corporation at a meeting called for such purpose. Section 6. Payment in Advance. Expenses (including attorneys' fees) or some part thereof incurred by an Indemnified Party in defending any Action, shall be paid by the corporation in advance of the final disposition of such Action if a determination to make such payment is made on behalf of the corporation as provided in Section 5 of this Article VI; provided that no such payment may be made unless the corporation shall have first received a written undertaking by or on behalf of the Indemnified Party to repay such amount unless it is ultimately determined that he or she is entitled to be indemnified by the corporation as authorized in this Article VI. 15 16 Section 7. Other Indemnification. The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which any Indemnified Party or other person may be entitled under the articles of incorporation, any agreement, bylaw (including without limitation any other or further Section or provision of this Article VI), vote of the shareholders or disinterested directors or otherwise, and any procedure provided for by any of the foregoing, both as to action in his or her official capacity and as to action in another capacity while holding such office. Section 8. Period of Indemnification. Any indemnification pursuant to this Article VI shall continue as to any Indemnified Party who has ceased to be a director, officer, employee, or agent of the corporation or, at the request of the corporation, was serving as and has since ceased to be a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, including, without limitation, any employee benefit plan of the corporation for which any such person served as trustee, plan administrator or other fiduciary, and shall inure to the benefit of the heirs and personal representatives of such Indemnified Party. The repeal or amendment of this Article VI or of any Section or provision thereof which would have the effect of limiting, qualifying or restricting any of the powers or rights of indemnification provided or permitted in this Article VI shall not, solely by reason of such repeal or amendment, eliminate, restrict or otherwise affect the right or power of the corporation to indemnify any person or affect any right of indemnification of such person, with respect to any acts or omissions which occurred prior to such repeal or amendment. Section 9. Insurance. By action of the board of directors, notwithstanding any interest of the directors in such action, the corporation may purchase and maintain insurance, in such amounts as the board may deem appropriate, on behalf of any Indemnified Party against any liability asserted against him or her and incurred by him or her in his or her capacity of or arising out of his or her status as an Indemnified Party, whether or not the corporation would have the power to indemnify him or her against such liability under applicable provisions of law. Section 10. Right to Impose Conditions to Indemnification. The corporation shall have the right to impose, as conditions to any indemnification provided or permitted in this Article VI, such reasonable requirements and conditions as to the board of directors or shareholders may appear appropriate in each specific case and circumstances, including but not limited to any one or more of the following: (a) that any counsel representing the person to be indemnified in connection with the defense or settlement of any Action shall be counsel mutually agreeable to the person to be indemnified and to the corporation; (b) that the corporation shall have the right, at its option, to assume and control the defense or 16 17 settlement of any claim or proceeding made, initiated or threatened against the person to be indemnified; and (c) that the corporation shall be subrogated, to the extent of any payments made by way of indemnification, to all of the indemnified person's right of recovery, and that the person to be indemnified shall execute all writings and do everything necessary to assure such rights of subrogation to the corporation. ARTICLE VII. Miscellaneous Section 1. Waivers of Notice. Whenever notice is required by law, by the articles of incorporation or by these bylaws, a waiver thereof in writing signed by the director, shareholder or other person entitled to said notice, whether before or after the time stated therein, or his or her appearance at such meeting in person or (in the case of a shareholders' meeting) by proxy, shall be equivalent to such notice. Section 2. Voting of Securities by the Corporation. Unless otherwise provided by resolution of the board of directors, on behalf of the corporation the chairman of the board, the president or any vice-president shall attend in person or by substitute appointed by him or her, or shall execute written instruments appointing a proxy or proxies to represent the corporation at, all meetings of the shareholders of any other corporation, association or other entity in which the corporation holds any stock or other securities, and may execute written waivers of notice with respect to any such meetings. At all such meetings and otherwise, the president or any vice-president, in person or by substitute or proxy as aforesaid, may vote the stock or other securities so held by the corporation and may execute written consents and any other instruments with respect to such stock or securities and may exercise any and all rights and powers incident to the ownership of said stock or securities, subject, however, to the instructions, if any, of the board of directors. Section 3. Seal. The corporate seal of the corporation shall be circular in form and shall contain the name of the corporation, the year of its organizational and the words "Seal, Colorado". Section 4. Fiscal Year. The fiscal year of the corporation shall be established by the board of directors. Section 5. Amendments. Subject to repeal or change of action of the shareholders, the power to alter, amend or repeal these bylaws and adopt new bylaws shall be vested in the board of directors. 17 18 Dated: October 1, 1984 /s/ Stephen M. Gose, Jr. ----------------------------- Stephen M. Gose, Jr. /s/ James E. Sigmon ----------------------------- James E. Sigmon /s/ Stephen M. Gose, III ----------------------------- Stephen M. Gose, III 18 EX-4.3 4 1995 FLEXIBLE INCENTIVE PLAN 1 EXHIBIT 4.3 THE EXPLORATION COMPANY 1995 FLEXIBLE INCENTIVE PLAN Section 1. PURPOSE OF THE PLAN The purposes of The Exploration Company 1995 Flexible Incentive Plan (the "Plan") are to promote the interests of The Exploration Company (together with any successor thereto, the "Company") and its stockholders by enabling the Company to attract, motivate and retain key employees by offering such key employees performance-based stock incentives and other equity interests in the Company and other incentive awards that recognize the creation of value for the stockholders of the Company and promote the Company's long-term growth and success. To achieve these purposes, eligible persons may receive stock options, Stock Appreciation Rights, Restricted Stock, Performance Awards, performance stock, Dividend Equivalent Rights and any other Awards, or any combination thereof. Section 2. DEFINITIONS As used in the Plan, the following terms shall have the meanings set forth below unless the content otherwise requires: 2.1 "Award" shall mean the grant of a stock option, a Stock Appreciation Right, a Restricted Stock, a Performance Award, performance stock, a Dividend Equivalent Right or any other award under the Plan. 2.2 "Board" shall mean the Board of Directors of the Company, as the same may be constituted from time to time. 2.3 "Change in Control" shall mean, after the effective date of the Plan, (i) the occurrence of an event of a nature that would be required to be reported in response to Item I or Item 2 of a Form 8-K Current Report of the Company promulgated pursuant to Sections 13 and 15(d) of the Exchange Act; provided that, without limitation, such a Change in Control shall be deemed to have occurred if (a) any "person", as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities or (b) during any period of two consecutive years, individuals who at 2 the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof unless the election by the Board or the nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved; (ii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being. converted into voting securities of the surviving entity) more than eighty percent (80%) of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a reorganization or recapitalization of the Company, or a similar transaction (collectively, a "Reorganization"), in which no "person" acquires more than twenty percent (20%) of the combined voting power of the Company's then outstanding securities shall not constitute a Change in Control of the Company; or (iii) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 2.5 "Committee" shall mean the Stock Option and Compensation Committee, if such a separate committee is appointed by the Board, or, until such time as a separate committee is appointed, it shall mean the Board. If a separate committee is appointed, the Committee shall meet the applicable requirements for "disinterested administration" within the requirements of Rule 16b-3 promulgated under the Exchange Act and any successor thereunder promulgated during the duration of the Plan. The Board may amend the Plan to modify the definition of Committee within the limits of Rule 16b-3 to assure that the Plan is administered in compliance with Rule 16b-3. Initially, the Committee will consist of not less than three (3) members of the Board who are appointed by, and serve at the pleasure of the Board and who are (i) "disinterested" within the meaning of Rule 16b-3 and (ii) "outside directors," as required under Section 162(m) of the Code and such Treasury Regulations as may be promulgated thereunder. The Board does not meet the applicable requirements of Rule 16b-3. 2.6 "Common Stock" shall mean the Common Stock, par value $.01 per share, of the Company. 2.7 "Designated Beneficiary" shall mean the beneficiary designated by a Participant in a manner determined by the Committee, to exercise rights of the 2 3 Participant in the event of the Participant's death. In the absence of an effective designation by a Participant the Designated Beneficiary shall be the Participant's estate. 2.8 "Disability" shall mean permanent and total inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, as determined in the sole and absolute discretion of the Committee. 2.9 "Dividend Equivalent Right" shall mean the right of the holder thereof to receive credits based on the cash dividends that would have been paid on the Shares specified in an Award granting Dividend Equivalent Rights if the Shares subject to such Award were held by the person to whom the Award is made. 2.10 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. 2.11 "Fair Market Value" shall mean with respect to the Shares, as of any date, (i) the last reported sales price on any stock exchange on which the Common Stock is traded or, if not reported on such exchange, on the composite tape, or, in case no such sale takes place on such day, the average of the reported closing bid and asked quotations on such exchange; (ii) if the Common Stock is not listed on a stock exchange or no such quotations are available, the closing price of the Common Stock as reported by the National Market System of the National Association of Securities Dealers, Inc., or, if no such quotations are available, the average of the high bid and low asked quotations in the over-the-counter market as reported by the National Quotation Bureau Incorporated, or similar organization; or (iii) in the event that there shall be no public market for the Common Stock, the fair market value of the Common Stock as determined (which determination shall be conclusive) in good faith by the Committee, based upon the value of the Company as a going concern, as if such Common Stock were publicly owned stock, but without any discount with respect to minority ownership. 2.12 "Incentive Stock Option" shall mean any stock option awarded under the Plan which qualifies as an "Incentive Stock Option" under Section 422 of the Code or any successor provision. 2.13 "Non-Tandem Stock Appreciation Right" shall mean any Stock Appreciation Right granted alone and not in connection with an Award which is a stock option. 3 4 2.14 "Non-Qualified Stock Option" shall mean any stock option awarded under the Plan that does not qualify, as an Incentive Stock Option. 2.15 "Option" shall mean any person who has been granted a stock option under the Plan and who has executed a written stock option agreement with the Company reflecting the terms of such grant. 2.16 "Performance Award" shall mean any Award thereunder of Shares, units or rights based upon, payable in, or otherwise related to, Shares (including Restricted Stock), or cash of an equivalent value, as die Committee may determine, at the end of a specified performance period established by the Committee. 2.17 "Plan" shall mean The Exploration Company 1995 Flexible Incentive Plan set forth herein. 2.18 "Reload Option" shall mean a stock option as deemed in subsection 6.6(b) herein. 2.19 "Restricted Stock" shall mean any Award of Shares under the Plan that are subject to restrictions or risk of forfeiture. 2.20 "Retirement" shall mean termination of employment other than discharge for cause, after age 65 or on or before age 65 if pursuant to the terms of any retirement plan maintained by the Company or any of its Subsidiaries in which such person participates. 2.21 "Shares" shall mean shares of the Company's Common Stock and any shares of capital stock or other securities of the Company hereafter issued or issuable upon, in respect of or in substitution or exchange for such Shares. 2.22 "Stock Appreciation Right" shall mean the right of the holder thereof to receive an amount in cash or Shares equal to the excess of the Fair Market Value of a Share on the date of exercise over the Fair Market Value of a Share on the date of the grant (or such other value as may be specified in the agreement granting the Stock Appreciation Right). 2.23 "Subsidiary" shall mean a subsidiary corporation of the Company, as defined in Section 424(f) of the Code. 2.24 "Tandem Stock Appreciation Right" shall mean a Stock Appreciation Right granted in connection with an Award which is a stock option. 4 5 Section 3. ADMINISTRATION OF THE PLAN 3.1 Committee. The Plan shall be administered and interpreted by the Committee. 3.2 Awards. Subject to the provisions of the Plan and directions from the Board, the Committee is authorized to: (a) determine the persons to whom Awards are to be granted; (b) determine the types and combinations of Awards to be granted, the number of Shares to be covered by the Award, the pricing of the Award, the time or times when the Award shall be granted and may be exercised, the terms, performance criteria or other conditions, vesting periods or any restrictions for an Award, any restrictions on Shares acquired pursuant to the exercise of an Award and any other terms and conditions of an Award; (c) conclusively interpret the provisions of the Plan; (d) prescribe, amend and rescind rules and regulations relating to the Plan or make individual decisions as questions arise, or both; (e) determine whether, to what extent and under what circumstances to provide loans from the Company to participants to purchase Shares subject to Awards under the Plan, and the terms and conditions of such loans; (f) rely upon employees of the Company for such clerical and recordkeeping duties as may be necessary in connection with the administration of the Plan; and (g) make all other determinations and take all other actions necessary or advisable for the administration of the Plan. 3.3 Procedures. A majority of the Committee members shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. All questions of interpretation and application of the Plan or pertaining to any question of fact or Award granted thereunder shall be decided by the Committee, whose decision shall be final, conclusive and binding upon the Company and each other affected party. Section 4. SHARES SUBJECT TO PLAN 4.1 Limitations. The maximum number of Shares that may be issued with respect to Awards under the Plan shall not exceed 400,000 unless such maximum shall 5 6 be increased or decreased by reason of changes in capitalization of the Company as hereinafter provided. The Shares issued pursuant to the Plan may be authorized but unissued Shares, or may be issued Shares which have been reacquired by the Company. 4.2 Changes. To the extent that any Award under the Plan, or any stock option or performance award granted under any prior incentive plan of the Company, shall be forfeited, shall expire or shall be canceled, in whole or in part then the number of Shares covered by the Award or stock option so forfeited, expired or canceled may again be awarded pursuant to the provisions of the Plan. In the event that Shares are delivered to the Company in full or partial payment of the exercise price for the exercise of a stock option granted under the Plan or any prior incentive plan of the Company, the number of Shares available for future Awards under the Plan shall be reduced only by the net number of Shares issued upon the exercise of the option. Awards that may be satisfied either by the issuance of Shares or by cash or other consideration shall, until the form of consideration to be paid is finally determined, be counted against the maximum number of Shares that may be issued under the Plan. If the Award is ultimately satisfied by the payment of consideration other than Shares, as, for example, a stock option granted in tandem with a Stock Appreciation Right that is settled by a cash payment of the stock appreciation, such Shares may again be made the subject of an Award under the Plan. Awards will not reduce the number of Shares that may be issued pursuant to the Plan if the settlement of the Award will not require the issuance of Shares, as, for example, a Stock Appreciation Right that can be satisfied only by the payment of cash. Section 5. ELIGIBILITY Eligibility for participation in the Plan shall be confined to those persons who are employed by the Company, and who are officers or directors of the Company, or who are in managerial or other key positions within the Company. In making any determination as to persons to whom Awards shall be granted, the type of Award, and/or the number of Shares to be covered by the Award, the Committee shall consider the position and responsibilities of the person, his or her importance to the Company, the duties of such person, his or her past, present and potential contributions to the growth and success of the Company, and such other factors as the Committee shall deem relevant in connection with accomplishing the purposes of the Plan. Section 6. STOCK OPTIONS 6.1 Grants. The Committee may grant stock options alone or in addition to other Awards granted under the Plan to any eligible officer, director or other key employee. Each person so selected shall be offered an option to purchase the number of Shares determined by the Committee. The Committee shall specify whether such option is an Incentive Stock Option or Non-Qualified Stock Option and any other terms and conditions relating to such Award. To the extent that any stock option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such stock option or the portion thereof which does not qualify 6 7 shall constitute a separate Non-Qualified Stock Option. Each such person so selected shall have a reasonable period of time within which to accept or reject the offered option. Failure to accept within the period so fixed by the Committee may be treated as a rejection. Each person who accepts an option shall enter into a written agreement with the Company, in such form as the Committee may prescribe, setting forth the terms and conditions of the option, consistent with the provisions of the Plan. The Option and the Company shall enter into option agreements for Incentive Stock Options and NonQualified Stock Options. At any time and from time to time, the Option and the Company may agree to modify an option agreement so that an incentive Stock Option may be converted to a Non-Qualified Stock Option. The Committee may require that an Option meet certain conditions before the option or a portion thereof may vest or be exercised, as, for example, that the Option remain in the employ of the Company for a stated period or periods of time before the option, or stated portions thereof may vest or be exercised. 6.2 Option Price. The option exercise price of the Shares covered by each stock option shall be determined by the Committee; provided, however, that the option exercise price of an Incentive Stock Option shall not be less than one hundred percent (100%) of the Fair Market Value of Shares on the date of the grant of such Incentive Stock Option. 6.3 Incentive Stock Options Limitations. (a) In no event shall any person be granted Incentive Stock Options to the extent that the Shares covered by any Incentive Stock Options (and any incentive stock options granted under any other plans of the Company and its Subsidiaries) that may be exercised for the first time by such person in any calendar year have an aggregate Fair Market Value in excess of $100,000. For this purpose, the Fair Market Value of the Shares shall be determined as of the dates on which the Incentive Stock Options are granted. It is intended that the limitation on Incentive Stock Options provided in this subsection 6.3(a) be the maximum limitation on options which may be considered Incentive Stock Options under the Code. (b) Notwithstanding anything herein to the contrary, in no event shall any employee owning more than ten percent (10%) of the total combined voting power of the Company or any Subsidiary be granted an Incentive Stock Option thereunder unless the option exercise price shall be at least one hundred ten percent (110%) of the Fair Market Value of the Shares subject to such Incentive Stock Option at the time that the Incentive Stock Option is granted and the term of such Incentive Stock Option shall not exceed five (5) years. 7 8 6.4 Option Term. Subject to subsection 6.3(b) hereof, the term of a stock option shall be for such period of months or years from the date of its grant as may be determined by the Committee; provided, however, that no Incentive Stock Option shall be exercisable later than ten (10) years from the date of its grant. Furthermore, no Incentive Stock Option may be exercised unless, at the time of such exercise, the Option is, and has been continuously since the date of grant of his or her Incentive Stock Option, employed by the Company, except that: (a) An Incentive Stock Option may, to the extent vested, be exercised within the period of three months after the date the Participant ceases to be an employee of the Company (or within such lesser period as may be specified in the applicable option agreement), provided that the option agreement may designate a longer exercise period and that the exercise after such three-month period shall be treated as the exercise of a Non-Qualified Stock Option under the Plan; (b) If the Option dies while in the employ of the Company, or within three months after the Option ceases to be such an employee, the Incentive Stock Option may, to the extent vested, be exercised by the Optionee's Designated Beneficiary within the period of one year after the date of death (or within such lesser period as may be specified in the applicable option agreement); and (c) If the Option ceases to be an employee of the Company by reason of the Optionee's Disability, the Incentive Stock Option may be exercised within the period of one year after the date of Disability (or within such lesser period as maybe specified in the applicable option agreement). 6.5 Vesting of Stock Options. (a) Each stock option granted thereunder may only be exercised to the extent that the Option is vested in such option. Each stock option shall vest separately in accordance with the option vesting schedule, if any, determined by the Committee in its sole discretion, which will be incorporated in the stock option agreement entered into between the Company and each Option. The option vesting schedule will be accelerated if, in the sole discretion of the Committee, the Committee determines that acceleration of the option vesting schedule would be desirable for the Company. (b) In the event of the dissolution or liquidation of the Company, each stock option granted under the Plan shall terminate as of a date to be fixed by the Board; provided, however, that not less than thirty (30) days' written notice of the date so fixed shall be given to each Option and each such Option shall be fully vested in and shall have the right during such period to exercise the option, even though such option would not otherwise be exercisable under the option vesting 8 9 schedule. At the end of such period, any unexercised option shall terminate and be of no other effect. (c) In the event of a Reorganization (as defined in Section 2.3 hereof): (1) If there is no plan or agreement respecting the Reorganization, or if such plan or agreement does not specifically provide for the change, conversion or exchange of the Shares under outstanding and unexercised stock options for other securities thin the provisions of subsection 6.5(b) shall apply as if the Company had dissolved or been liquidated on the effective date of the Reorganization; or (2) If there is a plan or agreement respecting the Reorganization, and if such plan or agreement specifically provides for the change, conversion or exchange of the Shares under outstanding and unexercised stock options for securities of another corporation, then the Board shall adjust the Shares under such outstanding and unexercised stock options (and shall adjust the Shares remaining under the Plan which are then available to be awarded under the Plan, if such plan or agreement makes no specific provision therefor) in a manner not inconsistent with the provisions of such plan or agreement for the adjustment change, conversion or exchange of such Shares and such options. (d) In the event of a Change in Control of the Company, all stock options and any associated Stock Appreciation Rights shall become fully vested and immediately exercisable and the vesting of all performance-based stock options shall be determined as if the performance period or cycle applicable to such stock options had ended immediately upon such Change in Control; provided, however, that if in the opinion of counsel to the Company the immediate exercisability of options when taken into consideration with all other "parachute payments" as defined in Section 28OG of the Code, as amended, would result in an "excess parachute payment" as defined in such section as well as an exercise tax imposed by Section 4999 of the Code, such options and any associated Stock Appreciation Rights shall become fully vested and immediately exercisable, except as and to the extent the Committee, in its sole discretion, shall otherwise determine, and which determination by the Committee shall be based solely upon maximizing the after-tax benefits to be received by any such Option. 6.6 Exercise of Stock Options. (a) Stock options may be exercised as to Shares only in amounts and at intervals of time specified in the written option agreement between the Company and the Option. Each exercise of a stock option, or any part thereof, shall be evidenced by a notice in writing to the Company. The purchase price of 9 10 the Shares as to which an option shall be exercised shall be paid in full at the time of exercise, and may be paid to the Company either: (1) in cash (including check, bank draft or money order); or (2) by the delivery of Shares having a Fair Market Value equal to the aggregate option rate; (3) by a combination of cash and Shares; or (4) by other consideration deemed acceptable by the Committee in its sole discretion. (b) If an Option delivers Shares (including Shares of Restricted Stock) already owned by him or her in full or partial payment of the exercise price for any stock option granted under the Plan or any prior incentive plan of the Company, or if the Option elects to have the Company reflect that number of Shares out of the Shares being acquired through the exercise of the option having a Fair Market Value equal to the exercise price of the stock option being exercised, the Committee may authorize the automatic grant of a new option (a "Reload Option") for that number of Shares as shall equal the number of already owned Shares surrendered (including Shares of Restricted Stock) or newly acquired Shares being retained in payment of the option exercise price of the underlying stock option being exercised. The grant of a Reload Option will become effective upon the exercise of the underlying stock option. The option exercise price of the Reload Option shall be the Fair Market Value of a Share on the effective date of the grant of the Reload Option. Each Reload Option shall be exercisable no earlier than six (6) months from the date of its grant and no later than the time when the underlying stock option being exercised could be last exercised. The Committee may also specify additional terms, conditions and restrictions for the Reload Option and the Shares to be acquired upon the exercise thereof. (c) The amount, as determined by the Committee, of any federal, state or local tax required to be withheld by the Company due to the exercise of a stock option shall be satisfied by payment by the Option to the Company of the amount of such withholding obligation in cash or other consideration acceptable to the Committee in its sole discretion. (d) An Option shall not have any of the rights of a stockholder of the Company with respect to the Shares covered by a stock option except to the extent that one or more certificates representing such Shares shall have been delivered to the Option, or the Option has been determined to be a stockholder of record by the Company's transfer agent, upon due exercise of the option. 10 11 6.7 Date of a Stock Option Grant. The granting of a stock option shall take place only upon the execution and delivery by the Company and an optionee of an option agreement. Neither any action taken by the Board nor anything contained in the Plan or in any resolution adopted or to be adopted by the Board or the stockholders of the Company shall constitute the granting of a stock option under the Plan. Section 7. STOCK APPRECIATION RIGHTS 7.1 Grants. The Committee may grant to any eligible employee either Non-Tandem Stock Appreciation Rights or Tandem Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as the Committee shall impose. The grant of the Stock Appreciation Right may provide that the holder may be paid for the value of the Stock Appreciation Right either in cash or in Shares, or a combination thereof, at the discretion of the Committee. In the event of the exercise of a Stock Appreciation Right payable in Shares, the holder of the Stock Appreciation Right shall receive that number of whole Shares of stock of the Company having an aggregate Fair Market Value on the date of exercise equal to the value obtained by multiplying (i) either (a) in the case of a Tandem Stock Appreciation Right, the difference between the Fair Market Value of a Share on the date of exercise over the per share exercise price of the related option, or (b) in the case of a Non-Tandem Stock Appreciation Right the difference between the Fair Market Value of a Share on the date of exercise over the Fair Market Value on the date of the grant by (ii) the number of Shares as to which the Stock Appreciation Right is exercised. However, notwithstanding the foregoing, the Committee, in its sole discretion, may place a ceiling on the amount payable upon exercise of a Stock Appreciation Right but any such limitation shall be specified at the time that the Stock Appreciation Right is granted. 7.2 Exercisability. A Tandem Stock Appreciation Right may be granted at the time of the grant of the related stock option or, if the related stock option is a Non-Qualified Stock Option, at any time thereafter during the term of the stock option. A Tandem Stock Appreciation Right granted in connection with an Incentive Stock Option (i) may be exercised at, and only at, the times and to the extent the related Incentive Plan Stock Option is exercisable, (ii) expires upon the termination of the related Incentive Stock Option, (iii) may not exceed 100% of the difference between the exercise price of the related Incentive Stock Option and the market price of the Shares subject to the related Incentive Stock Option at the time the Tandem Stock Appreciation Right is exercised and (iv) may be exercised at, and only at, such times as the market price of the Shares subject to the related Incentive Stock Option exceeds the exercise price of the related Incentive Stock Option. The Tandem Stock Appreciation Right may be transferred at, and only at, the times and to the extent the related stock option is transferable. If a Tandem Stock Appreciation Right is granted, there shall be surrendered and canceled from the related option at the time of exercise of the Tandem Stock Appreciation Right, in lieu of exercise under the related option, that number of Shares as shall equal the number of Shares as to which the Tandem Stock Appreciation Right shall have been exercised. 11 12 7.3 Certain Limitations on Non-Tandem Stock Appreciation Rights. A Non-Tandem Stock Appreciation Right will be exercisable as provided by the Committee and will have such other terms and conditions as the Committee may determine. A Non-Tandem Stock Appreciation Right is subject to acceleration of vesting or immediate termination in certain circumstances in the same manner as stock options pursuant to subsections 6.4 and 6.5 of the Plan. 7.4 Limited Stock Appreciation Rights. The Committee is also authorized to grant "limited stock appreciation rights," either as Tandem Stock Appreciation Rights or Non-Tandem Stock Appreciation Rights. Limited stock appreciation rights would become exercisable only upon the occurrence of a Change in Control or such other event as the Committee may designate at the time of grant or thereafter. Section 8. RESTRICTED STOCK 8.1 Grants. The Committee may grant Awards of Restricted Stock for no cash consideration, for such minimum consideration as may be required by applicable law, or for such other consideration as may be specified by the grant. The terms and conditions of the Restricted Stock shall be specified by the grant agreement. The Committee, in its sole discretion, may specify any particular rights which the person to whom an Award of Restricted Stock is made shall have in the Restricted Stock during the restriction period and the restrictions applicable to the particular Award, the vesting schedule (which may be based on service, performance or other factors) and rights to acceleration of vesting (including, without limitation, whether non-vested Shares are forfeited or vested upon termination of employment). Further, the Committee may award performance-based Restricted Stock by conditioning the grant, or vesting or such other factors, such as the release, expiration or lapse of restrictions upon any such Award (including the acceleration of any such conditions or terms) of such Restricted Stock upon the attainment of specified performance goals or such other factors as the Committee may determine. The Committee shall also determine when the restrictions shall lapse or expire and the conditions, if any, under which the Restricted Stock will be forfeited or sold back to the Company. Each Award of Restricted Stock may have different restrictions and conditions. The Committee, in its discretion, may prospectively change the restriction period and the restrictions applicable to any particular Award of Restricted Stock. Unless otherwise set forth in the Plan, Restricted Stock may not be disposed of by the recipient until the restrictions specified in the Award expire. 8.2 Awards. and Certificates. Any Restricted Stock issued hereunder may be evidenced such manner as the Committee, in its sole discretion, shall deem appropriate including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Shares of Restricted Stock awarded hereunder, such certificate shall bear an appropriate legend with respect to the restrictions applicable to such Award. The Company may retain, at its option, the physical custody of any stock certificate representing any awards of Restricted Stock 12 13 during the restriction period or require that the Restricted Stock be placed in escrow or trust, along with a stock power endorsed in blank, until all restrictions are removed or expire. Section 9. PERFORMANCE AWARDS 9.1 Grants. A Performance Award may consist of either or both, as the Committee may determine, of (i) "Performance Shares" or the right to receive Shares, Restricted Stock or cash of an equivalent value, or any combination thereof as the Committee may determine, or (ii) "Performance Units," or the right to receive a fixed dollar amount payable in cash, Common Stock, Restricted Stock or any combination thereof, as the Committee may determine. The Committee may grant Performance Awards to any eligible employee, for no cash consideration, for such minimum consideration as may be required by applicable law or for such other consideration as may be specified at the time of the grant. The terms and conditions of Performance Awards shall be specified at the time of the grant and may include provisions establishing the performance period, the performance criteria to be achieved during a performance period the criteria used to determine vesting (including the acceleration thereof), whether Performance Awards are forfeited or vest upon termination of employment during a performance period and the maximum or minimum settlement values. Each Performance Award shall have its own terms and conditions, which shall be determined in the discretion of the Committee. If the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable because of a change in the Company's business, operations, corporate structure or for other reasons that the Committee deems satisfactory, the Committee may modify the performance measures or objectives and/or the performance period. 9.2 Terms and Conditions. Performance Awards may be valued by reference to the Fair Market Value of a Share or according to any formula or method deemed appropriate by the Committee, in its sole discretion, including, but not limited to, achievement of specific financial, production, sales, cost or earnings performance objectives that the Committee believes to be relevant to the Company's business and for remaining in the employ of the Company for a specified period of time, or the Company's performance or the performance of its Common Stock measured against the performance of the market the Company's industry segment or its direct competitors. Performance Awards may be paid in cash, Shares (including Restricted Stock) or other consideration, or any combination thereof If payable in Shares, the consideration for the issuance of the Shares may be the achievement of the performance objective established at the time of the grant of the Performance Award. Performance Awards may be payable in a single payment or in installments and may be payable at a specified date or dates or upon attaining the performance objective, all at the Committee's discretion. The extent to which any applicable performance objective has been achieved shall be conclusively determined by the Committee. 13 14 Section 10. DIVIDEND EQUIVALENT RIGHTS The Committee may grant a Dividend Equivalent Right either as a component of another Award or as a separate Award, and, in general, each such holder of a Dividend Equivalent Right that is outstanding on a dividend record date for the Company's Common Stock shall be credited with an amount equal to the cash or stock dividends or other distributions that would have been received had the Shares covered by the Award been issued and outstanding on the dividend record date. The terms and conditions of the Dividend Equivalent Right shall be specified by the grant. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional Shares (which may thereafter accrue additional Dividend Equivalent Rights). Any such reinvestment shall be at the Fair Market Value at the time thereof. Dividend Equivalent Rights may be settled in cash or Shares, or a combination thereof, in a single payment or in installments. A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement or payment for or lapse of restrictions on such other Award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other Award. A Dividend Equivalent Right granted as a component of another Award may also contain terms a conditions different from such other Award. Section 11. OTHER AWARDS The Committee may grant to any eligible employee other forms of Awards based upon, payable in or otherwise related to, in whole or in part, Shares if the Committee, in its sole discretion, determines that such other form of Award is consistent with the purposes and restrictions of the Plan. The terms and conditions of such other form of Award shall be specified by the grant including, but not limited to, the price, if any, and the vesting schedule, if any. Such Awards may be granted for no cash consideration, for such minimum consideration as may be required by applicable law or for such other consideration as may be specified by the grant. Section 12. COMPLIANCE WITH SECURITIES AND OTHER LAWS In no event shall the Company be required to sell or issue Shares under any Award if the sale or issuance thereof would constitute a violation of applicable federal or state securities laws or regulations or a violation of any other law or regulation of any governmental or regulatory agency or authority or any national securities exchange. As a condition to any sale or issuance of Shares, the Company may place legends on Shares, issue stop transfer orders and require such agreements or undertakings as the Company may deem necessary or advisable to assure compliance with any such laws or regulations, including, if the Company or its counsel deems it appropriate, representations from the person to whom an Award is granted that he or she is acquiring the Shares solely for investment and not with a view to distribution and that no distribution of the Shares will be made unless registered pursuant to applicable federal and state securities laws, or in the opinion of counsel of the Company, such registration is unnecessary. 14 15 Section 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR REORGANIZATION The value of an Award in Shares shall be adjusted from time to time as follows: (a) Subject to any required action by stockholders, the number of Shares covered by each outstanding Award, and the exercise price, shall be proportionately adjusted for any increase or decrease in the number of issued Shares of the Company resulting from a subdivision or consolidation of Shares or the payment of a stock dividend (but only in Shares) or any other increase or decrease in the number of Shares affected without receipt of consideration by the Company. (b) Subject to any required action by stockholders, if the Company shall be the surviving corporation in any Reorganization, merger or consolidation, each outstanding Award shall pertain to and apply to the securities to which a holder of the number of Shares subject to the Award would have been entitled, and if a plan or agreement reflecting any such event is in effect that specifically provides for the change, conversion or exchange of Shares, then any adjustment to Shares relating to an Award hereunder shall not be inconsistent with the terms of any such plan or agreement. (c) In the event of a change in the Shares of the Company as presently constituted, which is limited to a change of par value into the same number of Shares with a different par value or without par value, the Shares resulting from any such change shall be deemed to be the Shares within the meaning of the Plan. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Board, whose determination shall be final, binding and conclusive. Except as hereinbefore expressly provided in the Plan, any person to whom an Award is granted shall have no rights by reason of any subdivision or consolidation of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, reorganization, merger or consolidation, or spin-off of assets or stock of another corporation, and any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect and no adjustment by reason thereof shall be made with respect to, the number or exercise price of Shares subject to an Award. The grant of an Award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, Reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell or transfer all or any part of its business or assets. 15 16 Section 14. AMENDMENT OR TERMINATION OF THE PLAN 14.1 Amendment of the Plan. Notwithstanding anything contained in the Plan to the contrary, all provisions of the Plan may at any time or from time to time be modified or amended by the Board; provided, however, that no Award at any time outstanding under the Plan may be modified, unpaired or canceled adversely to the holder of the Award without the consent of such holder; and provided, further, that the Plan may not be amended without approval by the holders of a majority of the Shares of the Company represented and voted at a meeting of the stockholders (a) to increase the maximum number of Shares subject to the Plan, (b) to materially modify the requirements as to eligibility for participation in the Plan, (c) to decrease the minimum exercise price for options, (d) to otherwise materially increase the benefits accruing to persons to whom Awards may be made under the Plan, as amended, or (e) if such approval is otherwise necessary, to comply with Rule 16b-3 promulgated under the Exchange Act as amended, or to comply with any other applicable laws, regulations or listing requirements, or to qualify for an exemption or characterization that is deemed desirable by the Board. 14.2 Termination of the Plan. The Board may suspend or terminate the Plan at any time, and such suspension or termination may be retroactive or prospective. However, no Award may be granted on or after the tenth anniversary of the adoption of the Plan. Termination of the Plan shall not impair or affect any Award previously granted hereunder and the rights of the holder of the Award shall remain in effect until the Award has been exercised in its entirety or has expired or otherwise has been terminated by the terms of such Award. Section 15. AMENDMENTS AND ADJUSTMENTS TO AWARDS The Committee may amend, modify or terminate any outstanding Award with the Participants consent at any time prior to payment or exercise in any manner not inconsistent with the terms of the Plan, including, without limitation, (i) to change the date or dates as of which (A) an option becomes exercisable or (B) a performance-based Award is deemed earned, (ii) to amend the terms of any outstanding Award to provide an exercise price per share which is higher or lower than the then current exercise price per share of such outstanding Award or (iii) to cancel an Award and grant a new Award in substitution therefor under such different terms and conditions as it determines in its sole and complete discretion to be appropriate including, but not limited to, having an exercise price per share which may be higher or lower than the exercise price per share of the canceled Award. The Committee is also authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 13 hereof affecting the Company, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent reduction or enlargement of the benefits or potential benefits intended to be made available under the Plan. Any provision of the Plan or any agreement regarding an Award to the contrary notwithstanding, the Committee may cause any 16 17 Award granted to be canceled in consideration of a cash payment or alternative Award made to the holder of such canceled Award equal in value to the Fair Market Value of such canceled Award. The determinations of value under this Section 15 shall be made by the Committee in its sole discretion. Section 16. GENERAL PROVISIONS 16.1 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. 16.2 No Right to Employment. Nothing in the Plan or in any Award, nor the grant of any Award, shall confer upon or be construed as giving any recipient of an Award any right to remain in the employ of the Company. Further, the Company may at any time dismiss a participant in the Plan from employment, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award agreement. No employee, participant or other person shall have any claim to be granted any Award, and there is no obligation for uniformity or treatment of employees, participants or holders or beneficiaries of Awards. 16.3 GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND EFFECT OF THE PLAN AND ANY RULES AND REGULATIONS RELATING TO THE PLAN SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. 16.4 Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or deemed amended without in the sole determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. 16.5 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. 16.6 Headings. Headings are given to the subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way 17 18 material or relevant to the construction or interpretation of the Plan or any provision thereof. 16.7 Effective Date. The Plan shall be effective as of the date of its approval by the holders of a majority of the Shares of the Company represented and voting at the next Annual Meeting of Stockholders. If the Plan is not approved by the stockholders at the 1994 Annual Meeting, after such date, the Plan and all Awards granted hereunder, if any, shall be void. 16.8 Non-Transferability of Awards. Awards shall not be transferable otherwise than by will or the laws of descent and distribution, and Awards may be exercised, during the lifetime of the holder, only by the holder; provided, however, that with the approval of the Committee, Awards other than Incentive Stock Options may be transferred as directed under a qualified domestic relations order. Any attempted assignment, transfer, pledge, hypothecation or other disposition of an Award contrary to the provisions hereof, or the levy of any execution, attachment or similar process upon an Award shall be null and void and without effect. Section 17. NAMED EXECUTIVE OFFICERS 17.1 Applicability of Section 17. The provisions of this Section 17 shall apply only to those executive officers (i) whose compensation is required to be reported in the Company's proxy statement pursuant to Item 402(a)(3)(i) and (ii) of Regulation S-K under the general rules and regulations under the Exchange Act, as amended, and (ii) whose total compensation, including estimated Awards, is determined by the Committee to possibly be subject to the limitations on deductions imposed by Section 162(m) of the Code ("Named Executive Officers"). In the event of any inconsistencies between this Section 17 and the other Plan provisions as they pertain to Named Executive Officers, the provisions of this Section 17 shall control. 17.2 Establishment of Performance Goals. Awards for Named Executive Officers, other than stock options and Stock Appreciation Rights, shall be based on the attainment of certain performance goals. No later than the earlier of (i) ninety (90) days after the commencement of the applicable fiscal year or such other award period as may be established by the Committee ("Award Period") and (ii) the completion of twenty-five percent (25%) of such Award Period, the Committee shall establish, in writing, the performance goals applicable to each such Award for Named Executive Officers. At the time the performance goals are established by the Committee, their outcome must be substantially uncertain. In addition, the performance goal must state, in terms of an objective formula or standard, the method for computing the amount of compensation payable to the Named Executive Officer if the goal is obtained. Such formula or standard shall be sufficiently objective so that a third party with knowledge of the relevant performance results could calculate the amount to be paid to the subject Named Executive Officer. The material terms of the performance goals for Named Executive Officers and 18 19 the compensation payable thereunder shall be submitted to the shareholders of the Company for their review and approval. Shareholder approval shall be obtained for such performance goals prior to any Award being paid to such Named Executive Officer. If the shareholders do not approve such performance goals, no amount shall be paid to such Named Executive Officer for such applicable Award Period under the Plan. The disclosure of the "material terms" of a performance goal and the compensation payable thereunder shall be determined under the guidelines set forth under Section 162(m) of the Code, and the Treasury Regulations thereunder. 17.3 Components of Awards. Each Award of a Named Executive Officer, other than stock options and Stock Appreciation Rights, shall be based on performance goals which are sufficiently objective so that a third party having knowledge of the relevant facts could determine whether the goal was met. Except as provided in subsection 17.8 herein, performance measures which may serve as determinants of Named Executive Officers Awards shall be limited to the following measures: earnings per share; return on assets; return on equity; return on capital; net profit after taxes; net profit before taxes; economic value added; operating profits; stock price; market share; and sales or expenses. Within ninety (90) days following the end of each Award Period, the Committee shall certify in writing that the performance goals, and any other material terms were satisfied. Thereafter, Awards shall be made for each named Executive Officer as determined by the Committee. The Awards may not vary from the preestablished amount based on the level of achievement. 17.4 No Mid-Year Change in Awards. Except as provided in subsections 17.8 and 17.9 herein, each Named Executive Officers Awards shall be based exclusively on the performance measures established by the Committee pursuant to subsection 17.2. 17.5 No Partial Award Period Participation. A Named Executive Officer who becomes eligible to participate in the Plan after performance goals have been established in an Award Period pursuant to subsection 17.2 may not participation in the Plan prior to the next succeeding Award Period, except with respect to Awards which are stock options or Stock Appreciation Rights. 17.6 Performance Goals. Except as provided in subsection 17.8 herein, performance goals shall not be changed following their establishment, and Named Executive Officers shall not receive any payout, except with respect to Awards which are stock options or Stock Appreciation Rights, when the minimum performance goals are not met or exceeded. 17.7 Individual Performance and Discretionary Adjustments. Except as provided in subsection 17.8 herein, subjective evaluations of individual performance of Named Executive Officers shall not be reflected in their Awards, other than Awards which are stock options or Stock Appreciation Rights. The payment of such Awards shall be entirely dependent upon the attainment of the preestablished performance goals. 19 20 17.8 Amendments. No amendment of the Plan with respect to any Named Executive Officer may be made which would (i) increase the maximum amount that can be paid to any one Participant under the Plan, (ii) change the specified performance goal for payment of Awards, or (iii) modify the requirements as to eligibility for participation in the Plan, unless the Company's shareholders have first approved such amendment in a manner which would permit the deduction under Section 162(m) of the Code of such payment in the fiscal year it is paid. The Committee shall amend this Section 17 and such other provisions as it deems appropriate, to cause amounts payable to Named Executive Officers to satisfy the requirements of Section 162(m) and the Treasury Regulations promulgated thereunder. 17.9 Stock Options and Stock Appreciation Rights. Notwithstanding any provision of the Plan (including the provisions of this Section 17) to the contrary, the amount of compensation which a Named Executive Officer may receive with respect to stock options and Stock Appreciation Rights which are granted hereunder is based solely on an increase in the value of the applicable Shares after the date of grant of such Award. Thus, no stock option may be granted hereunder to a Named Executive Officer with an exercise price less than the Fair Market Value of Shares on the date of grant. Furthermore, the maximum number of Shares (or cash equivalent value) with respect to which stock options or Stock Appreciation Rights may be granted hereunder to any Named Executive Officer during any calendar year may not exceed 80,000 Shares, subject to adjustment as provided in Section 13 hereunder. 17.10 Maximum Amount of Compensation. The maximum amount of compensation payable as an Award (other than an Award which is a stock option or Stock Appreciation Right) to any Named Executive Officer during any calendar year may not exceed $1,000,000. 20 EX-5.1 5 OPINION OF SMALL, CRAIG & WERKENTHIN, P.C. 1 EXHIBIT 5.1 LAW OFFICES Small, Craig & Werkenthin A PROFESSIONAL CORPORATION November 15, 1996 The Exploration Company 500 North Loop 1604 East, Suite 250 San Antonio, Texas 78232 Attention: Mr. James E. Sigmon, President Gentlemen: We have acted as counsel for The Exploration Company, a Colorado corporation (the "Company"), in connection with various legal matters relating to the Registration Statement on Form S-8 to be filed by the Company with the Securities and Exchange Commission (the "Commission") with respect to 400,000 shares of Common Stock, $.01 par value per share (the "Common Stock"), of the Company which may be purchased pursuant to exercise of options or other stock rights granted pursuant to the Company's 1995 Flexible Incentive Plan (the "Plan"). We have examined such corporate records, certificates and other documents and such questions of law as we have considered necessary or appropriate for the purposes of this opinion and, on the basis of such examination, advise you that in our opinion the 400,000 shares of Common Stock to be issued to participants in the Plan will, when issued pursuant to the terms of the Plan, be validly issued, fully paid and non-assessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. This consent is not to be construed as an admission that we are a person whose consent is required to be filed with the Registration Statement under the provisions of the Securities Act of 1933. Very truly yours, SMALL, CRAIG & WERKENTHIN, P. C. /s/ M. Frank Russell --------------------------------- M. Frank Russell For the Firm EX-23.1 6 CONSENT OF AKEN, DOHERTY, KLEIN & FUEGE, P.C. 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement of our report dated November 16, 1995, included in The Exploration Company and Subsidiary Form 1O-K for the year ended August 31, 1995, and to all references to our firm included in this Registration Statement. /s/ Akin, Doherty, Klein & Feuge, P.C. - -------------------------------------- Akin, Doherty, Klein & Feuge, P.C. San Antonio, Texas November 4, 1996 -----END PRIVACY-ENHANCED MESSAGE-----