Exhibit 10.1

EXECUTION VERSION

STOCK PURCHASE AGREEMENT

by and between

CHAPARRAL ENERGY, INC.

and

MAGNETAR FINANCIAL LLC

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Table of Contents

 

Article I    DEFINITIONS    1 Section 1.01    Definitions    1 Article II   
SALE AND PURCHASE    5 Section 2.01    Authorization of Shares    5 Section 2.02
   Sale and Purchase    5 Section 2.03    Closing and Closing Date    5 Article
III    REPRESENTATIONS AND WARRANTIES OF THE COMPANY    5 Section 3.01    No
Registration    5 Section 3.02    No Integration    6 Section 3.03   
Authorization of the Purchase Agreement    6 Section 3.04    Authorization of
the Shares    6 Section 3.05    Authorization and Enforceability of Operative
Documents    6 Section 3.06    Incorporation and Good Standing of the Company
and its Subsidiaries    6 Section 3.07    Capitalization and Other Capital Stock
Matters    7 Section 3.08    Non-Contravention of Existing Instruments; No
Further Authorizations or Approvals Required    8 Section 3.09    Company Not an
“Investment Company”    9 Section 3.10    No Restriction on Distributions    9
Section 3.11    No General Solicitation    9 Section 3.12    Brokers    9
Section 3.13    Edge Merger Agreement    10 Section 3.14    Edge Merger
Agreement Representations and Warranties    10 Section 3.15    Fundamental
Change    10 Section 3.16    Registration Rights    10 Section 3.17    No
Preemptive Rights, Stockholders’ Agreement, Etc.    10 Section 3.18    Company
Stockholders’ Agreement    10 Article IV    REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER    11 Section 4.01    Authorization    11 Section 4.02   
Unregistered Offering and Sale of Securities    11 Article V    ADDITIONAL
AGREEMENTS    13 Section 5.01    Conduct of Business    13 Section 5.02   
Consents and Approvals; HSR Act    13 Section 5.03    Notification of Certain
Matters    14 Section 5.04    Preemptive Rights    14 Section 5.05    No Short
Sales    16 Section 5.06    Use of Proceeds    16 Section 5.07    Access    16
Section 5.08    Board Representation    17 Article VI    CONDITIONS PRECEDENT   
18 Section 6.01    Conditions to the Obligations of Each Party to Effect the
Closing    18

 

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Section 6.02    Conditions to the Obligations of the Purchaser to Effect the
Closing    18 Section 6.03    Conditions to the Obligations of the Company to
Effect the Closing    20 Article VII    TERMINATION    21 Section 7.01   
Termination    21 Section 7.02    Effect of Termination    22 Article VIII   
MISCELLANEOUS    22 Section 8.01    Fees and Expenses    22 Section 8.02   
Interpretation; Severability    22 Section 8.03    Survival of Representations
and Warranties    23 Section 8.04    Waivers; Remedies; Amendments    23 Section
8.05    Binding Effect; Assignment    23 Section 8.06    Communications    24
Section 8.07    Entire Agreement    25 Section 8.08    Governing Law    25
Section 8.09    Execution in Counterparts    25

Schedules and Exhibits

 

Schedule I    Subsidiaries of the Company    Schedule I Exhibit A    Form of
Certificate of Designation    A-1 Exhibit B    Form of Registration Rights
Agreement    B-1 Exhibit C    Form of Certificate of Designations for the Series
A Preferred Stock    C-1 Exhibit D    Form of Amended and Restated Certificate
of Incorporation    D-1 Exhibit E    Form of Amended and Restated Bylaws    E-1
Exhibit F    Form of Opinion of McAfee & Taft A Professional Corporation    F-1

 

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STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT, dated as of July 14, 2008 (this “Agreement”), is
by and between CHAPARRAL ENERGY, INC., a Delaware corporation (the “Company”),
and MAGNETAR FINANCIAL LLC, on behalf of one or more of its Affiliates, a
Delaware limited liability company (the “Purchaser”).

WHEREAS, on the date hereof, the Company has entered into an Agreement and Plan
of Merger, dated the date hereof, by and among the Company, Chaparral
Exploration, L.L.C. (“Merger Sub”) and Edge (the “Edge Merger Agreement”),
pursuant to which, on the Closing Date, Edge will merge with and into Merger Sub
(the “Merger”), and the surviving corporation in the Merger will be a wholly
owned subsidiary of the Company; and

WHEREAS, the Company desires to sell the Shares to the Purchaser and the
Purchaser desires to purchase the Shares from the Company, in each case, on the
Closing Date immediately after the consummation of the Merger and upon the terms
and subject to the conditions set forth in this Agreement.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings specified in
this Section 1.01.

“Affiliate” means, with respect to a specified Person, any other Person,
directly or indirectly controlling, controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
“control” (including, with correlative meanings, “controlling,” “controlled by,”
and “under common control with”) means the power to direct or cause the
direction of the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.

“Board” means the board of directors of the Company or any substitute body
serving a similar function.

“Business Day” means any day other than a Saturday, Sunday, or a legal holiday
for commercial banks in New York, New York.

“Capital Stock” means (i) the equity ownership rights in a business entity,
whether a corporation, company, joint stock company, limited liability company,
general or limited partnership, joint venture, bank, association, trust, trust
company, land trust, business trust, sole proprietorship or other business
entity or organization, and whether in the form of capital stock, ownership
unit, limited liability company interest, membership interest, limited or
general partnership interest or any other form of ownership, and (ii) also
includes all Capital Stock Equivalents.

 

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“Capital Stock Equivalents” means all rights, warrants, options, convertible
securities (including the Series B Preferred Stock) or indebtedness,
exchangeable securities or other instruments, or other rights that are
outstanding and exercisable for or convertible or exchangeable into, directly or
indirectly, any shares of Common Stock.

“Certificate of Designation” means the Certificate of Designation of Series B
Preferred Stock of the Company substantially in the form attached hereto as
Exhibit A.

“Closing” has the meaning specified in Section 2.03.

“Closing Date” has the meaning specified in Section 2.03.

“Commission” means the United States Securities and Exchange Commission.

“Commitment Letter” means, collectively, that certain Senior Secured Credit
Facility Commitment Letter, dated June 24, 2008, by and among the Company,
Chaparral Energy, L.L.C., JP Morgan Chase Bank, N.A., J.P. Morgan Securities
Inc. and the other parties named therein, and the Summary of Indicative Terms
and Conditions attached as Exhibit A thereto.

“Common Stock” means the common stock, par value $0.01 per share, of the
Company.

“Company” has the meaning specified in the introductory paragraph of this
Agreement.

“Company Material Adverse Effect” means a “Parent Material Adverse Effect”, as
defined in the Edge Merger Agreement.

“Company Stockholders’ Agreement” means the Stockholders’ Agreement dated as of
September 29, 2006, as amended on July 14, 2008 (such amendments to be effective
upon the closing of the Merger or the closing of the other transactions
contemplated by this Agreement), by and among the Company, Fischer Investments,
L.L.C., Altoma Energy and CHK Holdings, L.L.C.

“Definitive Credit Facility Documentation” has the meaning specified in
Section 6.02(e).

“Edge” means Edge Petroleum Corporation, a Delaware corporation.

“Edge Common Stock” means common stock of Edge, par value $0.01 per share.

“Edge Material Adverse Effect” means an “Edge Material Adverse Effect”, as
defined in the Edge Merger Agreement.

“Edge Merger Agreement” has the meaning specified in the recitals.

“Edge Option” means each stock option to purchase Edge Common Stock granted by
Edge to an employee or director thereof.

 

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“Edge Preferred Stock” means 5.75% Series A cumulative convertible perpetual
preferred stock, par value $0.01 per share, of Edge.

“Edge Unit” means a unit with respect to Edge Common Stock granted pursuant to
any employee benefit plan of Edge.

“Existing Instrument” has the meaning specified in Section 3.08(a).

“Governmental Authority” means, with respect to a particular Person, the
country, state, county, city and political subdivisions in which such Person or
such Person’s Property is located or that exercises valid jurisdiction over any
such Person or such Person’s Property, and any court, agency, department,
commission, board, bureau or instrumentality of any of them that exercises valid
jurisdiction over any such Person or such Person’s Property.

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.

“Investment Company Act” means the Investment Company Act of 1940, as amended
from time to time, and the rules and regulations of the Commission promulgated
thereunder.

“Law” means any federal, state, local or foreign order, writ, injunction,
judgment, settlement, award, decree, statute, law, rule or regulation or common
law.

“Lenders” means JPMorgan Chase Bank, N.A. and the other lenders named in the
Commitment Letter.

“Letter of Intent” means the Letter of Intent, dated June 16, 2008, between Post
Oak Energy Capital, LP and the Company.

“Lien” means any lien, encumbrance, security interest, equity, charge or other
interest in Property securing an obligation owed to, or a claim by, a Person
other than the owner of the Property, whether such interest is based in Law or
contract or other instrument, and whether such obligation or claim is fixed or
contingent, and including but not limited to the lien or security interest
arising from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security purposes.
For the purpose of this Agreement, a Person shall be deemed to be the owner of
any Property that it has acquired or holds subject to a conditional sale
agreement, or leases under a financing lease or other arrangement pursuant to
which title to the Property has been retained by or vested in some other Person
in connection with a financing.

“Merger” has the meaning specified in the recitals.

“Merger Sub” has the meaning specified in the recitals.

“New Bylaws” has the meaning specified in Section 3.07(d).

“New Charter” has the meaning specified in Section 3.07(d).

 

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“New Stock” has the meaning specified in Section 5.05(a).

“Operative Documents” means this Agreement, the Certificate of Designation and
the Registration Rights Agreement.

“Outside Date” has the meaning specified in Section 7.01(b).

“Person” means any individual, corporation, company, voluntary association,
partnership, joint venture, trust, limited liability company, unincorporated
organization or government or any agency, instrumentality or political
subdivision thereof, or any other form of entity.

“Principal Market” shall mean The New York Stock Exchange or the Nasdaq Global
Market.

“Private Placement” has the meaning specified in Section 5.05(b).

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.

“Purchase Price” means $150,000,000.

“Purchaser” has the meaning specified in the introductory paragraph.

“Purchaser Designee” has the meaning specified in Section 5.09(a).

“Registration Rights Agreement” means the Registration Rights Agreement by and
between the Company and the Purchaser in the form attached hereto as Exhibit B.

“Regulation D” has the meaning specified in Section 3.11.

“Reimbursable Expenses” has the meaning specified in Section 8.01.

“Rule 144A” means Rule 144A under the Securities Act.

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the rules and regulations of the Commission promulgated thereunder.

“Senior Revolving Credit Facility” means the senior revolving credit facility
pursuant to the Definitive Credit Facility Documentation.

“Series A Preferred Stock” means 5.75% Series A cumulative convertible perpetual
preferred stock, par value $0.01 per share, of the Company to be issued pursuant
to the Edge Merger Agreement.

“Series B Preferred Stock” means the Series B Convertible Preferred Stock, par
value $0.01 per share, of the Company.

“Shares” has the meaning specified in Section 2.02.

 

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“Subsidiaries” means those entities listed on Schedule I.

“Term Sheet” means the Summary of Indicative Terms and Conditions and any
addendum thereto, in each case attached as Exhibit A to the Commitment Letter.

ARTICLE II

SALE AND PURCHASE

Section 2.01 Authorization of Shares. The Company has duly authorized the
issuance and sale of 1,500,000 shares of the Series B Preferred Stock, which
shares of Series B Preferred Stock will be, upon issuance, convertible into
authorized but unissued shares of Common Stock and will have the terms set forth
on the Certificate of Designation.

Section 2.02 Sale and Purchase. Subject to the terms and conditions set forth in
this Agreement, and in reliance upon the Company’s and the Purchaser’s
representations set forth herein, on the Closing Date (as defined below), the
Company shall sell to the Purchaser, and the Purchaser shall purchase from the
Company, 1,500,000 shares (the “Shares”) of Series B Preferred Stock for the
Purchase Price, representing a per share purchase price of $100.00 for each
Share. The purchase and sale of the Shares shall be effected on the Closing Date
by the Company executing and delivering to the Purchaser, duly registered in the
Purchaser’s name, duly executed stock certificates evidencing the Shares being
purchased by it, against delivery by the Purchaser to the Company of the
Purchase Price payable by the Purchaser, by wire transfer of immediately
available funds to such account as the Company shall have designated to the
Purchaser prior to the Closing (as defined below).

Section 2.03 Closing and Closing Date. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall take place on the same date
as the closing date of the Merger, or on such other date as may be mutually
agreed by the Company and the Purchaser, subject to the satisfaction or (to the
extent permitted by law) waiver on such date of the conditions set forth in
Article VI of this Agreement (the “Closing Date”), at the offices of McAfee &
Taft A Professional Corporation, 10th Floor, Two Leadership Square, Oklahoma
City, Oklahoma 73102, or such other location as the Purchaser and the Company
shall mutually select. The Company shall provide the Purchaser at least five
(5) Business Days’ advance notice of the closing date of the Merger.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Purchaser:

Section 3.01 No Registration. Assuming the accuracy of the representations and
warranties of the Purchaser contained in Section 4.02, it is not necessary, in
connection with the issuance and sale of the Shares to the Purchaser in the
manner contemplated by this Agreement or in connection with the issuance of
Common Stock upon conversion of the Series B Preferred Stock pursuant to its
terms, to register the Shares (or any such Common Stock) under the Securities
Act or any other securities Laws.

 

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Section 3.02 No Integration. None of the Company or any Subsidiaries has,
directly or through any agent, sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any “security” (as defined in the
Securities Act) that is or will be integrated with the sale of the Shares in a
manner that would require registration under the Securities Act of the Shares.

Section 3.03 Authorization of the Purchase Agreement. The Company has the
requisite authority to execute, deliver and perform its obligations under this
Agreement, and this Agreement has been duly authorized, executed and delivered
by the Company and constitutes the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms except as the
enforcement thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles and except as to rights to indemnification thereunder may be limited
by applicable Law.

Section 3.04 Authorization of the Shares. The Shares have been duly authorized
for issuance and sale by the Company and pursuant to this Agreement and, when
issued and delivered by the Company to the Purchaser pursuant to this Agreement
on the Closing Date, the Shares will be validly issued, fully paid and
non-assessable, and the issuance of the Shares will not be subject to any
preemptive or similar rights. The shares of Common Stock issuable upon
conversion of the Shares have been duly authorized for issuance by the Company
and, when issued and delivered by the Company, will be validly issued, fully
paid and non-assessable, and such shares will not be subject to any preemptive
or similar rights.

Section 3.05 Authorization and Enforceability of Operative Documents. The
Company has the requisite authority to execute, deliver and perform its
obligations under the Operative Documents (other than this Agreement), and each
of the Operative Documents (other than this Agreement) has been duly authorized
by the Company and, when executed and delivered by the Company, will be a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms except as the enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to or affecting the rights and remedies of creditors
or by general equitable principles and except as to rights to indemnification
thereunder may be limited by applicable Law.

Section 3.06 Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its Subsidiaries has been duly
incorporated or otherwise formed and is validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation, as the
case may be, and has power and authority (corporate or otherwise) to own or
lease, as the case may be, and operate its properties and to conduct its
business as presently conducted and, in the case of the Company, to enter into
and perform its obligations under the Operative Documents. Each of the Company
and each Subsidiary is duly qualified to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except for such jurisdictions where the failure to so qualify or to be in good
standing would not, individually or in the aggregate, result or reasonably be
expected to result in a Company Material Adverse Effect. All of the issued and
outstanding shares of capital stock, or similar

 

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equity interest, of each Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable and are owned by the Company, directly
or through Subsidiaries, free and clear of any Lien.

Section 3.07 Capitalization and Other Capital Stock Matters.

(a) As of the date hereof, the authorized capital of the Company consists of:
(i) 3,600,000 shares of Common Stock, of which 877,000 are issued and
outstanding, all of which were validly issued and fully paid and are
non-assessable, and none of which were issued in violation of any preemptive or
similar rights of any securityholder of the Company; and (ii) 600,000 shares of
preferred stock, par value $0.01 per share, none of which are issued and
outstanding.

(b) On the Closing Date, after giving effect to the Merger and the transactions
contemplated by this Agreement and the other Operative Documents, the authorized
capital of the Company will consist of: (i) 150,000,000 shares of Common Stock,
of which 52,341,368 shares will be issued and outstanding as of the Closing Date
(excluding shares issued pursuant to any Approved Plan (as defined in the
Certificate of Designation)); (ii) 10,000,000 shares of preferred stock, par
value $0.01 per share, of which 2,875,000 shares will be issued on the Closing
Date pursuant to the Edge Merger Agreement and designated as Series A Preferred
Stock, and of which 1,500,000 shares will be issued on the Closing Date pursuant
to this Agreement and designated as Series B Preferred Stock, and in each of
cases (i) and (ii), all of such issued and outstanding shares will validly
issued and fully paid and non-assessable as of the date of issuance, and none of
which will be issued in violation of any preemptive or similar rights of any
securityholder of the Company.

(c) Except as set forth on Schedule 3.07, there are, and as of the Closing Date
there will be, no options, warrants or other rights, agreements, arrangements or
commitments of any character obligating the Company or any Subsidiary to issue
or sell any shares of Capital Stock of, or other equity interests in, the
Company or any Subsidiary. Except pursuant to the terms of the Certificates of
Designations for the Series A Preferred Stock and the Series B Preferred Stock,
there are, and as of the Closing Date there will be, no outstanding contractual
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
acquire any shares of Capital Stock of the Company or any Subsidiary. Except for
pursuant to the terms of the Shares and other customary adjustments as a result
of stock dividends, stock splits, combinations of shares, reorganizations,
recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders), and the
issuance and sale of the shares of Series B Preferred Stock hereunder and the
conversion and exchange thereof will not obligate the Company to issue shares of
Common Stock or other securities to any Person or result in a right of any
holder of securities to adjust the exercise, conversion, exchange or reset price
under such securities. All of the issued and outstanding shares of Common Stock
have been issued in compliance with federal and state securities laws.

(d) The Company has provided to the Purchaser a true and complete copy of each
of the Amended and Restated Certificate of Incorporation and Bylaws of the

 

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Company as in effect on the date hereof. The forms of each of the Certificate of
Designation, the Amended and Restated Certificate of Incorporation (the “New
Charter”) and the Amended and Restated Bylaws (the “New Bylaws”) of the Company
to be in effect on the Closing Date are attached hereto as Exhibit A, Exhibit D
and Exhibit E, respectively.

(e) All of the issued and outstanding Capital Stock or equivalent equity
interests of each Subsidiary were duly authorized, validly issued and fully paid
and are non-assessable and are owned by the Company, directly or through its
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or claim (other than in favor of the Company or any Subsidiaries);
and none of the outstanding shares of Capital Stock or equivalent equity
interests of any Subsidiary were issued in violation of any preemptive or
similar rights arising by operation of law, or under the charter, bylaws or
other comparable organizational documents of any Subsidiary or under any
agreement to which the Company or any Subsidiary is a party.

Section 3.08 Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required.

(a) Neither the execution nor the delivery of any Operative Document or the Edge
Merger Agreement by the Company, nor the performance of its obligations
hereunder or thereunder, (i) will result in a violation or breach of the charter
or bylaws (or other applicable organizational document) of the Company or any
Subsidiaries, (ii) with or without the giving of notice or the passage of time,
or both, violate, or be in conflict with, breach of, or constitute a default
under, or cause or permit the termination or the acceleration of the maturity
of, any indenture, mortgage, loan or credit agreement, note, material contract,
franchise, lease or other instrument to which the Company or any Subsidiaries is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any Subsidiaries is subject (each, an
“Existing Instrument”), (iii) require notice to or the consent of any party to
any agreement or commitment, including, without limitation, any lease or license
to which the Company is a party, or by which it or its properties is bound or
subject other than those notices or consents that have been given or received;
(iv) result in the creation or imposition of any security interest, lien, or
other encumbrance upon any property or assets of the Company or any Subsidiaries
under any agreement or commitment to which it is a party, or by which it or its
properties is bound or subject; or (v) violate or breach any material statute or
Law or any judgment, decree, order, regulation or rule of any court or
Governmental Authority to which the Company, its Subsidiaries or their
properties is bound or subject.

(b) The Company’s execution, delivery and performance of the Operative Documents
and the Edge Merger Agreement and consummation of the transactions contemplated
hereby or thereby (i) have been duly authorized by all necessary corporate
action and will not result in any violation of the charter or bylaws (or other
applicable organizational document) of the Company or any Subsidiary, (ii) will
not conflict with or constitute a breach of, or default under, or result in the
termination (or a right of termination) under, the acceleration of any
obligations under or the creation or imposition of any Lien upon any property or
assets of the Company or any Subsidiaries pursuant to, or require the consent of
any other party to, any Existing Instrument or contract or other agreement or

 

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instrument to which the Company or any Subsidiaries is a party and (iii) will
not result in any violation of any material Law, regulation, judgment, order or
decree applicable to the Company or any Subsidiaries of any Governmental
Authority having jurisdiction over the Company or any Subsidiaries or any of its
or their properties.

(c) No consent, approval, authorization or other order of, or registration or
filing with, any court or other Governmental Authority or agency is required for
the Company’s execution, delivery and performance of the Operative Documents and
consummation of the transactions contemplated thereby and by this Agreement,
except (i) with respect to compliance with applicable requirements of the HSR
Act and any other applicable law analogous to the HSR Act or otherwise
regulating antitrust, competition or merger control matters in foreign
jurisdictions,] (ii) with respect to the transactions contemplated by the
Registration Rights Agreement, as may be required under the Securities Act and
the rules and regulations promulgated thereunder and (iii) such as have been
obtained or made by the Company and are in full force and effect under the
Securities Act, applicable state securities or blue sky laws.

Section 3.09 Company Not an “Investment Company”. The Company is not, and, after
receipt of payment for the Shares and application of the proceeds as set forth
in Section 5.07 will not be, an “investment company” or an “affiliated person”
of, or “promoter” or “principal underwriter” for an investment company, within
the meaning of the Investment Company Act, and will conduct its business in a
manner so that it will not become subject to the Investment Company Act.

Section 3.10 No Restriction on Distributions. No Subsidiary of the Company,
other than Chaparral Biofuels, LLC and Oklahoma Ethanol, LLC is currently
prohibited, directly or indirectly, from paying any dividends to the Company,
from making any other distribution on such Subsidiary’s capital stock, from
repaying to the Company any loans or advances to such subsidiary from the
Company or from transferring any of such Subsidiary’s property or assets to the
Company or any other subsidiary of the Company.

Section 3.11 No General Solicitation. None of the Company or any of its
affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act
(“Regulation D”)), has, directly or through an agent, engaged in any form of
general solicitation or general advertising in connection with the offering of
the Shares (as those terms are used in Regulation D) under the Securities Act or
in any manner involving a public offering within the meaning of Section 4(2) of
the Securities Act; the Company has not entered into any contractual arrangement
with respect to the distribution of the Shares except for this Agreement,
neither the Company nor anyone acting on its behalf has sold or has offered any
of the Shares for sale to, or solicited offers to buy from, or otherwise
approached or negotiated with respect thereto with, any prospective purchaser,
other than the Purchaser, and the Company will not enter into any such
arrangement except for the Registration Rights Agreement and as may be
contemplated thereby.

Section 3.12 Brokers. With the exception of SunTrust Robinson Humphrey and J.P.
Morgan Securities, Inc. (the fees of which are the obligations of the Company),
there is no broker, finder or other party that is entitled to receive from the
Company any brokerage or finder’s fee or other fee, commission or similar
compensation as a result of or in connection with any of the transactions
contemplated by this Agreement or the other Operative Documents.

 

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Section 3.13 Edge Merger Agreement. The Company has provided to the Purchaser a
true and complete copy of the Edge Merger Agreement and all agreements and
documents ancillary thereto. The Edge Merger Agreement and each of the
agreements and documents ancillary thereto is valid and binding and in full
force and effect. There have been no amendments to the terms of the Edge Merger
Agreement or any of the agreements and documents ancillary thereto other than
those provided to the Purchaser prior to the date of this Agreement.

Section 3.14 Edge Merger Agreement Representations and Warranties.

(a) The representations and warranties of the Company and Merger Sub made in
Article III of the Edge Merger Agreement are true and correct, and are
incorporated herein as if each such representation and warranty was made to, and
for the benefit of, the Purchaser.

(b) The representations and warranties of Edge made in Article II of the Edge
Merger Agreement are true and correct, and are incorporated herein as if each
such representation and warranty was made by the Company to, and for the benefit
of, the Purchasers.

Section 3.15 Fundamental Change. The Merger does not and will not constitute a
“Fundamental Change” under the Certificate of Designations of the Edge Preferred
Stock that would permit the holders of the Edge Preferred Stock to require the
Company to repurchase all or any portion of the Edge Preferred Stock.

Section 3.16 Registration Rights. Except as set forth in the Company
Stockholders’ Agreement, or as required by the Registration Rights Agreement,
the Company will not, as of the Closing Date, be under any obligation to
register any of its securities under the Securities Act.

Section 3.17 No Preemptive Rights, Stockholders’ Agreement, Etc. Following the
closing of the Merger, and except as contemplated by this Agreement or the
certificate of designations or the Series A Preferred Stock , (i) no stockholder
of the Company will be entitled to any preemptive or similar rights to subscribe
for shares of capital stock of the Company, (ii) no stockholder of the Company
will have any rights, contractual or otherwise, to designate members of the
Board, other than by voting such stockholder’s own shares of Common Stock in
accordance with Delaware Law, and (iii) there will be no stockholder, voting or
other agreements relating to the rights and obligations of the Company’s
stockholders. Any preemptive rights with respect to the sale of the Shares have
been duly waived.

Section 3.18 Company Stockholders’ Agreement. The Company has provided to the
Purchaser the Company Stockholders’ Agreement, as amended on the date hereof.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Company that:

Section 4.01 Authorization. The Purchaser has full power and authority to enter
into this Agreement. The execution and delivery of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby by it
have been duly and validly authorized by its board of directors or other
governing authority, and no other proceedings on its part which have not been
taken are necessary to authorize the execution, delivery and performance of this
Agreement by Purchaser, or for Purchaser to consummate the transactions provided
for herein. This Agreement, when executed and delivered by the Purchaser, will
constitute a valid and legally binding obligation of the Purchaser, enforceable
in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of creditors’ rights
generally, and as limited by laws relating to the availability of a specific
performance, injunctive relief, or other equitable remedies.

Section 4.02 Unregistered Offering and Sale of Securities.

(a) Investment. The Shares are being acquired for the Purchaser’s own account
and with no intention of distributing the Shares or any part thereof other than
in accordance with the Securities Act and other applicable securities and blue
sky laws, and the Purchaser has no present intention of selling or granting any
participation in or otherwise distributing the same in any transaction in
violation of the Securities Act or the securities or blue sky laws of any
jurisdiction. If the Purchaser should in the future decide to dispose of any of
the Shares, the Purchaser understands and hereby agrees that it may do so only
in compliance with the Securities Act and applicable securities and blue sky
laws of any jurisdiction, as then in effect, which may include a sale
contemplated by any registration statement pursuant to which the Shares are then
being offered.

(b) Securities Act Exemption. The Purchaser understands that (i) the Shares
(A) have not been registered under the Securities Act or any state securities
Laws, (B) will be issued in reliance upon an exemption from the registration and
prospectus delivery requirements of the Securities Act pursuant to Regulation D
thereof and (C) will be issued in reliance upon exemptions from the registration
and prospectus delivery requirements of state securities laws which relate to
private offerings, and (ii) the Purchaser must therefore bear the economic risk
of such investment indefinitely unless a subsequent disposition thereof is
registered or exempted under the Securities Act and applicable state securities
laws or is exempt therefrom.

(c) Nature of Purchaser. The Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Purchaser is an “accredited investor” as defined in Rule
501(a)(1), (2), (3) or (7) promulgated under the Securities Act and (B) by
reason of its business and financial experience it has such knowledge,
sophistication and experience in making similar investments and in business and
financial matters generally so as to be capable of evaluating

 

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the merits and risks of the prospective investment in the Shares, is able to
bear the economic risk of such investment and, at the present time, would be
able to afford a complete loss of such investment.

(d) Receipt of Information. The Purchaser acknowledges that it has been provided
a reasonable opportunity to ask questions of and receive answers from Company’s
officers, agents and other representatives, and to be furnished requested
information, regarding such matters sufficient to enable the Purchaser to
evaluate the risks and merits of purchasing the Shares and consummating the
transactions contemplated by this Agreement.

(e) It is understood that any certificates evidencing the Shares will bear the
following legend:

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF UNLESS (I) REGISTERED UNDER THE APPLICABLE SECURITIES
LAWS, (II) SUCH TRANSACTION IS PURSUANT TO RULE 144, RULE 144A OR REGULATION S
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (III) AN OPINION OF COUNSEL,
WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY, HAS BEEN DELIVERED TO
THE COMPANY AND SUCH OPINION STATES THAT THE SHARES MAY BE TRANSFERRED WITHOUT
SUCH REGISTRATION.”

Certificates evidencing the Shares and the certificates representing the
securities issued upon conversion or exchange of the Shares (or any securities
issued upon conversion or exchange of the Shares) shall not be required to
contain such legend or any other legend after (A) such securities are registered
for resale under the Securities Act, (B) following any sale of such securities
pursuant to and in accordance with Rule 144 or (C) if such legend is not
required under applicable requirements of the Securities Act (including
controlling judicial interpretations and pronouncements issued by the Staff of
the Commission).

Section 4.03 Reliance on Representations and Warranties of the Company. The
Purchaser is not relying on and acknowledges that no representation is being
made by the Company or any of its officers, employees, affiliates, agents or
representatives, except for representations and warranties expressly set forth
in this Agreement.

Section 4.04 No Conflict; Required Filings and Consents. The execution and
delivery of this Agreement by the Purchaser do not, and the performance of this
Agreement by the Purchaser will not: (i) require, with respect to the Purchaser,
any consent, approval, authorization, permit or filing with or notification to,
any governmental or regulatory authority in the United States or any state
thereof, except (x) in connection with the Securities Exchange Act of 1934, as
amended, and the HSR Act, or (y) where the failure to obtain such consents,

 

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approvals, authorizations or permits, or to make such filings or notifications,
would not prevent the Purchaser from being able to perform its obligations under
this Agreement, (ii) constitute a breach or violation of, or a default under,
the Certificate of Incorporation or By-Laws or similar organizational documents
of the Purchaser, or (iii) (x) now or with the passage of time constitute a
breach or violation of, or result in a default (or give rise to any right of
termination, material amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
contract, agreement, lease, license or other instrument or obligation to which
the Purchaser is a party or by which the Purchaser or any of its assets may be
bound, except for such breaches, violations or defaults (or such rights of
termination, material amendment, cancellation or acceleration) as to which
requisite waivers or consents have been obtained, or (y) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the
Purchaser or any of its assets, which in the case of either clause (iii)(x) or
clause (iii)(y), individually or in the aggregate, would prevent the Purchaser
from being able to perform its obligations under this Agreement. The execution
of this Agreement and the consummation of the transactions contemplated hereby
do not and will not violate, conflict with or constitute a breach of or default
under any term or provision of any instrument, contract, commitment, statute,
regulation, or judicial or administrative order, award, judgment or decree to
which the Purchaser is a party or by or to which the Purchaser or the assets of
the Purchaser are bound or subject, except for such violations, conflicts,
breaches or defaults which, individually or in the aggregate, would not prevent
the Purchaser from being able to perform its obligations under this Agreement.

Section 4.05 Brokers and Finders. The Purchaser has not employed any broker,
finder or investment banker or incurred any liability for any brokerage fees,
commissions or finder’s fees in connection with the transactions contemplated
hereby.

ARTICLE V

ADDITIONAL AGREEMENTS

Section 5.01 Conduct of Business. The Company covenants and agrees that, between
the date of this Agreement and the Closing Date, the Company shall comply with
Section 4.2 of the Edge Merger Agreement as if such Section 4.2 were
incorporated into and made a part of this Agreement.

Section 5.02 Consents and Approvals; HSR Act.

(a) From and after the date hereof, the Company and the Purchaser shall use
their reasonable best efforts to obtain as promptly as practicable any consent
or approval of any Person, including any regulatory authority, required in
connection with the transactions contemplated hereby and such other matters as
may be necessary or advisable to consummate the transactions contemplated by
this Agreement and the other Operative Documents.

(b) If required the Company and the Purchaser agree to make an appropriate
filing of a Notification and Report Form pursuant to the HSR Act with respect to
the

 

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transactions contemplated hereby as promptly as practicable, and in any event
within ten (10) Business Days following (but not including) the date hereof, and
to supply as promptly as practicable any additional information and documentary
material that may be requested pursuant to the HSR Act and to take all other
actions necessary to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable. The Company shall pay
all of the costs, expenses and filing fees incurred by the Purchaser in
connection with obtaining approval pursuant to the HSR Act (which payment shall
be in addition to those fees and expenses of the Purchaser payable pursuant to
Section 8.01).

Section 5.03 Notification of Certain Matters.

(a) Promptly upon the Company’s receipt of any notice from Edge pursuant to
Section 5.5 of the Edge Merger Agreement, but in any event within one
(1) Business Day thereafter, the Company shall provide the Purchaser with a copy
of such notice; to the extent any such notice by Edge is orally made, then the
Company shall provide the Purchaser with a detailed description of the contents
of such notice within the time period specified herein.

(b) If the Company is obligated to provide a notice to Edge pursuant to
Section 5.5 of the Edge Merger Agreement, the Company shall concurrently with
the delivery of such notice to Edge provide the Purchaser with a copy of such
notice; to the extent any such notice by the Company to Edge is orally made,
then the Company shall concurrently provide the Purchaser with a detailed
description of the contents of such notice within the time period specified
herein.

Section 5.04 Preemptive Rights.

(a) If after the Closing Date, and for so long as the Purchaser (together with
its Affiliates) beneficially owns at least 5% of the Common Stock on a fully
diluted basis, the Company proposes to sell any shares of its Capital Stock for
cash (including any convertible notes to be sold to financial institutions for
resale pursuant to Rule 144A, but excluding (i) Excluded Stock, as such term is
defined in the Certificate of Designation, or otherwise pursuant to an employee
benefit plan approved by the Board and (ii) shares of Common Stock being
publicly offered in a bona fide underwritten offering) to any Person in a
transaction or transactions, as the case may be, the Purchaser shall have the
right to purchase, at the same price per share and upon substantially similar
terms and conditions as such securities are proposed to be offered to others, up
to a number of shares of such Capital Stock (the “New Stock”) sufficient for it
to maintain the same percentage ownership of outstanding securities of such
class of Capital Stock of the Company as the Purchaser owned immediately prior
to such issuance.

(b) (i) In the event the Company intends to make a private offering of
convertible notes or convertible preferred stock made to financial institutions
for resale pursuant to Rule 144A, no later than five (5) Business Days after the
commencement of marketing with respect to such Rule 144A offering, it shall give
the Purchaser prompt written notice of its intention (including a copy of the
offering memorandum provided to investors pursuant to such Rule 144A offering)
describing, to the extent then known, the anticipated amount of securities,
range of prices, timing and other material terms of such offering. The

 

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Purchaser shall have ten (10) calendar days from the date of receipt of any such
notice to notify the Company in writing that it intends to exercise such
preemptive purchase rights and as to the amount of New Stock the Purchaser
desires to purchase, up to the maximum amount calculated pursuant to
Section 5.04(a). The failure to respond during such ten (10) calendar day period
shall constitute a waiver of the preemptive rights only in respect of such
offering.

(ii) If the Company proposes to sell any shares of its Capital Stock for cash to
any Person in a transaction or transactions, as the case may be, that is neither
an underwritten public offering nor a private offering of convertible notes or
convertible preferred stock made to financial institutions for resale pursuant
to Rule 144A (excluding (i) Excluded Stock, as such term is defined in the
Certificate of Designation, or otherwise pursuant to an employee benefit plan
approved by the Board) (a “Private Placement”), the Company shall give the
Purchaser prompt written notice of its intention, describing, to the extent then
known, the anticipated amount of securities, price and other material terms upon
which the Company proposes to offer the same. The Purchaser shall have ten
(10) calendar days from the date of receipt of the notice required by the
immediately preceding sentence to notify the Company in writing that it intends
to exercise such preemptive purchase rights and as to the amount of New Stock
the Purchaser desires to purchase, up to the maximum amount calculated pursuant
to Section 5.04(a). The failure of the Purchaser to respond during the ten
(10) calendar day period referred to in the second preceding sentence shall
constitute a waiver of the preemptive rights in respect of such offering only.

(c) (i) If the Purchaser exercises its preemptive purchase rights provided in
Section 5.04(b)(ii), the closing of the purchase of the New Stock with respect
to which such right has been exercised shall be conditioned on the consummation
of the Private Placement giving rise to such preemptive purchase rights and
shall take place simultaneously with the closing of the Private Placement or on
such other date as the Company and the Purchaser shall agree in writing;
provided, that the actual amount of New Stock to be sold to the Purchaser
pursuant to its exercise of preemptive rights hereunder shall be reduced if the
aggregate amount of Capital Stock sold in the Private Placement is reduced and,
at the option of the Purchaser (to be exercised by delivery of written notice to
the Company within three (3) Business Days of receipt of notice of such
increase), shall be increased if such aggregate amount of Capital Stock sold in
the Private Placement is increased. In connection with its purchase of New
Stock, the Purchaser shall execute an instrument in form and substance
reasonably satisfactory to the Company containing the representations,
warranties and agreements of the Purchaser that are required under the terms of
the Private Placement.

(ii) If the Purchaser exercises its preemptive purchase rights provided in
Section 5.04(b)(i), the Company shall offer the Purchaser, if such Rule 144A
offering is consummated, the New Stock (as adjusted to reflect the actual size
of such offering when priced) at the same price as the Capital Stock being
offered is offered to the initial purchasers and shall provide written notice of
such price to the Purchaser as soon as practicable prior to such consummation.
Contemporaneously with the execution of any purchase agreement entered into
between the Company and initial purchasers of such Rule 144A offering, the
Purchaser shall enter into an instrument in form and substance reasonably
satisfactory to the Company acknowledging the Purchaser’s binding obligation to
purchase the New Stock to be acquired by it upon the terms and conditions
offered to the initial purchasers and containing

 

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such additional representations, warranties and agreements of the Purchaser that
are customary in private placement transactions, and the failure to enter into
such an instrument at or prior to such time shall constitute a waiver of the
preemptive rights only in respect of such offering.

(d) In the event the Purchaser fails to exercise its preemptive purchase rights
provided in this Section 5.04 within the applicable ten (10) calendar day
period, the Company shall thereafter be entitled during the period of 60 days
following the conclusion of the applicable period to sell or enter into an
agreement (pursuant to which the sale of Capital Stock covered thereby shall be
consummated, if at all, within 60 days from the date of such agreement) to sell
the New Stock not purchased pursuant to this Section 5.04 at the price and on
the terms offered to the Purchaser. In the event the Company has not sold the
New Stock or entered into an agreement to sell the New Stock within said 60-day
period, the Company shall not thereafter offer, issue or sell such New Stock
without first offering such securities to the Purchaser in the manner provided
in this Section 5.04.

Section 5.05 No Short Sales. The Purchaser will not, nor will any of its
Affiliates, directly or indirectly engage in “short sales” of the Company’s
Common Stock (including the purchase or sale of derivative securities and the
entering into swap or other arrangements that result in an economic benefit as a
result of the decline in the price of the Company’s Common Stock) for so long as
the Purchaser continues to hold shares of Series B Preferred Stock.

Section 5.06 Use of Proceeds. The Company shall use the proceeds it receives
from the sale of the Shares for reduction of indebtedness and other liabilities
and for general corporate purposes.

Section 5.07 Access.

(a) To the extent not restricted by a third-party agreement or applicable Law,
subject to any necessary third-party approvals, prior to the Closing, the
Company shall, and shall, to the extent permitted by the Edge Merger Agreement,
cause Edge to, allow the Purchaser and its officers, employees, representatives,
consultants, attorneys, agents, lenders, bankers, financial advisors and other
advisors reasonable access during normal business hours, at the Purchaser’s sole
risk and expense, to all facilities, properties, personnel, books and records of
the Company and Edge and their respective subsidiaries, as applicable; provided,
that no investigation pursuant to this Section 5.07 shall affect any
representation or warranty given by the Company hereunder; and provided,
further, that notwithstanding the provision of information or investigation by
the any party hereto, no party shall be deemed to make any representation or
warranty except as expressly set forth in this Agreement. The Purchaser agrees
to conduct its investigation in a manner that does not interfere unreasonably
with the Company’s or Edge’s or their respective subsidiaries’ operations and
with the prompt and timely discharge by such their respective employees of their
duties. The Purchaser agrees to indemnify and hold Edge and its subsidiaries
harmless from any and all claims and liabilities, including costs and expenses
for loss, injury to or death of any representatives of Purchaser, and any loss,
damage to or destruction of any property owned by Edge or its subsidiaries or
others (including claims or liabilities for loss of use of any property)
resulting directly or indirectly from the action or inaction of any of the
Purchaser’s representatives during any visit to the business or property sites
of Edge or its subsidiaries

 

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prior to the Closing, whether pursuant to this Section 5.07 or otherwise, but
only to the extent that such claims, liabilities, losses or damages are not due
to the gross negligence or willful misconduct of the Company, Edge or their
respective employees, agents or representatives. Notwithstanding the foregoing,
the Company shall not be required to, or cause Edge to, provide access to or
otherwise disclose information if such information is subject to, or such access
or disclosure would jeopardize, the attorney-client privilege, work product
doctrine or other applicable privilege concerning legal proceedings or
governmental investigations or which it is required to keep confidential by
reason of contract or agreement with third parties or by reason of applicable
Law. Following the Closing, the Purchaser, will be permitted the reasonable
access set forth in this Section 5.07, but only after complying with the
requirements set forth in Section 220 of the Delaware General Corporation Law.

(b) Any information obtained by the Purchaser or its directors, officers,
employees, representatives, consultants, attorneys, agents, lenders, bankers,
financial advisors and other advisors under this Section 5.07 shall be subject
to the confidentiality and use restrictions contained in that certain letter
agreement between Post Oak Energy Capital, LP and the Company dated November 6,
2007.

Section 5.08 Board Representation.

(a) For so long as the Purchaser either (i) beneficially owns at least 7% of the
Common Stock on a fully diluted basis or (ii) holds at least half of the Series
B Preferred Stock purchased under this Agreement (or securities issued on the
conversion of either such Series B Preferred Stock or securities into which such
Series B Preferred Stock converted), the Company shall nominate and recommend
that its stockholders elect one director designated by the Purchaser (the
“Purchaser Designee”). The Purchaser Designee shall receive notice of all
meetings of any committee of the Board at the same time and in the same manner
as the members of such committees of the Board, have full rights to attend all
meetings thereof (whether such meetings are formal or informal, are convened in
person, telephonically, or by any other telecommunication means), and the
Company shall provide the Purchaser Designee all materials distributed to any
committee of the Board and all other information related to the Company which is
made available to, or which would otherwise be available upon reasonable request
by, the committee members thereof. Any vacancy in the position of the Purchaser
Designee shall only be filled with another designee designated by the Purchaser
in accordance with the terms hereof. Any vacancy created by any removal of the
Purchaser Designee shall also only be filled at the direction of the Purchaser.
Notwithstanding anything to the contrary contained in this Section 5.08, the
Purchaser shall have no right to nominate a Purchaser Designee to the Board
pursuant to this Section if at such time the Holders of the Preferred Stock are
entitled to elect a director to the Board pursuant to the Certificate of
Designation or otherwise. The right of the Purchaser to nominate a Purchaser
Designee as provided in this Section 5.08(a) shall not be assignable by the
Purchaser.

(b) The Company and the Purchaser shall take or cause to be taken all lawful
action necessary to ensure at all times as of and following the Closing Date
that the organizational documents of the Company are not inconsistent with the
provisions of this Agreement and the other Operative Documents or the
transactions contemplated hereby or thereby.

 

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ARTICLE VI

CONDITIONS PRECEDENT

Section 6.01 Conditions to the Obligations of Each Party to Effect the Closing.
The respective obligations of each party to effect the Closing shall be subject
to the satisfaction on or prior to the Closing Date of the following conditions:

(a) the waiting period, if any, applicable to the consummation of the
transactions contemplated hereby and by the Merger under the HSR Act shall have
expired or been earlier terminated; and

(b) no statute, rule or regulation shall have been enacted or promulgated by any
governmental authority that prohibits the consummation of the Merger or the
transactions contemplated hereby, and there shall be no order or injunction of a
court of competent jurisdiction in effect preventing the consummation of the
Merger or the transactions contemplated hereby.

Section 6.02 Conditions to the Obligations of the Purchaser to Effect the
Closing. The obligation of the Purchaser to effect the Closing shall be subject
to the satisfaction on or prior to the Closing Date of the following conditions:

(a) Representations and Warranties.

 

  (i) the representations and warranties of the Company set forth in
Section 3.07 (Capitalization and Other Capital Stock Matters) shall be true and
correct as of the date of this Agreement and as of the Closing Date as though
made on or as of the Closing Date (except to the extent expressly made as of an
earlier date, in which case as of such earlier date), other than, with respect
to Section 3.07(b), de minimis deviations therefrom;

 

  (ii) the representations and warranties of the Company set forth in
Section 3.14(a) (Edge Merger Agreement Representations and Warranties) shall be
true and correct as of the date of this Agreement and as of the Closing Date as
though made on or as of the Closing Date (except to the extent expressly made as
of an earlier date, in which case as of such earlier date), except where the
failure of any such representations and warranties to be so true and correct
(without giving effect to any qualification as to materiality or a Company
Material Adverse Effect) has not had and is not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect;

 

  (iii)

the representations and warranties of the Company set forth in Section 3.14(b)
(Edge Merger Agreement Representations and Warranties) shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made on or
as of the Closing Date (except to the extent expressly made as of an earlier
date, in which case as of such earlier date), except where the failure of any
such representations and warranties to be so true and correct (without giving
effect to any qualification as to

 

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materiality or an Edge Material Adverse Effect) has not had and is not
reasonably likely to have, individually or in the aggregate, an Edge Material
Adverse Effect; and

 

  (iv) the other representations and warranties of the Company in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on or as of the Closing Date
(except to the extent expressly made as of an earlier date, in which case as of
such earlier date);

(b) the Company shall have performed in all material respects all of its
covenants required to be performed by it under this Agreement at or prior to the
Closing Date;

(c) From and after the date hereof, there shall not have occurred an event that,
individually or in the aggregate, has had or would be reasonably expected to
have either an Edge Material Adverse Effect or a Company Material Adverse
Effect.

(d) at the Closing, the Company will deliver, or cause to be delivered, to the
Purchaser the following:

 

  (i) a certificate or certificates or other instruments representing the
Shares;

 

  (ii) a cross-receipt executed by the Company certifying that it has received a
wire transfer as of the Closing Date in an amount equal to the Purchase Price;

 

  (iii) a legal opinion of McAfee & Taft A Professional Corporation, as counsel
to the Company, addressed to the Purchaser in the form substantially similar to
the form attached hereto as Exhibit F;

 

  (iv) a copy of the Registration Rights Agreement, dated as of the Closing Date
and executed by the Company;

 

  (v) a certificate of Secretary of the Company, dated the Closing Date, in form
and substance reasonably satisfactory to the Purchaser, certifying as to (i) the
amended and restated certificate of incorporation of the Company, (ii) the
Certificate of Designation; (ii) the amended and restated by-laws of the
Company; (iii) the resolutions of the Board authorizing the execution and
performance of the Operative Documents and the issuance of the Series B
Preferred Stock; (iv) the designation of Frost Cochran as a member of the Board
as the Purchaser Designee pursuant to the terms of the Certificate of
Designation and the terms hereof; and (iv) incumbency and signatures of the
officers of the Company executing the Operative Documents;

 

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  (vi) a certificate of the chief executive officer and chief financial officer
of the Company, dated as of the Closing Date, certifying as to Section 6.02(a),
(b) and (c); and

 

  (vii) a fee in the amount set forth on Schedule 6.02(d) plus the Reimbursable
Expenses, by wire transfer of immediately available funds to such account as the
Purchaser shall have designated to the Company prior to the Closing.

(e) The debt financing for the Merger shall have been consummated on or prior to
the consummation of the Merger in accordance with the Commitment Letter and the
definitive documentation relating thereto or entered into in connection
therewith (collectively, the “Definitive Credit Facility Documentation”), in
each case, without giving effect to (i) any amendment, modification or waiver of
(A) any of the terms of the Term Sheet, including without limitation, the
sections entitled “Maturity”, “Conditions Precedent” and “Pricing Grid” set
forth therein, or (B) any condition to closing of the debt financing for the
Merger contained in the Commitment Letter or (ii) any other amendment,
modification or waiver of the Commitment Letter or of any corresponding term in
the Definitive Credit Facility Documentation. On the Closing Date (after giving
effect to the consummation of the Merger and such debt financing),
(a) availability under the Senior Revolving Credit Facility shall be at least
the amount set forth on Schedule 6.02(e), (b) the initial borrowing base
thereunder shall be at least the amount set forth on Schedule 6.02(e) and
(c) the applicable margin thereunder shall not be more than the amount set forth
on Schedule 6.02(e);

(f) the (i) shares of Common Stock issuable to holders of the Shares upon
conversion thereof, (ii) shares of Series A Preferred Stock, (iii) shares of
Common Stock issuable to holders of Series A Preferred Stock upon conversion
thereof, (iv) shares of Common Stock issuable to holders of Edge Common Stock
and Edge Units pursuant to the Merger and (v) shares of Common Stock issuable
upon the exercise of Edge Options, shall each have been approved for listing on
The New York Stock Exchange or other Principal Market, subject to official
notice of issuance;

(g) the New Bylaws shall have been duly adopted by the Board, and the
Certificate of Designation and the New Charter shall each have been duly filed
with the Secretary of State of the State of Delaware and satisfactory evidence
of such filings shall have been delivered to the Purchaser; and

(h) the Merger shall have been consummated in accordance with the terms and
conditions of the Edge Merger Agreement, without any amendment, modification or
waiver of such terms or conditions, except for amendments, modifications or
waivers of such terms or conditions for which Magnetar Financial LLC has
provided the Company its prior written approval.

Section 6.03 Conditions to the Obligations of the Company to Effect the Closing.
The obligation of the Company to effect the Closing shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:

(a) the representations and warranties of the Purchaser in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and as of the Closing Date as though made on or as of the Closing Date (except
to the extent expressly made as of an earlier date, in which case as of such
earlier date);

 

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(b) the Purchaser shall have performed in all material respects all of its
covenants required to be performed by it under this Agreement at or prior to the
Closing Date;

(c) at the Closing, the Purchaser will deliver, or cause to be delivered, to the
Company a copy of the Registration Rights Agreement, dated as of the Closing
Date and executed by the Purchaser; and

(d) the Merger shall have been consummated in accordance with the terms and
conditions of the Edge Merger Agreement.

ARTICLE VII

TERMINATION

Section 7.01 Termination.

(a) This Agreement shall automatically terminate in the event that the Edge
Merger Agreement is terminated in accordance with its terms.

(b) If the Closing shall not have been occurred on or before December 31, 2008
(the “Outside Date”), Purchaser shall have the right to terminate this
Agreement.

(c) This Agreement may be terminated by either the Company or the Purchaser if a
court of competent jurisdiction or other Governmental Authority shall have
issued a final, non-appealable order, decree or ruling permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated hereby or by
the Edge Merger Agreement; provided that the party seeking to terminate this
Agreement pursuant to this Section 7.01(c) shall have complied in all material
respects with its obligations in Section 5.02.

(d) This Agreement may be terminated by the Purchaser if the Company shall have
breached or failed to perform any of its representations, warranties or
covenants in this Agreement such that the conditions set forth in
Section 6.02(a) or 6.02(b) are not capable of being satisfied, and such breach
or failure to perform shall not have been cured prior to the earlier of (A) 30
days following notice of such breach or failure to the Company and (B) the
Outside Date; provided that the Purchaser shall have no right to terminate this
Agreement pursuant to this clause (c) if the Purchaser is then in material
breach or has materially failed to perform any of its representations,
warranties or covenants in this Agreement.

(e) This Agreement may be terminated by the Company if the Purchaser shall have
breached or failed to perform any of its representations, warranties or
covenants in

 

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this Agreement such that the conditions set forth in Section 6.03(a) or 6.03(b)
are not capable of being satisfied, and such breach or failure to perform shall
not have been cured prior to the earlier of (A) 30 days following notice of such
breach or failure to the Purchaser and (B) the Outside Date; provided that the
Company shall have no right to terminate this Agreement pursuant to this clause
(d) if the Company is then in material breach or has materially failed to
perform any of its representations, warranties or covenants in this Agreement.

Section 7.02 Effect of Termination.

(a) In the event that the Closing Date does not occur as a result of any party
hereto exercising its rights to terminate pursuant to this Article VII, then
this Agreement shall be null and void and, except for the provisions in Sections
7.01, 7.02, 8.01, 8.02, 8.03, 8.05, 8.06, 8.07 or 8.08 herein, which shall
survive termination, no party shall have any rights or obligations under this
Agreement, except that no such termination shall relieve any party from
liability for damages for any willful breach of this Agreement or any covenant
contained herein.

(b) In the event that this Agreement is terminated and the Company is entitled
to receive payment under Section 7.3(a) of the Edge Merger Agreement, the
Company shall promptly pay to the Purchaser, but within two (2) Business Days
following the Company’s receipt such payment under the Edge Merger Agreement,
the amount set forth on Schedule 6.02(d) by wire transfer of immediately
available funds to an account designated by the Purchaser. Payment pursuant to
this Section 7.02(b) shall not preclude, and shall be in addition to, any
liability under Section 7.02(a) or any Deal Protection Fee payable pursuant to
the Letter of Intent, and payment of such Deal Protection Fee shall not
preclude, and shall be in addition to, any liability under Section 7.02(a) or
any amount payable pursuant to this Section 7.02(b).

ARTICLE VIII

MISCELLANEOUS

Section 8.01 Fees and Expenses. Whether or not the Closing occurs, each of the
Company and the Purchaser shall bear its own costs, expenses and fees incurred
by it or on its behalf with respect to this Agreement and the transactions
contemplated hereby; provided, however, that the Company shall pay (i) those
fees and expenses set forth in Section 5.02(b) plus (ii) to the Purchaser an
amount up to $500,000 as reimbursement for the Purchaser’s reasonable and
documented out-of-pocket costs, expenses and fees incurred in connection with
the transactions contemplated hereby for third party engineering, legal,
accounting and other miscellaneous consulting costs (the “Reimbursable
Expenses”).

Section 8.02 Interpretation; Severability. Article, Section, Schedule, and
Exhibit references are to this Agreement, unless otherwise specified. All
references to instruments, documents, contracts, and agreements are references
to such instruments, documents, contracts, and agreements as the same may be
amended, supplemented, and otherwise modified from time to time, unless
otherwise specified. The word “including” shall mean “including but not limited
to.” Whenever any party has an obligation under this Agreement, the expense of
complying with that obligation shall be an expense of such party unless
otherwise specified. If any provision of this Agreement is held to be illegal,
invalid, not binding, or unenforceable, such

 

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provision shall be fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid, not binding, or unenforceable provision
had never comprised a part of this Agreement, and the remaining provisions shall
remain in full force and effect.

Section 8.03 Survival of Representations and Warranties. The representations and
warranties set forth in this Agreement or in any certificate delivered hereunder
shall survive the execution and delivery of this Agreement and continue in full
force and effect until the second anniversary of the Closing; provided, however,
that the representations and warranties set forth in Section 3.07
(Capitalization and Other Capital Stock Matters) of this Agreement shall survive
indefinitely. The covenants made in this Agreement shall survive the Closing and
remain operative and in full force and effect.

Section 8.04 Waivers; Remedies; Amendments.

(a) No Waiver; Remedies Cumulative. No failure or delay on the part of any party
in exercising any right, power, or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power, or
remedy preclude any other or further exercise thereof or the exercise of any
right, power, or remedy. The remedies provided for herein are cumulative and are
not exclusive of any remedies that may be available to a party at law or in
equity or otherwise.

(b) Amendments and Modifications. Except as otherwise provided herein, no
amendment, waiver, consent, modification, or termination of any provision of
this Agreement shall be effective unless signed by each of the parties hereto
affected by such amendment, waiver, consent, modification, or termination. Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by any party hereto from the terms of any provision of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
made or given. Except where notice is specifically required by this Agreement,
no notice to or demand on any party hereto in any case shall entitle any party
hereto to any other or further notice or demand in similar or other
circumstances.

Section 8.05 Binding Effect; Assignment. This Agreement shall be binding upon
the Company, the Purchaser, and their respective successors and permitted
assigns. Except as expressly provided in this Agreement, this Agreement shall
not be construed so as to confer any right or benefit upon any Person other than
the parties to this Agreement and their respective successors and permitted
assigns. At any time prior to the Closing Date, the Purchaser may assign all or
any portion of its rights and obligations hereunder and under the other
Operative Documents to one or more of its Affiliates, to any investor in any of
fund controlled by or under common control with the Purchaser, and to the Person
listed on Schedule 8.05, but no such assignment shall release or relieve the
Purchaser of its obligations under this Agreement. The Purchaser may assign a
portion of its rights and obligations hereunder and under the other Operative
Documents representing up to 49% in aggregate of the Shares to any Person or
Persons (other than an Affiliate of the Purchaser), upon the prior consent of
the Company, which consent shall not be unreasonably withheld, at any time prior
the Closing Date, and upon any such assignment, the Purchaser shall be fully
released from all obligations hereunder and under the other Operative Documents
that have been so assigned; provided that, for purposes of

 

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this sentence, any assignment to the Person listed on Schedule 8.05 of rights to
purchase Shares will reduce the number of Shares otherwise permitted to be
assigned by the Purchaser under this sentence, by the number of Shares assigned
to such Person. Following the Closing Date, the Purchaser shall have the right
to assign its rights and obligations hereunder to any Person purchasing any of
the Shares from the Purchaser. The rights and obligations of the Company
hereunder shall not be assignable at any time or to any other Person without the
prior written consent of the Purchaser.

Section 8.06 Communications. All notices and demands provided for hereunder
shall be in writing and shall be given by registered or certified mail, return
receipt requested, telecopy, air courier guaranteeing overnight delivery or
personal delivery to the following addresses:

 

  (a)    If to the Purchaser:      Magnetar Financial LLC      1603 Orrington
Avenue, 13th Floor      Evanston, IL 60201      Attn: Chief Legal Officer     
Telecopy: 847-869-2064      with a copy (which shall not constitute notice) to:
     Willkie Farr & Gallagher LLP      787 Seventh Avenue      New York, New
York 10019      Attention:    Bruce C. Herzog         David K. Boston     
Telecopy:    212-728-8111   (b)    If to the Company:      Chaparral Energy,
Inc.      701 Cedar Lake Boulevard      Oklahoma City, Oklahoma 73114      Attn:
Mark A. Fischer      Phone: (405) 478-8770      Fax: (405) 478-2906      with a
copy (which shall not constitute notice) to:      McAfee & Taft A Professional
Corporation      10th Floor, Two Leadership Square      Oklahoma City, Oklahoma
73102      Attention:    David J. Ketelsleger      Telecopy:    (405) 235-0439

 

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or to such other address as the Company or the Purchaser may designate in
writing. All notices and communications shall be deemed to have been duly given
at the time delivered by hand, if personally delivered; upon actual receipt if
sent by certified mail, return receipt requested, or regular mail, if mailed;
when receipt acknowledged, if sent via facsimile; and upon actual receipt when
delivered to an air courier guaranteeing overnight delivery.

Section 8.07 Entire Agreement. This Agreement, the other agreements and
documents that are Exhibits hereto and Section (iv) of the Letter of Intent (but
not the other provisions thereof) are intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other than
those set forth or referred to herein or therein with respect to the rights
granted by the Company or any of its Affiliates or the Purchaser or any of its
Affiliates set forth herein or therein. This Agreement, the other agreements and
documents that are Exhibits hereto and Section (iv) of the Letter of Intent (but
not the other provisions thereof) supersede all prior agreements and
understandings between the parties with respect to such subject matter.

Section 8.08 Governing Law. This Agreement will be construed in accordance with
and governed by the laws of the State of New York without regard to principles
of conflicts of laws.

Section 8.09 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be an original and all of which counterparts, taken together, shall constitute
but one and the same Agreement.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first set forth above.

 

CHAPARRAL ENERGY, INC. By:  

/s/ Mark A. Fischer

Name:   Mark A. Fischer Title:   CEO & President

[Signature Page to Purchase Agreement]

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MAGNETAR FINANCIAL LLC (on behalf of one or more of its Affiliates) By:  

/s/ Paul Smith

Name:   Paul Smith Title:   General Counsel

[Signature Page to Purchase Agreement]

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Exhibit A

FORM OF CERTIFICATE OF DESIGNATION

CERTIFICATE OF DESIGNATION OF

SERIES B CONVERTIBLE PREFERRED STOCK OF

CHAPARRAL ENERGY, INC.

 

 

Pursuant to Section 151 of the General

Corporation Law of the State of Delaware

 

 

Chaparral Energy, Inc. (the “Company”), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
“DGCL”), hereby certifies as follows:

FIRST: The Amended and Restated Certificate of Incorporation (the “Certificate
of Incorporation”) of the Company authorizes the issuance of up to 10,000,000
shares of preferred stock, par value $0.01 per share (the “Authorized Preferred
Stock”), and further authorizes the Board of Directors of the Company by
resolution or resolutions to provide for the issuance of Authorized Preferred
Stock in series, to establish the number of shares to be included in each such
series and to fix the designation, voting powers, preferences and relative
rights and qualifications, limitations or restrictions of each such series.

SECOND: On July 14, 2008, the Board of Directors of the Company adopted the
following resolution authorizing the creation and issuance of a series of said
Authorized Preferred Stock to be known as “Series B Convertible Preferred
Stock”:

RESOLVED: that, pursuant to authority conferred upon the Board of Directors by
the Amended and Restated Certificate of Incorporation of the Company, the Board
of Directors hereby authorizes the issuance of 1,500,000 shares of Series B
Convertible Preferred Stock, and hereby fixes the number, designation, powers,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, of such shares as
follows:

1. Designation and Amount; Ranking.

(a) There shall be created from the 10,000,000 shares of Authorized Preferred
Stock a series of preferred stock, designated as the “Series B Convertible
Preferred Stock,” par value $0.01 per share (the “Preferred Stock”), and the
number of shares of such series shall be 1,500,000. Such number of shares may be
decreased by resolution of the Board of Directors; provided that no decrease
shall reduce the number of shares of Preferred Stock to a number less than that
of the shares of Preferred Stock then outstanding plus the number of shares
issuable upon exercise of warrants or other rights then outstanding.

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(b) The Preferred Stock will, with respect to both dividend rights and rights
upon the liquidation, dissolution or winding-up of the Company, rank (i) senior
to all Junior Stock, (ii) on a parity with all other Parity Stock and
(iii) junior to all Senior Stock.

2. Definitions. As used herein, the following terms shall have the following
meanings:

“Accreted Value” shall mean, with respect to each share of Preferred Stock and
as to any shares of Preferred Stock, whether or not issued on the Issue Date or
on any date thereafter, the Initial Liquidation Value as further adjusted
pursuant to Section 3(a).

“Accretion Rate” shall have the meaning set forth in Section 3(a) hereof.

“Affiliate” shall mean, with respect to a specified Person, any other Person,
directly or indirectly controlling, controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
“control” (including, with correlative meanings, “controlling,” “controlled by,”
and “under common control with”) means the power to direct or cause the
direction of the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.

“Approved Plan” shall mean an equity incentive plan approved by the Board of
Directors and the stockholders of the Company pursuant to which (i) any such
stock options issuable thereunder have an exercise price of not less than
then-current Market Value of the Common Stock and (ii) the number of shares
issuable thereunder, together with all other shares issuable under any other
Approved Plan, does not exceed 5% of the aggregate outstanding Common Stock on a
fully diluted basis.

“Authorized Preferred Stock” shall have the meaning set forth in recitals
hereof.

“Authorized Share Allocation” shall have the meaning set forth in Section 6(i)
hereof.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular “person” (as that term is used in Section 13(d)(3)
of the Exchange Act), such “person” will be deemed to have beneficial ownership
of all securities that such “person” has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only after the passage of time. The terms “Beneficially Owns” and
“Beneficially Owned” have a corresponding meaning.

“Board of Directors” shall mean the Board of Directors of the Company or, with
respect to any action to be taken by the Board of Directors, any committee of
the Board of Directors duly authorized to take such action.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
or executive order to close.

“Capital Stock” of any Person shall mean any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.

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“Cash Dividend” shall have the meaning set forth in Section 3(a) hereof.

“Cash Dividend Rate” shall have the meaning set forth in Section 3(a) hereof.

“Certificate of Incorporation” shall have the meaning set forth in the recitals
hereof.

“Change of Control” shall mean:

(i) any “person” or “group” of related persons (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than Parent or one or more
Permitted Holders, is or becomes the Beneficial Owner, directly or indirectly,
of more than 50% of the total voting power of the Voting Stock of the Company
(or its successor by merger, consolidation or purchase of all or substantially
all of its assets) (for the purposes of this clause (i), such person or group
shall be deemed to Beneficially Own any Voting Stock of the Company held by a
parent entity, if such person or group Beneficially Owns, directly or
indirectly, more than 50% of the total voting power of the Voting Stock of such
parent entity);

(ii) the first day on which a majority of the members of the Board of Directors
are not Continuing Directors;

(iii) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Restricted
Subsidiaries (as defined in the Indenture) taken as a whole to any “person” (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than a
Permitted Holder or a Person controlled by a Permitted Holder;

(iv) the adoption by the stockholders of the Company of a plan or proposal for
the liquidation or dissolution of the Company; or

(v) the first day on which Parent ceases to own 100% of the outstanding Capital
Stock of the Company (after having acquired such Capital Stock).

“Change of Control Notice” shall have the meaning set forth in Section 8(b)
hereof.

“Change of Control Redemption Date” shall have the meaning set forth in
Section 8(b) hereof.

“Change of Control Redemption Price” shall have the meaning set forth in
Section 8(b) hereof.

“Common Stock” shall mean the common stock, par value $0.01 per share, of the
Company, or any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or as a result of a subdivision,
combination, or merger, consolidation or similar transaction in which the
Company is a constituent corporation.

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“Company” shall have the meaning set forth in the recitals hereof.

“Company Conversion Conditions” shall have the meaning set forth in Section 7(a)
hereof.

“Company Conversion Threshold Date” shall having the meaning set forth in
Section 7(a) hereof.

“Continuing Directors” means, as of any date of determination, any member of the
Board of Directors who: (i) was a member of such Board of Directors on
December 1, 2005; or (ii) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who were
members of such Board of Directors at the time of such nomination or election.

“Conversion Date” shall have the meaning set forth in Section 6(c) hereof.

“Conversion Notice” shall have the meaning set forth in Section 6(b) hereof.

“Conversion Price” shall mean $21.97, subject to adjustment as set forth in
Section 6(c) hereof.

“Convertible Securities” shall have the meaning set forth in Section 6(c)
hereof.

“Current Market Price” shall mean, with respect to any date, the average of the
Volume Weighted Average Prices per share of Common Stock for the ten
(10) consecutive Trading Days immediately preceding such date of determination
(as appropriately adjusted for any stock split, stock dividend, stock
combination, reverse stock split, recapitalization or similar event with respect
to the Common Stock occurring during such Trading Days).

“DGCL” shall have the meaning set forth in Section 3(a) hereof.

“Dividend Payment Date” shall mean January 15, April 15, July 15 and October 15
of each year, commencing [            ]1.

“Dividend Rate” shall mean either the Cash Dividend Rate or the Accretion Rate.

“Dividend Record Date” shall mean January 1, April 1, July 1 and October 1 of
each year.

“Edge” shall mean Edge Petroleum Corporation, a Delaware corporation.

“Electing Holder” shall have the meaning set forth in Section 8(a) hereof.

“Electing Holders Redemption Notice” shall have the meaning set forth in
Section 8(a) hereof.

 

1 First dividend payment following the Issue Date.

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“Equity Securities” shall mean any Capital Stock of the Company.

“Equity Threshold Date” shall mean the date on which the Company shall have
completed a bona fide underwritten offering or offerings of Common Stock for
cash that have resulted in aggregate proceeds to the Company before fees and
expenses (including underwriter commissions) of at least $200 million since the
Issue Date.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

“Existing Conversion Price” shall have the meaning set forth in
Section 6(c)(iii) hereof.

“Excluded Stock” shall have the meaning set forth in Section 6(c) hereof.

“FINRA” shall mean the Financial Industry Regulatory Authority.

“First Exercise Date” shall have the meaning set forth in Section 7(a) hereof.

“Forced Conversion Number” shall mean such number of shares of Preferred Stock
as is equal to up to one-third of the aggregate number of shares of Preferred
Stock originally issued pursuant to the Purchase Agreement (as appropriately
adjusted for any stock split, stock dividend, stock combination, reverse stock
split, recapitalization or similar event with respect to the Preferred Stock).

“Fundamental Transaction” shall have the meaning set forth in Section 4(b)
hereof.

“Holder” shall mean a holder of record of the Preferred Stock.

“Indentures” shall mean the Indenture, dated as of January 18, 2007, among the
Company, the subsidiaries of the Company party thereto as guarantors and Wells
Fargo Bank, National Association, as Trustee, and the Indenture, dated as of
December 1, 2005, among the Company, the subsidiaries of the Company party
thereto as guarantors and Wells Fargo Bank, National Association, as Trustee.

“Initial Liquidation Value” shall mean the amount of $100.00 per share of
Preferred Stock, as appropriately adjusted for any stock split, stock dividend,
stock combination, reverse stock split, recapitalization or similar event with
respect to the Preferred Stock.

“Issue Date” shall mean the earliest date of original issuance of any shares of
the Preferred Stock.

“Junior Stock” shall mean all classes of common stock of the Company and each
other class of capital stock or series of preferred stock established after the
Issue Date, by the Board of Directors, the terms of which expressly provide that
such class or series ranks junior to the Preferred Stock as to dividend rights
or rights upon the liquidation, dissolution or winding-up of the Company in all
respects.

“Liquidation Event” shall have the meaning set forth in Section 5(a) hereof.

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“Listing Condition” shall have the meaning set forth in Section 7(a) hereof.

“Lock-Up Condition” shall have the meaning set forth in Section 7(a) hereof.

“Make Whole Consideration” shall have the meaning set forth in Section 7(b)
hereof.

“Mandatory Conversion Date” shall have the meaning set forth in Section 7(c)
hereof.

“Market Value” at any date shall mean, in the event the Common Stock is traded
in the over the counter market or on a national securities exchange, the average
of the Volume Weighted Average Prices per share of Common Stock for the ten
consecutive Trading Days preceding such date. The closing price for each day
shall be the last reported sale price, regular way, or, in case no such reported
sale takes place on such day, the average of the last closing bid and asked
prices, regular way, in either case on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, or if not
listed or admitted to trading on any national securities exchange, the closing
sale price for such day reported by Nasdaq, if the Common Stock is traded
over-the-counter and quoted by the Nasdaq Stock Market, or if the Common Stock
is so traded, but not so quoted, the average of the closing reported bid and
asked prices of the Common Stock as reported by Nasdaq or any comparable system,
or, if the Common Stock is not listed on Nasdaq or any comparable system, the
average of the closing bid and asked prices as furnished by two members of FINRA
selected from time to time by the Board of Directors for that purpose. If the
Common Stock is not publicly traded or is not traded in such manner that the
quotations referred to above are available for the period required hereunder,
Market Value per share of Common Stock shall be deemed to be the fair value per
share of Common Stock as determined in good faith by a majority of the Board of
Directors, and if Holders of a majority of the shares of Preferred Stock then
outstanding reasonably object in writing to such determination of Market Value,
the Market Value shall be determined by a nationally recognized investment
banking firm, accounting firm or valuation firm selected by the Board of
Directors with the costs of such firm being paid by the Company.

“Merger” shall mean the merger of Edge with and into Chaparral Exploration,
L.L.C. pursuant to the Agreement and Plan of Merger, dated as of July 14, 2008,
by and among the Company, Edge and Chaparral Exploration, L.L.C.

“150% VWAP Condition” shall have the meaning set forth in Section 7(a) hereof.

“Options” shall have the meaning set forth in Section 6(c) hereof.

“Parent” shall mean any entity that acquires 100% of the outstanding Capital
Stock of the Company in a transaction in which the Beneficial Owners of the
Company immediately prior to such transaction are Beneficial Owners in the same
proportion of the Company immediately after such transaction.

“Parity Stock” shall mean the Series A Preferred Stock and any other class of
capital stock or series of preferred stock established after the Issue Date by
the Board of Directors, subject to Section 4(b), the terms of which expressly
provide that such class or series will rank on parity with the Preferred Stock
as to dividend rights or rights upon the liquidation, dissolution or winding-up
of the Company.

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“Permitted Holders” shall mean:

(i) Mark A. Fischer, Charles A. Fischer, Jr., Mark A. Fischer 1994 Trust and
Susan L. Fischer 1994 Trust;

(ii) any immediate family member (in the case of an individual), including any
child, stepchild, parent, stepparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of
any Person referred to in clause (i); or

(iii) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons Beneficially Owning a 50% or more
controlling interest of which consist of any one or more Persons referred to in
clause (i) or (ii).

“Person” shall mean any individual, corporation, general partnership, limited
partnership, limited liability partnership, joint venture, association,
joint-stock company, trust, limited liability company, unincorporated
organization or government or any agency or political subdivision thereof or any
other entity.

“PIK Dividend” shall have the meaning set forth in Section 3(a) hereof.

“Preferred Director” shall have the meaning set forth in Section 4(d) hereof.

“Preferred Stock” shall have the meaning set forth in Section 1 hereof.

“Preferred Stock Delivery Date” shall have the meaning set forth in Section 6(b)
hereof.

“Principal Market” shall mean The New York Stock Exchange or the Nasdaq Global
Market or their respective successors.

“Property” or “property” means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.

“Public Float” shall mean, as of any date, the aggregate number of outstanding
shares of Common Stock beneficially owned (as determined in accordance with Rule
13d-3 under the Exchange Act) by Persons who are not Affiliates of the Company
as of such date, and excluding, without duplication, shares of Common Stock
(i) beneficially owned by any Person that beneficially owns 10% or more of the
then outstanding Common Stock or (ii) which are restricted securities under Rule
144 under the Securities Act or known by the Company to be subject to
restrictions on transfer.

“Purchase Agreement” shall mean that certain Stock Purchase Agreement, dated as
of July 14, 2008, related to the sale of the Preferred Stock by the Company.

“Qualified Offering” shall mean a bona fide underwritten offering or private
placement of Common Stock (other than Excluded Stock and any other Common Stock
issuable pursuant to an employee benefit plan approved by the Board of
Directors) for cash (or deemed underwritten offering or offerings or private
placement or placements of Common Stock through the issuance of Options or
Convertible Securities), all or a portion of which is for the account of the
Company, which occurs after the Issue Date and on or before the Equity Threshold
Date.

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“Redemption Date” shall have the meaning set forth in Section 8(a) hereof.

“Registration Condition” shall have the meaning set forth in Section 7(a)
hereof.

“Registration Rights Agreement” shall mean that certain Registration Rights
Agreement, dated as of [            ], 2008, related to the registration by the
Company of the Preferred Stock and the Common Stock into which the Preferred
Stock converts.

“Resale Condition” shall have the meaning set forth in Section 7(a) hereof.

“Second Exercise Date” shall have the meaning set forth in Section 7(a) hereof.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Senior Stock” shall mean each class of capital stock or series of preferred
stock established after the Issue Date by the Board of Directors, subject to
Section 4(b), the terms of which expressly provide that such class or series
will rank senior to the Preferred Stock as to dividend rights or rights upon the
liquidation, dissolution or winding-up of the Company.

“Series A Preferred Stock” shall mean the Series A Cumulative Convertible
Perpetual Preferred Stock, par value $0.01 per share, of the Company issued
pursuant to the Merger.

“Share Delivery Date” shall have the meaning set forth in Section 6(b) hereof.

“Third Exercise Date” shall have the meaning set forth in Section 7(a) hereof.

“Trading Day” with respect to any security shall mean (i) if such security is
listed or admitted for trading on a national securities exchange, a day on which
such securities exchange is open for trading, (ii) if such security is quoted on
the Nasdaq Global Market, or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system, (iii) if not listed or admitted for trading on a national securities
exchange as described in clause (i) or quoted as described in clause (ii), a day
on which quotations are reported by the National Quotation Bureau Incorporated,
or (iv) otherwise, any Business Day.

“Trigger Event” shall mean,

(a) the failure by the Company for any reason (including the absence of funds or
amounts legally available to effect a redemption or repurchase, or an inability
to comply with the Indenture) to redeem the Preferred Stock on a Redemption Date
or upon a Change of Control, in each case pursuant to the terms of this
Certificate of Designation;

(b) the failure by the Company for any reason to perform or observe any other
material covenant or agreement (not specified in subsection (a) above) contained
in this Certificate of Designation and such failure continues for ten Trading
Days after notice from any Holder; or

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(c) the failure by the Company to cause a registration pursuant to Section 2(a)
of the Registration Rights Agreement to become effective within 120 days
following a demand for such registration pursuant to such section.

“Transfer Agent” shall mean any duly appointed transfer agent, registrar and
conversion and dividend disbursing agent for the Preferred Stock. Until notice
is given by the Company to the Holders of the appointment of a separate Transfer
Agent, the Company shall act as the Transfer Agent for the Preferred Stock, and
all references herein to the Transfer Agent shall be references to the Company
acting in such capacity.

“Volume Weighted Average Price” of the Common Stock on any date shall mean the
volume weighted average sale price per share on such date on the New York Stock
Exchange, or if the Common Stock is not listed on the New York Stock Exchange,
on any other Principal Market on which the Common Stock is then listed, in each
case as reported by Bloomberg Financial Markets (or any successor thereto)
through its “Volume at Price” functions for the period from 9:30 a.m. to 4:00
p.m. New York time and ignoring any block trades (which, for purposes of this
definition means any transfer of more than 20,000 shares (subject to adjustment
to reflect stock dividends, stock splits, stock combinations and other similar
events)). In the absence of such a listing or quotation, the Volume Weighted
Average Price will be an amount reasonably determined to be the Market Value of
the Common Stock.

“Voluntary Redemption Date” shall mean the eleventh anniversary of the Issue
Date.

“Voluntary Redemption Price” shall have the meaning set forth in Section 8(a)
hereof.

“Voting Stock” shall mean with respect to any Person, equity securities of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.

3. Dividends.

(a) The Holders shall be entitled to receive with respect to each share of
Preferred Stock, at the Company’s option, either (i) out of any funds or assets
legally available for that purpose, cumulative dividends, whether or not
declared or paid, payable in cash (a “Cash Dividend”) at the annual rate of 6.5%
of the Accreted Value per share in effect immediately after the prior Dividend
Payment Date (or the Issue Date in respect of the first Dividend Payment Date)
(the “Cash Dividend Rate”) or (ii) an increase in the Accreted Value per share
(a “PIK Dividend”) at an annual rate of 8.0% (compounded quarterly) of the
Accreted Value in effect immediately after the prior Dividend Payment Date (or
the Issue Date in respect of the first Dividend Payment Date) (the “Accretion
Rate”), in each case of clause (i) and (ii), based on a 360-day year of twelve
30-day months. Such Cash Dividends shall only be payable when, as and if
declared by the Board of Directors. To the extent that the Board of Directors so
declares, such Cash Dividends shall be payable in arrears on each Dividend
Payment Date for the quarterly period ending on the Dividend Record Date
immediately prior to such Dividend Payment Date, to the Holders of record of
Preferred Stock at the close of business on such Dividend Record

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Date. If a Dividend Payment Date is not a Business Day, then the Cash Dividend
shall be due and payable on the first Business Day following such Dividend
Payment Date. In the event that the Company does not declare and pay a Cash
Dividend at the Cash Dividend Rate on any Dividend Payment Date pursuant to this
Section 3(a), then upon such Dividend Payment Date on which such Cash Dividend
is not paid, the Accreted Value in effect immediately after the prior Dividend
Payment Date (or the Issue Date in respect of the first Dividend Payment Date)
shall be increased automatically at the Accretion Rate. If the amount of accrued
and unpaid dividends is to be determined as of any date other than a Dividend
Payment Date (for example, if determined on a Conversion Date, a Mandatory
Conversion Date or a Redemption Date and such date is not a Dividend Payment
Date), dividends shall accrue at the Accretion Rate daily (compounding quarterly
on each Dividend Payment Date), whether or not earned or declared, from and
after the Issue Date or the most recent Dividend Payment Date, as applicable;
provided, that if the Company pays Cash Dividends in respect of any Dividend
Payment Date, dividends shall accrue at the Cash Dividend Rate for the
immediately following quarterly period.

(b) No dividends or other distributions (other than a dividend or distribution
payable solely in shares of Junior Stock (in the case of Junior Stock) and other
than cash paid in lieu of fractional shares) may be declared, made or paid, or
set apart for payment upon, any Parity Stock or Junior Stock, nor may any Parity
Stock or Junior Stock be redeemed, purchased or otherwise acquired for any
consideration (or any money paid to or made available for a sinking fund for the
redemption of any Parity Stock or Junior Stock) by or on behalf of the Company
(except by conversion into or exchange for shares of Parity Stock (if such
issuance of Parity Stock has been approved in accordance with Section 4(b)) (in
the case of Parity Stock) or Junior Stock (in the case of Parity Stock or Junior
Stock); provided that this restriction shall not apply to (i) the repurchase of
Equity Securities from directors, employees, or consultants of the Company or
any of its subsidiaries pursuant to agreements under which the Company has the
obligation to repurchase such shares upon the occurrence of certain events, such
as the termination of service to the Company or a subsidiary, in an aggregate
amount not to exceed $5.0 million, (ii) regular cash dividends, and mandatory
repurchases, redemptions or liquidation payments required by the terms of the
certificate of designations for the Series A Preferred Stock (including any
Delayed Dividends (as defined by the terms of the certificate of designations
for the Series A Preferred Stock)), except that the Company may pay cash to
effect any such repurchase or redemption, only so long as the Company has
concurrently offered to repurchase the Preferred Stock on the terms set forth in
Section 8(b) hereof); (iii) dividends, distributions, redemptions, purchases or
other acquisitions for which the Company has obtained consent of the Holders
pursuant to Section 4(b)(iii) or (iv) any repurchases, redemptions or other
acquisitions of Common Stock made in lieu of withholding taxes in connection
with any exercise of employee stock options to acquire Common Stock.

(c) No dividends or other distributions on the Preferred Stock (other than a
dividend or distribution payable solely in shares of Preferred Stock, including
PIK Dividends) may be declared, made or paid, or set apart for payment upon, any
Preferred Stock, nor may any Preferred Stock be redeemed, purchased or otherwise
acquired for any consideration (or any money paid to or made available for a
sinking fund for the redemption of any Preferred Stock) by or on behalf of the
Company (except by conversion into or exchange for shares of Preferred Stock or
Parity Stock or Junior Stock), unless all accumulated and unpaid dividends shall
have been or contemporaneously are declared and paid, or are declared and a sum
of cash sufficient

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for the payment thereof is set apart for such payment, on the Series A Preferred
Stock, the Preferred Stock and any Parity Stock for all dividend payment periods
terminating on or prior to the date of such declaration, payment, redemption,
purchase or acquisition. Notwithstanding the foregoing, if full dividends have
not been paid on the Series A Preferred Stock, the Preferred Stock and any
Parity Stock, dividends may be declared and paid on the Series A Preferred
Stock, the Preferred Stock and such Parity Stock so long as the dividends are
declared and paid pro rata so that the amounts of dividends declared per share
on the Series A Preferred Stock, the Preferred Stock and such Parity Stock will
in all cases bear to each other the same ratio that accumulated and unpaid
dividends per share on the shares of Series A Preferred Stock, the Preferred
Stock and such other Parity Stock bear to each other.

(d) Each Holder shall be entitled to any dividend or other distribution paid or
made with respect to any share of Common Stock to the same extent as if such
Holder had converted its Preferred Stock and held such shares of Common Stock on
the record date for such dividend or other distribution. Payments or other
distributions under the preceding sentence shall be paid or made to Holders
concurrently with the related dividend or other distribution to holders of
Common Stock. Except as provided in this Section 3(d) and Section 3(a), Holders
shall not be entitled to any dividends or other distributions on the Preferred
Stock, whether payable in cash, property or stock.

(e) Notwithstanding anything in this Certificate of Designation to the contrary,
upon the occurrence and during the continuance of any Trigger Event, the
Dividend Rate, whether payable in cash or by PIK Dividend, shall increase by
3.0% per annum.

4. Voting.

(a) The Holders shall be entitled to vote with the holders of the Common Stock
on all matters submitted to a vote of stockholders of the Company (other than
the election of directors for so long as the Holders have the right to elect a
director pursuant to Section 4(d)), and except as otherwise expressly provided
by applicable law. Each Holder shall be entitled to the number of votes equal to
the largest number of full shares of Common Stock into which all shares of
Preferred Stock held of record by such Holder could then be converted at the
Conversion Price if the Preferred Stock were converted at the record date for
the determination of the stockholders entitled to vote on such matters or, if no
such record date is established, at the date such vote is taken or any written
consent of stockholders is first executed. The Holders shall be entitled to
notice of any stockholders’ meeting at the time and in the manner given to the
holders of the Common Stock in accordance with the Bylaws of the Company, as
well as prior notice of all stockholder actions to be taken by legally available
means in lieu of a meeting.

(b) So long as any shares of Preferred Stock remain outstanding, and in addition
to any other vote required by applicable law, unless a greater percentage shall
then be required by applicable law, the Company shall not, without the
affirmative vote or consent of the Holders of at least a majority of the then
outstanding Preferred Stock voting or consenting, as the case may be, separately
as one class:

(i) create, authorize or issue (by reclassification or otherwise) any class or
series of Senior Stock or Parity Stock (other than the Series A Preferred Stock
issued pursuant to the Merger), including Preferred Stock, or any security
convertible into Senior Stock or Parity Stock;

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(ii) amend, alter or repeal (whether by merger, consolidation, operation of law
or otherwise) the Certificate of Incorporation, this Certificate of Designation
or the Company’s Bylaws so as to affect adversely the specified rights,
preferences, privileges or voting rights of Holders;

(iii) (a) effect any recapitalization, reorganization, reclassification, merger,
sale, consolidation, or statutory share exchange (in each case, other than a
Change of Control) (each, a “Fundamental Transaction”), pursuant to which upon
the consummation of such Fundamental Transaction the stockholders of the Company
immediately prior to such Fundamental Transaction would not, after giving effect
to such Fundamental Transaction, Beneficially Own 50% or more of the total
voting power of the Voting Stock of either the Company (or its successor by
merger, consolidation or purchase of all or substantially all of its assets),
the surviving company in such merger, sale, consolidation or statutory share
exchange or its or the Company’s parent, or (b) permit a Permitted Holder to
become the Beneficial Owner, directly or indirectly (including as a result of
membership in a “group” (as such term is used in Section 13(d) of the Exchange
Act)), of more than 50% of the total voting power of the Voting Stock of the
Company (or its successor by merger, consolidation or purchase of all or
substantially all of its assets) (for the purposes of this Section 4(a)(iii),
any person or group shall be deemed to Beneficially Own any Voting Stock of the
Company held by a parent entity, if such person or group Beneficially Owns,
directly or indirectly, more than 50% of the total voting power of the Voting
Stock of such parent entity);

(iv) permit the Common Stock to fail to be listed on a Principal Market; or

(v) until the Equity Threshold Date, incur, or permit any of its Restricted
Subsidiaries (as defined in the Indentures) to, directly or indirectly, incur,
any Indebtedness (including Acquired Indebtedness) (each as defined in the
Indentures), if after giving effect to such incurrence, total outstanding
Indebtedness of the Company and its Restricted Subsidiaries would exceed $1.9
billion or total outstanding Indebtedness of the Company and its Restricted
Subsidiaries under Credit Facilities (including the Senior Secured Credit
Agreement (in each case, as defined in the Indentures)) of the Company or its
Restricted Subsidiaries would exceed $1.2 billion; provided, however, that
accrual of interest, accrual of dividends, the amortization of debt discount or
the accretion of accreted value, the payment of interest in the form of
additional Indebtedness, and unrealized losses or charges in respect of Hedging
Obligations (as defined in the Indentures) (including those resulting from the
application of FAS 133) will not be deemed to be an incurrence of Indebtedness
for purposes of this Section 4(b)(v); provided further that obligations arising
upon entering into Hedging Obligations after the Issue Date that, at the time of
entering into such Hedging Obligations, are “out-of-the-money (off market)”,
shall constitute incurrences of Indebtedness under the Company’s and its
Restricted Subsidiaries’ Senior Secured Credit Agreement for purposes of this
Section 4(b)(v) to the extent such obligations exceed $170 million in the
aggregate.

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(c) The Company may authorize, increase the authorized amount of, or issue any
class or series of Junior Stock with or without voting rights, without the
consent of the Holders, and in taking such actions the Company shall not be
deemed for purposes of Section 4(b)(ii) to have affected adversely the rights,
preferences, privileges or voting rights of the Holders.

(d) Director Elections

(i) For so long as 50% or more of the Preferred Stock issued pursuant to the
Purchase Agreement remains outstanding, the Holders shall have the exclusive
right, voting separately as a class, to elect one director (herein referred to
as the “Preferred Director”) to the Board of Directors. A Preferred Director
shall be elected by the affirmative vote, at a special meeting of Holders called
for such purpose, or, to the extent permitted by the Certificate of
Incorporation, the written consent, of the Holders of a majority of the then
outstanding Preferred Stock. Each Preferred Director so elected shall serve for
a term of one year (or, if the Board of Directors is divided into classes, the
length of time that such Preferred Director is entitled to serve determined by
reference to the class that such Preferred Director is included in, which, at
the time of determination of such class, shall be the class that would be
permitted to serve for the longest period of time) and until his or her
successor is elected and qualified. The Preferred Director shall be entitled to
receive notice of all meetings of any committee of the Board of Directors at the
same time and in the same manner as the members of such committees of the Board
of Directors, have full rights to attend all meetings thereof (whether such
meetings are formal or informal, are convened in person, telephonically, or by
any other telecommunication means), and the Company shall provide the Preferred
Director all materials distributed to any committee of the Board of Directors
and all other information related to the Company which is made available to, or
which would otherwise be available upon reasonable request by, the committee
members thereof. Any vacancy in the position of a Preferred Director may be
filled only by the Holders. Each Preferred Director may, during his or her term
of office, be removed at any time, with or without cause, by and only by the
affirmative vote, at a special meeting of Holders of the Preferred Stock called
for such purpose, or, to the extent permitted by the Certificate of
Incorporation, the written consent, of the Holders of a majority of the then
outstanding Preferred Stock.

(ii) The Secretary of the Company (or such other person as may be required
pursuant to the Certificate of Incorporation) may, and upon the written request
of the holders of record of at least 25% of the then outstanding shares of
Preferred Stock (addressed to the Board of Directors and the Secretary of the
Company, in each case, at the principal office of the Company) shall, call a
special meeting of the Holders for the election of the Preferred Director to be
elected by them as herein provided. Such call shall be made by notice to each
Holder by first-class mail, postage prepaid (return receipt requested) at its
address as it appears in the register of the Company and such notice shall be
mailed at least ten (10) days but no more than fifteen (15) days before the date
of the special meeting, or as required by law. Such meeting shall be held at the
earliest practicable date upon the notice required for special meetings of
stockholders at the place designated by the Secretary of the Company. If such
meeting shall not be called by a proper officer of the Company or a proper
member or members of the Board of Directors within ten (10) days after receipt
of such written request by the Board of Directors and the Secretary of the
Company (in the manner provided above), then the Holders of at least 25% of the
shares of

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Preferred Stock then outstanding may call such meeting at the expense of the
Company (the reasonable expenses related thereto to be reimbursed to the Holders
as incurred), and such meeting may be called by such Holders upon the notice
required for special meetings of stockholders and shall be held at the place
designated in such notice. Any Holder that would be entitled to vote at any such
meeting shall have access to the stock books of the Company for the purpose of
causing a meeting of Holders to be called pursuant to the provisions of this
Section 4(d)(ii).

(iii) In case of a vacancy occurring in the office of any Preferred Director so
elected pursuant to Section 4(d)(i) hereof, the Holders of a majority of the
then outstanding Preferred Stock may, at a special meeting of the Holders or by
written consent, elect a successor to hold office for the unexpired term of such
Preferred Director.

(e) In exercising the separate class voting rights set forth in Sections 4(b)
and 4(d), each share of Preferred Stock shall be entitled to one vote.

5. Liquidation Rights.

(a) In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, or its subsidiaries the assets of which constitute
all or substantially all of the assets of the Company and its subsidiaries taken
as a whole, in either case in a single or series of transactions by merger or
otherwise (each a “Liquidation Event”), subject to the payment or provision for
payment of the debts and other liabilities of the Company, each Holder shall be
entitled to receive and to be paid out of the remaining assets and funds of the
Company available for distribution to its stockholders, prior to the holders of
Junior Stock an amount for each share of Preferred Stock then held by such
Holder equal to the greater of (a) the Accreted Value plus accrued and unpaid
dividends as of the date of such Liquidation Event and (b) the amount that such
Holder would have received if, immediately prior to such Liquidation Event, it
had voluntarily converted its Preferred Stock pursuant to Section 6. For
purposes hereof, any sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all the assets
or business of the Company and its subsidiaries, or the merger or consolidation
of the Company and/or its subsidiaries into or with any other Person, in each
case, that would constitute a Change of Control, shall be deemed a “Liquidation
Event”.

(b) If any Liquidation Event occurs prior to the fifth anniversary of the Issue
Date, each Holder shall be entitled to receive and to be paid out of the
remaining assets and funds of the Company available for distribution to its
stockholders, prior to the holders of Junior Stock, an amount for each share of
Preferred Stock then held by such Holder equal to the greater of (a) 105% of the
Accreted Value plus accrued and unpaid dividends as of the date of such
transaction and (b) the amount that such Holder would have received if,
immediately prior to such transaction, it had voluntarily converted its
Preferred Stock pursuant to Section 6.

(c) After the indefeasible payment in cash to the Holders of full preferential
amounts provided for in this Section 5, Holders as such shall have no right or
claim to any of the remaining assets or funds of the Company.

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(d) In the event the assets and funds of the Company available for distribution
to Holders upon any Liquidation Event shall be insufficient to pay in full all
amounts to which such Holders are entitled pursuant to Section 5(a) and amounts
to which holders of Parity Stock are entitled, no such distribution shall be
made on account of any shares of Preferred Stock or Parity Stock upon such
Liquidation Event unless proportionate distributable amounts shall be paid on
account of the shares of Preferred Stock, ratably, in proportion to the full
distributable amounts for which Holders of all Preferred Stock and of any Parity
Stock are entitled upon such Liquidation Event with the amount allocable to each
series of such stock determined on a pro rata basis of the aggregate liquidation
preference of the outstanding shares of each such series and accumulated and
unpaid dividends to which each such series is entitled.

(e) The provisions of this Section 5 shall not in any way limit the right of
Holders to elect to convert their shares of Preferred Stock into shares of
Common Stock pursuant to Section 6 prior to or in connection with any
Liquidation Event. However, following the occurrence of a Liquidation Event and
the payment in full to a Holder of its applicable liquidation preference, such
holder shall cease to have any rights hereunder to participate in any future
dividends or distributions made to the holders of Common Stock.

6. Conversion at the Option of Holders.

(a) Each Holder shall have the right, at its option, exercisable at any time and
from time to time from the Issue Date to convert, subject to the terms and
provisions of this Section 6, any or all of such Holder’s shares of Preferred
Stock. In such case, the shares of Preferred Stock shall be converted into such
whole number of fully paid and nonassessable shares of Common Stock as is equal,
subject to Section 6(c)(v), to the product of the number of shares of Preferred
Stock being so converted multiplied by the quotient of (i) the Accreted Value
per share of Preferred Stock then in effect plus accrued and unpaid dividends as
of such date divided by (ii) the Conversion Price then in effect.

(b) The conversion right of a Holder shall be exercised by the Holder by
delivery to the Company and the Transfer Agent of written notice in the form of
Exhibit B (“Conversion Notice”), at any time during usual business hours of the
Company and the Transfer Agent, that the Holder elects to convert all or a
portion of the shares of Preferred Stock represented by its related certificate
and specifying the name or names (with address) in which a certificate or
certificates for shares of Common Stock are to be issued and (if so required by
the Company or the Transfer Agent, if any) by a written instrument or
instruments of transfer in form reasonably satisfactory to the Company or the
Transfer Agent, if any, duly executed by the Holder or its duly authorized legal
representative. The Holder shall not be required to physically surrender
certificates representing the Preferred Stock to be converted with the
Conversion Notice. The Holder and the Company shall maintain records showing the
number of Preferred Stock converted by such Holder and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of certificates
representing the Preferred Stock upon exercise. Immediately prior to the close
of business on the date of receipt by the Company and the Transfer Agent, if
any, of the Conversion Notice, each converting Holder shall be deemed to be the
holder of record of Common Stock issuable upon conversion of such Holder’s
Preferred Stock being converted notwithstanding that the share register of the
Company shall then be closed or that certificates representing such

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Common Stock shall not then be actually delivered to such Holder. On the date of
any conversion, all rights with respect to the shares of Preferred Stock so
converted (the “Conversion Date”), including the rights, if any, to receive
notices, will terminate, except only the rights of Holders thereof to
(i) receive certificates for the number of whole shares of Common Stock into
which such shares of Preferred Stock have been converted and cash, in lieu of
any fractional shares as provided in Section 6(g) and (ii) exercise the rights
to which they are entitled as holders of Common Stock. If the Conversion Date
shall not be a Business Day, then such Conversion Date shall be deemed to be the
next succeeding Business Day. Upon receipt by the Company of copy of a
Conversion Notice, the Company shall (i) as soon as practicable, but in any
event within two (2) Trading Days, provide a confirmation of receipt of such
Conversion Notice to such Holder and the Transfer Agent, if any, which
confirmation shall constitute an instruction to the Company and the Transfer
Agent to process such Conversion Notice in accordance with the terms herein and
(ii) on or before the third (3rd) Trading Day following the date of receipt by
the Company and the Transfer Agent of such Conversion Notice (the “Share
Delivery Date”), (a) provided the Transfer Agent is participating in the DTC
Fast Automated Securities Transfer Program, credit such aggregate number of
shares of Common Stock to which the Holder shall be entitled to the Holder’s or
its designee’s balance account with DTC through its Deposit Withdrawal Agent
Commission system, or (b) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program, issue and deliver to the address as
specified in the Conversion Notice, a certificate, registered and bearing
restrictive legends, if applicable, in the name of the Holder or its designee,
for the number of shares of Common Stock to which the Holder shall be entitled.
If the number of shares of Preferred Stock represented by the certificate(s)
submitted for conversion is greater than the number of shares of Preferred Stock
being converted, then the Company shall, as soon as practicable and in no event
later than three (3) Business Days after receipt of the certificate(s) (the
“Preferred Stock Delivery Date”) and at its own expense, instruct the Transfer
Agent to issue and deliver to the Holder a new Preferred Stock certificate
representing the number of shares of Preferred Stock not converted. The Person
or Persons entitled to receive the shares of Common Stock issuable upon a
conversion of Preferred Stock shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on the Conversion Date.

(c) The Conversion Price shall be subject to adjustment as follows:

(i) Common Stock Issued at less than the Conversion Price. If and whenever, on
or after the date this Certificate of Designation is filed with the Secretary of
State of the State of Delaware, the Company issues or sells, or is deemed to
have issued or sold, any shares of its Common Stock (other than Excluded Stock)
for consideration per share less than the Conversion Price, then immediately
upon such issue or sale, the Conversion Price shall be reduced to the price
determined by multiplying the Conversion Price in effect immediately prior to
such time by a fraction:

(A) the numerator of which shall be (x) the number of shares of Common Stock
outstanding immediately prior to such issue or sale (assuming the conversion of
all then outstanding Preferred Stock and the exercise or conversion to Common
Stock of all then outstanding Options and Convertible Securities (other than
Series A Preferred Stock)) plus (y) the number of shares of Common Stock which
the aggregate consideration received by the Company for the total

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number of additional shares of Common Stock so issued or sold (or deemed to be
issued or sold) would purchase at the Conversion Price in effect immediately
prior to such issue or sale; and

(B) the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such issue or sale or deemed issuance or sale
(assuming the conversion of all then outstanding Preferred Stock and the
exercise or conversion to Common Stock of all then outstanding Options and
Convertible Securities (other than Series A Preferred Stock)).

For purposes of this Section 6(c)(i), “Excluded Stock” means shares of Common
Stock (in each case as adjusted for any stock splits, stock dividends,
recapitalizations, combinations or similar transactions), Options (as defined
below) and Convertible Securities (as defined below) issued:

(i) pursuant to one or more Approved Plans,

(ii) upon conversion of the Preferred Stock or the Series A Preferred Stock,

(iii) in connection with any (A) stock splits, stock dividends,
recapitalizations or reorganizations for which an adjustment to the Conversion
Price is made pursuant to Section 6(c)(iv), or (B) mergers or consolidations for
which an adjustment to the Conversion Price is made pursuant to Section 6(c)(v)
and

(iv) as consideration in the Merger, including Options assumed in the Merger.

For purposes of this Section 6(c), outstanding shares of Preferred Stock will be
deemed convertible at all times into shares of Common Stock, where each share of
Preferred Stock is deemed convertible into the greatest whole number of shares
of Common Stock which would be issuable upon conversion of such share of
Preferred Stock if the Preferred Stock were then convertible at the Conversion
Price then in effect.

(ii) Options and Convertible Securities. For purposes of determining the
adjusted Conversion Price under Section 6(c)(i) or Section 6(c)(v), the
following shall be applicable (it being acknowledged that the issuance of
Excluded Stock shall not be subject to the provisions of this Section 6(c)(ii)):

(A) If the Company in any manner issues or grants any options, warrants, or
similar rights (“Options”) to purchase or acquire Common Stock or Equity
Securities convertible or exchangeable, with or without consideration, into or
for Common Stock (“Convertible Securities”) and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than the Conversion Price in
effect immediately prior to the time of the granting of such Options, then the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to be outstanding and to have been issued and sold by the Company for
such price

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per share on the date of such issuance or grant. For purposes of this
subparagraph, the “price per share for which Common Stock is issuable” shall be
determined by dividing (a) the total amount, if any, received or receivable by
the Company as consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Company upon
exercise of all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or sale of such
Convertible Securities and the conversion or exchange of such Convertible
Securities, by (b) the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options. No further
adjustment of the Conversion Price shall be made when Convertible Securities are
actually issued upon the exercise of such Options or when Common Stock is
actually issued upon the exercise of such Options or the conversion or exchange
of such Convertible Securities. Upon the expiration, repurchase or other
termination without exercise or conversion of any Options or Convertible
Securities for which an adjustment was made under Section 6 upon the issuance or
sale thereof, the Conversion Price, shall, upon such expiration, be readjusted
and shall thereafter be such as it would have been had it been originally
adjusted (or had the original adjustment not been required, as the case may be)
on the basis of (i) the number of shares of Common Stock, if any, actually
issued or sold upon the exercise or conversion of such Options or Convertible
Securities, and (ii) the consideration actually received by the Company upon
such exercise or conversion plus the consideration, if any, actually received by
the Company for the issuance, or sale of all such Options or Convertible
Securities whether or not exercised or converted; provided, however, that no
such readjustment shall have the effect of increasing the Conversion Price or
decreasing the number of shares of Common Stock issuable upon conversion of the
Preferred Stock by an amount in excess of the amount of the adjustment initially
made in respect of the issuance or sale of such Options or Convertible
Securities.

(B) If the Company in any manner issues or sells any Convertible Securities and
the price per share for which Common Stock is issuable upon such conversion or
exchange is less than the Conversion Price in effect immediately prior to the
time of such issue or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share on the date of such issuance or sale. For the purposes of
this subparagraph, the “price per share for which Common Stock is issuable”
shall be determined by dividing (a) the total amount received or receivable by
the Company as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange of such Convertible
Securities, by (b) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible

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Securities. No further adjustment of the Conversion Price shall be made when
Common Stock is actually issued upon the conversion or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section 6(c), no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.

(C) If any Options or Convertible Securities for which an adjustment was made
under Section 6 upon the issuance or sale thereof by its terms provides, with
the passage of time or otherwise, for any increase or decrease in the amount of
additional consideration payable to the Company or increase or decrease in the
number of shares of Common Stock issuable upon such exercise or conversion or
exchange (by change of rate or otherwise) (other than in either case by action
of antidilution provisions), upon the occurrence of any such increase or
decrease, the Conversion Price shall be readjusted to reflect such increase or
decrease insofar as it affects rights of acquisition, exchange or conversion
which have not theretofore expired; provided, however, that no such readjustment
shall have the effect of increasing the Conversion Price or decreasing the
number of shares of Common Stock issuable upon conversion of the Preferred Stock
by an amount in excess of the amount of the adjustment initially made in respect
of the issuance or sale of such Options or Convertible Securities.

(D) If any Common Stock, Option, or Convertible Security is issued or sold or
deemed to have been issued or sold for cash, the consideration received for such
Common Stock, Option, or Convertible Security shall be deemed to be the amount
received by the Company for such Common Stock, Option, or Convertible Security.
In case any Common Stock, Options, or Convertible Securities are issued or sold
for a consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration, as
determined in good faith by the Board of Directors, as of the date of receipt.
If any Common Stock, Option, or Convertible Security is issued in connection
with any merger in which the Company is the surviving Company, the amount of
consideration for such Common Stock, Option, or Convertible Security shall be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving corporation as is attributable to such Common Stock, Option or
Convertible Security, as determined in good faith by the Board of Directors, as
of the date of receipt.

(E) In case any Option is issued in connection with the issue or sale of other
securities of the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Option by the parties to
such transaction, the Option shall be deemed to have been issued for a
consideration of $0.01.

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(F) The number of shares of Common Stock outstanding at any given time does not
include shares owned or held by or for the account of the Company or any
subsidiary, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.

(iii) Qualified Offering. Notwithstanding anything in this Certificate of
Designation to the contrary, if at any time after the Issue Date the Company
completes a Qualified Offering and the product of 1.2 and the purchase price per
share of Common Stock paid (or deemed paid) by investors in any offering or
private placement consummated in such Qualified Offering is less than the
Conversion Price then in effect (the “Existing Conversion Price”), the Existing
Conversion Price shall immediately thereafter be reduced to the product of 1.2
and the lowest purchase price per share of Common Stock paid in any such
Qualified Offering; provided however, that in no event shall the amount of the
reduction to the Existing Conversion Price pursuant to this section exceed 35%
of the Existing Conversion Price; provided further, that if an issuance or
deemed issuance of Common Stock would result in a greater reduction in the
Existing Conversion Price under the other provisions of this Section 6(c) than
under this Section 6(c)(iii), then the Existing Conversion Price shall be
adjusted instead pursuant to such other applicable provision of this
Section 6(c).

(iv) Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision shall be
proportionately reduced so that the conversion of the Preferred Stock after such
time shall entitle the Holder to receive the aggregate number of shares of
Common Stock or other securities of the Company which, if the Preferred Stock
had been converted immediately prior to such time, such Holder would have owned
upon such conversion and been entitled to receive by virtue of such stock split,
stock dividend, recapitalization or other event, and if the Company at any time
combines (by combination, reverse stock split or otherwise) its outstanding
shares of Common Stock into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination shall be proportionately increased.

(v) Reorganization, Mergers, Consolidations, or Sales of Assets. If at any time
or from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares,
provided for elsewhere in this Section 6(c)), or a merger or consolidation of
the Company with or into another entity then, as a part of such reorganization,
merger, or consolidation, provision shall be made so that the Holders shall,
after such reorganization, merger, or consolidation, be entitled to receive upon
conversion of the Preferred Stock shares of stock of the Company, or of the
successor entity resulting from such merger or consolidation, other securities
and/or property to which the Common Stock issuable upon conversion of the
Preferred Stock at the then Conversion Price (as in effect immediately prior to
such reorganization, merger or consolidation) would have been entitled to
receive upon such reorganization, merger or consolidation if such shares were
then convertible at the Conversion Price at that time, and Common Stock issuable
in connection with a conversion of the Preferred Stock after such
reorganization, merger or consolidation shall

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refer to the shares of stock, other securities and/or property to be issued in
respect of Common Stock in connection with such reorganization, merger or
consolidation. If the holders of Common Stock have the right to elect the kind
and amount of consideration receivable upon consummation of such transaction,
then the Holders, in connection with such transaction and at the same time
holders of Common Stock are allowed to make such election, shall be given the
right to make a similar election ,which election must be made in the same time
frame as the election of holders of Common Stock with respect to the
consideration into which the Preferred Stock shall thereafter be convertible.

(d) Conversion Price Reset. In addition to adjustments to the Conversion Price
pursuant to Section 6(c), if the Equity Threshold Date has not occurred prior to
July 1, 2010 and the Conversion Price in effect on such date exceeds $19.11
(such per share amount subject to appropriate adjustment for any stock split,
reverse stock split, stock dividend, recapitalization or similar event), the
Conversion Price in effect on such date will be reduced to $19.11 (such per
share amount subject to appropriate adjustment for any stock split, reverse
stock split, stock dividend, recapitalization or similar event).

(e) Statement Regarding Adjustments. Whenever the Conversion Price shall be
adjusted as provided in Section 6(c) or Section 6(d), the Company shall
forthwith file, at the office of the Transfer Agent, a statement showing in
detail the facts requiring such adjustment and the Conversion Price that shall
be in effect after such adjustment, and the Company shall also cause a copy of
such statement to be sent by mail, first class postage prepaid, to each Holder
at its address appearing on the Company’s records. Each such statement shall be
signed by the Company’s chief financial officer. Where appropriate, such copy
may be given in advance and may be included as part of a notice required to be
mailed under the provisions of Section 6(f). The Company shall, upon written
request at any time of any Holder, furnish or cause to be furnished to such
Holder a certificate setting forth (i) all adjustments and readjustments to the
Conversion Price, (ii) the Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of such Holder’s shares of
Preferred Stock if such shares were convertible at such time at the Conversion
Price at that time in effect.

(f) Notice to Holders. In the event the Company shall propose to take any action
of the type described in clauses (i) (but only if the action of the type
described in clause (i) would result in an adjustment in the Conversion Price),
(iv) or (v) of Section 6(c), the Company shall give notice to each Holder, in
the manner set forth in Section 6(e), which notice shall specify the record
date, if any, with respect to any such action and the approximate date on which
such action is to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect on the
Conversion Price and the number, kind or class of shares or other securities or
property which shall be deliverable upon conversion of shares of the Preferred
Stock. Except as otherwise provided herein, such notice shall be given at least
five days prior to the taking of such proposed action.

(g) No Fractional Shares. No fractional shares or securities representing
fractional shares of Common Stock shall be issued upon the conversion of any
shares of Preferred Stock, whether voluntary or mandatory. If more than one
share of Preferred Stock shall be surrendered for conversion at one time by the
same Holder, the number of full shares of Common Stock

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issuable upon conversion thereof shall be computed on the basis of the aggregate
then Accreted Value of the shares of Preferred Stock so surrendered, plus
accrued and unpaid dividends thereon as of such date. If the conversion of any
share or shares of Preferred Stock results in a fraction, an amount equal to
such fraction multiplied by the Market Value of the Common Stock on the Trading
Day next preceding the day of conversion shall be paid to such Holder in cash by
the Company.

(h) Costs. The Company shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of shares of Common
Stock upon conversion of any shares of the Preferred Stock or deemed issuances
pursuant to this Section 6 or Section 7; provided that the Company shall not be
required to pay any federal or state income taxes, franchise or similar taxes or
other taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificate for such shares in a name other than
that of the Holder in respect of which such shares are registered with the
Company.

(i) Reservation of Common Stock. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the Preferred Stock, such number of
shares of Common Stock (the “Authorized Share Allocation”) equal to 110% of the
shares of Common Stock necessary from time to time to effect the conversion of
all outstanding shares of Preferred Stock at the Conversion Price then in effect
and the conversion of such Preferred Stock pursuant to its terms, and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Preferred
Stock, the Company shall use its commercially reasonable efforts to take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.

7. Conversion at the Option of the Company.

(a) With 150% VWAP Condition. If, at any time after the later of (i) the second
anniversary of the Issue Date and (ii) the date by which the Company shall have
completed bona fide underwritten public offerings of its Common Stock that have
resulted in at least $250 million in aggregate net proceeds to the Company after
the Issue Date (such later date, the “Company Conversion Threshold Date”), (a) a
registration statement covering the resale of the Common Stock underlying all of
the outstanding shares of the Preferred Stock is effective under the Securities
Act and the Holders are not then subject to any blackout or other limitations
under the Registration Rights Agreement or otherwise that would prevent the
Holders from selling such Common stock thereunder (the “Registration
Condition”), (b) the average of the Volume Weighted Average Prices of the Common
Stock for the 10 Trading Days ending on the Trading Date immediately before the
Company elects to convert the Preferred Stock exceeds 150% of the then
Conversion Price (such condition, the “150% VWAP Condition”), (c) the Holders
are not restricted from selling their shares of the Company pursuant to any
“lock-up” provisions or agreements (the “Lock-Up Condition”), (d) so long as a
Preferred Director is then a member of the Board of Directors, the officers and
directors of the Company are not then precluded under any insider trading or
other similar policy from selling securities of the Company (the “Resale
Condition”) and (e) the Common Stock is then listed on a Principal Market (the
“Listing Condition” and, together with the Registration Condition, the 150% VWAP
Condition, the

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Lock-Up Condition and the Resale Condition, the “Company Conversion
Conditions”), then the Company shall have the right, at its option, to convert
the Preferred Stock according to the following schedule and in the following
amounts: (1) on any date after the Company Conversion Threshold Date, the
Company may elect to convert up to the Forced Conversion Number of shares of
Preferred Stock (the date of such election being the “First Exercise Date”) so
long as the Company Conversion Conditions are satisfied at such First Exercise
Date; (2) on any date commencing with the 180th day following the First Exercise
Date, the Company may elect to convert up to the Forced Conversion Number of
shares of Preferred Stock (the date of such election being the “Second Exercise
Date”) so long as the Company Conversion Conditions are satisfied at such Second
Exercise Date and (3) on any date commencing with the 180th day following the
Second Exercise Date, the Company may elect to convert up to the Forced
Conversion Number of shares of Preferred Stock (the date of such election being
the “Third Exercise Date”) so long as the Company Conversion Conditions are
satisfied at such Third Exercise Date. In each case of clauses (1), (2) and
(3) of the preceding sentence, the Preferred Stock to be converted shall be
convertible into that whole number of fully paid and nonassessable shares of
Common Stock as is equal, subject to Section 6(c)(v), to the product of the
number of shares of Preferred Stock being so converted multiplied by the
quotient of (i) the Accreted Value then in effect plus accrued and unpaid
dividends as of such date divided by (ii) the Conversion Price then in effect,
with any resulting fractional shares of Common Stock to be settled in accordance
with Section 6(g). Notwithstanding the foregoing, the Company shall have the
right to elect to convert up to all of the outstanding Preferred Stock after the
Company Conversion Threshold Date if, at the time of election, in addition to
satisfying all the Company Conversion Conditions, the Company shall, prior to
the date of such election, have completed bona fide underwritten public
offerings of its Common Stock that have resulted in at least $500 million in
aggregate proceeds after the Issue Date to any party selling in such public
offering and the Common Stock to be issued on conversion shall represent less
than 25% of the then Public Float (without taking into account the Common Stock
issuable upon conversion of the Preferred Stock).

(b) Without 150% VWAP Condition. If, at any time following the Company
Conversion Threshold Date, (i) each of the Company Conversion Conditions (other
than the 150% VWAP Condition) is satisfied, then the Company shall have the
right, at its option, to convert the Preferred Stock according to the following
schedule and in the following amounts: (1) on any date after the Company
Conversion Threshold Date, the Company may elect to convert up to the Forced
Conversion Number of shares of Preferred Stock so long as the Company Conversion
Conditions (other than the 150% VWAP Condition) are satisfied at such First
Exercise Date; (2) on any date commencing with the 180th day following the First
Exercise Date, the Company may elect to convert up to the Forced Conversion
Number of shares of Preferred Stock so long as the Company Conversion Conditions
(other than the 150% VWAP Condition) are satisfied at such Second Exercise Date
and (3) on any date commencing with the 180th day following the Second Exercise
Date, the Company may elect to convert up to the Forced Conversion Number of
shares of Preferred Stock so long as the Company Conversion Conditions (other
than the 150% VWAP Condition) are satisfied at such Third Exercise Date. In each
case of clauses (1), (2) and (3) of the preceding sentence, the Preferred Stock
to be converted shall be convertible into that whole number of fully paid and
nonassessable shares of Common Stock as is equal, subject to Section 6(c)(v), to
the product of the number of shares of Preferred Stock being so converted
multiplied by the quotient of (i) 150% of the Accreted Value

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per share then in effect plus accrued and unpaid dividends as of such date
divided by (ii) the Conversion Price then in effect, with any resulting
fractional shares of Common Stock to be settled in accordance with Section 6(g);
provided, that the Company shall have the right to substitute, for up to
one-third of the shares of Common Stock otherwise issuable upon conversion under
this Section 7(b), cash in an amount equal to the product of (x) the then
Current Market Price of the Common Stock and (y) the number of shares of Common
Stock otherwise deliverable for which the Company has elected to substitute cash
in accordance with this proviso (collectively, the “Make Whole Consideration”).
Notwithstanding the foregoing, the Company shall have the right to elect to
convert up to all of the outstanding Preferred Stock after the Company
Conversion Threshold Date by issuing and delivering, as applicable, the Make
Whole Consideration in consideration therefor if, at the time of election, in
addition to satisfying the Company Conversion Conditions (other than the 150%
VWAP Condition), the Company shall, prior to the date of such election, have
completed bona fide underwritten public offerings of its Common Stock that have
resulted in at least $500 million in aggregate proceeds and the Common Stock to
be issued on conversion shall represent less than 25% of the then Public Float
(without taking into account the Common Stock that at such time are issuable but
are not yet issued upon conversion of the Preferred Stock).

(c) To exercise the mandatory conversion right described in Section 7(a) or
Section 7(b), the Company must give irrevocable notice by issuing a press
release or by publication (with subsequent prompt notice) to the Holders (not
more than one Trading Day after the date of the press release) confirming the
Company’s election to convert the Preferred Stock pursuant to this Section 7.
The conversion date will be a date selected by the Company (the “Mandatory
Conversion Date”) and will be no more than three (3) Trading Days after the date
on which the Company issues the press release described in this Section 7(c).

(d) In addition to any information required by applicable law or regulation, the
press release and notice of a mandatory conversion described in Section 7(c)
shall state, as appropriate: (i) the Mandatory Conversion Date; (ii) the number
of shares of Common Stock to be issued upon conversion of each share of
Preferred Stock to be converted; (iii) the number of shares of Preferred Stock;
(iv) that dividends on the Preferred Stock to be converted will cease to accrue
on the Mandatory Conversion Date; and (v) the amount of the Make Whole
Consideration, if applicable.

(e) On and after the Mandatory Conversion Date, dividends will cease to accrue
on the Preferred Stock called for a mandatory conversion pursuant to
Section 7(a) or Section 7(b) and all rights of Holders will terminate except for
the right to receive the whole shares of Common Stock issuable upon conversion
thereof, cash in lieu of any fractional shares of Common Stock in accordance
with Section 6(g) and/or the Make Whole Consideration.

(f) If fewer than all of the outstanding shares of Preferred Stock are to be
converted by the Company pursuant to Section 7(a) or Section 7(b), shares of
Preferred Stock to be converted shall be selected by the Company from the then
outstanding shares of Preferred Stock, pro rata (as nearly as may be) on the
basis of total shares of Preferred Stock then held by each Holder.

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8. Redemption.

(a) Redemption at Option of Holders.

(i) Subject to Section 8(a)(ii), if requested by a Holder (an “Electing
Holder”), such Holder shall have the right, but not the obligation, to require
the Company from time to time to redeem all or any portion of such Holder’s
Preferred Stock (a) on or after the Voluntary Redemption Date, at a cash
redemption price equal to the then Accreted Value of such Preferred Stock (plus
accrued and unpaid dividends) to be redeemed or (b) on or after the seventh
anniversary of the Issue Date (but before the Voluntary Redemption Date), in
exchange for that number of shares of Common Stock as equals the product of the
number of shares of Preferred Stock being so redeemed multiplied by the quotient
of (i) the Accreted Value then in effect plus accrued and unpaid dividends as of
such date divided by (ii) the Current Market Price on the Redemption Date, with
any resulting fractional shares of Common Stock to be rounded up to the next
full share (either of such value or the value described in clause (a) being the
“Voluntary Redemption Price”).

(ii) If the Company is unable to redeem any shares of Preferred Stock then to be
redeemed because such redemption would violate the applicable laws of the State
of Delaware, then the Company shall redeem the shares of Preferred Stock that it
is entitled to redeem pursuant to the laws of the State of Delaware and shall
redeem such other shares then subject to redemption as soon thereafter as
redemption would not violate such laws.

(iii) The Electing Holders shall give the Company written notice of their
election to have their Preferred Stock redeemed pursuant to this Section 8(a) at
least thirty (30) days prior to any applicable date selected by the Electing
Holders (the “Redemption Date”) on which the Electing Holders desire to have
shares of Preferred Stock so redeemed (the “Electing Holders Redemption
Notice”). On or prior to each Redemption Date, each holder of Preferred Stock to
be redeemed shall surrender its certificate or certificates representing such
redeemed shares to the Company, in the manner and at the place specified by the
Company, and thereupon the applicable Voluntary Redemption Price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.

(b) Change of Control Redemption.

(i) Upon a Change of Control occurring prior to the fifth anniversary of the
Issue Date, a Holder of the Preferred Stock shall have the right, but not the
obligation, to require the Company to redeem such Holder’s Preferred Stock at a
cash redemption price equal to the greater of (i) 105% of the Accreted Value per
share of Preferred Stock to be redeemed as of the date of such redemption (plus
accrued and unpaid dividends) or (ii) the fair value of the consideration as of
the date of such Change of Control, as

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determined in good faith by the Board of Directors, that such Holder would have
received if, immediately prior to such redemption, it had voluntarily converted
its Preferred Stock pursuant to Section 6.

(ii) Upon a Change of Control occurring on or after the fifth anniversary of the
Issue Date, a Holder of the Preferred Stock shall have the right, but not the
obligation (subject to Section 8(a)(ii)), to require the Company to redeem such
Holder’s Preferred Stock at a cash redemption price equal to the then Accreted
Value of such Preferred Stock (plus accrued and unpaid dividends) to be
redeemed.

(iii) Any Holder requesting redemption of its Preferred Stock pursuant to this
Section 8(b) shall give the Company written notice of such election within
thirty (30) days of receipt of the Change of Control Notice, which notice shall
indicate the number of shares of Preferred Stock that such Holder elects for the
Company to redeem. Subject to the Company’s prior compliance with Sections 4.10,
4.15 and 4.16 of the Indentures (to the extent that any of the securities issued
thereunder are then outstanding and the covenants in such Sections of the
Indentures are then in effect), the Company shall make payment of the redemption
price payable under either Sections 8(b)(i) or (ii) hereof (the “Change of
Control Redemption Price”) within five Trading Days after the Company’s receipt
of such notice (the “Change of Control Redemption Date”). Notwithstanding
anything herein to the contrary, the periods for the Company’s obligations in
respect of redemption will be extended to the extent necessary to comply with
applicable securities laws and rules. To the extent redemptions required by this
Section 8(b) are deemed or determined by a court of competent jurisdiction to be
prepayments of the Preferred Stock by the Company, such redemptions shall be
deemed to be voluntary prepayments. Notwithstanding anything to the contrary in
this Section 8(b), until the Change of Control Redemption Price is paid in full,
the shares of Preferred Stock submitted for redemption under this Section 8 may
be converted pursuant to Section 6, in whole or in part, by the Holder into
shares of Common Stock, or in the event the conversion date is after the
consummation of the Change of Control, equity interests of the successor entity
substantially equivalent to the Company’s Common Stock pursuant to
Section 6(c)(v). The parties hereto agree that in the event of the Company’s
redemption of any portion of the Preferred Stock under this Section 8(b), a
Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for each Holder.
Accordingly, any redemption premium due under this Section 8(b) is intended by
the parties to be, and shall be deemed, a reasonable estimate of such Holder’s
actual loss of its investment opportunity and not as a penalty.

(c) Subject to any contractual restrictions and applicable law, the Company will
use commercially reasonable efforts to give each Holder notice of any Change of
Control no less than 30 days prior to the consummation of a Change of Control.
Within ten days following the consummation of a Change of Control, the Company
shall provide written notice thereof to the Holders (the “Change of Control
Notice”).

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9. Certificates.

(a) Form and Dating. The Preferred Stock and the Transfer Agent’s certificate of
authentication (if a Transfer Agent other than the Company is appointed) shall
be substantially in the form set forth in Exhibit A, which is hereby
incorporated in and expressly made a part of this Certificate of Designation.
The Preferred Stock certificate may have notations, legends or endorsements
required by law, stock exchange or FINRA rule, agreements to which the Company
is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company). Each Preferred Stock
certificate shall be dated the date of its authentication. The terms of the
Preferred Stock certificate set forth in Exhibit A are part of the terms of this
Certificate of Designation.

(b) Record Holders. The Company and any Transfer Agent other than the Company
may deem and treat the record Holder as the true and lawful owner thereof for
all purposes, and neither the Company nor any such Transfer Agent shall be
affected by any notice to the contrary.

(c) Registration of Transfer. Upon the surrender of any certificate representing
Preferred Stock to the Company or any Transfer Agent other than the Company
accompanied by a duly executed and completed certificate in the form of Exhibit
C hereto which is hereby incorporated by reference in this Certificate of
Designation, the Company shall, or shall cause such Transfer Agent to, at the
request of the record Holder of such certificate, execute and deliver (at the
Company’s expense) a new certificate or certificates in exchange therefor, of
Preferred Stock representing in the aggregate the number of shares of Preferred
Stock represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of shares of
Preferred Stock as is requested by the Holder of the surrendered certificate and
shall be substantially identical in form to the surrendered certificate, and
dividends shall accrue on the Preferred Stock represented by such new
certificate from the date to which dividends have been fully paid on such
Preferred Stock represented by the surrendered certificate.

(d) Replacement Certificates. If a mutilated Preferred Stock certificate is
surrendered to the Company or any Transfer Agent other than the Company or if
the Holder of a Preferred Stock certificate claims that the Preferred Stock
certificate has been lost, destroyed or wrongfully taken, the Company shall
issue and the Transfer Agent (if one is then appointed) shall countersign a
replacement Preferred Stock certificate if the reasonable requirements of such
Transfer Agent and the Company are met. If required by such Transfer Agent or
the Company, such Holder shall agree to customary indemnity provisions
sufficient in the reasonable judgment of the Company and such Transfer Agent to
protect the Company and such Transfer Agent from any loss which either of them
may suffer if a Preferred Stock certificate is replaced. The Company and such
Transfer Agent may charge the Holder for their respective expenses in replacing
a Preferred Stock certificate.

10. Other Provisions.

(a) Any notice required by this Certificate of Designations to Holders shall be
deemed given upon personal delivery, upon delivery by nationally recognized
overnight delivery service with proof of receipt maintained, upon delivery by
facsimile with receipt confirmed or five business days after deposit in the
United States mail, certified mail, return receipt requested, postage prepaid,
and addressed to each Holder of record at such Holder’s address appearing on the
Company’s books.

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(b) With respect to any notice to a Holder required to be provided hereunder,
neither failure to mail such notice, nor any defect therein or in the mailing
thereof, to any particular Holder shall affect the sufficiency of the notice or
the validity of the proceedings referred to in such notice with respect to the
other Holders or affect the legality or validity of any distribution, rights,
warrant, reclassification, consolidation, merger, business combination,
conveyance, transfer, dissolution, liquidation or winding-up, or the vote upon
any such action. Any notice which was mailed in the manner herein provided shall
be conclusively presumed to have been duly given whether or not the Holder
receives the notice.

(c) Shares of Preferred Stock issued and reacquired will be retired and canceled
promptly after reacquisition thereof and, upon compliance with the applicable
requirements of Delaware law, have the status of authorized but unissued shares
of preferred stock of the Company undesignated as to series and may, subject to
Section 4(b), with any and all other authorized but unissued shares of preferred
stock of the Company be designated or redesignated and issued or reissued, as
the case may be, as part of any series of preferred stock of the Company, except
that any issuance or reissuance of shares of Preferred Stock must be in
compliance with this Certificate of Designation.

(d) The shares of Preferred Stock shall be issuable only in whole shares.

(e) All notice periods referred to herein shall commence on the date of the
mailing of the applicable notice.

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IN WITNESS WHEREOF, the Company has caused this Certificate of Designation to be
signed this      day of             , 2008

 

CHAPARRAL ENERGY, INC. By:  

 

Name:   Title:  

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EXHIBIT A

FORM OF PREFERRED STOCK

FACE OF SECURITY

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE COMPANY OR ANY
TRANSFER AGENT APPOINTED BY THE COMPANY SUCH CERTIFICATES AND OTHER INFORMATION
AS THE COMPANY OR SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH APPLICABLE RESTRICTIONS ON TRANSFER. UNTIL OTHERWISE
DETERMINED, THE COMPANY HAS ELECTED TO ACT AS TRANSFER AGENT.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF UNLESS (I) REGISTERED UNDER THE APPLICABLE SECURITIES
LAWS, (II) SUCH TRANSACTION IS PURSUANT TO RULE 144, RULE 144A OR REGULATION S
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (III) AN OPINION OF COUNSEL,
WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY, HAS BEEN DELIVERED TO
THE COMPANY AND SUCH OPINION STATES THAT THE SHARES MAY BE TRANSFERRED WITHOUT
SUCH REGISTRATION.

A COPY OF THE CERTIFICATE OF INCORPORATION OF THE COMPANY IS ON FILE WITH THE
DELAWARE SECRETARY OF STATE AND MAY BE OBTAINED BY THE RECORD HOLDER FREE OF
CHARGE BY WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS
OR REGISTERED OFFICE.

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Certificate Number

   Number of Shares of    Convertible Preferred Stock

[            ]

   [            ]

Series B Convertible Preferred Stock

of

Chaparral Energy, Inc.

Chaparral Energy, Inc., a Delaware corporation (the “Company”), hereby certifies
that [                    ] (the “Holder”) is the registered owner of
[                    ] fully paid and non-assessable preferred securities of the
Company designated the Series B Convertible Preferred Stock, par value $0.01 per
share, (the “Preferred Stock”). The shares of Preferred Stock are transferable
on the books and records of the Company, in person or by a duly authorized
attorney, upon surrender of this certificate duly endorsed and in proper form
for transfer. The designations, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Stock represented hereby are
issued and shall in all respects be subject to the provisions of the Certificate
of Designation dated [            ], 2008, as the same may be amended from time
to time (the “Certificate of Designation”). Capitalized terms used herein but
not defined shall have the meaning given them in the Certificate of Designation.
The Company will provide a copy of the Certificate of Designation to a Holder
without charge upon written request to the Company at its principal place of
business.

Reference is hereby made to select provisions of the Preferred Stock set forth
on the reverse hereof, and to the Certificate of Designation, which select
provisions and the Certificate of Designation shall for all purposes have the
same effect as if set forth at this place.

Upon receipt of this certificate, the Holder is bound by the Certificate of
Designation and is entitled to the benefits thereunder.

If at any time a Transfer Agent other than the Company has been appointed and is
acting, unless the Transfer Agent’s Certificate of Authentication hereon has
been properly executed, these shares of Preferred Stock shall not be entitled to
any benefit under the Certificate of Designation or be valid or obligatory for
any purpose.

 

A-1

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IN WITNESS WHEREOF, the Company has executed this certificate this      day of
                    , 2008.

 

CHAPARRAL ENERGY, INC. By:  

 

Name:   Title:   By:  

 

Name:   Title:  

 

A-2

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REVERSE OF SECURITY

Cash dividends on each share of Preferred Stock shall be payable at a rate per
annum set forth in the face hereof or as provided in the Certificate of
Designation.

The shares of Preferred Stock shall be convertible into the Company’s Common
Stock in the manner and according to the terms set forth in the Certificate of
Designation.

The Company will furnish without charge to each Holder who so requests the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock and the qualifications, limitations or
restrictions of such preferences and/or rights.

 

A-3

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ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of
Preferred Stock evidenced hereby to:

 

(Insert assignee’s social security or tax identification number)

 

(Insert address and zip code of assignee)

and irrevocably appoints:

 

agent to transfer the shares of Preferred Stock evidenced hereby on the books of
the Transfer Agent. The agent may substitute another to act for him or her.

Date:

Signature:

(Sign exactly as your name appears on the other side of this Preferred Stock
Certificate)

Signature Guarantee:

 

A-4

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EXHIBIT B

NOTICE OF CONVERSION

(To be Executed by the Holder

in order to Convert the Preferred Stock)

The undersigned hereby irrevocably elects to convert (the “Conversion”) shares
of Series B Convertible Preferred Stock (the “Preferred Stock”), represented by
stock certificate No.(s)                    . (the “Preferred Stock
Certificates”) into shares of common stock (“Common Stock”) of Chaparral Energy,
Inc. (the “Company”) according to the conditions of the Certificate of
Designation of the Preferred Stock (the “Certificate of Designation”), as of the
date written below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith the Preferred Stock Certificates. No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any. A copy of each Preferred Stock Certificate is attached hereto (or
evidence of loss, theft or destruction thereof).

The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Preferred Stock shall be made pursuant to registration of the
Common Stock under the Securities Act of 1933 (the “Act”), or pursuant to any
exemption from registration under the Act.

Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designation.

 

Date of Conversion:   

 

Applicable Conversion Price:   

 

Number of shares of Preferred Stock to be Converted:   

 

Signature:  

 

Name:  

 

Address:**   

 

Fax No.:   

 

 

* The Company shall issue and deliver shares of Common Stock to an overnight
courier not later than three business days following receipt of this notice.

** Address where shares of Common Stock and any other payments or certificates
shall be sent by the Company.

 

B-1

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EXHIBIT C

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR

REGISTRATION OF TRANSFER OF PREFERRED STOCK

 

Re: Series B Convertible Preferred Stock (the “Preferred Stock”) of Chaparral
Energy, Inc. (the “Company”)

This Certificate relates to                      shares of Preferred Stock held
by                      (the “Transferor”).

The Transferor has requested the Company by written order to exchange or
register the transfer of Preferred Stock.

In connection with such request and in respect of such Preferred Stock, the
Transferor does hereby certify that the Transferor is familiar with the
Certificate of Designation relating to the above-captioned Preferred Stock and
that the transfer of this Preferred Stock does not require registration under
the Securities Act of 1933 (the “Securities Act”) because:

 

  ¨ Such Preferred Stock is being acquired for the Transferor’s own account
without transfer.

 

  ¨ Such Preferred Stock is being transferred to the Company.

 

  ¨ Such Preferred Stock is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act.

 

 

(INSERT NAME OF TRANSFEROR] by:  

 

Date:                    

Please check applicable box.

 

C-1

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Exhibit B

FORM OF REGISTRATION RIGHTS AGREEMENT

CHAPARRAL ENERGY, INC.

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT, dated as of                     , between
MAGNETAR FINANCIAL LLC, on behalf of one or more of its affiliates, a Delaware
limited liability company (the “Investor”), and CHAPARRAL ENERGY, INC., a
Delaware corporation (the “Company”).

R E C I T A L S

WHEREAS, the Investor has, pursuant to the terms of the Securities Purchase
Agreement, dated as of July 14, 2008, by and between the Company and the
Investor (the “Purchase Agreement”), agreed to purchase shares of Series B
Convertible Preferred Stock, par value $0.01 per share, of the Company (the
“Preferred Stock”); and

WHEREAS, the Company has agreed, as a condition precedent to the Investor’s
obligations under the Purchase Agreement, to grant the Investor certain
registration rights; and

WHEREAS, the Company and the Investor desire to define the registration rights
of the Investor on the terms and subject to the conditions herein set forth.

NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the parties hereby agree as follows:

SECTION 1. DEFINITIONS

As used in this Agreement, the following terms have the respective meanings set
forth below:

Agreement: shall mean this Registration Rights Agreement between the Investor
and the Company;

Automatic Shelf Registration Statement: shall mean a registration statement
filed by a Well-Known Seasoned Issuer which shall become effective thereof
pursuant to General Instruction I.D for Form S-3;

Commission: shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act;

Common Stock: shall mean shares of common stock, par value $0.01 per share, of
the Company;

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Edge Merger Agreement: shall have the meaning set forth in the Purchase
Agreement;

Exchange Act: shall mean the Securities Exchange Act of 1934, as amended;

Holder: shall mean any Investor who is a holder of Registrable Securities or any
assignee of record of such Registrable Securities in accordance with the terms
hereof;

Initiating Holder: shall mean, at any one time, a holder or holders of a
majority of the then outstanding Registrable Securities, assuming conversion of
all then outstanding Preferred Stock into Common Stock;

Person: shall mean an individual, corporation, partnership, other entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act);

Register, Registered and Registration: shall mean a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act (and any post-effective amendments filed or required to be filed) and the
declaration or ordering of effectiveness of such registration statement;

Registrable Securities: shall mean (A) shares of Preferred Stock purchased by
the Investor pursuant to the Securities Purchase Agreement, (B) shares of Common
Stock issuable to the Investor or its successors or assigns upon conversion of
the Preferred Stock and (C) any stock of the Company issued as a dividend or
other distribution with respect to, or in exchange for or in replacement of, the
shares of Common Stock or Preferred Stock referred to in clause (A) or (B);
provided, however, that notwithstanding the foregoing, Registrable Securities
shall not include any securities (i) sold by a Holder to the public pursuant to
Rule 144 under the Securities Act, (ii) that may be sold or transferred by a
Holder pursuant to Rule 144 under the Securities Act (or any similar provision
then in force) without any volume, manner of sale or current public information
restrictions thereunder, so long as, at the time of determination, such Holder
(x) is not an affiliate of the Company and (y) owns less than one percent
(1%) of the outstanding Common Stock on a fully diluted basis or (iii) sold
pursuant to an effective registration statement under the Securities Act.

Registration Expenses: shall mean all expenses incurred by the Company in
compliance with Sections 2(a), (b) and (c) hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and expenses of one
counsel for the Holders, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company);

security, securities: shall have the meaning set forth in Section 2(1) of the
Securities Act;

 

-2-

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Securities Act: shall mean the Securities Act of 1933, as amended; and

Underwriter: shall mean a securities dealer that purchases any shares of Common
Stock as principal and not as part of such dealer’s market-making activities.

Well-Known Seasoned Issuer: shall have the meaning set forth in Rule 405 under
the Securities Act.

SECTION 2. REGISTRATION RIGHTS

(a) Requested Registration.

(i) Request for Registration. Subject to the conditions of this Section 2(a), if
the Company shall receive from the Initiating Holder, at any time after the date
hereof, a written request that the Company effect any registration with respect
to all or a part of the Registrable Securities, the Company will:

(1) promptly give written notice of the proposed registration, qualification or
compliance to all other Holders; and

(2) subject to the limitations of this Section 2(a), prepare and file such
registration as may be so requested as soon as practicable, and in any event
within forty-five (45) days of such request (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act), and to use its reasonable best efforts to cause such registration
statement to be declared effective under the Securities Act by the Commission as
promptly as practicable after such filing as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within ten (10) business days after
written notice from the Company is given under Section 2(a)(i)(1) above;
provided that the Company shall not be obligated to effect, or take any action
to effect, any such registration pursuant to this Section 2(a):

(A) In any particular jurisdiction in which the Company would be required to
qualify to do business or execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act or applicable rules or regulations thereunder;

(B) After the Company has effected three (3) such registrations pursuant to this
Section 2(a) and such registrations have been declared or ordered effective;

 

-3-

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(C) If the Registrable Securities requested by all Holders to be registered
pursuant to such request do not have an anticipated aggregate public offering
price (before any underwriting discounts and commissions) of more than
$10,000,000;

(D) If the Initiating Holder proposes to dispose of shares of Registrable
Securities that may be immediately registered on Form S-3 pursuant to a request
made pursuant to Section 2(c) below;

(E) If the Board of Directors, in its good faith judgment, determines that any
registration of Registrable Securities requested pursuant to this Section 2(a)
(a “Requested Registration”) should not be made or continued because (a) at the
time the Company receives the request, the Company or its subsidiaries is in
possession of material non-public information, disclosure of which would be
required in such registration statement (but would not be required if such
registration statement were not filed) and the Board of Directors determines in
good faith that such disclosure would be materially detrimental to the Company
and its stockholders, (b) it could reasonably be expected to interfere with a
material financing, acquisition, corporate reorganization or merger or other
material transaction involving the Company and such interference would be
materially detrimental to the Company, or (c) prior to receiving such request
for registration, the Board of Directors of the Company had determined to effect
a registered underwritten public offering of the Company’s equity securities for
the Company’s account (so long as at such time the Holders’ Registrable
Securities would be eligible to be included pursuant to Section 2(b) in such
offering) and the Company had taken substantial steps (including, but not
limited to, selecting and entering into a letter of intent with the managing
Underwriter for such offering) and is proceeding with reasonable diligence to
effect such offering (each, a “Valid Business Reason”), the Company may
(x) postpone filing a registration statement relating to a Requested
Registration until such Valid Business Reason no longer exists, but in no event
for more than sixty (60) days, and (y) in case a registration statement has been
filed relating to a Requested Registration, if the Valid Business Reason has not
resulted from actions taken by the Company, the Company may cause such
registration statement to be withdrawn and its effectiveness terminated or may
postpone amending or supplementing such registration statement (so long as the
Initiating Holder shall have the rights set forth in this Section 2(a) within
sixty (60) days of any such event). The Company shall give written notice of its
determination to postpone or withdraw a registration statement (provided that
the Company shall not disclose any information that could be deemed material
non-public information to any holder of Registrable Securities that are included
in a registration statement that is subject to such postponement or withdrawal)
and of the fact that the Valid Business Reason for such postponement or
withdrawal no longer exists, in each

 

-4-

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case, as soon as practicable after the occurrence thereof. Notwithstanding
anything to the contrary contained herein, the Company may not postpone or
withdraw a filing due to a Valid Business Reason under this Agreement more than
once in any twelve (12) month period; or

(F) With respect to Registrable Securities, if such Registrable Securities are
already covered by an effective registration statement under the Securities Act.

(ii) The registration statement filed pursuant to the request of the Initiating
Holder may, subject to the provisions of Section 2(a)(ii) below, include other
securities of the Company which are held by Persons who, by virtue of agreements
with the Company, are entitled to include their securities in any such
registration (“Other Stockholders”). In the event any Holder requests a
registration pursuant to this Section 2(a) in connection with a distribution of
Registrable Securities to its partners, members or stockholders, the
registration shall provide for the resale by such partners, if requested by such
Holder.

(iii) The registration rights set forth in this Section 2 may not be assigned by
a Holder, in whole or in part, except to a transferee of Registrable Securities
in a transaction or series of related transactions that (i) do not constitute a
“sale” under the federal securities laws, or (ii) are not subject to the
registration requirements of the Securities Act by reason of an exemptions from
such registration requirements afforded by Section 4(2) of the Securities Act or
pursuant to Regulation D promulgated thereunder, (who shall be bound by all
obligations of this Agreement) if such transferee (a) is a subsidiary, parent,
general partner, limited partner, retired partner, member or retired member, of
a Holder that is a corporation, partnership, limited liability partnership or
limited liability company, or (b) is a member of a Holder’s immediate family or
(c) is a trust for the benefit of an individual Holder, or (d) acquires at least
10% of the aggregate Registrable Securities originally issued pursuant to the
Purchase Agreement (as adjusted for stock splits, combinations and conversions
of such Registrable Securities), (e) is an entity affiliated by common control
with such Holder or (f) is a permitted transferee under Section 8.05 of the
Purchase Agreement; provided, however, (i) the transferor shall furnish to the
Company written notice of the name and address of such transferee or assignee
and the securities with respect to which such registration rights are being
assigned and (ii) such transferee shall agree in writing reasonably acceptable
to the Company to be subject to all restrictions set forth in this Agreement.

(iv) Underwriting. If the Initiating Holder intends to distribute the
Registrable Securities covered by its request by means of an underwriting, it
shall so advise the Company as a part of its request made pursuant to
Section 2(a)(i). The Company’s Board of Directors shall have the right to
designate, in their sole and absolute discretion, the book-running managing
Underwriter(s) with respect to any underwritten registration, or with respect to
any other underwritten public offering of Registrable Securities or other
securities of the Company and shall select such additional Underwriters to be
used in connection with the offering, if any. The Board of Directors shall also
have the right to select one or more co-managers for each such offering if the
Board of Directors, subject to the approval of the Initiating Holder not to be
unreasonably withheld, shall determine that any be necessary, and the
underwriting fees related

 

-5-

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to any such offering shall be allocated among any such co-managers in such
proportions as the Board of Directors shall determine. In the event of any such
offering, the representatives of the Underwriter(s), the Company and any Holder
whose Registrable Securities are included in such offering will, subject to the
proviso in Section 2(a)(v) below, enter into an agreement appropriate to the
circumstances, containing provision for, among other things, compensation,
indemnification, contribution, lock-up agreements and representations and
warranties which are usual and customary for similar agreements entered into by
the Underwriter(s) in similar transactions. In connection with such offering,
the Company shall take all such actions as the Holders of a majority of number
of shares of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities, including making executive officers of the Company
available to participate in, and cause them to cooperate with the underwriters
in connection with, “road show” and other customary marketing activities
(including one-on-one meetings with prospective purchasers of the Registrable
Securities).

(v) If Other Stockholders request inclusion of their securities in the
underwriting, the Holders shall offer to include the securities of such Other
Stockholders in the underwriting and may condition such offer on their
acceptance of the further applicable provisions of this Section 2. The Holders
whose shares are to be included in such registration and the Company shall
(together with all Other Stockholders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the Underwriter(s) selected for such
underwriting and complete and execute any questionnaires, indemnities,
contribution, lock-up agreements and other documents reasonably required under
the terms of such underwriting agreement, and furnish to the Company such
information in writing as the Company may reasonably request for inclusion in
the registration statement; provided, however, that (i) the Company shall cause
such underwriting agreement to provide for indemnification or contribution
obligations on the part of the Holders that are not materially greater than the
obligations of the Holders under Section (f)(ii), (ii) the obligation of the
Holders to indemnify any Person pursuant to any such underwriting agreement
shall be several, not joint and several, among the Holders selling Registrable
Securities in such Registration, and the liability of each such Holder will be
in proportion thereto, and (iii) no Holder shall be required to make any
representations or warranties, or provide any indemnity, in connection with any
such Registration other than representations and warranties (or indemnities with
respect thereto) as to (A) such Holder’s ownership of its Registrable Securities
to be transferred pursuant to such underwriting agreement free and clear of all
liens, claims and encumbrances, (B) such Holder’s power and authority to effect
the sale of such Registrable Securities pursuant to such underwriting agreement,
(C) such matters pertaining to compliance with securities laws by such Holder as
may be reasonably requested by the representative of the Underwriter or
Underwriters and (D) such matters relating to written information furnished to
the Company by such Holder specifically for use in the registration statement
and prospectus (and any related documents) to be used by the Company in
connection with such Registration (such matters in this clause (D) being the
“Required Indemnity” and, together with those matters in clauses (A), (B) and
(C), the “Required Representations”).

(vi) Notwithstanding any other provision of this Section 2(a), if such
representative advises the Holders in writing that marketing factors require a
limitation on the number of shares to be underwritten, the securities of the
Company held by Other Stockholders shall be excluded

 

-6-

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from such registration to the extent so required by such limitation. If, after
the exclusion of such shares, further reductions are still required, the number
of shares included in the registration by each Holder shall be reduced on a pro
rata basis (based on the number of shares held by such Holder) by such minimum
number of shares as is necessary to comply with such request. No Registrable
Securities or any other securities excluded from the underwriting by reason of
the underwriter’s marketing limitation shall be included in such registration.
If any Other Stockholder who has requested inclusion in such registration as
provided above disapproves of the terms of the underwriting, such Person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holder. The securities so withdrawn shall also be withdrawn
from registration. If the underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, the Company and officers and
directors of the Company may include its or their securities for its or their
own account in such registration if the representative so agrees and if the
number of Registrable Securities and other securities which would otherwise have
been included in such registration and underwriting will not thereby be limited.
Until the earlier of the second anniversary of the date hereof and the Equity
Threshold Date (as defined in the certificate of designation with respect to the
Preferred Stock), each Holder of Registrable Securities agrees, if requested by
the Company and the Underwriter(s), not to sell or otherwise transfer or dispose
(except for standard exceptions agreed to by the representative of the
Underwriter or Underwriters) of any Registrable Securities held by such Holder
for a period of up to one hundred eighty (180) days (in the case of the initial
underwritten offering of Common Stock by the Company after the date hereof) or a
period of up to ninety (90)days (in the case of any subsequent underwritten
offering of Common Stock by the Company) following the effective date of a
registration statement of the Company filed under the Securities Act with
respect to such underwritten offering, provided that all officers and directors
of the Company and Other Stockholders with registration rights enter into
agreements on substantially the same terms.

(b) Company Registration.

(i) If at any time after the date hereof, the Company shall determine to
register any of its equity securities for sale for cash, either for its own
account or for the account of Other Stockholders, other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a Rule 145 transaction under the Securities Act, or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:

(1) promptly give to each of the Holders a written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other state securities
laws); and

(2) include in such registration (and any related qualification under blue sky
laws or other compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests (other than
Registrable Securities

 

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already covered by an effective registration statement under the Securities
Act), made by the Holders within fifteen (15) days after receipt of the written
notice from the Company described in clause (1) above, except as set forth in
Section 2(b)(ii) below. Such written request may specify all or a part of the
Holders’ Registrable Securities and shall describe the intended method of
disposition of the Registrable Securities by such Holders. In the event any
Holder requests inclusion in a registration pursuant to this Section 2(b) in
connection with a distribution of Registrable Securities to its partners,
members or stockholders, the registration shall provide for the resale by such
partners, if requested by such Holder.

(3) At any time, the Company may terminate or withdraw its registration
statement referred to in this Section 2(b) and without any obligation to any
Holder, whether or not any Holder has elected to include Registrable Securities
in such registration. The Company may suspend the effectiveness and use of any
such registration statement at any time for an unlimited amount of time, whether
or not any Holder has elected to include any Registrable Securities in such
registration.

(ii) Underwriting. If the registration of which the Company gives notice is for
a registered public offering involving an underwriting, the Company shall so
advise each of the Holders as a part of the written notice given pursuant to
Section 2(b)(i)(1) above. In such event, the right of each of the Holders to
registration pursuant to this Section 2(b) shall be conditioned upon such
Holders’ participation in such underwriting and the inclusion of such Holders’
Registrable Securities in the underwriting to the extent provided herein. The
Holders whose shares are to be included in such registration shall (together
with the Company and the Other Stockholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the Underwriter(s) selected for underwriting by
the Company and complete and execute any questionnaires, indemnities,
contribution and lock-up agreements, and other documents reasonably required
under the terms of such underwriting agreement, and furnish to the Company such
information in writing as the Company may reasonably request for inclusion in
the registration statement; provided, however, that (i) the Company shall use
all reasonable efforts to cause such underwriting agreement to provide for
indemnification or contribution obligations on the part of the Holders that are
not materially greater than the obligations of the Holders under Section
(f)(ii), (ii) the obligation of the Holders to indemnify any Person pursuant to
any such underwriting agreement shall be several, not joint and several, among
the Holders selling Registrable Securities in such Registration, and the
liability of each such Holder will be in proportion thereto, and (iii) no Holder
shall be required to make any representations or warranties other than the
Required Representations, or provide any indemnity other than the Required
Indemnity, in connection with any such Registration. Notwithstanding any other
provision of this Section 2(b), if the representative determines in good faith
that marketing factors require a limitation on the number of shares to be
underwritten, the number of securities that may be included in the registration
and underwriting shall be allocated in the following manner: first, to the
Company with respect to sales for its own account; second, pro rata to the
Holders and the Other Stockholders who by contractual right demanded such
registration (“Demanding Stockholders”) based on the respective

 

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number of securities then held by the Holders and Demanding Stockholders that
are requested to be covered by such registration; and third, pro rata to
officers, directors and Other Stockholders of the Company (other than Demanding
Stockholders) based on the number of securities of the Company then held by such
officers, directors and Other Stockholders; provided, however, that (A) until
the Equity Threshold Date, in no event shall the amount of Registrable
Securities of the selling Holders included in the registration be reduced below
fifty percent (50%) of the total amount of securities included in such
registration by all other selling stockholders and (B) on or after the Equity
Threshold Date, in no event shall the amount of Registrable Securities of the
selling Holders included in the registration be reduced below twenty-five
percent (25%) of the total amount of securities included in such registration.
If any of the Holders or any officer, director or Other Stockholder disapproves
of the terms of any such underwriting, he, she or it may elect to withdraw
therefrom by written notice to the Company and the underwriter, delivered at
least five (5) business days prior to the effective date of the registration
statement.

(iii) The Company’s Board of Directors shall have the right to designate, in
their sole and absolute discretion, the book-running managing Underwriter(s)
with respect to any underwritten registration effected pursuant to this
Section 2(b), or with respect to any other underwritten public offering of
Registrable Securities or other securities of the Company pursuant to this
Section 2(b) and shall select such additional Underwriters to be used in
connection with the offering, if any. The Board of Directors shall also have the
right to select one or more co-managers for each such offering if the Board of
Directors, in their sole and absolute discretion, shall determine that any be
necessary, and the underwriting fees related to any such offering shall be
allocated among any such co-managers in such proportions as the Board of
Directors shall determine. In the event of any such offering, the
Underwriter(s), the Company and any Holder whose Registrable Securities are
included in such offering will, subject to the first proviso in Section 2(b)(ii)
above, enter into an agreement appropriate to the circumstances, containing
provision for, among other things, compensation, indemnification and lock-up
agreements, and representations and warranties, which are usual and customary
for similar agreements entered into by the Underwriter(s) in similar
transactions. In connection with such offering, the Company shall take all such
actions as the Holders of a majority of number of shares of the Registrable
Securities being sold or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities,
including making executive officers of the Company available to participate in,
and cause them to cooperate with the underwriters in connection with, “road
show” and other customary marketing activities (including one-on-one meetings
with prospective purchasers of the Registrable Securities).

(c) Form S-3. If the Company meets the eligibility requirements for use of Form
S-3, the Company shall use best efforts to maintain its qualification for
registration on Form S-3 for secondary sales. For so long as the Company meets
the eligibility requirements for use of Form S-3, the Initiating Holder shall
have the right to collectively request three (3) registrations on Form S-3 (such
requests shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended method of disposition of shares by
such holders), provided that the Company shall not be obligated to effect, or
take any action to effect, any such registration pursuant to this Section 2(c):

(i) In any particular jurisdiction in which the Company would be required to
qualify to do business or execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act or applicable rules or regulations thereunder;

 

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(ii) If the Registrable Securities requested by all Holders to be registered
pursuant to such request do not have an anticipated aggregate public offering
price (before any underwriting discounts and commissions) of more than
$5,000,000;

(iii) If the Board of Directors, in its good faith judgment, determines that any
registration of Registrable Securities pursuant to this Section 2(c) (an “S-3
Registration”) should not be made or continued because of a Valid Business
Reason, the Company may (x) postpone filing a registration statement relating to
a S-3 Registration until such Valid Business Reason no longer exists, but in no
event for more than sixty (60) days, and (y) in case a registration statement
has been filed relating to a S-3 Registration, if the Company reasonably
believes that there is or may be in existence material nonpublic information or
events involving the Company, the failure of which to be disclosed in the
prospectus, any preliminary prospectus or free writing prospectus and any
amendment thereof or supplement thereto included in the registration statement
could result in a Violation (as defined below), the Company may cause such
registration statement to be withdrawn and its effectiveness terminated or may
postpone amending or supplementing such registration statement (so long as the
Holders shall have the rights set forth in this Section 2(c) within sixty
(60) days of any such event). The Company shall give written notice of its
determination to postpone or withdraw a registration statement (provided that
the Company shall not disclose any information that could be deemed material
non-public information to any holder of Registrable Securities that are included
in a registration statement that is subject to such postponement or withdrawal)
and of the fact that the Valid Business Reason for such postponement or
withdrawal no longer exists, in each case, promptly after the occurrence
thereof. Notwithstanding anything to the contrary contained herein, the Company
may not postpone or withdraw a filing due to a Valid Business Reason under this
Agreement more than once in any twelve (12) month period; or

(iv) If the Registrable Securities are already covered by an effective
registration statement under the Securities Act.

The Company shall give written notice to all Holders of the receipt of a request
for registration pursuant to this Section 2(c) and shall provide a reasonable
opportunity for other Holders to participate in the registration, provided that
if the registration is for an underwritten offering, the terms of
Section 2(a)(ii) above shall apply to all participants in such offering. Subject
to the foregoing, the Company will use its best efforts to effect the
registration as soon as practicable, and in any event within sixty (60) days of
the Initiating Holder’s request, of all shares of Registrable Securities on Form
S-3 to the extent requested by the Holder or Holders thereof for

 

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purposes of disposition. In the event any Holder requests a registration
pursuant to this Section 2(c) in connection with a distribution of Registrable
Securities to its partners, members or stockholders, the registration shall
provide for the resale by such partners, if requested by such Holder.

(d) Expenses of Registration. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to this Section 2
shall be borne by the Company. The Company shall not, however, be required to
pay for expenses relating to underwriting discounts and commissions for
Registrable Securities sold by a Holder pursuant to an effective registration
statement.

(e) Registration Procedures. In the case of each registration effected by the
Company pursuant to this Section 2, the Company will keep the Holders, as
applicable, advised in writing as to the initiation of each registration and as
to the completion thereof. At its expense, the Company will:

(i) prepare and file with the Commission a registration statement on the
appropriate form under the Securities Act, which form shall be selected by the
Company (provided, that if the Company meets the eligibility requirements for
use of Form S-3, such form shall be a Form S-3, and provided further, that, if
the Company is then a Well-Known Seasoned Issuer and the Initiating Holder
intends to offer the covered Registrable Securities on a delayed or continuous
basis, such form shall be an Automatic Shelf Registration Statement) and shall
comply as to form in all material respects with the requirements and
distribution methods of the applicable form and, if applicable, Rule 415 under
the Securities Act and include all financial statements required by the
Commission to be filed therewith; and use its best reasonable efforts to cause
such Registration Statement to become effective and remain effective for the
applicable period in accordance with Section 2(e)(iii) hereof;

(ii) prepare and file with the Commission such amendments and post-effective
amendments to each registration statement as may be necessary to keep such
registration statement effective for the applicable period in accordance with
Section 2(e)(iii) hereof;

(iii) keep such registration effective for a period of one hundred twenty
(120) days or until the Holders (or in the case of a distribution to the
partners of such Holder, such partners) have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (1) the one hundred twenty (120) day period
shall be extended for a period of time equal to the period during which the
Holders or partners, as applicable, are prohibited from selling any securities
included in such registration due to any suspension of effectiveness provided
for in accordance with the provisions in Sections 2(a)(i)(2)(F) or 2(c)(iii)
hereof; and (2) in the case of any registration of Registrable Securities on
Form S-3 which are intended to be offered on a continuous or delayed basis, such
one hundred twenty (120) day period shall be extended until all such Registrable
Securities are sold, provided that Rule 415, or any successor rule under the
Securities Act, permits an offering on a continuous or delayed basis, or until
the Holders of all the unsold Registrable Securities may sell or transfer such
Registrable Securities pursuant to Rule

 

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144 under the Securities Act (or any other similar provision then in force)
without any volume, manner of sale or current public information restrictions
thereunder, so long as, at the time of determination, such Holders (x) are not
affiliates of the Company and (y) collectively own less than one percent (1%) of
the outstanding Common Stock on a fully diluted basis;

(iv) prior to filing a registration statement or prospectus or any amendment or
supplement thereto, furnish to each Holder and each underwriter, if any, of the
Registrable Securities covered by such registration statement, copies of such
registration statement as proposed to be filed, and thereafter furnish to each
such Holder and underwriter, if any, such number of copies of such registration
statement, and each amendment and supplement thereto (in each case including all
exhibits thereto and documents incorporated by reference therein), the
prospectus included in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 or Rule 430A under the Securities Act and such other documents as such
Holder or underwriter may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Holder;

(v) notify each Holder of Registrable Securities covered by such registration at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result of which the
prospectus, any preliminary prospectus or free writing prospectus and any
amendment thereof or supplement thereto included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;

(vi) use its best efforts to obtain the withdrawal at the earliest possible time
of any stop order suspending the effectiveness of the applicable registration
statement and the elimination of any other impediment to the continued
effectiveness of such registration statement;

(vii) subject to Section 2(a)(i)(2)(A) and Section 2(c)(i), use its best efforts
to register or qualify the Registrable Securities under all applicable state
securities or blue sky laws of such jurisdictions as any Holder of Registrable
Securities covered by a registration statement shall reasonably request in
writing by the time the applicable registration statement is declared effective
by the Commission and do any and all other acts and things that may be
reasonably necessary or advisable to enable each Holder to complete the
disposition in each such jurisdiction of the Registrable Securities owned by
such Holder;

(viii) use reasonable efforts to cause the Registrable Securities covered by
such registration to be listed on the New York Stock Exchange, or if the Common
Stock is not then listed on the New York Stock Exchange, on the principal
national securities exchange on which the Common Stock is then listed, or if the
Common Stock is not then listed on a national securities exchange, authorized
for quotation on any automated quotation system on which the Common Stock is
then quoted;

 

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(ix) obtain a CUSIP number for all Registrable Securities, as the case may be,
not later than the effective date of a registration statement; and

(x) furnish, on the date that such Registrable Securities are delivered to the
underwriters for sale, if such securities are being sold through underwriters
or, if such securities are not being sold through underwriters, on the date that
the registration statement with respect to such securities becomes effective,
(1) an opinion, dated as of such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders participating in such registration and
(2) a letter, dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders participating in such
registration.

(f) Indemnification.

(i) The Company will indemnify each of the Holders, as applicable, each of its
officers, directors and partners, each Person controlling each of the Holders
and each of their respective successors and assigns, with respect to each
registration which has been effected pursuant to this Section 2, and each
underwriter, if any, and each person who controls any underwriter, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, preliminary prospectus, free writing
prospectus and any amendment thereof or supplement thereto, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or the
Exchange Act or any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance (collectively a “Violation”), and
will reimburse each of the Holders, each of its officers, directors and
partners, and each Person controlling each of the Holders, each such underwriter
and each Person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action; provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by the Holders
and stated to be specifically for use therein.

 

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(ii) Each of the Holders will, if Registrable Securities held by it are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers and
each underwriter, if any, of the Company’s securities covered by such a
registration statement, each person who controls the Company or such
underwriter, each Other Stockholder and each of their officers, directors, and
partners, and each person controlling such Other Stockholder against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, preliminary
prospectus, free writing prospectus and any amendment thereof or supplement
thereto, offering circular or other document made by such Holder, any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements by such Holder therein not
misleading, and will reimburse the Company and such Other Stockholders,
directors, officers, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
and defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, preliminary prospectus, free writing prospectus and any
amendment thereof or supplement thereto, offering circular or other document, or
such violation is made, in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use therein; provided, however, that the obligations of each of
the Holders hereunder shall be limited to an amount equal to the net proceeds to
such Holder of securities sold as contemplated herein.

(iii) Each party entitled to indemnification under this Section 2(f) (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party’s expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of counsel shall be at the expense of the Indemnifying Party),
and provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 2(f) unless the Indemnifying Party is materially prejudiced
thereby. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.

 

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(iv) If the indemnification provided for in this Section 2(f) is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such loss, liability, claim, damage or
expense, as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue (or alleged untrue)
statement of a material fact or the omission (or alleged omission) to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

(v) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with any underwritten public offering contemplated by this
Agreement are in conflict with the foregoing provisions, the provisions in this
Agreement shall be controlling.

(g) Information by the Holders.

(i) Each of the Holders holding securities included in any registration shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Section 2.

(ii) In the event that, either immediately prior to or subsequent to the
effectiveness of any registration statement, any Holder shall distribute
Registrable Securities to its partners, members, stockholders or other permitted
transferees, such Holder shall so advise the Company and provide such
information as shall be necessary to permit an amendment to such registration
statement to provide information with respect to such partners, members,
stockholders or other permitted transferees as selling security holders.
Promptly following receipt of such information, the Company shall file an
appropriate amendment to such registration statement reflecting the information
so provided.

(h) Rule 144 Reporting.

 

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With a view to making available the benefits of certain rules and regulations of
the Commission which may permit the sale of restricted securities to the public
without registration, the Company agrees to:

(i) make and keep public information available as those terms are understood and
defined in Rule 144 under the Securities Act (“Rule 144”);

(ii) use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and

(iii) so long as a Holder owns any Registrable Securities, furnish to such
Holder upon request a written statement by the Company as to its compliance with
the reporting requirements of Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as such Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such Holder to sell any such securities without
registration.

(i) Termination. The registration rights set forth in this Section 2 shall not
be available to any Holder if all of the Registrable Securities held by such
Holder have been sold in a registration pursuant to the Securities Act or
pursuant to Rule 144, or until all such Holder’s unsold Registrable Securities
may be sold or transferred by such Holder pursuant to Rule 144 under the
Securities Act (or any other similar provision then in force) without any
volume, manner of sale or current public information restrictions thereunder, so
long as, at the time of determination, such Holder (x) is not an affiliate of
the Company and (y) owns less than one percent (1%) of the outstanding Common
Stock on a fully diluted basis.

(j) Seniority. The Company shall not, without first obtaining the written
consent of the Holders who hold a majority of the then outstanding Registrable
Securities, assuming conversion of all then outstanding Preferred Stock into
Common Stock, grant future Registration rights on terms more favorable than the
Registration rights granted pursuant to this Agreement.

SECTION 3. MISCELLANEOUS

(a) Directly or Indirectly. Where any provision in this Agreement refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.

(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such State.

 

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(c) Section Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.

(d) Notices.

(i) All communications under this Agreement shall be in writing and shall be
delivered by hand or facsimile or mailed by overnight courier or by registered
or certified mail, postage prepaid:

(1) if to the Company, to 701 Cedar Lake Blvd., Oklahoma City, Oklahoma, 73114,
Attention: Mark A. Fischer (facsimile: (405) 478-2906), or at such other address
as it may have furnished in writing to the Holders, with a copy to McAfee & Taft
A Professional Corporation, 10th Floor, Two Leadership Square, Oklahoma City,
Oklahoma 73102, Attention: David J. Ketelsleger (facsimile: (405) 235-0439).

(2) if to the Holders, to Magnetar Financial LLC, 1603 Orrington Avenue, 13th
Floor, Evanston, IL 60201, Attn: Chief Legal Officer (facsimile: 847-869-2064),
or at such other address or facsimile number as may have been furnished the
Company in writing, with a copy to Willkie Farr & Gallagher LLP, 787 Seventh
Avenue, New York, NY 10019 (facsimile: (212) 728-8111), Attention: Bruce C.
Herzog, Esq. and David K. Boston, Esq.

(ii) Any notice so addressed shall be deemed to be given: if delivered by hand
or facsimile, on the date of such delivery; if mailed by overnight courier, on
the first business day following the date of such mailing; and if mailed by
registered or certified mail, on the third business day after the date of such
mailing.

(e) Reproduction of Documents. This Agreement and all documents relating hereto,
including, without limitation, any consents, waivers and modifications which may
hereafter be executed may be reproduced by the Holders by any photographic,
photostatic, microfilm, microcard, miniature photographic or other similar
process and the Holders may destroy any original document so reproduced. The
parties hereto agree and stipulate that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by the Holders in the regular course of business) and that
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.

(f) Successors and Assigns. Except as expressly provided in this Agreement, this
Agreement shall not be construed so as to confer any right or benefit upon any
Person other than the parties to this Agreement and their respective successors
and permitted assigns. The Investor may not assign all or any portion of its
rights and obligations hereunder to any Person purchasing any of the Shares from
the Investor except as provided in Section 2(a) of this Agreement. The rights
and obligations of the Company hereunder shall not be assignable at any time or
to any other Person without the prior written consent of the Investor.

 

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(g) Entire Agreement; Amendment and Waiver. This Agreement constitutes the
entire understanding of the parties hereto relating to the subject matter hereof
and supersedes all prior understandings among such parties. This Agreement may
be amended, and the observance of any term of this Agreement may be waived, with
(and only with) the written consent of the Company and the Holders holding a
majority of the then outstanding Registrable Securities, assuming conversion of
all then outstanding Preferred Stock into Common Stock. Any amendment or waiver
effected in accordance with this Section 3(g) shall be binding upon each Holder
and the Company.

(h) Severability. In the event that any part or parts of this Agreement shall be
held illegal or unenforceable by any court or administrative body of competent
jurisdiction, such determination shall not affect the remaining provisions of
this Agreement which shall remain in full force and effect.

(i) Counterparts. This Agreement may be executed in two or more counterparts
(including by facsimile), each of which shall be deemed an original and all of
which together shall be considered one and the same agreement.

(j) Effective Date. This Agreement shall be effective from and after the
consummation of the Edge Merger Agreement.

[Signature page follows]

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first set forth above.

 

CHAPARRAL ENERGY, INC.

By:

 

 

Name:

 

Title:

 

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MAGNETAR FINANCIAL LLC (on behalf of one or more of its Affiliates) By:  

 

Name:   Title:  

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Exhibit C

FORM OF CERTIFICATE OF DESIGNATION FOR THE SERIES A PREFERRED STOCK

CERTIFICATE OF DESIGNATIONS OF

5.75% SERIES A CUMULATIVE CONVERTIBLE PERPETUAL PREFERRED STOCK

OF CHAPARRAL ENERGY, INC.

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware

Chaparral Energy, Inc., a Delaware corporation (the “Company”), certifies that
pursuant to the authority contained in Article FOURTH of its Second Amended and
Restated Certificate of Incorporation, as amended (the “Certificate of
Incorporation”), and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware (the “DGCL”), the Board of
Directors of the Company [in a meeting held] [by resolution adopted by unanimous
written consent, pursuant to Section 141(f) of the DGCL,] on
[                    ], duly approved and adopted the following resolution,
which resolution remains in full force and effect on the date hereof:

RESOLVED, that pursuant to the authority vested in the Board of Directors by the
Certificate of Incorporation, the Board of Directors does hereby designate,
create, authorize and provide for the issue of a series of the Company’s
preferred stock, par value $0.01 per share, with a liquidation preference of $50
per share, plus an amount equal to the sum of all accumulated and unpaid
dividends, subject to adjustment as provided in Section 15(ii) hereof, which
shall be designated as 5.75% Series A Cumulative Convertible Perpetual Preferred
Stock (the “Series A Preferred Stock”) consisting of 2,875,000 shares, no shares
of which have heretofore been issued by the Company, having the following
powers, designations, preferences and relative, participating, optional and
other special rights, and qualifications, limitations and restrictions thereof:

Section 1. Ranking. The Series A Preferred Stock will rank, with respect to
payment of dividends and distribution of assets upon the liquidation, winding-up
or dissolution of the Company: (i) senior to all Junior Stock, (ii) on parity
with all Parity Stock and (iii) junior to all Debt Obligations and Senior Stock.
The Company’s ability to issue Capital Stock that ranks senior to its Series A
Preferred Stock shall be subject to the provisions of Section 4 hereof.

Section 2. Dividends.

(i) Each holder of shares of the outstanding Series A Preferred Stock (together,
the “Holders”) shall be entitled, when, as and if declared by the Board of
Directors out of assets of the Company legally available therefor, to receive
cumulative dividends at the rate per annum of 5.75% per share on the liquidation
preference thereof of $50 per share of Series A Preferred Stock subject to
adjustment as provided in Section 15(ii) hereof (such liquidation preference, as
adjusted from time to time, the “Liquidation Preference”), payable in cash,
payable quarterly in arrears (such rate, the “Dividend Rate”). Dividends payable
for each full dividend period will be computed by dividing the Dividend Rate by
four and shall be payable in arrears on each Dividend Payment Date commencing on
the Dividend Payment Date next

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following the Effective Time of the Merger (the “First Dividend Payment Date”)
for the quarterly period ending immediately prior to such Dividend Payment Date,
to the holders of record of Series A Preferred Stock at the close of business on
the Dividend Record Date applicable to such Dividend Payment Date. Such
dividends shall accumulate from the most recent date as to which dividends shall
have been paid or, if no dividends have been paid, from the Last Edge Payment
Date (as defined below) (whether or not in any dividend period or periods there
shall be assets of the Company legally available for the payment of such
dividends in whole or in part). The initial dividend on the Series A Preferred
Stock, for the quarterly period commencing on the day after the quarterly period
ending immediately prior to the Last Edge Payment Date and ending immediately
prior to the First Dividend Payment Date, shall be $0.71875 per share and shall
be payable, when, as and if declared, on the First Dividend Payment Date. Each
subsequent quarterly dividend on the Series A Preferred Stock, when, as and if
declared, shall be $0.71875 per share. Dividends payable for any partial
dividend period shall be computed on the basis of days elapsed over a 360 day
year consisting of twelve 30 day months. The most recent date as to which
dividends shall have been paid on the 5.75% Series A Cumulative Convertible
Perpetual Preferred Stock of Edge Petroleum Corporation, a Delaware corporation
(“Edge”), is referred to herein as (the “Last Edge Payment Date”).

(ii) No dividend will be declared or paid upon, or any sum set apart for the
payment of dividends upon, any outstanding share of the Series A Preferred Stock
with respect to any dividend period unless all dividends for all preceding
dividend periods have been declared and paid or declared and a sufficient sum of
money or number of shares of Common Stock have been set apart for the payment of
such dividend, upon all outstanding shares of Series A Preferred Stock.

(iii) The Company is only obligated to pay a dividend on the Series A Preferred
Stock if the Board of Directors declares the dividend payable and the Company
has assets that legally can be used to the pay the dividend.

(iv) No dividends or other distributions (other than a dividend or distribution
payable solely in shares of Parity Stock or Junior Stock (in the case of Parity
Stock) or Junior Stock (in the case of Junior Stock), rights issued under
“poison pill” rights plans to purchase Junior Stock and cash paid in lieu of
fractional shares in accordance with Section 13 hereof) may be declared, made or
paid, or set apart for payment upon, any Parity Stock or Junior Stock, nor may
any Parity Stock or Junior Stock be redeemed, purchased or otherwise acquired
for any consideration (or any money paid to or made available for a sinking fund
for the redemption of any Parity Stock or Junior Stock) by or on behalf of the
Company (except by conversion into or exchange for shares of Parity Stock or
Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of
Junior Stock)), unless all accumulated and unpaid dividends shall have been or
contemporaneously are declared and paid, or are declared and a sum of cash
sufficient for the payment thereof is set apart for such payment, on the Series
A Preferred Stock and any Parity Stock for all dividend payment periods
terminating on or prior to the date of such declaration, payment, redemption,
purchase or acquisition. Notwithstanding the foregoing, if full dividends have
not been paid on

 

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the Series A Preferred Stock and any Parity Stock, dividends may be declared and
paid on the Series A Preferred Stock and such Parity Stock so long as the
dividends are declared and paid pro rata so that the amounts of dividends
declared per share on the Series A Preferred Stock and such Parity Stock will in
all cases bear to each other the same ratio that accumulated and unpaid
dividends per share on the shares of Series A Preferred Stock and such other
Parity Stock bear to each other.

(v) Holders shall not be entitled to any dividends on the Series A Preferred
Stock in excess of full cumulative dividends calculated pursuant to this
Section 2. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series A Preferred Stock that
may be in arrears.

(vi) With respect to dividends that have been declared for payment, a Holder at
the close of business on a Dividend Record Date will be entitled to receive the
dividend payment on its Series A Preferred Stock on the next succeeding Dividend
Payment Date notwithstanding the Company’s default in payment of the dividend
due on that Dividend Payment Date.

(vii) Dividends in arrears on the Series A Preferred Stock in respect of a
dividend period not declared for payment (“Delayed Dividends”) may be declared
by the Board of Directors and paid on any date fixed by the Board of Directors,
whether or not a Dividend Payment Date, to the Holders of record as they appear
on the stock register of the Company on a record date selected by the Board of
Directors, which shall (a) not precede the date the Board of Directors declares
the dividend payable and (b) not be more than 60 days prior to the date the
dividend is paid.

(viii) Holders will not have any right to receive dividends that may be declared
on the Common Stock. The right to receive dividends declared on the Common Stock
will be realized only after conversion of a Holder’s shares of Series A
Preferred Stock into shares of Common Stock.

Section 3. Liquidation Preference.

(i) In the event of any voluntary or involuntary liquidation, winding up or
dissolution of the Company, each Holder shall be entitled to receive and to be
paid out of the assets of the Company available for distribution to stockholders
of the Company, before any payment or distribution of assets is made to holders
of the Common Stock or any other Junior Stock but after any payment or
distribution in respect of Debt Obligations or Senior Stock, the Liquidation
Preference, plus accumulated and unpaid dividends (whether or not declared)
thereon to the date fixed for liquidation, winding up or dissolution.

(ii) Neither the sale, conveyance or other transfer of all or substantially all
of the assets or business of the Company (other than in connection with the
liquidation, winding-up or dissolution of its business) nor the merger or
consolidation of the Company into or with any other Person shall be deemed to be
a liquidation, winding-up or dissolution, voluntary or involuntary, for the
purposes of this Section 3.

 

3

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(iii) In the event the assets of the Company available for distribution to
Holders upon any liquidation, winding-up or dissolution of the Company, whether
voluntary or involuntary, shall be insufficient to pay in full all amounts to
which such Holders are entitled pursuant to Section 3(i) and amounts to which
holders of Parity Stock are entitled, no such distribution shall be made on
account of any shares of Parity Stock upon such liquidation, dissolution or
winding-up unless proportionate distributable amounts shall be paid on account
of the shares of Series A Preferred Stock and holders of Parity Stock, ratably,
in proportion to the full distributable amounts for which Holders and holders of
any Parity Stock are entitled upon such liquidation, winding-up or dissolution,
with the amount allocable to each series of such stock determined on a pro rata
basis of the aggregate liquidation preference of the outstanding shares of each
series and accumulated and unpaid dividends to which each series is entitled.

(iv) After the payment to the Holders of full preferential amounts provided for
in Sections 3(i) and 3(iii) hereof, the Holders as such shall have no right or
claim to any of the remaining assets of the Company.

Section 4. Voting Rights.

(i) Holders shall have no voting rights, except as set forth in this Section 4
or as expressly required by Delaware law from time to time.

(ii) If and whenever (a) six full quarterly dividends, whether or not
consecutive, payable on the Series A Preferred Stock, are not paid or (b) the
Company fails to pay the purchase price on the Fundamental Change Purchase Date
for shares of Series A Preferred Stock following a Fundamental Change, then, in
each case, the number of directors constituting the Board of Directors will be
increased by two and the holders of the Series A Preferred Stock, voting as a
single class with any other class or series of preferred stock having similar
voting rights that are exercisable, shall have a right to elect those additional
directors to the Board of Directors until all accumulated and unpaid dividends
on the Series A Preferred Stock have been paid in full or until the purchase
price for shares of Series A Preferred Stock following a Fundamental Change has
been paid in full, as the case may be. The directors so elected shall not be
divided into the classes of the Board of Directors, but shall serve for annual
terms. To exercise this right, any Holder may by written notice request that the
Board of Directors call a special meeting of the holders of the Company’s
preferred stock for the purpose of electing the additional directors and, if
such non-payment of dividends is continuing, the Board of Directors shall call
such meeting within 60 days after such written request. The terms of the
directors so elected will continue until such time as all accumulated and unpaid
dividends on the Series A Preferred Stock have been paid in full or until the
purchase price for shares of Series A Preferred Stock following a Fundamental
Change has been paid in full, as the case may be, and at such time, the number
of directors will, without further action, be reduced by two.

 

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(iii) So long as any shares of Series A Preferred Stock are outstanding, in
addition to any other vote of stockholders of the Company required under
applicable law or the Certificate of Incorporation, the affirmative vote or
consent of the Holders of at least 66 2/3% of the then outstanding shares of the
Series A Preferred Stock will be required to approve (a) any amendment of the
Certificate of Incorporation, by merger or otherwise, if the amendment would
alter or change the powers, preferences, privileges or rights of the Series A
Preferred Stock so as to affect the Holders adversely, (b) the issuance,
authorization or increase in the authorized amount of, or the issuance or
authorization of any obligation or security convertible into or evidencing a
right to purchase any class or series of Senior Stock or (c) any
reclassification of any authorized stock of the Company into any class or series
of, or any obligation or security convertible into or evidencing a right to
purchase, any Senior Stock; provided that no such vote shall be required for the
Company to issue, authorize or increase the authorized amount of, or issue or
authorize any obligation or security convertible into or evidencing a right to
purchase, any Parity Stock or Junior Stock.

(iv) In all cases where the Holders are entitled to vote, each share of Series A
Preferred Stock shall be entitled to one vote. When the Holders are entitled to
vote as a class with holders of any other class or series of preferred stock
having similar voting rights that are exercisable, each class or series shall
have the number of votes proportionate to the aggregate liquidation preference
of its outstanding shares. Holders shall generally not have any vote in a merger
or consolidation, including in any such transactions in which the Series A
Preferred Stock is converted into the right to receive cash or securities;
provided, however, that as described in Section 4(iii)(a), Holders shall be
entitled to vote in mergers and consolidations that amend the powers,
preferences, privileges or rights of the Holders so as to adversely affect them.

Section 5. Forced Conversion; Limited Optional Redemption.

(i) On or after January 20, 2010, the Company may at any time, by providing not
less than 15 nor more than 45 days’ notice, cause the Series A Preferred Stock
to be automatically converted at the applicable Conversion Rate (a “Forced
Conversion”); provided that the Company may exercise this right only if the
Closing Sale Price of the Common Stock for at least 20 Trading Days in a period
of 30 consecutive Trading Days, including the last Trading Day of such 30-day
period, ending on the Trading Day prior to the date the Company gives notice of
its election to call a Forced Conversion (by press release as described in
Section 5(ii) hereof), equals or exceeds 130% of the Conversion Price on each
such Trading Day.

(ii) To exercise its right to call a Forced Conversion, the Company must issue a
press release prior to the close of business on the first Trading Day following
any date on which the conditions described in Section 5(i) hereof are met,
announcing such election to call a Forced Conversion. The Company will also give
notice by mail

 

5

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or by publication (with subsequent prompt notice by mail) to the Holders (not
more than seven Business Days after the date of the press release) of the
election to call a Forced Conversion. The forced conversion date will be a date
selected by the Company (the “Forced Conversion Date”) and will be no more than
45 days or less than 15 days after the date on which the Company issues the
press release described in this Section 5(ii).

(iii) In addition to any information required by applicable law or regulation,
the press release and notice of a Forced Conversion described in this Section 5
shall state, as appropriate:

(a) the Forced Conversion Date;

(b) the Conversion Rate and whether the conversion obligation will be satisfied
in cash, shares of Common Stock or a combination of cash and shares of Common
Stock; and

(c) that dividends on the Series A Preferred Stock to be converted will cease to
accumulate on the Forced Conversion Date.

The provisions under Section 9 hereof shall apply as if the Forced Conversion
Date were the date on which the Company received notice of conversion; provided
that the provisions related to conversion retraction described in
Section 9(ii)(b) shall not apply.

(iv) On and after the Forced Conversion Date, dividends shall cease to
accumulate on the Series A Preferred Stock to be converted, all rights of
Holders of such Series A Preferred Stock shall terminate and all outstanding
shares of Series A Preferred Stock shall automatically convert at the applicable
Conversion Rate. The dividend payment with respect to the Series A Preferred
Stock for which a Forced Conversion Date occurs during the period between the
close of business on any Dividend Record Date to the close of business on the
corresponding Dividend Payment Date will be payable on such Dividend Payment
Date to the record holder of such share on such Dividend Record Date. Except as
provided in the immediately preceding sentence, with respect to a Forced
Conversion, no payment or adjustment will be made upon conversion of Series A
Preferred Stock for accumulated and unpaid dividends or for dividends with
respect to the Common Stock issued upon such conversion.

(v) The Company may not authorize, issue a press release announcing or give
notice of any Forced Conversion pursuant to Section 5(i) hereof unless, prior to
giving the forced conversion notice, all accumulated and unpaid dividends on the
Series A Preferred Stock for periods ended prior to the date of such press
release or notice shall have been paid.

(vi) In addition to the Company’s right to call a Forced Conversion as described
in Section 5(i) hereof, if fewer than 15% of the shares of Series A Preferred
Stock issued by the Company on the Issue Date (plus 15% of any additional shares

 

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issued by the Company pursuant to the underwriters’ over-allotment option with
respect to such issuance) are outstanding, the Company shall have the right, at
any time on or after January 20, 2010, at its option in accordance with this
clause (vi), to redeem for cash all such outstanding shares of Series A
Preferred Stock, to the extent of lawfully available funds therefor, at a
redemption price per share of Series A Preferred Stock equal to the Liquidation
Preference plus an amount equal to accumulated and unpaid dividends to, but
excluding, the Redemption Date, for each share of Series A Preferred Stock. If
the Redemption Date falls after a Dividend Record Date and on or prior to the
corresponding Dividend Payment Date, (a) the Company shall pay the full amount
of accumulated and unpaid dividends payable on such Dividend Payment Date only
to the holder of record at the close of business on the corresponding Dividend
Record Date and (b) the purchase price payable on the Redemption Date shall
include only the Liquidation Preference, but shall not include any amount in
respect of dividends declared and payable on such corresponding Dividend Payment
Date. The provisions of Section 5(iv) and Section 5(v) shall apply to any such
redemption as if the Redemption Date were the Forced Conversion Date. To
exercise the redemption right for the Series A Preferred Stock as set forth in
this Section 5(vi), the Company shall issue a notice by press release setting
forth a redemption date (the “Redemption Date”) for the Series A Preferred
Stock, which shall be at least 15 days but no more than 45 days after the date
of such notice, followed by a notice by mail or by publication (with subsequent
prompt notice by mail) to Holders not more than seven Business Days after the
date of such press release notice; provided that the Company may not issue a
redemption notice or press release, or otherwise exercise its redemption right
set forth in this Section 5(vi), if at such time 15% or more of the shares of
Series A Preferred Stock issued by the Company on the Issue Date (plus 15% of
any additional shares issued by the Company pursuant to the underwriters’
over-allotment option with respect to such issuance) are outstanding or the
Company shall not have paid all accumulated and unpaid dividends on the Series A
Preferred Stock for all dividend periods ended prior to the date of such press
release or notice. On and after the Redemption Date, all rights of Holders will
terminate except for the right to receive the redemption price for the shares of
Series A Preferred Stock redeemed. For the avoidance of doubt, the designation
of a Redemption Date by the Company pursuant to this Section 5(vi) shall not
terminate any conversion right with respect to the Series A Preferred Stock as
set forth in Section 6 below.

Section 6. Conversion at the Option of the Holder.

(i) Subject to the Company’s right to call a Forced Conversion as described in
Section 5(i) hereof, each share of Series A Preferred Stock will be convertible
at any time at the option of the Holder thereof into approximately 0.7581 shares
of Common Stock based on an initial conversion price of $65.95 per share (as
such conversion price may be adjusted, the “Conversion Price”) subject to
adjustment as set forth in Section 7 hereof. Upon conversion, the Company shall
have the right to deliver, in lieu of shares of Common Stock, cash or a
combination of cash and shares of Common Stock, as set forth in Section 9
hereof. The conversion rate per share of Series A Preferred Stock at any time
(as such conversion rate may be adjusted, the

 

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“Conversion Rate”) is equal to $50 divided by the Conversion Price at such time
rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded
upward (e.g., .76545 would be rounded up to .7655). Upon any conversion at a
Holder’s option, the Holder shall not receive any cash payment representing
accumulated and unpaid dividends on the Series A Preferred Stock, whether or not
in arrears, except as set forth in Section 6(ii) hereof.

(ii) Holders of shares of Series A Preferred Stock at the close of business on a
Dividend Record Date will be entitled to receive the dividend payment, if
declared and paid, on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion of such shares following such Dividend Record
Date. However, shares of Series A Preferred Stock surrendered for conversion
during the period between the close of business on any Dividend Record Date and
the close of business on the Business Day immediately preceding the applicable
Dividend Payment Date must be accompanied by a payment in cash of an amount
equal to the dividend payable on such shares of Series A Preferred Stock on that
Dividend Payment Date (a) unless the Company has specified a Forced Conversion
Date during such period and conversion occurs at any time after the Company has
issued the press release announcing such Forced Conversion, (b) unless the
Company has specified a Fundamental Change Purchase Date during such period or
(c) except to the extent of any accumulated and unpaid dividends (for dividend
periods other than the current dividend payment period). A Holder on a Dividend
Record Date who (or whose transferee) tenders any shares for conversion on the
corresponding Dividend Payment Date shall receive the dividend payable by the
Company if declared and paid on the Series A Preferred Stock on that date, and
the converting holder shall not be required to include payment in the amount of
such dividend upon surrender of shares of Series A Preferred Stock for
conversion.

(iii) Subject to Section 15(i) hereof, the conversion right of a Holder shall be
exercised by the Holder of shares of Series A Preferred Stock represented by
physical certificates other than the Global Preferred Stock by the surrender to
the Company of the certificates representing shares of Series A Preferred Stock
to be converted at any time during usual business hours at its principal place
of business or the offices of its duly appointed Transfer Agent to be maintained
by it, accompanied by written notice to the Company in the form of Exhibit A
that the Holder elects to convert all or a portion of the shares of Series A
Preferred Stock represented by such certificate and specifying the name or names
(with address) in which a certificate or certificates representing shares of
Common Stock are to be issued and (if so required by the Company or its duly
appointed Transfer Agent) by a written instrument or instruments of transfer in
form reasonably satisfactory to the Company or its duly appointed Transfer Agent
duly executed by the Holder or its duly authorized legal representative and, if
required, by payment of funds equal to dividends payable on the next Dividend
Payment Date to which such Holder is not entitled and by transfer tax stamps or
funds therefor, if required pursuant to Section 15(vii) hereof. Such conversion
notice is irrevocable, unless the Company elects to settle all or a portion of
the Conversion Value in cash, in which event such conversion notice may be
retracted during the Conversion Retraction Period. If a Holder’s shares of
Series A Preferred

 

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Stock are represented by Global Preferred Stock, such Holder must comply with
the Depositary’s procedures for converting a beneficial interest in such Global
Preferred Stock and, if required, pay funds equal to dividends payable on the
next Dividend Payment Date to which such Holder is not entitled and, if required
by Section 15(vii) hereof, pay all taxes or duties, if any. The date on which a
Holder satisfies the foregoing requirements for conversion is referred to herein
as the “Conversion Date.” If the Company elects to satisfy its conversion
obligation only in shares of Common Stock, it will deliver the shares of Common
Stock due upon conversion, together with any cash in lieu of fractional shares
in accordance with Section 13 hereof, no later than the third Business Day
following the Conversion Date, except as set forth in Section 8(iii) and
Section 8(iv) hereof. If the Company elects to satisfy any portion of its
conversion obligation in cash, it will deliver the shares of Common Stock (if
any) and cash due upon conversion on the third Business Day following the last
Trading Day of the related Cash Settlement Averaging Period. Immediately prior
to the close of business on the Conversion Date, each converting Holder shall be
deemed to be the holder of record of Common Stock issuable upon conversion of
such Holder’s Series A Preferred Stock notwithstanding that the share register
of the Company shall then be closed or that certificates representing such
Common Stock shall not then be actually delivered to such Holder. On the
Conversion Date all rights with respect to the shares of Series A Preferred
Stock so converted, including the rights, if any, to receive notices, will
terminate, except the rights of Holders thereof to: (a) receive certificates
representing the number of whole shares of Common Stock into which such shares
of Series A Preferred Stock have been converted and cash, in lieu of any
fractional shares, in accordance with Section 13 hereof; (b) receive Additional
Shares, cash or Reference Property, as applicable, payable upon a Fundamental
Change, in accordance with Section 8(iv); and (c) exercise the rights to which
they are entitled as holders of Common Stock.

Section 7. Anti-Dilution Adjustments.

(i) Anti-Dilution Adjustments. The Conversion Price shall be subject to the
following adjustments from time to time:

(a) Stock Dividends. In case the Company shall pay or make a dividend or other
distribution to all holders of Common Stock in shares of Common Stock, the
Conversion Price, as in effect at the opening of business on the Business Day
following the date fixed for the determination of stockholders of the Company
entitled to receive such dividend or other distribution, shall be decreased by
multiplying such Conversion Price by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination and the denominator shall be the sum of such
number of shares and the total number of shares constituting such dividend or
other distribution, such decrease to become effective immediately after the
opening of business on the Business Day following the date fixed for such
determination.

 

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(b) Stock Purchase Rights. In case the Company shall issue to all holders of its
Common Stock rights, options or warrants, entitling them to subscribe for or
purchase shares of Common Stock for a period expiring within 60 days from the
date of issuance of such rights, options or warrants at a price per share of
common stock (or having a conversion price per share) less than the Market Value
as of the date fixed for the determination of stockholders of the Company
entitled to receive such rights, options or warrants (other than pursuant to a
dividend reinvestment, share purchase or similar plan), the Conversion Price in
effect at the opening of business on the Business Day following the date fixed
for such determination shall be decreased by multiplying such Conversion Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock which the aggregate
consideration expected to be received by the Company upon the exercise,
conversion or exchange of such rights, options or warrants (as determined in
good faith by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) would purchase at such Market Value and the
denominator of which shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination plus the
number of shares of Common Stock so offered for subscription or purchase, either
directly or indirectly, such decrease to become effective immediately after the
opening of business on the Business Day following the date fixed for such
determination; provided, however, that no such adjustment of Conversion Price
shall be made if the Holders would be entitled to receive such rights, options
or warrants without conversion and based on the applicable Conversion Rate;
provided further, however, that if any of the foregoing rights, options or
warrants is only exercisable upon the occurrence of a Triggering Event, then the
Conversion Price will not be adjusted until such Triggering Event occurs.

(c) Stock Splits; Reverse Splits; Reclassifications and Combinations. In case
outstanding shares of Common Stock shall be subdivided, split or reclassified
into a greater number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the Business Day following the day upon which such
subdivision, split or reclassification becomes effective shall be
proportionately decreased, and, conversely, in case outstanding shares of Common
Stock shall each be combined or reclassified into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business on the
Business Day following the day upon which such combination or reclassification
becomes effective shall be proportionately increased, such increase or decrease,
as the case may be, to become effective immediately after the opening of
business on the Business Day following the day upon which such subdivision,
split, reclassification or combination becomes effective.

(d) Cash Distributions. In case the Company shall, by dividend or otherwise,
make distributions to all holders of its Common Stock exclusively in cash
(excluding any dividend or distribution in connection with the liquidation,
dissolution or winding up of the Company, or any distribution consisting of cash

 

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in part which is provided for in Section 7(i)(f) hereof) immediately after the
close of business on such date for determination, the Conversion Price shall be
adjusted by dividing the Conversion Price in effect immediately prior to the
close of business on the date fixed for determination of the stockholders of the
Company entitled to receive such distribution by a fraction, (A) the numerator
of which shall be equal to the Market Value of a share of Common Stock as of the
date fixed for such determination and (B) the denominator of which shall be
equal to the Market Value of a share of Common Stock as of the date fixed for
such determination less the per share amount of the dividend or distribution.

(e) Common Stock Repurchase Premiums. In the case that a tender or exchange
offer made by the Company or any Subsidiary of the Company for all or any
portion of the Common Stock shall expire and such tender or exchange offer (as
amended through the expiration thereof) shall require the payment to
stockholders of the Company (based on the acceptance, up to any maximum
specified in the terms of the tender or exchange offer, of Purchased Shares (as
defined below)) of an aggregate consideration having a Fair Market Value (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) per share of the Common Stock
that exceeds the Closing Sale Price of the Common Stock on the Trading Day next
succeeding the last date on which tenders or exchanges may be made pursuant to
such tender or exchange offer, then, immediately prior to the opening of
business on the Business Day after the last day (such day, the “Expiration
Time”) tenders could have been made pursuant to such tender or exchange offer
(as amended through the expiration thereof), the Conversion Price shall be
decreased by multiplying the Conversion Price immediately prior to the close of
business on the Expiration Time by a fraction (1) the numerator of which shall
be equal to (x) the product of (I) the Market Value as of the date of the
Expiration Time and (II) the number of shares of Common Stock outstanding
(including any Purchased Shares (as defined below)) on the Expiration Time less
(y) the amount of cash plus the Fair Market Value (determined as aforesaid) of
the aggregate consideration payable to stockholders of the Company pursuant to
the tender or exchange offer (assuming the acceptance, up to any maximum
specified in the terms of the tender or exchange offer, of Purchased Shares (as
defined below)), and (2) the denominator of which shall be equal to the product
of (x) the Market Value as of the Expiration Time and (y) the number of shares
of Common Stock outstanding (including any Purchased Shares (as defined below))
on the Expiration Time less the number of all shares validly tendered, not
withdrawn and accepted for payment on the Expiration Time (such validly tendered
shares, up to any such maximum, being referred to as the “Purchased Shares”).

(f) Debt, Asset or Security Distributions. In case the Company shall, by
dividend or otherwise, distribute to all holders of its Common Stock evidences
of its indebtedness, assets or securities (but excluding any dividend or
distributions referred to in Section 7(i)(a), 7(i)(b), 7(i)(c), 7(i)(d) or
7(ii)), the Conversion Price shall be decreased by multiplying the Conversion
Price in effect immediately prior to the close of business on the date fixed for
the determination

 

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of stockholders of the Company entitled to receive such distribution by a
fraction, the numerator of which shall be the Market Value of a share of Common
Stock as of the date fixed for such determination less the then Fair Market
Value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) of the
portion of the assets or evidences of indebtedness so distributed applicable to
one share of Common Stock and the denominator of which shall be the Market Value
of a share of Common Stock as of the date fixed for such determination, such
adjustment to become effective immediately prior to the opening of business on
the Business Day following the date fixed for the determination of stockholders
of the Company entitled to receive such distribution.

(ii) Right and Warrants. If the Company distributes rights or warrants (other
than those referred to above in Section 7(i)(b) hereof) pro rata to the holders
of Common Stock, so long as such rights or warrants have not expired or been
redeemed by the Company, the Holder of any shares of Series A Preferred Stock
surrendered for conversion shall be entitled to receive upon such conversion, in
addition to the shares of Common Stock then issuable upon such conversion (the
“Conversion Shares”), a number of rights or warrants to be determined as
follows:

(a) if such conversion occurs on or prior to the date for the distribution to
the holders of rights or warrants of separate certificates evidencing such
rights or warrants (the “Distribution Date”), the same number of rights or
warrants to which a holder of a number of shares of Common Stock equal to the
number of Conversion Shares is entitled at the time of such conversion in
accordance with the terms and provisions applicable to the rights or warrants;
and

(b) if such conversion occurs after the Distribution Date, the same number of
rights or warrants to which a holder of the number of shares of Common Stock
into which such Series A Preferred Stock was convertible immediately prior to
such Distribution Date would have been entitled on such Distribution Date had
such Series A Preferred Stock been converted immediately prior to such
Distribution Date in accordance with the terms and provisions applicable to the
rights and warrants.

The Conversion Price shall not be subject to adjustment on account of any
declaration, distribution or exercise of such rights or warrants.

(iii) De Minimis Adjustments. Notwithstanding anything herein to the contrary,
no adjustment under this Section 7 shall be made to the Conversion Price unless
such adjustment would require an increase or decrease of at least one percent
(1.0%) of the Conversion Price then in effect. Any lesser adjustment shall be
carried forward and shall be made at the time of and together with the next
subsequent adjustment, if any, which, together with any adjustment or
adjustments so carried forward, shall amount to an increase or decrease of at
least one percent (1.0%) of such Conversion Price; provided, however, that
notwithstanding the foregoing, all such carried forward adjustments shall be
made at the time the Company shall have

 

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designated a Forced Conversion Date or upon giving a Fundamental Change Notice,
and at the time of conversion of Series A Preferred Stock. No adjustment under
this Section 7 shall be made if such adjustment will result in a Conversion
Price that is less than the par value of the Common Stock. All adjustments to
the Conversion Price shall be calculated to the nearest 1/100th of a share of
Common Stock (or if there is not a nearest 1/100th of a share to the next lower
 1/100th of a share).

(iv) Tax-Related Adjustments. The Company may make such decreases in the
Conversion Price, in addition to those required by this Section 7, as the Board
of Directors considers advisable in order to avoid or diminish any income tax to
any holders of shares of Common Stock resulting from any dividend or
distribution of stock or issuance of rights or warrants to purchase or subscribe
for stock or from any event treated as such for income tax purposes.

(v) Stockholder Rights Plans. Upon conversion of the Series A Preferred Stock,
the Holders shall receive, in addition to the shares of Common Stock and any
cash for fractional shares in accordance with Section 13 hereof, if any, the
rights issued under any future stockholder rights plan the Company may establish
whether or not such rights are separated from the Common Stock prior to
conversion. A distribution of rights pursuant to a stockholder rights plan will
not result in an adjustment to the Conversion Price pursuant to Section 7(i)(b),
7(i)(f) or 7(ii) provided that the Company has provided for the Holders to
receive such rights upon conversion.

(vi) Notice of Adjustment. Whenever the Conversion Price is adjusted in
accordance with this Section 7, the Company shall (a) compute the Conversion
Price in accordance with this Section 7 and prepare and transmit to the Transfer
Agent an Officer’s Certificate setting forth the Conversion Price, the method of
calculation thereof in reasonable detail, and the facts requiring such
adjustment and upon which such adjustment is based and (b) as soon as
practicable following the occurrence of an event that requires an adjustment to
the Conversion Price pursuant to this Section 7 (or if the Company is not aware
of such occurrence, as soon as practicable after becoming so aware), the Company
or, at the request and expense of the Company, the Transfer Agent shall provide
a written notice to the Holders of the occurrence of such event and a statement
setting forth in reasonable detail the method by which the adjustment to the
Conversion Price was determined and setting forth the adjusted Conversion Price.

(vii) Reversal of Adjustment. If the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter (and before the dividend or
distribution has been paid or delivered to stockholders) legally abandon its
plan to pay or deliver such dividend or distribution, then thereafter no
adjustment in the Conversion Price then in effect shall be required by reason of
the taking of such record.

(viii) Exceptions to Adjustment. The applicable Conversion Price shall not be
adjusted:

(a) upon the issuance of any shares of Common Stock pursuant to any present or
future plan providing for the reinvestment of dividends or interest payable on
the Company’s securities and the investment of additional optional amounts in
shares of Common Stock under any plan;

 

13

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(b) upon the issuance of any shares of Common Stock or options or rights to
purchase those shares pursuant to any present or future employee, director or
consultant benefit plan or program of or assumed by the Company or any of its
Subsidiaries;

(c) upon the issuance of any shares of Common Stock pursuant to any option,
warrant, right or exercisable, exchangeable or convertible security outstanding
as of the Issue Date (including any shares of Series A Preferred Stock issued
upon the exercise of any underwriter over-allotment option);

(d) for a change in the par value or no par value of Common Stock; or

(e) for accumulated and unpaid dividends.

Section 8. Fundamental Change.

(i) Within ten Trading Days after the Effective Date of a Fundamental Change
(or, in the case of a Fundamental Change described in clause (b) of the
definition of such term, within ten Trading Days prior to the anticipated
Effective Date of such Fundamental Change) (the “Fundamental Change Notice
Date”), the Company shall give notice of such Fundamental Change in accordance
with Section 11(ii) hereof to each record holder of Series A Preferred Stock
(the “Fundamental Change Notice”). Such Fundamental Change Notice shall state:

(a) the events causing the Fundamental Change;

(b) the Effective Date or anticipated Effective Date of such Fundamental Change;

(c) the purchase price and whether that price will be paid in cash, shares of
Common Stock, or a combination of cash and shares of Common Stock;

(d) the name and address of the Transfer Agent; and

(e) if applicable, the expected determination of the number of Additional Shares
to be added to the Conversion Rate as set forth pursuant to Section 8(iv) below.

Simultaneously with the Fundamental Change Notice, the Company shall issue a
press release and publish a notice containing the foregoing information in a
newspaper of general circulation in The City of New York or publish the
information on its website or through such other public medium as the Company
may use at that time and deliver a copy of such notice to the Transfer Agent.

 

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(ii) Upon the conversion of Series A Preferred Stock in connection with a
Fundamental Change, a Holder will be entitled to receive a cash payment for all
accumulated and unpaid dividends. If the Effective Date is a date that is prior
to the close of business on any Dividend Record Date, however, the Holder will
not be entitled to receive any portion of the dividend payable for such period
on such converted shares on the corresponding Dividend Payment Date. If the
Effective Date is a date that is after the close of business on any Dividend
Record Date and prior to the close of business on the corresponding Dividend
Payment Date, all dividends, including accumulated and unpaid dividends, whether
or not in arrears, with respect to the Series A Preferred Stock converted on
such date, will be payable on such Dividend Payment Date to the record Holder of
such shares on such Dividend Record Date.

(iii) Purchase or Exchange Upon a Fundamental Change.

(a) Upon the occurrence of a Fundamental Change, Holders shall have the right,
subject to the terms and conditions of this Certificate of Designations
(including, without limitation, the availability of legally available funds to
the Company), to require the Company to repurchase all of, or any portion of,
such Holders’ shares of Series A Preferred Stock. The Company shall purchase
such Series A Preferred Stock at a price equal to 100% of the Liquidation
Preference plus any accumulated and unpaid dividends, to, but excluding, the
date that is not less than 30 nor more than 60 days after the Company mails
notice of the occurrence of such Fundamental Change (the “Fundamental Change
Purchase Date”). If the Fundamental Change Purchase Date falls after a Dividend
Record Date and on or prior to the corresponding Dividend Payment Date, (1) the
Company shall pay the full amount of accumulated and unpaid dividends payable on
such Dividend Payment Date only to the holder of record at the close of business
on the corresponding Dividend Record Date and (2) the purchase price payable on
the Fundamental Change Purchase Date shall include only the Liquidation
Preference, but shall not include any amount in respect of dividends declared
and payable on such corresponding dividend payment date.

(b) The Company may, subject to legally available funds, elect to pay the
purchase price in cash, shares of Common Stock, or a combination of cash and
Common Stock. If the Company elects to pay all or a portion of the purchase
price in shares of Common Stock, such shares of Common Stock shall be valued at
a discount of 5% below the average of the daily Volume-Weighted Average Price
per share for the ten consecutive Trading Days ending on the third Trading Day
prior to the Fundamental Change Purchase Date; provided, however, that the
Company shall not pay the purchase price in shares of Common Stock or a
combination of shares of Common Stock and cash unless (1) the Company shall have
given a timely Fundamental Change Notice including its intention to pay the
purchase price or a specified percentage of the

 

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purchase price with shares of Common Stock and (2) such shares of Common Stock
are registered under the Securities Act and the Exchange Act, in each case, if
required.

(c) To exercise the right to require the Company to repurchase shares of Series
A Preferred Stock as set forth under 9(ii)(a) herein, Holders must deliver a
written notice (the “Fundamental Change Purchase Notice”) to the Transfer Agent
prior to the close of business on the Business Day immediately preceding the
Fundamental Change Purchase Date. The Fundamental Change Purchase Notice must
state:

(1) if certificated shares of Series A Preferred Stock have been issued, the
Series A Preferred Stock certificate numbers, or if not, such information as may
be required under the Depositary’s applicable procedures;

(2) the number of shares of Series A Preferred Stock to be purchased; and

(3) that the Company is to purchase such Series A Preferred Stock pursuant to
the applicable provisions of the Series A Preferred Stock and this Certificate
of Designations.

(d) Holders may withdraw any Fundamental Change Purchase Notice by a written
notice of withdrawal delivered to the Transfer Agent prior to the close of
business on the Business Day immediately preceding the Fundamental Change
Purchase Date. The notice of withdrawal must state:

(1) the number of the withdrawn shares of Series A Preferred Stock;

(2) if certificated shares of Series A Preferred Stock have been issued, the
Series A Preferred Stock certificate numbers, or if not, such information as may
be required under the Depositary’s applicable procedures; and

(3) the number, if any, of shares of Series A Preferred Stock that remain
subject to the Fundamental Change Purchase Notice.

(e) Holders must either effect book-entry transfer or deliver the Series A
Preferred Stock to be purchased, together with necessary endorsements, to the
office of the Transfer Agent after delivery of the Fundamental Change Purchase
Notice to receive payment of the fundamental change purchase price. Holders
shall receive payment in cash or shares of Common Stock, as applicable, on the
later of the Fundamental Change Purchase Date or the time of book-entry transfer
or the delivery of the Series A Preferred Stock. If the Transfer Agent holds
cash or securities sufficient to pay the fundamental change purchase price of
the Series A Preferred Stock on the

 

16

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Business Day following the Fundamental Change Purchase Date, then, immediately
after the Fundamental Change Purchase Date, whether or not book-entry transfer
of the Series A Preferred Stock is made or whether or not the Series A Preferred
Stock is delivered to the Transfer Agent or the Depositary: 1) the shares of
Series A Preferred Stock shall cease to be outstanding; 2) dividends shall cease
to accrue; and 3) all other rights of such Holders shall terminate.

(f) Notwithstanding the foregoing, the Company shall not be required to purchase
shares of Series A Preferred Stock upon the occurrence of a Fundamental Change
if (1) a third party agrees to purchase the shares of Series A Preferred Stock
upon the occurrence of a Fundamental Change in the manner, at the times and
otherwise in compliance with the requirements set forth in this Certificate of
Designations applicable to a purchase of shares of Series A Preferred Stock upon
the occurrence of a Fundamental Change and (2) the third party purchases the
shares of Series A Preferred Stock on such basis.

(iv) Adjustment to the Conversion Rate Upon a Fundamental Change.

(a) If a Holder converts its Series A Preferred Stock at any time beginning on
the Fundamental Change Notice Date after a notice is given to Holders regarding
a Fundamental Change described in clause (b) of the definition of that term, and
ending at the close of business on the 30th Trading Day immediately following
the Effective Date of such Fundamental Change, the Company will increase the
applicable Conversion Rate by a number of additional shares (the “Additional
Shares”) for such Series A Preferred Stock as described in Section 8(iv)(b)
hereof; provided that (a) such increase in the Conversion Rate shall not take
place if such Fundamental Change is not consummated and (b) the Company shall
issue shares of Common Stock at the Conversion Rate (without such increase) on
or prior to the fifth Business Day following the Conversion Date and the
Additional Shares described in Section 8(iv)(b) hereof will be issued after the
later to occur of (i) the fifth Business Day following the Effective Date of
such Fundamental Change and (ii) the fifth Business Day following the relevant
Conversion Date. On and after the Effective Date, Holders entitled to receive
Additional Shares pursuant to this Section 8(iv)(a) shall, as set forth under
Section 10 below, receive Reference Property based on the number of Additional
Shares set forth above.

(b) The number of Additional Shares will be determined by reference to the table
below, based on the Effective Date and the price of the Common Stock (the “Stock
Price”). If the consideration (excluding cash payments for fractional shares or
pursuant to statutory appraisal rights) for the Common Stock consists solely of
cash, then the Stock Price will be the cash amount paid per share of the Common
Stock. Otherwise, the Stock Price will be the average of the Closing Sale Price
per share of the Common Stock for the five consecutive Trading Days immediately
preceding the Effective Date of such Fundamental Change.

 

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(c) The following table sets forth the number of Additional Shares per share of
Series A Preferred Stock to be added to the Conversion Rate in connection with
the Fundamental Change referred to in Section 8(iv)(a):

Number of Additional Shares

 

    Stock Price

Effective Date

  $52.77   $59.74   $69.69   $79.65   $89.61   $99.56   $109.52   $119.47  
$129.43   $139.39   $149.34   $159.30   $169.26   $179.21   $189.17   $199.12

Jan. 20, 2008

  0.1894   0.1689   0.1265   0.0974   0.0766   0.0613   0.0499   0.0412   0.0344
  0.0290   0.0246   0.0211   0.0182   0.0158   0.0137   0.0120

Jan. 20, 2009

  0.1894   0.1512   0.1062   0.0759   0.0552   0.0408   0.0308   0.0236   0.0185
  0.0147   0.0119   0.0098   0.0082   0.0069   0.0059   0.0050

Jan. 20, 2010

  0.1894   0.1421   0.0871   0.0436   0.0147   0.0030   0.0000   0.0000   0.0000
  0.0000   0.0000   0.0000   0.0000   0.0000   0.0000   0.0000

Thereafter

  0.1894   0.1421   0.0871   0.0436   0.0147   0.0030   0.0000   0.0000   0.0000
  0.0000   0.0000   0.0000   0.0000   0.0000   0.0000   0.0000

The Stock Prices set forth in the table will be adjusted as of any date on which
the Conversion Price of the Series A Preferred Stock is adjusted. The adjusted
Stock Prices will equal the Stock Prices applicable immediately prior to the
adjustment divided by a fraction, the numerator of which is the Conversion Price
immediately prior to the adjustment to the Conversion Price and the denominator
of which is the Conversion Price as so adjusted.

(v) The exact Stock Price and Effective Date may not be set forth in the table,
in which case:

(1) if the Stock Price is between two Stock Prices in the table or the Effective
Date is between two Effective Dates in the table, the number of Additional
Shares will be determined by straight-line interpolation between the Additional
Share amounts set forth for the higher and lower Stock Prices and the two
Effective Dates, as applicable, based on a 365-day year;

(2) if the Stock Price is in excess of $199.12 per share (subject to adjustment
in the same manner as the Stock Price), no Additional Shares will be added to
the Conversion Rate; and

(3) if the Stock Price is less than or equal to $52.77 per share (subject to
adjustment in the same manner as the Stock Price), no Additional Shares will be
added to the Conversion Rate.

Section 9. Settlement Upon Conversion.

(i) Pursuant to the procedures set forth in this Section 9, upon a conversion
the Company shall have the right to deliver the Conversion Value, in lieu of
shares of Common Stock, in cash or a combination of cash and shares of Common
Stock, provided that the Company may only elect to deliver cash if its credit
facilities in existence at that time permit such payment and assets are legally
available to pay such amounts. Unless the Company has elected to call a Forced
Conversion, it shall not be required to notify Holders of its method for
settling its conversion obligation relating to the Conversion Value until the
Series A Preferred Stock is submitted for conversion.

 

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(ii) If the Company receives a conversion notice from a Holder of Series A
Preferred Stock, the following procedures shall apply:

(a) During the Settlement Notice Period, the Company shall notify any Holders of
Series A Preferred Stock exercising a conversion right, if the Company elects to
settle any portion of its conversion obligation in whole or in part in cash. If
the Company elects to settle the Conversion Value in a combination of cash and
shares of Common Stock, it shall specify the percentage of the Conversion Value
relating to the Series A Preferred Stock surrendered for conversion that will be
paid in cash. Any portion of the Conversion Value which the Company does not
elect to settle in cash shall be settled in shares of Common Stock (except that
the Company shall pay cash in lieu of issuing any fractional shares). The
Company shall treat all Holders converting on the same Trading Day in the same
manner. The Company shall not, however, have any obligation to settle conversion
obligations arising on different Trading Days in the same manner. For example,
the Company may choose on one Trading Day to settle in shares of Common Stock
only and choose on another Trading Day to settle in cash or a combination of
shares of Common Stock and cash.

(b) If the Company timely elects to pay cash for any portion of the Conversion
Value, Holders may retract the conversion notice at any time during the
Conversion Retraction Period; provided that no such retraction may be made (and
a conversion notice shall be irrevocable) if the Company does not elect to
deliver cash in lieu of shares of Common Stock (other than cash in lieu of
fractional shares).

(c) Settlement amounts shall be computed as follows:

1) If the Company elects to satisfy a conversion solely in shares of Common
Stock (other than with respect to fractional shares), it shall deliver to the
Holder, for each share of Series A Preferred Stock, a number of shares of Common
Stock equal to the applicable Conversion Rate.

2) If the Company elects to satisfy a conversion solely in cash, it shall
deliver to the Holder, for each share of Series A Preferred Stock, cash in an
amount equal to the Conversion Value.

3) If the Company elects to satisfy the conversion obligation in a combination
of cash and shares of Common Stock, it shall deliver to the Holder, for each
share of Series A Preferred Stock:

(i) a cash amount (the “Cash Amount”) (excluding any cash paid for fractional
shares) equal to the product of (a) the Conversion Value and (b) the percentage
of the conversion obligation to be satisfied in cash; and

(ii) a number of shares of common stock equal to the difference between: (a) the
applicable Conversion Rate; minus (b) the number

 

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of shares of common stock equal to the quotient of (x) the Cash Amount divided
by (y) the arithmetic average of the Volume-Weighted Average Price of the Common
Stock on each Trading Day during the Cash Settlement Averaging Period.

Section 10. Recapitalizations, Reclassifications and Changes in the Company’s
Stock.

(i) In the event of any reclassification of Common Stock (other than a change in
par value, or from par value to no par value, or from no par value to par
value), or any consolidation or merger of the Company (other than with a
Subsidiary of the Company) with or into another Person or any merger of another
Person with or into the Company (other than, in any of the cases described
above, a consolidation or merger in which the Company is the resulting or
surviving Person and which does not result in any reclassification or change of
outstanding Common Stock), or any sale or other disposition to another Person
(other than to a subsidiary of the Company) of all or substantially all of the
assets of the Company (computed on a consolidated basis) other than in
connection with a liquidation or winding up of the Company (any of the
foregoing, a “Transaction”), upon conversion of its shares of Series A Preferred
Stock on and after the related effective date for such Transaction, a Holder
will be entitled to receive the kind and amount of securities (of the Company or
another issuer), cash and other property receivable upon such Transaction by a
holder of the number of shares of Common Stock into which such shares of Series
A Preferred Stock were convertible into immediately prior to such Transaction,
after giving effect to any adjustment event (the “Reference Property”). The
provisions of this Section 10(i) and any equivalent thereof in any such
securities similarly shall apply to successive Transactions. For purposes of
this paragraph, the type and amount of Reference Property to which a holder of
Common Stock would have been entitled in the case of a reclassification,
consolidation, merger, sale or other disposition that causes the Common Stock to
be converted into the right to receive more than a single type of consideration,
determined based in part upon any form of stockholder election, shall be deemed
to be (a) the weighted average of the types and amounts of consideration
received by the holders of Common Stock that affirmatively make such an election
or (b) if no holders of Common Stock make such an election, the types and amount
of consideration actually received by such holders.

(ii) This provision does not limit the rights of Holders in the event of a
Fundamental Change, including the Company’s obligation to increase the
Conversion Rate by the additional number of shares in connection with a
conversion or the Company’s right to elect to adjust the conversion obligation
pursuant to Section 9 hereof.

Section 11. Notices.

(i) When the Company is required, pursuant to this Certificate of Designations,
to give notice to Holders by issuing a press release, rather than directly to
holders, the Company shall do so in a public medium that is customary for such

 

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press release; provided, however, that in such cases, publication of a press
release through the Dow Jones News Service shall be considered sufficient to
comply with such notice obligation.

(ii) When the Company is required, pursuant to this Certificate of Designations,
to give notice to Holders without specifying the method of giving such notice,
the Company may do so by sending notice via first class mail or by overnight
courier to the Holders of record as of a reasonably current date or by
publication, as provided in Section 11(iii) hereof.

(iii) When the Company is required, pursuant to this Certificate of
Designations, to give notice by publication, the Company shall do so by
publishing a notice in the national edition of The Wall Street Journal, The New
York Times or a newspaper of national circulation chosen in good faith by the
Company.

(iv) When the Company is required to give notice herein to any Holder within a
specified number of Trading Days prior to a specified event, the Company will
identify such Trading Days in good faith based on its reasonable expectations
for the application of the definition of “Trading Days” set forth herein. Any
notice issued in reliance on such identification will satisfy the Company’s
obligation with respect to the timing of such notice, notwithstanding any
subsequent events that may cause such days to fail to be Trading Days.

Section 12. Form.

(i) The shares of Series A Preferred Stock shall be issued in the form of one or
more permanent global shares (each, a share of “Global Preferred Stock”) in
definitive, fully registered form with the global legend (the “Global Stock
Legend”) as set forth on the form of Series A Preferred Stock Certificate
attached hereto as Exhibit B, which is hereby incorporated in and expressly made
a part of the terms of the Series A Preferred Stock.

(ii) Each share of Global Preferred Stock may have notations, legends or
endorsements required by law, stock exchange rules, agreements to which the
Company is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company). The shares of Global
Preferred Stock shall be deposited on behalf of the Holders represented thereby
with the Transfer Agent as custodian for the Depositary, and registered in the
name of the Depositary or a nominee of the Depositary, duly executed by the
Company and countersigned and registered by the Transfer Agent as hereinafter
provided.

(iii) The aggregate number of shares represented by each share of Global
Preferred Stock may from time to time be increased or decreased by adjustments
made on the records of the Transfer Agent and the Depositary or its nominee as
hereinafter provided. This Section 12 shall apply only to a share of Global
Preferred Stock deposited with or on behalf of the Depositary. The Company shall
execute and the Transfer Agent shall, in accordance with this Section 12,
countersign

 

21

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and deliver initially one or more shares of Global Preferred Stock that
(a) shall be registered in the name of Cede & Co. or other nominee of the
Depositary and (b) shall be delivered by the Transfer Agent to Cede & Co. or
pursuant to instructions received from Cede & Co. or held by the Transfer Agent
as custodian for the Depositary pursuant to an agreement between the Depositary
and the Transfer Agent.

(iv) Members of, or participants in, the Depositary (“Agent Members”) shall have
no rights under this Certificate of Designations with respect to any share of
Global Preferred Stock held on their behalf by the Depositary or by the Transfer
Agent as the custodian of the Depositary, or under such share of Global
Preferred Stock, and the Depositary may be treated by the Company, the Transfer
Agent and any agent of the Company or the Transfer Agent as the absolute owner
of such share of Global Preferred Stock for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Transfer Agent or any agent of the Company or the Transfer Agent from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices of the Depositary governing the exercise of the
rights of a holder of a beneficial interest in any shares of Global Preferred
Stock.

(v) Owners of beneficial interests in shares of Global Preferred Stock shall not
be entitled to receive physical delivery of certificated shares of Series A
Preferred Stock, unless (x) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for the shares of Global Preferred
Stock or if at any time the Depositary ceases to be a clearing agency registered
under the Exchange Act and, in either case a successor is not appointed within
90 days or (y) the Company in its discretion determines not to have any of the
Series A Preferred Stock represented by the shares of Global Preferred Stock.
Any Series A Preferred Stock that is exchangeable pursuant to the preceding
sentence is exchangeable for certificated shares of Series A Preferred Stock
issuable for such number of shares and registered in such names as the
Depositary shall direct. Subject to the foregoing, the shares of Global
Preferred Stock are not exchangeable, except for shares of Global Preferred
Stock representing the same aggregate number of shares and registered in the
name of the Depositary or its nominee.

(vi)(a) An Officer shall sign the share of Global Preferred Stock for the
Company, in accordance with the Company’s bylaws and applicable law, by manual
or facsimile signature.

(b) If an Officer whose signature is on a share of Global Preferred Stock no
longer holds that office at the time the Transfer Agent countersigns the share
of Global Preferred Stock, the share of Global Preferred Stock shall be valid
nevertheless.

(c) A share of Global Preferred Stock shall not be valid until an authorized
signatory of the Transfer Agent manually countersigns such share of Global
Preferred Stock. The signature shall be conclusive evidence that such

 

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share of Global Preferred Stock has been authenticated under the terms of the
Series A Preferred Stock. Each share of Global Preferred Stock shall be dated
the date of its authentication.

Section 13. Fractional Shares.

No fractional shares of Common Stock or securities representing fractional
shares of Common Stock shall be issued to Holders upon conversion. In lieu of
any fraction of a share of Common Stock that would otherwise be issuable in
respect of the aggregate number of shares of the Series A Preferred Stock
surrendered by a Holder upon a conversion, such Holder shall have the right to
receive an amount in cash (computed to the nearest cent) equal to the same
fraction of (a) in the case of any payment of a stock dividend or payment in
connection with an increased Conversion Rate, the Closing Sale Price on the
Trading Day next preceding the issuance of such Common Stock or (b) in the case
of Common Stock issuable upon conversion, the Closing Sale Price on the Trading
Day next preceding the Conversion Date.

Section 14. Definitions.

(i) “Additional Shares” shall have the meaning ascribed thereto in Section 8(iv)
hereof.

(ii) “Agent Members” shall have the meaning ascribed thereto in Section 12(iv)
hereof.

(iii) “Board of Directors” means the Board of Directors of the Company and, as
used herein, shall include any duly authorized committee of the Board of
Directors.

(iv) “Board Resolution” shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Transfer Agent.

(v) “Business Day” means any day other than a Saturday or Sunday or any other
day on which banks in The City of New York are authorized or required by law or
executive order to close.

(vi) “Capital Stock” of any Person means any and all shares, interests,
participations or other equivalents however designated of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person and any rights (other than debt securities convertible
or exchangeable into an equity interest), warrants or options to acquire an
equity interest in such Person.

(vii) “Cash Settlement Averaging Period” means the 20 Trading Day period
beginning on the Trading Day following the final Trading Day of the Conversion
Retraction Period.

 

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(viii) “Certificate of Incorporation” shall have the meaning ascribed thereto in
the preamble hereof.

(ix) The “Closing Sale Price” of the Common Stock on any date means the closing
sale price per share (or if no closing sale price is reported, the average of
the closing bid and ask prices or, if more than one in either case, the average
of the average closing bid and the average closing ask prices) on such date as
reported on the principal United States securities exchange on which such Common
Stock is traded or, if such Common Stock is not listed on a United States
national or regional securities exchange, as reported by the National Quotation
Bureau Incorporated. In the absence of such a quotation, the Closing Sale Price
of the Common Stock will be the average of the mid-point of the last bid and ask
prices for the Common Stock on the relevant date from each of at least three
nationally recognized independent investment banking firms selected by the
Company for this purpose.

(x) “Common Stock” shall mean the common stock, par value $0.01 per share, of
the Company, or any other class of stock resulting from successive changes or
reclassifications of such common stock consisting solely of changes in par
value, or from par value to no par value, or as a result of a subdivision,
combination, merger, consolidation or similar transaction in which the Company
is a constituent Corporation. Following a Transaction pursuant to which the
Series A Preferred Stock is convertible into Reference Property, the “Common
Stock” for purposes of this Certificate of Designations shall mean a unit of
such Reference Property based on one share of Common Stock immediately prior to
such Transaction.

(xi) “Company” shall have the meaning ascribed thereto in the preamble hereof.

(xii) “Conversion Date” shall have the meaning ascribed thereto in
Section 6(iii).

(xiii) “Conversion Price” shall have the meaning ascribed thereto in
Section 6(i) hereof.

(xiv) “Conversion Rate” shall have the meaning ascribed thereto in Section 6(i)
hereof.

(xv) “Conversion Retraction Period” means any time during the two Trading Day
period beginning on the Trading Day after the final day of the Settlement Notice
Period.

(xvi) “Conversion Shares” shall have the meaning ascribed thereto in
Section 7(ii) hereof.

(xvii) “Conversion Value” means an amount equal to the product of the applicable
Conversion Rate multiplied by the arithmetic average of the Volume-Weighted
Average Price of the Common Stock on each Trading Day during the Cash Settlement
Averaging Period.

 

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(xviii) “Debt Obligations” shall mean all of the Company’s existing and future
debt obligations or indebtedness of any kind.

(xix) “Delayed Dividends” shall have the meaning ascribed thereto in
Section 2(vii) hereof.

(xx) “Depositary” shall mean Depository Trust Company (“DTC”) or its successor
depositary.

(xxi) “DGCL” shall have the meaning ascribed thereto in the preamble hereof.

(xxii) “Distribution Date” shall have the meaning ascribed thereto in
Section 7(ii)(a) hereof.

(xxiii) “Dividend Payment Date” shall mean January 15, April 15, July 15 and
October 15 of each year (or the next succeeding Business Day if such date is not
a Business Day), commencing on the First Dividend Payment Date.

(xxiv) “Dividend Rate” shall have the meaning ascribed thereto in Section 2(i)
hereof.

(xxv) “Dividend Record Date” shall mean (a) with respect to a dividend payment
other than Delayed Dividends, the first calendar day (or the next succeeding
Business Day if such day is not a Business Day) of the calendar month in which
such Dividend Payment Date falls and (b) with respect to Delayed Dividends, the
record date selected pursuant to Section 2(vii) hereof.

(xxvi) “DTC” shall mean the Depository Trust Company or its successor
depositary.

(xxvii) “Edge” shall have the meaning ascribed thereto in Section 2(i) hereof.

(xxviii) “Effective Date” shall mean the actual effective date of a Fundamental
Change.

(xxix) “Effective Time of the Merger” shall mean the time the parties to the
Merger cause the Merger to be consummated by duly filing a certificate of merger
with the Secretary of State of the State of Delaware.

(xxx) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

(xxxi) “Expiration Time” shall have the meaning ascribed thereto in
Section 7(i)(e) hereof.

 

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(xxxii) “Fair Market Value” means the amount that a willing buyer would pay a
willing seller in an arm’s length transaction.

(xxxiii) “First Dividend Payment Date” shall have the meaning ascribed thereto
in Section 2(i) hereof.

(xxxiv) “Forced Conversion” shall have the meaning ascribed thereto in
Section 5(i) hereof.

(xxxv) “Forced Conversion Date” shall have the meaning ascribed thereto in
Section 5(ii) hereof.

(xxxvi) “Fundamental Change” means (a) a “person” or “group” within the meaning
of Section 13(d) of the Exchange Act other than the Company, its Subsidiaries or
any employee benefit plan of the Company or any of its Subsidiaries, files a
Schedule TO or any schedule, form or report under the Exchange Act disclosing
that the person or group has become the direct or indirect ultimate “beneficial
owner,” as defined in Rule 13d-3 under the Exchange Act, of the common equity of
the Company representing more than 50% of the voting power of its common equity
other than a filing with a disclosure relating to a transaction which complies
with the proviso in subsection (b) of this paragraph; (b) consummation of any
share exchange, consolidation or merger of the Company pursuant to which the
Common Stock will be converted into cash, securities or other property or any
sale, lease or other transfer in one transaction or a series of transactions of
all or substantially all of the consolidated assets of the Company and its
Subsidiaries, taken as a whole, to any Person other than a Subsidiary of the
Company; provided, however, that a transaction where the holders of more than
50% of all classes of the common equity of the Company immediately prior to the
transaction own, directly or indirectly, more than 50% of all classes of common
equity of the continuing or surviving corporation or transferee immediately
after the event shall not be a Fundamental Change; (c) the Company is liquidated
or dissolved or holders of its Capital Stock approve any plan or proposal for
its liquidation or dissolution; or (d) the Common Stock is neither listed on a
national securities exchange nor listed nor approved for quotation on an
over-the-counter market in the United States; provided, however, that a
Fundamental Change shall not be deemed to have occurred in the case of a share
exchange, merger or consolidation, or in an exchange offer having the result
described in subsection (a) of this paragraph, if 90% or more of the
consideration in the aggregate paid for Common Stock (and excluding cash
payments for fractional shares and cash payment pursuant to dissenters’
appraisal rights) in the share exchange, merger or consolidation or exchange
offer constituting the Fundamental Change consists of shares of common stock of
a United States company with full voting rights traded on a national securities
exchange (or which shall be so traded or quoted when issued or exchanged in
connection with such Fundamental Change) (such securities being referred to as
“Publicly Traded Securities”).

(xxxvii) “Fundamental Change Notice” shall have the meaning ascribed thereto in
Section 8(i) hereof.

 

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(xxxviii) “Fundamental Change Notice Date” shall have the meaning ascribed
thereto in Section 8(i) hereof.

(xxxix) “Fundamental Change Purchase Date” shall have the meaning ascribed
thereto in Section 8(iii)(a) hereof.

(xl) “Global Preferred Stock” shall have the meaning ascribed thereto in
Section 12(i) hereof.

(xli) “Global Stock Legend” shall have the meaning ascribed thereto in
Section 12(i) hereof.

(xlii) “Holders” shall have the meaning ascribed thereto in Section 2(i) hereof.

(xliii) “Issue Date” shall mean [            ], the original date of issuance of
the Series A Preferred Stock and the date on which the Effective Time of the
Merger occurs.

(xliv) “Junior Stock” shall mean the Common Stock and each other class of
Capital Stock or series of preferred stock established after the Issue Date, the
terms of which do not expressly provide that such class or series ranks senior
to or on parity with the Series A Preferred Stock as to dividend rights or
rights upon the liquidation, winding-up or dissolution of the Company.

(xlv) “Liquidation Preference” shall have the meaning ascribed thereto in
Section 2(i) hereof.

(xlvi) “Last Edge Payment Date” shall have the meaning ascribed thereto in
Section 2(i) hereof.

(xlvii) “Market Value” means, with respect to any date of determination, the
average Closing Sale Price of the Common Stock for a five consecutive Trading
Day period on the New York Stock Exchange (or such other national securities
exchange or automated quotation system on which the Common Stock is then listed
or authorized for quotation or, if not so listed or authorized for quotation,
the average of the mid-point of the last bid and ask prices for the Common Stock
on the relevant date from each of at least three nationally recognized
independent investment banking firms selected by the Company for this purpose)
preceding the earlier of (i) the day preceding the date of determination and
(ii) the day before the “ex date” with respect to the issuance or distribution
requiring such computation. For purposes of this definition, the term “ex date”
when used with respect to any issuance or distribution, means the first date on
which the Common Stock trades, regular way, on the New York Stock Exchange or
other principal U.S. securities exchange or quotation system on which the Common
Stock is listed or quoted at that time, without the right to receive the
issuance or distribution.

 

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(xlviii) “Merger” means the merger of Echo with and into Chaparral Exploration,
L.L.C., a wholly owned subsidiary of the Company.

(xlix) “Merger Agreement” means the Agreement and Plan of Merger by and among
Echo, the Company and Chaparral Exploration, L.L.C., dated as of July 14, 2008.

(l) “Officer” means the Chief Executive Officer, the Chief Financial Officer,
the Treasurer, or the General Counsel of the Company.

(li) “Officer’s Certificate” means a certificate signed by two Officers of the
Company.

(lii) “Opinion of Counsel” shall mean a written opinion from legal counsel who
is acceptable to the Company or the Transfer Agent. The counsel may be an
employee of or counsel to the Company or Transfer Agent.

(liii) “Parity Stock” shall mean the Series B cumulative convertible preferred
stock, par value $0.01 per share, of the Company with voting powers,
designations, preferences, rights, and qualifications, limitations or
restrictions substantially similar to those set forth in the form of certificate
of designations attached as Exhibit 4.2(d) to the Merger Agreement, and any
other class of Capital Stock or series of preferred stock established after the
Issue Date, the terms of which expressly provide that such class or series will
rank on parity with the Series A Preferred Stock as to dividend rights or rights
upon the liquidation, winding-up or dissolution of the Company.

(liv) “Person” means any individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization or government or
any agency or political subdivision thereof.

(lv) “Purchased Shares” shall have the meaning ascribed thereto in
Section 7(i)(e) hereof.

(lvi) “Redemption Date” shall have the meaning ascribed thereto in
Section 5(vi).

(lvii) “Reference Property” shall have the meaning ascribed thereto in
Section 10(i) hereof.

(lviii) “SEC” shall mean the Securities and Exchange Commission.

(lix) “Securities Act” shall mean the Securities Act of 1933, as amended, and
the rules and regulation promulgated thereunder.

(lx) “Senior Stock” shall mean each class of Capital Stock or series of
preferred stock established after the Issue Date, the terms of which expressly
provide that such class or series will rank senior to the Series A Preferred
Stock as to dividend rights or rights upon the liquidation, winding-up or
dissolution of the Company.

 

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(lxi) “Series A Preferred Stock” shall have the meaning ascribed thereto in the
preamble hereof.

(lxii) “Settlement Notice Period” means any time on or prior to the date that is
three Trading Days following the Conversion Date.

(lxiii) “Subsidiary” means, with respect to any Person, (a) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (b) any partnership (1) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(2) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).

(lxiv) “Trading Day” means a day (i) on which the principal exchange or market
on which the Common Stock is traded is open for trading and (ii) that is not a
Disrupted Trading Day. If there is no exchange or market on which the Common
Stock is traded, “Trading Day” means any Business Day. A “Disrupted Trading Day”
means a Trading Day on which shares of Common Stock experience any of the
following during the one-hour period ending at the conclusion of the regular
Trading Day: (a) any suspension of or limitation imposed on the trading of
shares of Common Stock on any national or regional securities exchange or
association or over-the-counter market; (b) any event (other than an event
listed under subsection (c) below) that disrupts or impairs the ability of
market participants in general to (i) effect transactions in or obtain market
values for shares of Common Stock on any relevant national or regional
securities exchange or association or over-the-counter market or (ii) effect
transactions in or obtain market values for futures or options contracts
relating to shares of Common Stock on any relevant national or regional
securities exchange or association or over-the-counter market; or (c) any
relevant national or regional securities exchange or association or
over-the-counter market on which shares of Common Stock trade closes on any
exchange Trading Day prior to its scheduled closing time unless such earlier
closing time is announced by the exchange at least one hour prior to the earlier
of (i) the actual closing time for the regular trading session on such exchange
and (ii) the submission deadline for orders to be entered into the exchange for
execution on such Trading Day.

(lxv) “Transaction” shall have the meaning ascribed thereto in Section 10(i)
hereof.

(lxvi) “Transfer Agent” means [            ] unless and until a successor is
selected by the Company, and then such successor; provided that any Transfer
Agent may also serve as paying agent or conversion agent, as the case may be.

 

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(lxvii) “Triggering Event” means a specified event the occurrence of which
entitles the holders of rights, options or warrants to exercise such rights,
option or warrants.

(lxviii) “Volume-Weighted Average Price” means, as to the Common Stock per share
on a Trading Day, the volume-weighted average price per share of Common Stock as
displayed under the heading “Bloomberg VWAP” on Bloomberg page
“[            ].N1 <equity> AQR” (or any successor thereto) in respect of the
period from the scheduled open of the primary exchange or market on which the
Common Stock is listed or traded to the scheduled close of such exchange or
market on such Trading Day (or, if such volume-weighted average price is
unavailable, the market value of one share of Common Stock on such Trading Day
determined, using a volume-weighted average method, by a nationally recognized
investment banking firm retained for such purpose by the Company).

Section 15. Miscellaneous.

(i) Notwithstanding any provision herein to the contrary, in accordance with
Sections 4, 5, 6, 7 or 8, the procedures for conversion of shares of Series A
Preferred Stock not held in certificated form will be governed by arrangements
among the Depositary of the shares of Series A Preferred Stock, its participants
and Persons that may hold beneficial interests through such participants
designed to permit settlement without the physical movement of certificates.
Payments, transfers, deliveries, exchanges and other matters relating to
beneficial interests in global security certificates may be subject to various
policies and procedures adopted by the Depositary from time to time including
procedures for the payment of funds equal to dividends payable to which a Holder
is not entitled upon conversion and taxes or duties, if any.

(ii) The liquidation preference and the annual dividend rate set forth herein
each shall be subject to equitable adjustment whenever there shall occur a stock
split, combination, reclassification or other similar event involving the Series
A Preferred Stock. Such adjustments shall be determined in good faith by the
Board of Directors (and such determination shall be conclusive) and submitted by
the Board of Directors to the Transfer Agent.

(iii) For the purposes of Section 7, the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Company
but shall include shares issuable in respect of scrip certificates issued in
lieu of fractions of shares of Common Stock.

(iv) If the Company shall take any action affecting the Common Stock, other than
any action described in Section 7, that in the opinion of the Board of Directors
would materially adversely affect the conversion rights of the Holders, then the
Conversion Price may (but shall not be required to be) be adjusted, to the
extent permitted by law, in such manner, and at such time, as the Board of
Directors may determine to be equitable in the circumstances.

 

1 Chaparral Energy Inc.’s ticker symbol.

 

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(v) The Company covenants that it will at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock for the purpose of effecting conversion of the Series A
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series A Preferred Stock not theretofore
converted. For purposes of this Section 15(v), the number of shares of Common
Stock that shall be deliverable upon the conversion of all outstanding shares of
Series A Preferred Stock shall be computed as if at the time of computation all
such outstanding shares were held by a single Holder.

(vi) The Company covenants that any shares of Common Stock issued upon
conversion of the Series A Preferred Stock or issued in respect of a stock
dividend payment or Additional Shares in connection with an increased Conversion
Rate shall be validly issued, fully paid and non-assessable.

(vii) The Company shall pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock or other securities or property upon conversion of the Series A Preferred
Stock pursuant thereto; provided, however, that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock or other securities or
property in a name other than that of the Holder of the Series A Preferred Stock
to be converted and no such issue or delivery shall be made unless and until the
Person requesting such issue or delivery has paid to the Company the amount of
any such tax or established, to the reasonable satisfaction of the Company, that
such tax has been paid or is not applicable.

(viii) Except as otherwise provided in Section 5(vi) hereof, the Series A
Preferred Stock is not redeemable.

(ix) The Series A Preferred Stock is not entitled to any preemptive or
subscription rights in respect of any securities of the Company.

(x) Whenever possible, each provision hereof shall be interpreted in a manner as
to be effective and valid under applicable law, but if any provision hereof is
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating or otherwise adversely affecting the remaining provisions hereof.
If a court of competent jurisdiction should determine that a provision hereof
would be valid or enforceable if a period of time were extended or shortened or
a particular percentage were increased or decreased, then such court may make
such change as shall be necessary to render the provision in question effective
and valid under applicable law.

(xi) Series A Preferred Stock may be issued in fractions of a share which shall
entitle the Holder, in proportion to such Holder’s fractional shares, to
exercise voting rights, receive dividends, participate in distributions and have
the benefit of all other rights of Holders of Series A Preferred Stock.

 

31

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(xii) Subject to applicable escheat laws, any monies set aside by the Company in
respect of any payment with respect to shares of the Series A Preferred Stock,
or dividends thereon, and unclaimed at the end of two years from the date upon
which such payment is due and payable shall revert to the general funds of the
Company, after which reversion the Holders of such shares shall look only to the
general funds of the Company for the payment thereof. Any interest accumulated
on funds so deposited shall be paid to the Company from time to time.

(xiii) Except as may otherwise be required by law, the shares of Series A
Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this Certificate of Designations or the Certificate of
Incorporation.

(xiv) The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.

(xv) If any of the voting powers, preferences and relative, participating,
optional and other special rights of the Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth herein is
invalid, unlawful or incapable of being enforced by reason of any rule of law or
public policy, all other voting powers, preferences and relative, participating,
optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth herein which can
be given effect without the invalid, unlawful or unenforceable voting powers,
preferences and relative, participating, optional and other special rights of
Series A Preferred Stock and qualifications, limitations and restrictions
thereof shall, nevertheless, remain in full force and effect, and no voting
powers, preferences and relative, participating, optional or other special
rights of Series A Preferred Stock and qualifications, limitations and
restrictions thereof herein set forth shall be deemed dependent upon any other
such voting powers, preferences and relative, participating, optional or other
special rights of Series A Preferred Stock and qualifications, limitations and
restrictions thereof unless so expressed herein.

(xvi) Shares of Series A Preferred Stock that (a) have not been issued on or
before [            ]2 or (b) have been issued and reacquired in any manner,
including shares of Series A Preferred Stock purchased or redeemed or exchanged
or converted, shall (upon compliance with any applicable provisions of the laws
of Delaware) have the status of authorized but unissued shares of preferred
stock of the Company undesignated as to series and may be designated or
redesignated and issued or reissued, as the case may be, as part of any series
of preferred stock of the Company, provided that any issuance of such shares as
Series A Preferred Stock must be in compliance with the terms hereof.

 

2 The date by which Echo Preferred Stock shall have been exchanged for Parent
Preferred Stock.

 

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(xvii) If any of the Series A Preferred Stock certificates shall be mutilated,
lost, stolen or destroyed, the Company shall issue, in exchange and in
substitution for and upon cancellation of the mutilated Series A Preferred Stock
certificate, or in lieu of and substitution for the Series A Preferred Stock
certificate lost, stolen or destroyed, a new Series A Preferred Stock
certificate of like tenor and representing an equivalent amount of shares of
Series A Preferred Stock, but only upon receipt of evidence of such loss, theft
or destruction of such Series A Preferred Stock certificate and bond and
indemnity, if requested, satisfactory to the Company and the Transfer Agent.

IN WITNESS WHEREOF, the Company has caused this Certificate of Designations to
be duly executed by             ,              of the Company this      day of
                .

[Signature Page Follows]

 

33

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CHAPARRAL ENERGY, INC. By:  

 

Name:   Title:  

[Signature Page to Certificate of Designations]

--------------------------------------------------------------------------------

EXHIBIT A

FORM OF NOTICE OF CONVERSION

(To be Executed by the Registered Holder

in order to convert the 5.75% Series A Cumulative Convertible Perpetual
Preferred Stock)

The undersigned hereby irrevocably elects to convert (the “Conversion”), as of
the date written below,      shares of 5.75% Series A Cumulative Convertible
Perpetual Preferred Stock (the “Series A Preferred Stock”), represented by stock
certificate No(s).      (the “Preferred Stock Certificates”) into shares of
common stock, par value $0.01 per share (“Common Stock”), of Chaparral Energy,
Inc. (the “Company”) according to the conditions of the Certificate of
Designations establishing the terms of the Series A Preferred Stock, dated
[                        ], as such may be amended from time to time (the
“Certificate of Designations”). If shares are to be issued in the name of a
Person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates. No
fee will be charged to the holder for any conversion, except for transfer taxes,
if any. A copy of each Preferred Stock Certificate is attached hereto (or
evidence of loss, theft or destruction thereof).

The Company is not required to issue shares of Common Stock, cash and/or a
combination of shares and cash (and/or check in respect of the cash amount), at
the Company’s option until the original Preferred Stock Certificate(s) (or
evidence of loss, theft or destruction thereof) to be converted are received by
the Company or its Transfer Agent. The Company shall issue and deliver shares of
Common Stock to an overnight courier as promptly as practicable following
receipt of the original Preferred Stock Certificate(s) to be converted.

Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designations.

 

Date of Conversion:     

 

   Applicable Conversion Rate:     

 

   Number of Shares of Series A Preferred Stock:     

 

  

Number of Shares of Common Stock to be Issued1:

 

    

 

  

Signature:   

 

      Name:   

 

      Address2:   

 

      Fax No.:   

 

     

 

1

The undersigned recognizes that the Company has the right, subject to the terms
of the Certificate of Designations, to make payment in shares of Common Stock,
cash or a combination of shares and cash, at the Company’s option.

2 Address where shares of Common Stock and any other payments or certificates
shall be sent by the Company.

 

A-1

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EXHIBIT B

FORM OF SERIES A PREFERRED STOCK CERTIFICATE

5.75% SERIES A CUMULATIVE CONVERTIBLE PERPETUAL PREFERRED STOCK

(Liquidation Preference $50 per Share)

Chaparral Energy, Inc.

Incorporated under the Laws of the State of Delaware

CUSIP: [        ]

CERTIFICATE NUMBER 1      SHARES

This represents and certifies that CEDE & CO is the owner of              fully
paid and non-assessable shares of 5.75% Series A Cumulative Convertible
Perpetual Preferred Stock (Liquidation Preference $50 per Share), of Chaparral
Energy, Inc. (the “company”) transferable upon the books of the company by the
holder hereof in person or by the holder’s duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all of the provisions
of the Certificate of Incorporation and all amendments thereto (copies of which
are on file at the office of the company), to which the holder hereof by
acceptance hereof expressly assents.

[INSERT IF GLOBAL PREFERRED STOCK] UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL PREFERRED STOCK SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL PREFERRED STOCK
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE CERTIFICATE OF DESIGNATIONS REFERRED TO BELOW.

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR AND
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.

 

B-1

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IN WITNESS WHEREOF, Chaparral Energy, Inc. has executed this Certificate as of
the date set forth below.

 

CHAPARRAL ENERGY, INC. By:  

 

Name:   Title:   By:  

 

Name:   Title:   Dated:  

 

 

B-2

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TRANSFER AGENT’S CERTIFICATE OF AUTHENTICATION

This is one of the certificates representing shares of Series A Preferred Stock
referred to in the within mentioned Certificate of Designations.

 

as Transfer Agent By:  

 

Name:   Title:   Authorized Signatory Dated:  

 

 

B-3

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REVERSE OF THE SECURITY

The company will furnish to any stockholder, upon request and without charge, a
full statement of the information required by §151(f) of the General Corporation
Law of the State of Delaware with respect to the powers, designations,
preferences and relative, participating, optional, or other special rights of
the 5.75% Series A Cumulative Convertible Perpetual Preferred Stock (Liquidation
Preference $50 per Share) and the qualifications, limitations or restrictions on
those preferences and/or rights of such preferred stock and each other class or
series authorized to be issued. Any such request must be made to the secretary
of the company or to the Transfer Agent.

ASSIGNMENT

For Value Received,              hereby sells, assigns and transfers unto
             (print or typewrite name, address and social security or other
identifying number of assignee) Shares of the stock represented by this
Certificate, and does hereby irrevocably constitute and appoint
                     attorney, to transfer the said stock on the books of the
within named company with full power of substitution in the premises.

Dated:                         

X                                       
                                         
                                         
                                         
                                                                

NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.

 

B-4

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Exhibit D

FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

CHAPARRAL ENERGY, INC.

Chaparral Energy, Inc. (the “Corporation”), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(“DGCL”), hereby certifies as follows pursuant to Sections 242 and 245 of the
DGCL:

1. The original Certificate of Incorporation of the Corporation (the “Original
Certificate”) was filed in the Office of the Secretary of State of the State of
Delaware (the “Secretary of State”) on September 14, 2005.

2. The Original Certificate was amended and restated on September 26, 2006 (the
“Amended and Restated Certificate”).

3. This Second Amended and Restated Certificate of Incorporation was duly
adopted in accordance with Sections 242 and 245 of the DGCL. The Board of
Directors duly adopted resolutions setting forth and declaring advisable this
Second Amended and Restated Certificate of Incorporation, and the holders of a
majority of the outstanding stock of the Corporation approved this Second
Amended and Restated Certificate of Incorporation by written consent in
accordance with Section 228 of the DGCL.

4. The Amended and Restated Certificate is hereby amended and restated to read
in its entirety as follows:

FIRST: The name of the corporation is Chaparral Energy, Inc. (hereinafter called
the “Corporation”).

SECOND: The address of the Corporation’s registered office in the State of
Delaware is Capitol Services, Inc., 615 S. Dupont Highway, Dover, DE 19901. The
name of the registered agent of the corporation at such address is Capitol
Services, Inc.

THIRD: The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware, as from time to time amended (the “DGCL”).

FOURTH: The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 160,000,000, of which 10,000,000
shares shall be Preferred Stock, and 150,000,000 shares shall be Common Stock,
all with a par value of $.01 per share.

A. Preferred Stock.

 

1

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(1) Preferred Stock may be issued from time to time in one or more series and in
such amounts as may be determined by the Board of Directors. The voting powers,
designations, preferences and relative, participating, optional or other special
rights, if any, and the qualifications, limitations or restrictions thereof, if
any, of the Preferred Stock of each series shall be such as are fixed by the
Board of Directors, authority so to do being hereby expressly granted, and as
are stated and expressed in a resolution or resolutions adopted by the Board of
Directors providing for the issue of such series of Preferred Stock (herein
called the “Directors’ Resolution”). Such Directors’ Resolution may (i) limit
the number of shares of such series that may be issued, (ii) provide for a
sinking fund for the purchase or redemption of shares of such series and specify
the terms and conditions governing the operations of any such fund, (iii) grant
voting rights to the holders of shares of such series, (iv) impose conditions or
restrictions upon the creation of indebtedness of the Corporation or upon the
issuance of additional Preferred Stock or other capital stock ranking on a
parity therewith, or prior thereto, with respect to dividends or distribution of
assets upon liquidation, (v) impose conditions or restrictions upon the payment
of dividends upon, or the making of other distributions to, or the acquisition
of, shares ranking junior to the Preferred Stock or to any series thereof with
respect to dividends or distributions of assets upon liquidation, (vi) state the
time or times, the price or prices or the rate or rates of exchange and other
terms, conditions and adjustments upon which shares of any such series may be
made convertible into, or exchangeable for, at the option of the holder or the
Corporation or upon the occurrence of a specified event, shares of any other
class or classes or of any other series of Preferred Stock or any other class or
classes of stock or other securities of the Corporation, and (vii) grant such
other special rights and impose such qualifications, limitations or restrictions
thereon as shall be fixed by the Board of Directors, to the extent not
inconsistent with this Article FOURTH and to the full extent now or hereafter
permitted by the laws of the State of Delaware.

(2) Except as expressly provided by law, or except as may be provided in any
Directors’ Resolution, the Preferred Stock shall have no right or power to vote
on any question or in any proceeding or to be represented at, or to receive
notice of, any meeting of stockholders of the Corporation.

(3) Preferred Stock that is redeemed, purchased or retired by the Corporation
shall assume the status of authorized but unissued Preferred Stock and may
thereafter, subject to the provisions of any Directors’ Resolution providing for
the issue of any particular series of Preferred Stock, be reissued in the same
manner as authorized but unissued Preferred Stock.

B. Common Stock. All shares of the Common Stock of the Corporation shall be
identical and, except as otherwise required by law or as otherwise provided in
the Directors’ Resolution or Resolutions, if any, adopted by the Board of
Directors with respect to any series of Preferred Stock, the holders of the
Common Stock shall exclusively possess all voting power, and each share of
Common Stock shall have one vote.

 

2

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FIFTH: In furtherance and not in limitation of the powers conferred by law,
subject to any limitations contained elsewhere in this Certificate of
Incorporation, bylaws of the Corporation may be adopted, amended or repealed by
a majority of the Board of Directors of the Corporation, but any bylaws adopted
by the Board of Directors may be amended or repealed by the stockholders
entitled to vote thereon. Election of directors need not be by written ballot.

SIXTH: The business and affairs of the Corporation shall be managed by and under
the direction of the Board of Directors. In addition to the powers and
authorities conferred upon the Board of Directors by the DGCL or by the other
provisions of this Certificate of Incorporation, the Board of Directors is
hereby authorized and empowered to exercise all such powers and do all such acts
and things as may be exercised or done by the Corporation, subject to the
provisions of the DGCL, this Certificate of Incorporation and any bylaws of the
Corporation; provided, however, that no bylaws hereafter adopted by the
Corporation, or any amendments thereto, shall invalidate any prior act of the
Board of Directors that would have been valid if such bylaws or amendment had
not been adopted.

The number of directors shall be fixed from time to time exclusively by
resolution adopted by a majority of the directors then in office, but shall
consist of not fewer than three (3) nor more than ten (10) directors, subject,
however, to increases above ten (10) members as may be required in order to
permit the holders of any series of Preferred Stock issued by the Corporation to
elect directors under specified circumstances. Subject to the preceding
sentence, the maximum number of directors may not be increased by the Board of
Directors to exceed ten (10) without the affirmative vote of 66- 2/3% of the
members of the entire Board of Directors.

The directors, other than those who may be elected by the holders of any series
of Preferred Stock, shall be divided into three classes as nearly equal in size
as is practicable. The Board of Directors shall by resolution designate the
Class I, Class II and Class III directors, whose terms shall expire at the
annual meetings of stockholders in 2009, 2010 and 2011, respectively. At each
annual stockholders’ meeting after the adoption of this Certificate of
Incorporation, each director to replace those of a class whose terms expire at
such annual meeting shall be elected to hold office until the third succeeding
annual meeting of stockholders and shall serve until that director’s respective
successor shall have been duly elected and qualified or until that director’s
earlier death, resignation or removal. If the number of directors is hereafter
changed, any newly created directorships or decrease in directorships shall be
so apportioned among the classes as to make all classes as nearly equal in
number as is practicable, but each director then continuing to serve as such
shall nevertheless continue as a director of the class of which that director is
a member until the expiration of that director’s term or until that director’s
earlier death, resignation or removal.

No director may be removed before the expiration of his term of office except
for cause and then only by the affirmative vote of the holders of not less than
a majority of the voting power of all outstanding shares of the Corporation
entitled to vote

 

3

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generally in the election of directors, voting together as a single class. The
Board of Directors may not remove any director, and no recommendation by the
Board of Directors that a director be removed may be made to the Stockholders
unless such recommendation is set forth in a resolution adopted by the
affirmative vote of not less than 66-2/3% of the number of directors then in
office. Notwithstanding the foregoing, whenever the holders of any class or
series of Preferred Stock are entitled to elect one or more directors by this
Certificate of Incorporation, the holders of such class or series may remove
such director(s) with or without cause (unless otherwise provided in the terms
of the class or series of Preferred Stock entitled to elect such director)
before the expiration of his term of office by the affirmative vote of holders
of not less than a majority (or such other percentage as is specified in the
terms of the class or series of Preferred Stock electing such director) of all
outstanding shares of such class or series of Preferred Stock.

Subject to the rights of the holders of any series of Preferred Stock, any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at a duly called annual or special meeting of the stockholders
of the Corporation and may not be effected by any consent in writing by such
stockholders.

SEVENTH: A director of the Corporation shall not be personally liable either to
the Corporation or to any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except (i) for any breach of the director’s duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) for any matter in respect of which such director shall be liable
under Section 174 of Title 8 of the DGCL or any amendment thereto or successor
provision thereof, or (iv) for any transaction from which the director derived
an improper personal benefit. Neither amendment nor repeal of this Article
SEVENTH nor the adoption of any provision of the Certificate of Incorporation
inconsistent with this Article SEVENTH shall eliminate or reduce the effect of
this Article SEVENTH in respect of any matter occurring, or any cause of action,
suit or claim that, but for this Article SEVENTH, would accrue or arise, prior
to such amendment, repeal or adoption of any inconsistent provision. If the DGCL
is amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.

EIGHTH: To the maximum extent permitted by Delaware law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation and who is made a party to the proceeding by reason of his service
in that capacity or (b) any individual who, while a director of the Corporation
and at the request of the Corporation, serves or has served another corporation,
real estate investment trust, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, partner or trustee
of such corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made a party to the
proceeding by reason of

 

4

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his service in that capacity against judgments, penalties, fines, settlements
and reasonable expenses actually incurred by them, unless it is established that
(i) the act or omission of the director or officer was material to the matter
giving rise to the proceeding and (A) was committed in bad faith or (B) was the
result of active and deliberate dishonesty, (ii) the director or officer
actually received an improper personal benefit, or (iii) in the case of any
criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful. The Corporation may, with the approval of
its Board of Directors, provide such indemnification and advance for expenses to
a person who served a predecessor of the Corporation in any of the capacities
described in (a) or (b) above and to any employee or agent of the Corporation or
a predecessor of the Corporation.

The Corporation shall, as a condition to advancing expenses to a director or
officer, obtain a written undertaking by or on behalf of such director or
officer to repay the amount paid or reimbursed by the Corporation if it shall
ultimately be determined that such persons are not entitled to be indemnified by
the Corporation under Delaware law or any applicable contract.

Neither the amendment nor repeal of this Article EIGHTH, nor the adoption or
amendment of any other provision of this Certificate of Incorporation
inconsistent with this Article EIGHTH shall eliminate or reduce the effect of
this Article EIGHTH in respect of any matter occurring, or any cause of action,
suit or claim that, but for this Article EIGHTH, would accrue or arise, prior to
such amendment, repeal or adoption of an inconsistent provision.

The Corporation shall have the power to purchase and maintain insurance on
behalf of any person who 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, employee benefit plan trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person’s status as such, whether of not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Article EIGHTH or otherwise.

NINTH: The Corporation is to have perpetual existence.

I, THE UNDERSIGNED, hereunto set my hand this     th day of         , 2008.

 

 

Mark A. Fischer

Chief Executive Officer and President

 

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Exhibit E

FORM OF AMENDED AND RESTATED BYLAWS

SECOND AMENDED AND RESTATED

BYLAWS

OF

CHAPARRAL ENERGY, INC.

(AS OF              , 2008)

PREAMBLE

These Second Amended and Restated Bylaws (“Bylaws”) are subject to, and governed
by, the General Corporation Law of the State of Delaware (“DGCL”) and the Second
Amended and Restated Certificate of Incorporation of Chaparral Energy, Inc. (the
“Corporation”), as amended (the “Certificate of Incorporation”, such term to
include the resolutions of the Board of Directors of the Corporation creating
any series of preferred stock, par value $0.01 per share, of the Corporation).
In the event of a direct conflict between the provisions of these Bylaws and the
mandatory provisions of the DGCL or the provisions of the Certificate of
Incorporation, such provisions of the DGCL and the Certificate of Incorporation,
as the case may be, will be controlling.

ARTICLE I

Offices and Records

Section 1.1. Registered Office and Agent. The registered office and registered
agent of the Corporation shall be as designated from time to time by the
appropriate filing by the Corporation in the office of the Secretary of State of
the State of Delaware.

Section 1.2. Other Offices. The Corporation may also have offices at such other
places, both within and without the State of Delaware, as the Board of Directors
of the Corporation (the “Board of Directors”) may from time to time determine or
the business of the Corporation may require.

Section 1.3. Books and Records. The books and records of the Corporation may be
kept at the Corporation’s principal office in Oklahoma City, Oklahoma or at such
other locations within or outside the State of Delaware as may from time to time
be designated by the Board of Directors.

ARTICLE II

Meetings of Stockholders

Section 2.1. Annual Meetings. An annual meeting of the Corporation’s
stockholders (the “Stockholders”) shall be held each calendar year for the
purposes of (i) electing directors as provided in Article III and
(ii) transacting such other business as may properly be brought before the
meeting. Each annual meeting shall be held on such date (no later than 13 months
after the date of the last annual meeting of Stockholders) and at such time as
shall be designated by the Board of Directors and stated in the notice or
waivers of notice of such meeting.

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Section 2.2. Special Meetings. Special meetings of the Stockholders, for any
purpose or purposes, may be fixed at any time by the Chairman of the Board (if
any) or the Chief Executive Officer and shall be called by the Secretary within
ten (10) days after the written request, or by resolution adopted by the
affirmative vote, of a majority of the total number of directors then in office,
which request or resolution shall fix the date, time and place, and state the
purpose or purposes, of the proposed meeting. Except as provided by applicable
law, these Bylaws or the Certificate of Incorporation, Stockholders shall not be
entitled to call a special meeting of Stockholders or to require the Board of
Directors or any officer to call such a meeting or to propose business at such a
meeting. Business transacted at any special meeting of Stockholders shall be
limited to the purposes stated in the notice or waivers of notice of such
meeting.

Section 2.3. Place of Meetings. The Board of Directors may designate the place
of meeting (either within or without the State of Delaware) for any meeting of
Stockholders. If no designation is made by the Board of Directors, the place of
meeting shall be held at the principal executive office of the Corporation. In
addition, the Board of Directors may determine that the meeting shall not be
held at any place, but may instead be held solely by means of remote
communications as authorized by these Bylaws.

Section 2.4. Notice of Meetings.

(a) Written notice of each meeting of Stockholders shall be delivered to each
Stockholder of record entitled to vote thereat, which notice shall (i) state the
place, if any, date and time of the meeting, the means of remote communications,
if any, by which Stockholders and proxy holders may be deemed to be present in
person and vote at any such meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, and (ii) be given not less
than 10 nor more than 60 days before the date of the meeting.

(b) Each notice of a meeting of Stockholders shall be given as provided in
Section 9.1, except that if no address appears on the Corporation’s books or
stock transfer records with respect to any Stockholder, notice to such
Stockholder shall be deemed to have been given if sent by first-class mail or
telecommunication to the Corporation’s principal executive office or if
published at least once in a newspaper of general circulation in the county
where such principal executive office is located.

(c) If any notice addressed to a Stockholder at the address of such Stockholder
appearing on the books of the Corporation is returned to the Corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the Stockholder at such address, all
further notices to such Stockholder at such address shall be deemed to have been
duly given without further mailing if the same shall be available to such
Stockholder upon written demand of such Stockholder at the principal executive
office of the Corporation for a period of one year from the date of the giving
of such notice.

(d) Any previously scheduled meeting of the Stockholders may be postponed by
resolution of the Board of Directors upon public notice given prior to the time
previously scheduled for such meeting.

 

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Section 2.5. Voting List. At least 10 days before each meeting of Stockholders,
the Secretary or other officer or agent of the Corporation who has charge of the
Corporation’s stock ledger shall prepare a complete list of the Stockholders
entitled to vote at such meeting, arranged in alphabetical order and showing,
with respect to each Stockholder, his address and the number of shares
registered in his name. Such list shall be open to the examination of any
Stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting: (i) on a
reasonably accessible electronic network, provided that the information required
to gain access to such list is provided with the notice of the meeting, or
(ii) during ordinary business hours, at the principal place of business of the
Corporation. If the list is made available on an electronic network, then the
Corporation may take reasonable steps to ensure that such information is
available only to Stockholders. If the meeting is to held at a place, the list
shall be produced and kept at the time of the meeting during the whole time
thereof, and may be inspected by any Stockholder who is present. If the meeting
is to be held solely by means of remote communication, then the list shall also
be open to the examination of any Stockholder during the whole time of the
meeting on a reasonable accessible electronic network, and the information
required to access such list shall be provided with the notice of the meeting.
The stock ledger of the Corporation shall be the only evidence as to who are the
Stockholders entitled to examine any list required by this Section 2.5 or to
vote in person or by proxy at any meeting of Stockholders and the number of
shares held by them.

Section 2.6. Quorum and Adjournment. The holders of a majority of the voting
power of the outstanding shares of the Corporation entitled to vote generally in
the election of directors (the “Voting Stock”), present in person or represented
by proxy, shall constitute a quorum at any meeting of Stockholders, except as
otherwise provided by applicable law, the Certificate of Incorporation or these
Bylaws. If a quorum is present at any meeting of Stockholders, such quorum shall
not be broken by the withdrawal of enough Stockholders to leave less than a
quorum and the Stockholders may continue to transact business until adjournment,
provided that any action taken (other than adjournment) is approved by at least
a majority of the shares required to constitute a quorum. If a quorum shall not
be present at any meeting of Stockholders, the holders of a majority of the
voting stock represented at such meeting or, if no Stockholder entitled to vote
is present at such meeting, any officer of the Corporation may adjourn such
meeting from time to time until a quorum shall be present. Notwithstanding
anything in these Bylaws to the contrary, the chairman of any meeting of
Stockholders shall have the right, acting in his sole discretion, to adjourn
such meeting from time to time.

Section 2.7. Adjourned Meetings. When a meeting of Stockholders is adjourned to
another time or place, unless otherwise provided by these Bylaws, notice need
not be given of the adjourned meeting if the time, place, if any, thereof, and
the means of remote communications, if any, by which stockholders and proxy
holders may be deemed present in person and vote at such adjourned meeting, are
announced at the meeting at which the adjournment is taken; provided, however,
if an adjournment is for more than 30 days or if after an adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Stockholder entitled to vote thereat. At any
adjourned meeting at which a quorum shall be present in person or by proxy, the
Stockholders entitled to vote thereat may transact any business which might have
been transacted at the meeting as originally noticed.

 

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Section 2.8. Voting.

(a) Election of directors at all meetings of Stockholders shall be by written
ballot, unless otherwise provided in the Certificate of Incorporation; if
authorized by the Board of Directors, such requirement of a written ballot shall
be satisfied by a ballot submitted by electronic transmission, provided that any
such electronic transmission must either set forth or be submitted with
information from which it can determined that electronic transmission was
authorized by the Stockholder or proxy holder. Except as otherwise provided in
the Certificate of Incorporation, directors shall be elected by a plurality of
the votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors. Except as otherwise provided
by applicable law, the Certificate of Incorporation or these Bylaws, all matters
other than the election of directors submitted to the Stockholders at any
meeting shall be decided by the vote of the holders of a majority of the stock
having voting power present in person or represented by proxy and entitled to
vote on the subject matter. Except as otherwise provided in the Certificate of
Incorporation or by applicable law, (i) no Stockholder shall have any right of
cumulative voting and (ii) each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
Stockholders.

(b) Shares standing in the name of another corporation (whether domestic or
foreign) 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 standing in the name of a
deceased person may be voted by the executor, personal representative or
administrator of such deceased person, either in person or by proxy. Shares
standing in the name of a guardianship, conservatorship or trust may be voted by
the appropriate fiduciary, either in person or by proxy, but no fiduciary shall
be entitled to vote shares held in such fiduciary capacity without a transfer of
such shares into the name of such fiduciary. Shares standing in the name of a
receiver may be voted by such receiver. A Stockholder whose shares are pledged
shall be entitled to vote such shares, unless in the transfer by the pledgor on
the books of the Corporation he has expressly empowered the pledgee to vote
thereon, in which case only the pledgee (or his proxy) may represent the stock
and vote thereon.

(c) If shares or other securities having voting power stand of record in the
name of two or more persons (whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety or otherwise) or if
two or more persons have the same fiduciary relationship respecting the same
shares, unless the Secretary is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to voting shall
have the following effect:

(i) if only one votes, his act binds all;

(ii) if more than one votes, the act of the majority so voting binds all; and

(iii) if more than one votes but the vote is evenly split on any particular
matter, each faction may vote the securities in question proportionately or any
person voting the shares, or a beneficiary, (if any) may apply to the Delaware
Court of Chancery or such other court as may have jurisdiction to appoint an
additional person to act with the person so voting the shares, which shall then
be voted as determined by a majority such persons and the person so appointed by
the court.

 

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If the instrument so filed shows that any such tenancy is held in unequal
interests, a majority or even-split for the purpose of the paragraph (c) shall
be a majority or even-split in interest.

Section 2.9. Proxies.

(a) At any meeting of Stockholders, each Stockholder having the right to vote
thereat may be represented and vote either in person or by proxy executed in
writing by such Stockholder or by his duly authorized attorney-in-fact. Each
such proxy shall be filed with the Secretary of the Corporation at or before the
beginning of each meeting at which such proxy is to be voted. Unless otherwise
provided therein, no proxy shall be valid after three years from the date of its
execution. Each proxy shall be revocable unless expressly provided therein to be
irrevocable and coupled with an interest sufficient in law to support an
irrevocable power or unless otherwise made irrevocable by applicable law.

(b) A proxy shall be deemed signed if the Stockholder’s name is placed on the
proxy (whether by manual signature, telegraphic transmission or otherwise) by
the Stockholder or his attorney-in-fact. In the event any proxy shall designate
two or more persons to act as proxies, a majority of such persons present at the
meeting (or, if only one shall be present, then that one) shall have and may
exercise all the powers conferred by the proxy upon all the persons so
designated unless the proxy shall otherwise provide.

(c) Except as otherwise provided by applicable law, by the Certificate of
Incorporation or by these Bylaws, the Board of Directors may, in advance of any
meeting of Stockholders, prescribe additional regulations concerning the manner
of execution and filing of proxies (and the validation of same) which may be
voted at such meeting.

Section 2.10. Record Date. For the purpose of determining the Stockholders
entitled to notice of or to vote at any meeting of Stockholders (or any
adjournment thereof) or to receive payment of any dividend or other distribution
or allotment of any rights or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date on which the resolution fixing the record date is adopted by
the Board of Directors or be more than 60 nor less than 10 days prior to the
date of such meeting nor more than 60 days prior to any other action. If no
record date is fixed, (i) the record date for determining Stockholders entitled
to notice of or to vote at a meeting of Stockholders shall be at the close of
business on the day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held and (ii) the record date for determining Stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. A determination of
Stockholders of record entitled to notice of or to vote at a meeting of
Stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.

 

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Section 2.11. Conduct of Meetings; Agenda.

(a) Meetings of the Stockholders shall be presided over by the officer of the
Corporation whose duties under these Bylaws require him to do so; provided,
however, if no such officer of the Corporation shall be present at any meeting
of Stockholders, such meeting shall be presided over by a chairman to be chosen
by a majority of the voting power of the shares entitled to vote at the meeting
who are present in person or by proxy. At each meeting of Stockholders, the
officer of the Corporation whose duties under these Bylaws require him to do so
shall act as secretary of the meeting; provided, however, if no such officer of
the Corporation shall be present at any meeting of Stockholders, the chairman of
such meeting shall appoint a secretary. The order of business at each meeting of
Stockholders shall be as determined by the chairman of the meeting, including
such regulation of the manner of voting and the conduct of discussion as seems
to him in order.

(b) The Board of Directors may, in advance of any meeting of Stockholders, adopt
an agenda for such meeting, adherence to which the chairman of the meeting may
enforce.

Section 2.12. Inspectors of Election; Opening and Closing of Polls.

(a) Before any meeting of Stockholders, the Board of Directors may, and if
required by law shall, appoint one or more persons to act as inspectors of
election at such meeting or any adjournment thereof. If any person appointed as
inspector fails to appear or fails or refuses to act, the chairman of the
meeting may, and if required by law or requested by any Stockholder entitled to
vote or his proxy shall, appoint a substitute inspector. If no inspectors are
appointed by the Board of Directors, the chairman of the meeting may, and if
required by law or requested by any Stockholder entitled to vote or his proxy
shall, appoint one or more inspectors at the meeting. Notwithstanding the
foregoing, inspectors shall be appointed consistent with the mandatory
provisions of Section 231 of the DGCL.

(b) Inspectors may include individuals who serve the Corporation in other
capacities (including as officers, employees, agents or representatives);
provided, however, that no director or candidate for the office of director
shall act as an inspector. Inspectors need not be Stockholders.

(c) The inspectors shall (i) determine the number of shares of capital stock of
the Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum and the validity and
effect of proxies and (ii) receive votes or ballots, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes and ballots, determine the results and do such acts as are
proper to conduct the election or vote with fairness to all Stockholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. The inspectors shall have such other
duties as may be prescribed by Section 231 of the DGCL.

(d) The chairman of the meeting may, and if required by the DGCL shall, fix and
announce at the meeting the date and time of the opening and the closing of the
polls for each matter upon which the Stockholders will vote at the meeting.

 

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Section 2.13. Procedures for Bringing Business before Annual Meetings.

(a) Notwithstanding anything in these Bylaws to the contrary, no business shall
be conducted at an annual meeting of Stockholders except in accordance with the
procedures hereinafter set forth in this Section 2.13; provided, however, that
nothing in this Section 2.13 shall be deemed to preclude discussion by any
Stockholder of any business properly brought before any annual meeting of
Stockholders in accordance with such procedures.

(b) At any annual meeting of Stockholders, only such business shall be conducted
as shall have been properly brought before the meeting. To be properly brought
before an annual meeting, business (other than business relating to any
nomination of directors, which is governed by Section 3.6) must be (i) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors (or any duly authorized committee thereof),
(ii) otherwise properly brought before the meeting by or at the direction of the
chairman of the meeting or Board of Directors (or any duly authorized committee
thereof) or (iii) otherwise properly brought before the meeting by a Stockholder
of record entitled to vote in the election of directors generally, in compliance
with the provisions of this Section 2.13 and a proper subject to be brought
before such meeting. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a Stockholder (other
than business relating to any nomination of directors, which is governed by
Section 3.6), the Stockholder must have given timely notice thereof in writing
to the Secretary. To be timely, a Stockholder’s notice must be delivered to or
mailed and received at the principal executive office of the Corporation not
later than the close of business on the 120th day and not sooner than the close
of business on the 180th day prior to the first anniversary of the date of the
preceding year’s annual meeting; provided, however, that if no annual meeting
was held in the previous year or the date of the annual meeting of Stockholders
has been changed by more than 30 calendar days from the date contemplated at the
time of the previous year’s proxy statement, the notice must be received by the
Corporation not later than the later of the close of business on the 120th day
prior to the first anniversary of the date of the preceding year’s annual
meeting or the 10th day following the day on which public announcement of the
date of such meeting is first made by the Corporation. The first anniversary of
the 2008 annual meeting of Stockholders shall be deemed to be [May 10], 2009.
Any meeting of Stockholders which is adjourned and will reconvene within 30 days
after the meeting date as originally noticed shall, for purposes of any
Stockholder’s notice contemplated by this paragraph (b), be deemed to be a
continuation of the original meeting, and no business may be brought before such
adjourned meeting by any Stockholder unless timely notice of such business was
given to the Secretary of the Corporation for the meeting as originally noticed.
In no event shall the public disclosure of an adjournment of an annual meeting
of Stockholders constitute a new time period for the giving of a Stockholder’s
notice as described above.

(c) Each notice given by a Stockholder as contemplated by paragraph (b) above
other than a proposed nomination of any person for election or reelection as a
director (which is addressed in Section 3.6) shall set forth, as to each matter
the Stockholder proposes to bring before the annual meeting: (i) the nature of
the proposed business with reasonable particularity, including the exact text of
any proposal to be presented for adoption and any supporting statement, which
proposal and supporting statement shall not in the aggregate exceed 500 words,
and his reasons for conducting such business at the annual meeting; (ii) any
material interest of

 

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the Stockholder in such business; (iii) the name, principal occupation and
record address of the Stockholder; (iv) the class and number of shares of the
Corporation which are held of record or beneficially owned by the Stockholder;
(v) the dates upon which the Stockholder acquired such shares of stock and
documentary support for any claims of beneficial ownership; and (vi) such other
matters as may be required by the Certificate of Incorporation.

(d) The foregoing right of a Stockholder to propose business for consideration
at an annual meeting of Stockholders shall be subject to such conditions,
restrictions and limitations as may be imposed by the Certificate of
Incorporation. Nothing in this Section 2.13 shall entitle any Stockholder to
propose business for consideration at any special meeting of Stockholders.

(e) The chairman of any meeting of Stockholders shall determine whether business
has been properly brought before the meeting and, if the facts so warrant, may
refuse to transact any business at such meeting which has not been properly
brought before the meeting.

(f) Notwithstanding any other provision of these Bylaws, the Corporation shall
be under no obligation to include any Stockholder proposal in its proxy
statement or otherwise present any such proposal to Stockholders at a meeting of
Stockholders if the Board of Directors reasonably believes that the proponents
thereof have not complied with Sections 13 and 14 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and the rules and regulations
promulgated thereunder, and the Corporation shall not be required to include in
its proxy statement to Stockholders any Stockholder proposal not required to be
included in its proxy statement to Stockholders in accordance with the Exchange
Act and such rules or regulations.

(g) Nothing in this Section 2.13 shall be deemed to affect any rights of
Stockholders to request inclusion of proposals in the Corporation’s proxy
statement pursuant to Rule 14a-8 of the Exchange Act.

(h) Reference is made to Section 3.6 for procedures relating to the nomination
of any person for election or reelection as a director of the Corporation.

ARTICLE III

Board of Directors — Powers, Number, Nominations,

Resignations, Removal, Vacancies and Compensation

Section 3.1. Management. The business and affairs of the Corporation shall be
managed by and under the direction of the Board of Directors.

Section 3.2. Number. The number of directors shall be fixed from time to time
exclusively by resolution adopted by a majority of the directors then in office,
but shall consist of not less than three (3) nor more than ten (10) directors,
subject, however, to increases above ten (10) members as may be required in
order to permit the holders of any series of preferred stock issued by the
Corporation to elect directors under specified circumstances. Subject to the
preceding sentence, the maximum number of directors may not be increased by the
Board of Directors to exceed ten (10) without the affirmative vote of 66-2/3% of
the members of the entire Board of Directors.

 

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Section 3.3. Qualification. A director need not be a Stockholder or a resident
of the State of Delaware. Each director must have attained twenty-one (21) years
of age.

Section 3.4. Classes of Directors. Subject to the rights of the holders of any
series of preferred stock to elect additional directors under specified
circumstances, the Board of Directors shall be divided into three classes
designated as Class I, Class II and Class III. The number of directors in each
class shall be the whole number contained in the quotient arrived at by dividing
the authorized number of directors by three, and if a fraction is also contained
in such quotient then if such fraction is one-third (1/3), the extra director
shall be a member of Class I, and if the fraction is two-thirds (2/3), one of
the extra directors shall be a member of Class I and the other member of Class
II. In the event of any increase or decrease in the authorized number of
directors, (i) each director then serving as such shall nevertheless continue as
a director of the class of which he is a member and (ii) the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors among the three classes of directors so as
to ensure that no one class has more than one director more than any other
class. To the extent possible, consistent with the foregoing rule, any newly
created directorships shall be added to those classes whose terms of office are
to expire at the latest dates following such allocation, and any newly
eliminated directorships shall be subtracted from those classes whose terms of
office are to expire at the earliest dates following such allocation, unless
otherwise provided from time to time by resolution adopted by the Board of
Directors.

Section 3.5. Election; Term of Office(a) Subject to the Certificate of
Incorporation and Sections 3.9 and 3.10 of these Bylaws, each director elected
at an annual meeting of Stockholders to succeed a director whose term is
expiring shall hold office until the third annual meeting of Stockholders after
his election or until his successor is elected and qualified or until his
earlier death, resignation or removal; provided, however, the term of office of
directors initially appointed to Class I shall expire at the annual meeting of
Stockholders in 2009, the term of office of directors initially appointed to
Class II shall expire at the annual meeting of Stockholders in 2010 and the term
of office of directors initially appointed to Class III shall expire at the
annual meeting of Stockholders in 2011. Notwithstanding anything in these Bylaws
to the contrary, whenever the holders of any one or more classes or series of
preferred stock issued by the Corporation shall have the right, voting,
separately by class or series, to elect directors at an annual meeting or the
election, term or office, filling of vacancies and other features of such
directorships shall be governed by the Certificate of Incorporation applicable
thereto.

(b) Directors shall be elected by Stockholders only at annual meetings of
Stockholders, except that if any such annual meeting is not held or if any
director to be elected thereat is not elected, such director may be elected at
any special meeting of Stockholders held for that purpose.

(c) No decrease in the number of directors constituting the number of directors
then in office shall have the effect of shortening the term of any incumbent
director.

 

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Section 3.6. Nominations

(a) Notwithstanding anything in these Bylaws to the contrary, only persons who
are nominated in accordance with the procedures hereinafter set forth in this
Section 3.6 shall be eligible for election as directors of the Corporation.

(b) Nominations of persons for election to the Board of Directors at a meeting
of Stockholders may be made only (i) by or at the direction of the Board of
Directors or (ii) by any Stockholder entitled to vote for the election of
directors at the meeting who satisfies the eligibility requirements (if any) set
forth in the Certificate of Incorporation and who complies with the notice
procedures set forth in this Section 3.6 and in the Certificate of
Incorporation; provided, however, Stockholders may not nominate persons for
election to the Board of Directors at any special meeting of Stockholders unless
the business to be transacted at such special meeting, as set forth in the
notice of such meeting, includes the election of directors. Nominations by
Stockholders shall be made pursuant to timely notice in writing to the
Secretary. To be timely, a Stockholder’s notice given in the context of an
annual meeting of Stockholders shall be delivered to or mailed and received at
the principal executive office of the Corporation not later than the close of
business on the 120th day and not sooner than the close of business on the 180th
day prior to the first anniversary of the date of the preceding year’s annual
meeting; provided, however, that if no annual meeting was held in the previous
year or the date of the annual meeting of Stockholders has been changed by more
than 30 calendar days from the date contemplated at the time of the previous
year’s proxy statement, the notice must be received by the Corporation not later
than the later of the close of business on the 120th day prior to the first
anniversary of the date of the preceding year’s annual meeting or the 10th day
following the day on which public announcement of the date of such meeting is
first made by the Corporation. The first anniversary of the first annual meeting
of Stockholders shall be deemed to be [May 10], 2009. To be timely, a
Stockholder’s notice given in the context of a special meeting of Stockholders
shall be delivered to or mailed and received at the principal executive office
of the Corporation not earlier than the close of business on the 10th day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such special meeting. For purposes of the foregoing, “public
announcement” means the disclosure in a press release reported by the PR
Newswire, Dow Jones News Service, Associated Press or comparable national news
service or in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
Any meeting of Stockholders which is adjourned and will reconvene within 30 days
after the meeting date as originally noticed shall, for purposes of any notice
contemplated by this paragraph (b), be deemed to be a continuation of the
original meeting and no nominations by a Stockholder of persons to be elected
directors of the Corporation may be made at any such reconvened meeting other
than pursuant to a notice that was timely for the meeting on the date originally
noticed.

(c) Each notice given by a Stockholder as contemplated by paragraph (b) above
shall set forth the following information, in addition to any other information
or matters required by the Certificate of Incorporation:

(i) as to each person whom the Stockholder proposes to nominate for election or
re-election as a director, (A) the exact name of such person, (B) such person’s
age,

 

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principal occupation, business address and telephone number and residence
address and telephone number, (C) the number of shares (if any) of each class of
stock of the Corporation owned directly or indirectly by such person and (D) all
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors pursuant to Regulation 14A
under the Exchange Act or any successor regulation thereto (including such
person’s notarized written acceptance of such nomination, consent to being named
in the proxy statement as a nominee and statement of intention to serve as a
director if elected);

(ii) as to the Stockholder giving the notice, (A) his name and address, as they
appear on the Corporation’s books, (B) his principal occupation, business
address and telephone number and residence address and telephone number, (C) the
class and number of shares of the Corporation which are held of record or
beneficially owned by him and (D) the dates upon which he acquired such shares
of stock and documentary support for any claims of beneficial ownership; and

(iii) a description of all arrangements or understandings between the
Stockholder giving the notice and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or nominations
are to be made by such Stockholder.

At the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a Stockholder’s notice
of nomination which pertains to the nominee.

(d) The foregoing right of a Stockholder to nominate a person for election or
reelection to the Board of Directors shall be subject to such conditions,
restrictions and limitations as may be imposed by the Certificate of
Incorporation.

(e) Nothing in this Section 3.6 shall be deemed to affect any rights of
Stockholders to request inclusion of proposals in the Corporation’s proxy
statement pursuant to Rule 14a-8 of the Exchange Act.

(f) The chairman of a meeting of Stockholders shall have the power and duty to
determine whether a nomination was made in accordance with the procedures set
forth in this Section 3.6 and, if any nomination is not in compliance with this
Section 3.6, to declare that such defective nomination shall be disregarded.

Section 3.7. Resignations. Any director may resign at any time by giving written
notice to the Board of Directors or the Secretary. Such resignation shall take
effect at the date of receipt of such notice or at any later time specified
therein. Acceptance of such resignation shall not be necessary to make it
effective. When one or more directors shall resign from the Board of Directors,
effective at a future date, a majority of the directors then in office,
excluding those who have so resigned, shall have the power to fill such vacancy
or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each Director so chosen shall hold
office for the unexpired portion of the term of the Director whose place shall
be vacated and until his successor shall have been duly elected and qualified.

 

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Section 3.8. Removal. No director may be removed before the expiration of his
term of office except for cause and then only by the affirmative vote of the
holders of not less than a majority of the voting power of all outstanding
Voting Stock, voting together as a single class. The Board of Directors may not
remove any director, and no recommendation by the Board of Directors that a
director be removed may be made to the Stockholders unless such recommendation
is set forth in a resolution adopted by the affirmative vote of not less than
66-2/3% of the number of directors then in office. Notwithstanding the
foregoing, whenever the holders of any class or series of preferred stock are
entitled to elect one or more directors by the Certificate of Incorporation, the
holders of such class or series may remove such director(s) with or without
cause before the expiration of his term of office by the affirmative vote of
holders of not less than a majority of all outstanding shares of such class or
series of preferred stock.

Section 3.9. Vacancies.

(a) In case any vacancy shall occur on the Board of Directors because of death,
resignation or removal, such vacancy may be filled by a majority of the
directors remaining in office (though less than a quorum) or by the sole
remaining director. The director so appointed shall serve for the unexpired term
of his predecessor or until his successor is elected and qualified or until his
earlier death, resignation or removal. If there are no directors then in office,
an election of directors may be held in the manner provided by applicable law.

(b) Any newly created directorship resulting from any increase in the number of
directors constituting the total number of directors which the Corporation would
have if there were no vacancies may be filled by a majority of the directors
then in office (though less than a quorum), or by the sole remaining director.
Each director so appointed shall hold office until his successor is elected and
qualified or until his earlier death, resignation or removal.

(c) Except as expressly provided in these Bylaws or the Certificate of
Incorporation or as otherwise provided by law, Stockholders shall not have any
right to fill vacancies on the Board of Directors, including newly created
directorships.

(d) If, as a result of a disaster or emergency (as determined in good faith by
the then remaining directors), it becomes impossible to ascertain whether or not
vacancies exist on the Board of Directors and a person is or persons are elected
by the directors, who in good faith believe themselves to be a majority of the
remaining directors, or the sole remaining director, to fill a vacancy or
vacancies that such remaining directors in good faith believe exists, then the
acts of such person or persons who are so elected as directors shall be valid
and binding upon the Corporation, although it may subsequently develop that at
the time of the election (i) there was in fact no vacancy or vacancies existing
on the Board of Directors or (ii) the directors, or the sole remaining director,
who so elected such person or persons did not in fact constitute a majority of
the remaining directors.

Section 3.10. Subject to Rights of Holders of Preferred Stock. Notwithstanding
the foregoing provisions of this Article III, if the resolutions of the Board of
Directors creating any series of preferred stock of the Corporation entitle the
holders of such preferred stock, voting separately by series, to elect
additional directors under specified circumstances, then all provisions of such
resolutions relating to the nomination, election, term of office, removal,
filling of vacancies and other features of such directorships shall, as to such
directorships, govern and control over any conflicting provisions of this
Article III.

 

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Section 3.11. Compensation. The Board of Directors shall have the authority to
fix, and from time to time to change, the compensation of directors. Each
director shall be entitled to reimbursement from the Corporation for his
reasonable expenses incurred in attending meetings of the Board of Directors (or
any committee thereof) and meetings of the Stockholders. Nothing contained in
these Bylaws shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending such
meetings.

ARTICLE IV

Board of Directors — Meetings and Actions

Section 4.1. Place of Meetings. The directors may hold their meetings and have
one or more offices, and keep the books of the Corporation, in such place or
places, within or without the State of Delaware, as the Board of Directors may
from time to time determine.

Section 4.2. Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place, within or without the State of
Delaware, as shall from time to time be determined by the Board of Directors.
Except as otherwise provided by applicable law, any business may be transacted
at any regular meeting of the Board of Directors.

Section 4.3. Special Meetings. Special meetings of the Board of Directors shall
be called by the Secretary at the request of the Chairman of the Board (if any)
or the Chief Executive Officer on not less than 24 hours’ notice to each
director, specifying the time, place and purpose of the meeting. Special
meetings shall be called by the Secretary on like notice at the written request
of any two directors, which request shall state the purpose of the meeting.

Section 4.4. Quorum; Voting.

(a) At all meetings of the Board of Directors, a majority of the total number of
directors then in office shall be necessary and sufficient to constitute a
quorum for the transaction of business. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time (without notice other than announcement at the
meeting) until a quorum shall be present. A meeting of the Board of Directors at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors; provided, however, that no action
of the remaining directors shall constitute the act of the Board of Directors
unless the action is approved by at least a majority of the required quorum for
the meeting or such greater number of directors as shall be required by
applicable law, by the Certificate of Incorporation or by these Bylaws.

(b) The act of a majority of the directors present at any meeting of the Board
of Directors at which there is a quorum shall be the act of the Board of
Directors unless by express provision of law, the Certificate of Incorporation
or these Bylaws a different vote is required, in which case such express
provision shall govern and control.

 

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Section 4.5. Conduct of Meetings. At meetings of the Board of Directors,
business shall be transacted in such order as shall be determined by the
chairman of the meeting unless the Board of Directors shall otherwise determine
the order of business. The Board of Directors shall keep regular minutes of its
proceedings which shall be placed in the minute book of the Corporation.

Section 4.6. Presumption of Assent. A director 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 such action unless his dissent shall be entered in
the minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as secretary of the meeting before the adjournment
thereof or shall forward any dissent by certified or registered mail to the
Secretary immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any director who voted in favor of such action.

Section 4.7. Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if all directors consent thereto in writing or by electronic
transmission, and the writing or writings or electronic transmission or
transmissions are filed with the minutes of proceedings of the Board of
Directors. Such filing shall be in paper form if the minutes are maintained in
paper and shall be in electronic form if the minutes are maintained in
electronic form.

Section 4.8. Telephonic Meetings. Unless otherwise restricted by the Certificate
of Incorporation or these Bylaws, members of the Board of Directors may
participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at such meeting.

ARTICLE V

Committees of the Board of Directors

Section 5.1. Executive Committee.

(a) The Board of Directors may, by resolution adopted by the affirmative vote of
a majority of the number of directors then in office, designate an Executive
Committee which, during the intervals between meetings of the Board of Directors
and subject to Section 5.12, shall have and may exercise, in such manner as it
shall deem to be in the best interests of the Corporation, all of the powers of
the Board of Directors in the management or direction of the business and
affairs of the Corporation, except as reserved to the Board of Directors or as
delegated by the Board of Directors to another committee of the Board of
Directors or as may be prohibited by law. The Executive Committee shall consist
of not less than two directors, the exact number to be determined from time to
time by the affirmative vote of a majority of the number of directors then in
office. None of the members of the Executive Committee need be an officer of the
Corporation.

 

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(b) Meetings of the Executive Committee may be called at any time by the
Chairman of the Board (if any) or the Chief Executive Officer on not less than
one day’s notice to each member given verbally or in writing, which notice shall
specify the time, place and purpose of the meeting.

Section 5.2. Other Committees. The Board of Directors may, by resolution adopted
by a majority of the number of directors then in office, establish additional
standing or special committees of the Board of Directors, each of which shall
consist of two or more directors (the exact number to be determined from time to
time by the Board of Directors) and, subject to Section 5.12, shall have such
powers and functions as may be delegated to it by the Board of Directors to the
fullest extent permitted by Section 141(c)(2) of the DGCL. No member of any such
additional committee need be an officer of the Corporation. The committees may
include an audit committee, a compensation committee and a nominating and
corporate governance committee meeting the requirements of applicable law or the
applicable listing standards of any securities exchange on which securities of
the Corporation are then listed or included for quotation, including any
transition rules that may apply.

Section 5.3. Subcommittees. Unless otherwise provided in the Certificate of
Incorporation or the resolution of the Board of Directors designating the
committee, a committee may create one or more subcommittees, each subcommittee
to consist of one or more members of the committee, and delegate to a
subcommittee any or all of the powers and authority of the committee.

Section 5.4. Term. Each member of a committee of the Board of Directors shall
serve as such until the earliest of (i) his death, (ii) the expiration of his
term as a director, (iii) his resignation as a member of such committee or as a
director and (iv) his removal as a member of such committee or as a director.

Section 5.5. Committee Changes; Removal. The Board of Directors shall have the
power at any time to fill vacancies in, to change the membership of and to
abolish any committee of the Board of Directors except those committees required
under the rules of the Securities and Exchange Commission and any securities
exchange on which securities of the Corporation are then listed or included for
quotation, if applicable; provided, however, that no such action shall be taken
in respect of the Executive Committee unless approved by a majority of the
number of directors then in office.

Section 5.6. Alternate Members. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. If no alternate members
have been so appointed or each such alternate committee member is absent or
disqualified, the committee member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member.

 

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Section 5.7. Rules and Procedures.

(a) The Board of Directors may designate one member of each committee as
chairman of such committee; provided, however, that, except as provided in the
following sentence, no person shall be designated as chairman of the Executive
Committee unless approved by a majority of the number of directors then in
office. If a chairman is not so designated for any committee, the members
thereof shall designate a chairman.

(b) Each committee shall adopt its own rules (not inconsistent with these Bylaws
or with any specific direction as to the conduct of its affairs as shall have
been given by the Board of Directors) governing the time, place and method of
holding its meetings and the conduct of its proceedings and shall meet as
provided by such rules.

(c) If a committee is comprised of an odd number of members, a quorum shall
consist of a majority of that number. If a committee is comprised of an even
number of members, a quorum shall consist of one-half of that number. If a
committee is comprised of two members, a quorum shall consist of both members.
If a quorum is not present at a meeting of any committee, a majority of the
members present may adjourn the meeting from time to time, without notice other
than an announcement at the meeting, until a quorum is present. The act of a
majority of the members present at any meeting at which a quorum is in
attendance shall be the act of a committee, unless the act of a greater number
is required by law, the Certificate of Incorporation, these Bylaws or the
committee’s rules as adopted in Section 5.7(b).

(d) Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when requested.

(e) Unless otherwise provided by these Bylaws or by the rules adopted by any
committee, notice of the time and place of each meeting of such committee shall
be given to each member of such committee as provided in these Bylaws with
respect to notices of special meetings of the Board of Directors.

Section 5.8. Presumption of Assent. A member of a committee of the Board of
Directors who is present at a meeting of such committee at which action on any
corporate matter is taken shall be presumed to have assented to such action
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof or shall forward any
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to any member who voted in favor of such action.

Section 5.9. Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of a committee of the Board of Directors may be taken
without a meeting if all members of such committee consent thereto in writing or
by electronic transmission, and the writing or writings or electronic
transmission or transmissions are filed with the minutes of proceedings of the
committee. Such filing shall be in paper form if the minutes are maintained in
paper and shall be in electronic form if the minutes are maintained in
electronic form.

 

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Section 5.10. Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of any committee of the
Board of Directors may participate in a meeting of such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
in a meeting shall constitute presence in person at such meeting.

Section 5.11. Resignations. Any committee member may resign at any time by
giving written notice to the Board of Directors or the Secretary. Such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein. Acceptance of such resignation shall not be
necessary to make it effective.

Section 5.12. Limitations on Authority. Unless otherwise provided in the
Certificate of Incorporation, no committee of the Board of Directors shall have
the power or authority to (i) authorize an amendment to the Certificate of
Incorporation, (ii) adopt an agreement of merger or consolidation,
(iii) recommend to the Stockholders the sale, lease or exchange of all or
substantially all of the Corporation’s property and assets, (iv) recommend to
the Stockholders a dissolution of the Corporation or a revocation of a
dissolution, (v) amend these Bylaws, (vi) declare a dividend or other
distribution on, or authorize the issuance, purchase or redemption of,
securities of the Corporation, (vii) elect any officer of the Corporation or
(viii) approve any material transaction between the Corporation and one or more
of its directors, officers or employees or between the Corporation and any
corporation, partnership, association or other organization in which one or more
of its directors, officers or employees are directors or officers or have a
financial interest; provided, however, that the Executive Committee may, to the
extent authorized in the resolution or resolutions providing for the issuance of
shares of preferred stock adopted by the Board of Directors as provided in the
Certificate of Incorporation, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes of stock of
the Corporation or fix the number of shares of any series of stock or authorize
the decrease or increase of the shares of any such series.

ARTICLE VI

Officers

Section 6.1. Number; Titles; Qualification; Term of Office.

(a) The officers of the Corporation shall include a Chief Executive Officer, a
President, a Secretary and a Treasurer. The Board of Directors from time to time
may also elect such other officers (including, without limitation, a Chairman of
the Board and one or more Vice Presidents) as the Board of Directors deems
appropriate or necessary. Each officer shall hold office until his successor
shall have been duly elected and shall have been qualified or until his earlier
death, resignation or removal. Any two or more offices may be held by the same
person, but no officer shall execute any instrument in more than one capacity if
such instrument is required by law or any act of the Corporation to be executed
or countersigned by two or more officers. None of the officers need be a
Stockholder or a resident of the State of Delaware. No officer (other than the
Chairman of the Board, if any) need be a director.

 

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(b) The Board of Directors may delegate to the Chairman of the Board (if any)
and/or the Chief Executive Officer the power to appoint one or more employees of
the Corporation as divisional or departmental vice presidents and fix their
duties as such appointees. However, no such divisional or departmental vice
presidents shall be considered an officer of the Corporation, the officers of
the Corporation being limited to those officers elected by the Board of
Directors.

Section 6.2. Election. At the first meeting of the Board of Directors after each
annual meeting of Stockholders at which a quorum shall be present, the Board of
Directors shall elect the officers of the Corporation.

Section 6.3. Removal. Any officer may be removed, either with or without cause,
by the Board of Directors; provided, however, that (i) the Chairman of the Board
(if any) and the Chief Executive Officer may be removed only by the affirmative
vote of a majority of the number of directors then in office and (ii) the
removal of any officer shall be without prejudice to the contract rights, if
any, of such officer. Election or appointment of an officer shall not of itself
create contract rights.

Section 6.4. Resignations. Any officer may resign at any time by giving written
notice to the Board of Directors, the Chairman of the Board (if any) or the
Chief Executive Officer. Any such resignation shall take effect on receipt of
such notice or at any later time specified therein. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. Any such resignation is without prejudice to the rights, if any, of
the Corporation under any contract to which the officer is a party.

Section 6.5. Vacancies. If a vacancy shall occur in any office because of death,
resignation, removal, disqualification or any other cause, the Board of
Directors may elect or appoint a successor to fill such vacancy for the
remainder of the term.

Section 6.6. Salaries. The salaries of all officers of the Corporation shall be
fixed by the Board of Directors or pursuant to its direction, and no officer
shall be prevented from receiving such salary by reason of the fact that he is
also a director of the Corporation.

Section 6.7. Chairman of the Board. The Chairman of the Board (if any) shall
have all powers and shall perform all duties incident to the office of Chairman
of the Board and such other powers and duties as may be prescribed by the Board
of Directors or these Bylaws. The Chairman of the Board, if present, shall
preside at all meetings of the Board of Directors and of the Stockholders.
During the time of any vacancy in the office of Chief Executive Officer or in
the event of the absence or disability of the Chief Executive Officer, the
Chairman of the Board shall have the duties and powers of the Chief Executive
Officer unless otherwise determined by the Board of Directors. In no event shall
any third party having dealings with the Corporation be bound to inquire as to
any facts required by the terms of this Section 6.7 for the exercise by the
Chairman of the Board of the powers of the Chief Executive Officer.

Section 6.8. Chief Executive Officer.

(a) The Chief Executive Officer shall be the chief executive officer of the
Corporation and, subject to the supervision, direction and control of the Board
of Directors, shall have general

 

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supervision, direction and control of the business and officers of the
Corporation with all such powers as may be reasonably incident to such
responsibilities. He shall have the general powers and duties of management
usually vested in the chief executive officer of a corporation.

(b) During the time of any vacancy in the office of the Chairman of the Board or
in the event of the absence or disability of the Chairman of the Board, the
Chief Executive Officer shall have the duties and powers of the Chairman of the
Board unless otherwise determined by the Board of Directors. During the time of
any vacancy in the office of President or in the event of the absence or
disability of the President, the Chief Executive Officer shall have the duties
and powers of the President unless otherwise determined by the Board of
Directors. In no event shall any third party having any dealings with the
Corporation be bound to inquire as to any facts required by the terms of this
Section 6.8 for the exercise by the Chief Executive Officer of the powers of the
Chairman of the Board or the President.

Section 6.9. President.

(a) The President shall be the chief operating officer of the Corporation and,
subject to the supervision, direction and control of the Chief Executive Officer
and the Board of Directors, shall manage the day-to-day operations of the
Corporation. He shall have the general powers and duties of management usually
vested in the chief operating officer of a corporation and such other powers and
duties as may be assigned to him by the Board of Directors, the Chief Executive
Officer or these Bylaws.

(b) During the time of any vacancy in the offices of the Chairman of the Board
and Chief Executive Officer or in the event of the absence or disability of the
Chairman of the Board and the Chief Executive Officer, the President shall have
the duties and powers of the Chief Executive Officer unless otherwise determined
by the Board of Directors. In no event shall any third party having any dealings
with the Corporation be bound to inquire as to any facts required by the terms
of this Section 6.9 for the exercise by the President of the powers the Chief
Executive Officer.

Section 6.10. Vice Presidents. In the absence or disability of the President,
the Vice Presidents, if any, in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the President,
shall perform all the duties of the President as chief operating officer of the
Corporation, and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the President as chief operating officer of the
Corporation. In no event shall any third party having dealings with the
Corporation be bound to inquire as to any facts required by the terms of this
Section 6.10 for the exercise by any Vice President of the powers of the
President as chief operating officer of the Corporation. The Vice Presidents
shall have such other powers and perform such other duties as from time to time
may be assigned to them by the Board of Directors, the Chief Executive Officer
or the President.

Section 6.11. Treasurer. The Treasurer shall (i) have custody of the
Corporation’s funds and securities, (ii) keep full and accurate account of
receipts and disbursements, (iii) deposit all monies and valuable effects in the
name and to the credit of the Corporation in such depository or depositories as
may be designated by the Board of Directors and (iv) perform such other duties
as may be prescribed by the Board of Directors or the Chief Executive Officer.

 

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Section 6.12. Assistant Treasurers. Each Assistant Treasurer shall have such
powers and duties as may be assigned to him by the Board of Directors, the Chief
Executive Officer or the President. In case of the absence or disability of the
Treasurer, the Assistant Treasurer designated by the President (or, in the
absence of such designation, the Treasurer) shall perform the duties and
exercise the powers of the Treasurer during the period of such absence or
disability. In no event shall any third party having dealings with the
Corporation be bound to inquire as to any facts required by the terms of this
Section 6.12 for the exercise by any Assistant Treasurer of the powers of the
Treasurer under these Bylaws.

Section 6.13. Secretary.

(a) The Secretary shall keep or cause to be kept, at the principal office of the
Corporation or such other place as the Board of Directors may order, a book of
minutes of all meetings and actions of the Board of Directors, committees of the
Board of Directors and Stockholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice thereof given,
the names of those present at meetings of the Board of Directors and committees
thereof, the number of shares present or represented at Stockholders’ meetings
and the proceedings thereof.

(b) The Secretary shall keep, or cause to be kept, at the principal office of
the Corporation or at the office of the Corporation’s transfer agent or
registrar, a share register, or a duplicate share register, showing the names of
all Stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same and the number and
date of cancellation of every certificate surrendered for cancellation.

(c) The Secretary shall give, or cause to be given, notice of all meetings of
the Stockholders and of the Board of Directors required by these Bylaws or by
law to be given, and he shall keep the seal of the Corporation, if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors, the Chairman of the
Board (if any), the Chief Executive Officer, the President or these Bylaws.

(d) The Secretary may affix the seal of the Corporation, if one be adopted, to
contracts of the Corporation.

Section 6.14. Assistant Secretaries. Each Assistant Secretary shall have such
powers and duties as may be assigned to him by the Board of Directors, the
Chairman of the Board (if any), the Chief Executive Officer or the President. In
case of the absence or disability of the Secretary, the Assistant Secretary
designated by the President (or, in the absence of such designation, the
Secretary) shall perform the duties and exercise the powers of the Secretary
during the period of such absence or disability. In no event shall any third
party having dealings with the Corporation be bound to inquire as to any facts
required by the terms of this Section 6.14 for the exercise by any Assistant
Secretary of the powers of the Secretary under these Bylaws.

 

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ARTICLE VII

Stock

Section 7.1. Capital Stock; Share Certificates. The shares of the Corporation’s
capital stock may be certified or uncertified, as provided under the laws of the
State of Delaware. Except as otherwise provided by law, and subject to
Section 7.3, the rights and obligations of Stockholders are identical whether or
not their shares are represented by certificates. Each Stockholder, upon written
request to the Corporation or its transfer agent, shall be entitled to a
certificate of the capital stock of the Corporation. If certified, certificates
for shares of stock of the Corporation shall be in such form as shall be
approved by the Board of Directors, except that a certificate shall not be in
bearer form. The certificates shall be signed (i) by the Chairman of the Board
(if any), the President or a Vice President and (ii) by the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer.

Section 7.2. Signatures on Certificates. Any or all of the signatures on the
certificates may be a facsimile and the seal of the Corporation (or a facsimile
thereof), if one has been adopted, may be affixed thereto. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, such certificate may be
issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.

Section 7.3. Legends. The Board of Directors shall have the power and authority
to provide that certificates representing shares of stock of the Corporation
bear such legends and statements (including, without limitation, statements
relating to the powers, designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
of the shares represented by such certificates) as the Board of Directors deems
appropriate in connection with the requirements of federal or state securities
laws or other applicable laws.

Section 7.4. Lost, Stolen or Destroyed Certificates. The Board of Directors, the
Secretary and the Treasurer each may direct a new certificate or certificates to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, in each case upon
the making of an affidavit of that fact by the owner of such certificate, or his
legal representative. When authorizing such issue of a new certificate or
certificates, the Board of Directors, the Secretary or the Treasurer, as the
case may be, may, in its or his discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as the Board of Directors, the Secretary or the Treasurer, as the
case may be, shall require and/or to furnish the Corporation a bond in such form
and substance and with such surety as the Board of Directors, the Secretary or
the Treasurer, as the case may be, may direct as indemnity against any claim, or
expense resulting from any claim, that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.

Section 7.5. Registration and Transfer of Shares. The Board of Directors may
appoint one or more transfer agents for the Corporation’s capital stock and may
make, or

 

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authorize such agent or agents to make, all such rules and regulations as are
expedient governing the issue, transfer and registration of shares of capital
stock of the Corporation and any certificates representing such shares. The
capital stock of the Corporation shall be transferable only on the books of the
Corporation either (a) if such shares are certificated, by the surrender to the
Corporation or its transfer agent of the old stock certificate therefore duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, or (b) if such shares are uncertificated, upon proper
instructions from the holder thereof, in each case with such proof of
authenticity of signature as the Corporation or its transfer agent may
reasonably require. Prior to due presentment for registration of transfer of a
security (whether certificated or uncertificated), the Corporation shall treat
the registered owner of such security as the person exclusively entitled to
vote, receive notifications and dividends, and otherwise to exercise all rights
and powers of such security.

Section 7.6. Registered Stockholders. The Corporation shall be entitled to treat
the holder of record of any share of stock of the Corporation as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim or interest in such share on the part of any other person, whether
or not the Corporation shall have express or other notice thereof, except as
expressly provided by the laws of the State of Delaware.

Section 7.7. Regulations. The Board of Directors shall have the power and
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer and registration or the replacement of
certificates for shares of stock of the Corporation. The Board of Directors may
(i) appoint and remove transfer agents and registrars of transfers and
(ii) require all stock certificates to bear the signature of any such transfer
agent and/or any such registrar of transfers.

Section 7.8. Stock Options, Warrants, etc. Unless otherwise expressly prohibited
in the resolutions of the Board of Directors creating any class or series of
preferred stock of the Corporation, the Board of Directors shall have the power
and authority to create and issue (whether or not in connection with the issue
and sale of any stock or other securities of the Corporation) warrants, rights
or options entitling the holders thereof to purchase from the Corporation any
shares of capital stock of the Corporation of any class or series or any other
securities of the Corporation for such consideration and to such persons, firms
or corporations as the Board of Directors, in its sole discretion, may
determine, setting aside from the authorized but unissued stock of the
Corporation the requisite number of shares for issuance upon the exercise of
such warrants, rights or options. Such warrants, rights and options shall be
evidenced by one or more instruments approved by the Board of Directors. The
Board of Directors shall be empowered to set the exercise price, duration, time
for exercise and other terms of such warrants, rights and options; provided,
however, that the consideration to be received for any shares of capital stock
subject thereto shall not be less than the par value thereof.

Section 7.9. Authority upon Liquidation or Dissolution. Subject to applicable
law and the provisions of the Certificate of Incorporation, any vote or votes
authorizing liquidation of the Corporation or proceeding for its dissolution may
provide, subject to (i) any agreements among and between Stockholders, (ii) the
rights of creditors and (iii) rights expressly provided for particular classes
or series of stock, for the distribution pro rata among the Stockholders of
assets of the Corporation, wholly or in part in kind, whether such assets be in

 

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cash or other property, and may authorize the Board of Directors of the
Corporation to determine the value of the different assets of the Corporation
for the purpose of such liquidation and may divide, or authorize the Board of
Directors of the Corporation to divide, such assets or any part thereof among
the Stockholders in such manner that every Stockholder will receive a
proportionate amount in value (determined as aforesaid) of cash or property of
the Corporation upon such liquidation or dissolution even though each
Stockholder may not receive a strictly proportionate part of each such asset.

ARTICLE VIII

Indemnification

Section 8.1. Third Party Actions. The Corporation (i) shall, to the maximum
extent permitted from time to time under the laws of the State of Delaware,
indemnify every person who is or was a party or is or was threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation), by reason of the fact that such person
is or was a director or officer of the Corporation or any of its direct or
indirect subsidiaries or is or was serving at the request of the Corporation or
any of its direct or indirect subsidiaries as a director, officer or fiduciary
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, and (ii) may, to the maximum extent permitted from time to
time under the laws of the State of Delaware, indemnify every person who is or
was a party or is or was threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that such person is or was an employee or
agent of the Corporation or any of its direct or indirect subsidiaries or is or
was serving at the request of the Corporation or any of its direct or indirect
subsidiaries as an employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including counsel fees), judgments, fines and amounts paid or owed in
settlement, actually and reasonably incurred by such person or rendered or
levied against such person in connection with such action, suit or proceeding,
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not, in itself, create a presumption that the
person did not act in good faith and in a manner which such person reasonably
believed to be in or not opposed to the best interests of the Corporation or,
with respect to any criminal action or proceeding, that the person had
reasonable cause to believe that his conduct was unlawful.

Section 8.2. Actions By or in the Right of the Corporation. The Corporation
(i) shall, to the maximum extent permitted from time to time under the laws of
the State of Delaware, indemnify every person who is or was a party or who is or
was threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that such person is or was a director or officer of the
Corporation or any of its direct or indirect subsidiaries or is or was serving
at the request of the Corporation or any of its direct or indirect subsidiaries
as a director, officer or fiduciary of another corporation, partnership, joint
venture, trust, employee benefit

 

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plan or other enterprise, and (ii) may, to the maximum extent permitted from
time to time under the laws of the State of Delaware, indemnify every person who
is or was a party or who is or was threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was an employee or agent of the Corporation or any of its direct or
indirect subsidiaries or is or was serving at the request of the Corporation or
any of its direct or indirect subsidiaries as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including counsel fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action or suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation; provided, however, that no indemnification shall be made with
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnification.

Section 8.3. Determination. Any indemnification under Sections 8.1 and 8.2
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
Sections 8.1 and 8.2, as applicable. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (i) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (ii) by a
committee if designated by majority vote of such directors, even though less
than a quorum, or (iii) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (iv) by the
Stockholders.

Section 8.4. Expenses. Expenses incurred by a director or officer of the
Corporation or any of its direct or indirect subsidiaries in defending a civil
or criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article VIII. Such expenses
incurred by other employees and agents of the Corporation and other persons
eligible for indemnification under this Article VIII may be paid upon such terms
and conditions, if any, as the Board of Directors deems appropriate.

Section 8.5. Non-exclusivity. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any provision of law, the
Certificate of Incorporation, the certificate of incorporation or bylaws or
other governing documents of any direct or indirect subsidiary of the
Corporation, under any agreement, vote of Stockholders or disinterested
directors or under any policy or policies of insurance maintained by the
Corporation on behalf of any person or otherwise, both as to action in his
official capacity and as to action in another capacity while holding any of the
positions or having any of the relationships referred to in this Article VIII.

 

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Section 8.6. Enforceability. The provisions of this Article VIII (i) are for the
benefit of, and may be enforced directly by, each director or officer of the
Corporation the same as if set forth in their entirety in a written instrument
executed and delivered by the Corporation and such director or officer and
(ii) constitute a continuing offer to all present and future directors and
officers of the Corporation. The Corporation, by its adoption of these Bylaws,
(A) acknowledges and agrees that each present and future director and officer of
the Corporation has relied upon and will continue to rely upon the provisions of
this Article VIII in becoming, and serving as, a director or officer of the
Corporation or, if requested by the Corporation, a director, officer or
fiduciary or the like of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, (B) waives reliance upon, and all
notices of acceptance of, such provisions by such directors and officers and
(C) acknowledges and agrees that no present or future director or officer of the
Corporation shall be prejudiced in his right to enforce directly the provisions
of this Article VIII in accordance with their terms by any act or failure to act
on the part of the Corporation.

Section 8.7. Insurance. The Board of Directors may authorize the Corporation to
purchase and maintain insurance on behalf of any person who 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
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article VIII.

Section 8.8. Survival. The provisions of this Article VIII shall continue as to
any person who has ceased to be a director or officer of the Corporation and
shall inure to the benefit of the estate, executors, administrators, heirs,
legatees and devisees of any person entitled to indemnification under this
Article VIII.

Section 8.9. Amendment. No amendment, modification or repeal of this Article
VIII or any provision hereof shall in any manner terminate, reduce or impair the
right of any past, present or future director or officer of the Corporation to
be indemnified by the Corporation, nor the obligation of the Corporation to
indemnify any such director or officer, under and in accordance with the
provisions of this Article VIII as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising, in whole or in
part, from a state of facts extant on the date of, or relating to matters
occurring prior to, such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.

Section 8.10. Definitions. For purposes of this Article VIII, (i) other than
Section 8.8, reference to any person shall include the estate, executors,
personal representatives, administrators, heirs, legatees and devisees of such
person, (ii) “employee benefit plan” and “fiduciary” shall be deemed to include,
but not be limited to, the meaning set forth, respectively, in sections 3(3) and
21(A) of the Employee Retirement Income Security Act of 1974, as amended,
(iii) references to the judgments, fines and amounts paid or owed in settlement
or rendered or levied shall be deemed to encompass and include excise taxes
required to be paid pursuant to applicable law in respect of any transaction
involving an employee benefit plan and (iv) references to the Corporation shall
be deemed to include any predecessor corporation or entity and any constituent
corporation or entity absorbed in a merger, consolidation or other

 

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reorganization of or by the Corporation which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, employees, agents and fiduciaries so that any person who was a
director, officer, employee, agent or fiduciary of such predecessor or
constituent corporation or entity, or served at the request of such predecessor
or constituent corporation or entity as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, shall stand in the same position under the
provisions of this Article VIII with respect to the Corporation as such person
would have with respect to such predecessor or constituent corporation or entity
if its separate existence had continued.

ARTICLE IX

Notices and Waivers

Section 9.1. Methods of Giving Notices. Whenever, by applicable law, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any Stockholder, any director or any member of a committee of the Board of
Directors and no provision is made as to how such notice shall be given,
personal notice shall not be required and such notice may be given (i) in
writing, by mail, postage prepaid, addressed to such Stockholder, director or
committee member at his address as it appears on the books or (in the case of a
Stockholder) the stock transfer records of the Corporation or (ii) by any other
method permitted by law (including, but not limited to, overnight courier
service or “electronic transmission” as defined under and in accordance with
Section 232 of the DGCL). Any notice required or permitted to be given by mail
shall be deemed to be delivered and given at the time when the same is deposited
in the United States mail as aforesaid. Any notice required or permitted to be
given by overnight courier service shall be deemed to be delivered and given one
business day after delivery to such service with all charges prepaid and
addressed as aforesaid. Any notice required or permitted to be given by
electronic transmission shall be deemed to be delivered and given: (i) if by
facsimile telecommunication, when directed to a number at which the Stockholder,
director or committee member has consented to receive notice; (ii) if by
electronic mail, when directed to an electronic mail address at which the
Stockholder, director or committee member has consented to receive notice;
(iii) if by posting on an electronic network together with separate notice to
the Stockholder, director or committee member of such specific posting, upon the
later of (A) such posting and (B) the giving of such separate notice; and
(iv) if by any other form of electronic transmission, when directed to the
Stockholder, director or committee member.

Section 9.2. Waiver of Notice. Whenever any notice is required to be given to
any Stockholder, director or member of a committee of the Board of Directors by
applicable law, the Certificate of Incorporation or these Bylaws, a waiver
thereof in writing signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a Stockholder (whether in person or by
proxy), director or committee member at a meeting shall constitute a waiver of
notice of such meeting, except where such person attends for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened.

 

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ARTICLE X

Miscellaneous Provisions

Section 10.1. Dividends. Subject to applicable law and the provisions of the
Certificate of Incorporation, dividends may be declared by the Board of
Directors at any meeting and may be paid in cash, in property or in shares of
the Corporation’s capital stock. Any such declaration shall be at the discretion
of the Board of Directors. A director shall be fully protected in relying in
good faith upon the books of account of the Corporation or statements prepared
by any of its officers as to the value and amount of the assets, liabilities or
net profits of the Corporation or any other facts pertinent to the existence and
amount of surplus or other funds from which dividends might properly be
declared.

Section 10.2. Reserves. There may be created by the Board of Directors, out of
funds of the Corporation legally available therefor, such reserve or reserves as
the Board of Directors from time to time, in its absolute discretion, considers
proper to provide for contingencies, to equalize dividends or to repair or
maintain any property of the Corporation, or for such other purpose as the Board
of Directors shall consider beneficial to the Corporation, and the Board of
Directors may thereafter modify or abolish any such reserve in its absolute
discretion.

Section 10.3. Signatory Authority on Accounts. All checks, drafts or other
orders for payment of money, notes or other evidences of indebtedness, issued in
the name of or payable to the Corporation shall be signed by such officer or
officers or by such employees or agents of the Corporation as may be designated
from time to time by the Board of Directors.

Section 10.4. Corporate Contracts and Instruments. Subject always to the
specific directions of the Board of Directors, the Chairman of the Board (if
any), the President, any Vice President, the Secretary or the Treasurer may
enter into contracts and execute instruments in the name and on behalf of the
Corporation. The Board of Directors and, subject to the specific directions of
the Board of Directors, the Chairman of the Board (if any) or the President may
authorize one or more officers, employees or agents of the Corporation to enter
into any contract or execute any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances.

Section 10.5. Attestation. With respect to any deed, deed of trust, mortgage or
other instrument executed by the Corporation through its duly authorized officer
or officers, the attestation to such execution by the Secretary or an Assistant
Secretary of the Corporation shall not be necessary to constitute such deed,
deed of trust, mortgage or other instrument a valid and binding obligation of
the Corporation unless the resolutions, if any, of the Board of Directors
authorizing such execution expressly state that such attestation is necessary.

Section 10.6. Securities of Other Corporations. Subject always to the specific
directions of the Board of Directors, the Chairman of the Board, the Chief
Executive Officer, the President or any Vice President of the Corporation shall
have the power and authority to transfer, endorse for transfer, vote, consent or
take any other action with respect to any securities of another issuer which may
be held or owned by the Corporation and to make, execute and deliver any waiver,
proxy or consent with respect to any such securities.

 

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Section 10.7. Fiscal Year. The fiscal year of the Corporation shall be January 1
through December 31, unless otherwise fixed by the Board of Directors.

Section 10.8. Seal. The seal of the Corporation shall be such as from time to
time may be approved by the Board of Directors.

Section 10.9. Invalid Provisions. If any part of these Bylaws shall be invalid
or inoperative for any reason, the remaining parts, so far as is possible and
reasonable, shall remain valid and operative.

Section 10.10. Headings. The headings used in these Bylaws have been inserted
for administrative convenience only and shall not limit or otherwise affect any
of the provisions of these Bylaws.

Section 10.11. References/Gender/Number. Whenever in these Bylaws the singular
number is used, the same shall include the plural where appropriate. Words of
any gender used in these Bylaws shall include the other gender where
appropriate. In these Bylaws, unless a contrary intention appears, all
references to Articles and Sections shall be deemed to be references to the
Articles and Sections of these Bylaws.

Section 10.12. Amendments. These Bylaws may be altered, amended or repealed or
new bylaws may be adopted by the affirmative vote of a majority of the directors
then in office; provided, however, that no such action shall be taken at any
special meeting of the Board of Directors unless notice of such action is
contained in the notice of such special meeting. These Bylaws may not be
altered, amended or rescinded, nor may new bylaws be adopted, by the
Stockholders except by the affirmative vote of the holders of not less than
66-2/3% of all outstanding Voting Stock, voting together as a single class. Each
alteration, amendment or repeal of these Bylaws shall be subject in all respects
to Section 8.8.

 

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Exhibit F

FORM OF OPINION OF MCAFEE & TAFT A PROFESSIONAL CORPORATION

 

1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has all requisite corporate
power and authority to own and lease its property and to carry on its business
as it is presently conducted, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of the jurisdictions set
forth on Schedule 1 hereto.

 

2. Each of the Subsidiaries set forth on Schedule 2 hereto is duly organized,
validly existing and in good standing under their respective states of
incorporation or formation, has all requisite corporate or limited liability
company power and authority to own and lease its property and to carry on its
business as it is presently conducted, and is duly qualified to do business as a
foreign corporation or limited liability company and is in good standing under
the laws of the jurisdictions set forth on Schedule 2 hereto.

 

3. The Company has all requisite corporate power and authority to execute and
deliver the Operative Documents and to perform its obligations thereunder,
including the issuance of the Series B Preferred Stock; and all corporate action
required to be taken by the Company for the due and proper authorization,
execution and delivery of the Operative Documents and for the consummation of
the transactions contemplated thereby has been duly and validly taken. The
Operative Documents are valid and binding obligations of the Company and are
each enforceable in accordance with their terms except (a) as limited by any
applicable bankruptcy, insolvency, reorganization or other law relating to or
affecting creditors’ rights generally, (b) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and (c) as such enforceability of rights to indemnity and
contribution contained therein may be limited under applicable securities laws.
The Certificate of Designation has been duly and validly filed with and accepted
by the Secretary of State of the State of Delaware. The New Bylaws and New
Charter have been duly adopted by the Board, and the New Charter has been duly
filed with and accepted by the Secretary of State of the State of Delaware.

 

4. Immediately prior to the Closing, the authorized capital of the Company
consists of: (i) 3,600,000 shares of Common Stock, of which 877,000 are issued
and outstanding, all of which were validly issued and fully paid and are
non-assessable, and none of which were issued in violation of any preemptive or
similar rights of any securityholder of the Company; and (ii) 600,000 shares of
preferred stock, par value $0.01 per share, none of which are issued and
outstanding. After giving effect to the Echo Merger and the transactions
contemplated by the Operative Documents, the authorized capital stock of the
Company consists of (i) 150,000,000 shares of Common Stock, of which 52,295,080
shares will be issued and outstanding pursuant to the Echo Merger;
(ii) 10,000,000 shares of preferred stock, par value $0.01 per share, of which
(a) 2,875,000 shares are designated as Series A Preferred Stock, and of which
2,875,000 shares will be issued and outstanding, and (b) 1,500,000 shares are
designated as Series B Preferred Stock, and of which 1,500,000 shares will be
issued and outstanding, and in each of cases (i), (ii) and (iii), all of such
shares have been duly and validly authorized, and when issued and delivered and
paid for by the Purchaser, as applicable, will be validly issued and fully paid
and non-assessable as of the date of issuance. The certificates for the Series B
Preferred Stock are in valid form.

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5. All the outstanding shares of capital stock of each Subsidiary listed on
Schedule 2 hereto have been duly and validly authorized and issued and are fully
paid and nonassessable, and, other than (i) in connection with the Company’s and
the Subsidiaries’ obligations under the Credit Agreement and (ii) Oklahoma
Ethanol, LLC, 66.67% of which is owned indirectly by the Company, all
outstanding shares of capital stock or equity interests of the Subsidiaries are
owned by the Company, either directly or through wholly one or more owned
subsidiaries, free and clear of any security interest, claim, lien or
encumbrance.

 

6. The shares of Common Stock issuable upon conversion of the Series B Preferred
Stock (the “Convertible Common Stock”) have been duly and validly authorized and
reserved, and upon conversion of the Series B Preferred Stock, will be validly
issued, fully paid and nonassessable.

 

7. Except as set forth in the Operative Documents and the Echo Merger Agreement,
to such counsel’s knowledge, there are no outstanding warrants, options,
conversion or exchange privileges or other rights or agreements to purchase or
otherwise acquire or issue any equity securities of the Company, and the Company
is not a party or subject to any agreement or understanding which affects or
relates to the voting or giving of written consents with respect to any
security, or by a director, of the Company or any instrument or security
exercisable or exchangeable for, or convertible into any equity security of the
Company. Except for the Purchase Agreement and the Stockholders’ Agreement,
dated as of September 29, 2006, between the Company, Fischer Investments,
L.L.C., Altoma Energy, L.L.C., CLK Holdings, L.L.C., as amended , to such
counsel’s knowledge, there are no stockholder, voting or other agreements in
existence relating to the rights and obligations of the Company’s stockholders.

 

8. Neither the execution, delivery or performance of the Operative Documents by
the Company, nor the performance of the Purchase Agreement or the consummation
of the transactions contemplated thereby, including the issuance of the Series B
Preferred Stock (or the Convertible Common Stock issuable upon conversion
thereof), will conflict with, result in a breach or violation of, or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or
the Subsidiaries pursuant to, (i) the New Charter or the New Bylaws, (ii) the
terms, conditions or provisions of any indenture, mortgage, deed of trust, note
agreement, loan agreement of the Company or other material contract or agreement
listed on Schedule 8 hereto or (iii) any statute, law, rule or regulation or, to
such counsel’s knowledge, any judgment, order or decree applicable to the
Company or the Subsidiaries of any court, regulatory body, administrative
agency, governmental body, or other regulatory authority having jurisdiction
over the Company or the Subsidiaries or any of its or their properties or
business.

 

9. Assuming the accuracy of the Purchaser’s representations and warranties
contained in Section 4.05 of the Purchase Agreement, the execution and delivery
by the Company of the Operative Documents, the issuance of the Series B
Preferred Stock (and the Convertible Common Stock issuable upon conversion
thereof), the performance by the Company of its obligations thereunder and the
consummation by the Company of the transactions contemplated thereby do not
require the Company to obtain any consent, approval, clearance or action of, or
make any filing, submission or registration with, or give any notice to, any
governmental authority or judicial authority, except the filing of the
Certificate of Designation with the Secretary of State of the State of
Delaware[, filings required under the HSR Act] and filings required by The New
York Stock Exchange, as the case may be.

 

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10. The Company is not an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for an investment company, within the
meaning of the Investment Company Act of 1940, as amended.

 

11. Based in part on the representations of the Purchaser set forth in
Section 4.02 of the Purchase Agreement, the issuance and sale of the Series B
Preferred Stock and the conversion of the Series B Preferred Stock into Common
Stock do not require registration under the Securities Act.

 

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