Exhibit 10.3

 

Execution Copy

 

STOCKHOLDERS’ AGREEMENT

 

This Stockholders Agreement (this “Agreement”) is entered into this 10th day of
September, 2004 (the “Effective Date”) by and among International Business
Associates Ltd. an exempted limited liability company organized under the laws
of the Turks and Caicos Islands, BWI (the “Company”), John Kean, Jr., and
Stanley J. Brownell, (each individually a “Founder” and collectively, the
“Founders”), and International Business Associates Holding Co., Ltd., a British
Virgin Islands company (the “Purchaser”). The Company, each of the Founders, and
the Purchaser are individually referred to herein as a “Party”, and
collectively, the “Parties.” The Founders and the Purchaser are collectively
referred to herein as the “Stockholders.”

 

Unless otherwise defined in this Agreement, terms appearing in initial capital
form shall have the meaning set forth in that certain Series A Redeemable
Preferred Stock Subscription Agreement among the Parties dated as of the date
hereof (the “Stock Subscription Agreement”).

 

In consideration of the premises and the mutual agreements and covenants
hereinafter set forth, the Company, each of the Founders, and the Purchaser
hereby agree as follows:

 

1. Organizational Matters of the Company.

 

1.1 Ownership. As a result of the purchase by Purchaser of the Warrant, the
initial beneficial ownership of the Company’s ordinary shares is fifty-two
percent (52%) in favor of the Founders and forty-eight percent (48%) in favor of
the Purchaser. The Parties contemplate that, whenever the Company requires
additional working capital prior to the redemption of all of the Series A
Preferred, as determined by the Board of Directors of the Company acting
unanimously, the Purchaser shall have the right, but not the obligation, to
purchase additional shares of Series A Preferred and warrants on terms and
conditions no less favorable to those offered by the Company to the Purchaser in
the Stock Subscription Agreement. Without the consent of the Purchaser, the
Founders shall not acquire, by purchase or otherwise, ownership of capital stock
representing more than fifty-two percent (52%) of the outstanding shares of
capital stock of the Company, on a Fully Diluted Basis, except in accordance
with this Agreement. Without the consent of the Founders, the Purchaser shall
not acquire, by purchase or otherwise, ownership of capital stock representing
more than forty-eight percent (48%) of the outstanding shares of capital stock
of the Company, on a Fully Diluted Basis, except in accordance with this
Agreement. As used in this Agreement, “Fully Diluted Basis” means, as the
context requires, either (a) the aggregate number of Common Stock issued and
outstanding at the relevant time, after giving effect to all then outstanding
options, warrants, convertible securities or other rights to acquire Common
Stock (whether or not then exercisable or exercisable at a price below the then
market value of the Common Stock) of all shareowners, including the Warrant,
and/or (b) the number of Common Stock owned by a particular shareholder at the
relevant time, after giving effect to all then outstanding options, warrants,
convertible securities or other rights to acquire Common Stock (whether or not
then exercisable or exercisable at a price below the then market value of the
Common Stock) held by such shareholder, including, in the case of the Purchaser,
the Warrant.

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1.2 Governance; Voting. The management of the Company and the preparation and
adoption of the Company’s business plan will be vested in the Board of Directors
and such officers as the Board may designate from time to time. Subject to the
management guidelines attached hereto as Exhibit A and the other terms of this
Agreement, the day-to-day management of the Company will be at the direction of
the Board of Directors. The Board and the members appointed thereto (each a
“Director”) shall be proposed by and shall serve at the direction of the
Stockholders as provided for herein and in the Memorandum of Association and
Articles of Association.

 

(a) The Board of Directors shall be comprised of five (5) Directors or such
other number of directors as may be established in accordance with the Company’s
organizational documents from time to time. So long as the Series A Preferred
shall remain outstanding, the Purchaser shall be entitled to nominate three (3)
candidates for membership on the Board of Directors of the Company, and the
Founders shall be entitled to nominate two (2) directors for membership on the
Board of Directors of the Company. From and after the retirement of the Series A
Preferred, so long as the Founders hold a majority of the outstanding Common
Stock, the Purchaser (if the Purchaser then holds shares of Common Stock) shall
be entitled to nominate two (2) candidates for membership on the Board of
Directors of the Company, and the Founders shall be entitled to nominate three
(3) directors for membership on the Board of Directors of the Company. The
Purchaser and the Founders agree to vote for the nominees of each of them. If a
Founder is unable to serve or has transferred his shares of Common Stock in the
manner permitted by Section 3.3(a), then the Founder’s successor in interest as
holder of his Shares or his legal representative shall be entitled to nominate
directors in the same manner and to the same extent as if the Founder were
himself acting.

 

(b) Subject to the Company’s Memorandum of Association and Articles of
Association (as in effect on the date hereof and from time to time thereafter)
and the terms and conditions of this Agreement, the Board will have the
authority on behalf and in the name of the Company to perform all acts necessary
and desirable to the objects and purposes of the Company and to comply, as
deemed necessary in the Board’s sole discretion, with any and all applicable
laws, regulations, orders or decrees including without limitation, such laws and
regulations applicable to Purchaser’s parent company, Harken Energy Corporation,
without a vote of the Stockholders (including but not limited to opening bank or
other accounts and negotiating, effecting and authorizing the purchase and sale
of Shares); provided, that those matters which, under the terms of Exhibit A,
are within the scope of powers and authority of the Company’s management shall
remain with Company’s management unless otherwise modified by the Board as
deemed necessary in its sole discretion to comply with any laws, regulations,
orders or decrees as set forth in this Subsection (b). The Purchaser and the
Founders agree to instruct their Board of Directors nominees to elect John Kean
Jr. as the Chairperson of the Board, so long as he is able to serve and remains
a Stockholder. He shall preside over all Board meetings. As used in this
Agreement, “Shares” means and includes any and all shares of Common Stock and/or
shares of capital stock of the Company, by whatever name called, which carry
voting rights and shall include any such shares now owned or subsequently
acquired by a Stockholder, however acquired, including without limitation stock
splits and stock dividends.

 

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(c) All certificates representing Shares owned or hereafter acquired by the
Stockholders or any transferee of the Stockholders bound by this Agreement shall
have affixed thereto a legend substantially in the following form:

 

“The shares of stock represented by this certificate are subject to certain
voting agreements as set forth in a Stockholders’ Agreement, as amended from
time to time, by and among the registered owner of this certificate, the Company
and certain other stockholders of the Company, a copy of which is available for
inspection at the offices of the Secretary of the Company.”

 

2. Actions Requiring Special Unanimous Approval of the Board of Directors.

 

2.1 Notwithstanding anything in this Agreement to the contrary (including any
provision of Exhibit A) and to the extent permitted by the law of the Turks and
Caicos Islands, BWI, the Parties acknowledge that the matters set forth below
will require the unanimous approval of the Company’s Board of Directors (so long
as any shares of Series A Preferred remain outstanding):

 

(a) any amendment of the Memorandum of Association, Articles of Association or
other organizational documents of the Company;

 

(b) a consolidation or merger of the Company, whether by merger, reverse merger,
share exchange, sale of stock or otherwise, with or into any other Person, or a
sale, whether for cash, shares of stock, securities or properties, of all or
substantially all or any part of the assets of the Company, or any share
exchange pursuant to which shares of capital stock of the Company are converted
into other securities, cash or property of another Person, or any other change
of control transaction;

 

(c) the voluntary dissolution or voluntary liquidation of the Company;

 

(d) the Company’s entering into or amending any contract with any Stockholder or
any affiliate thereof if the payment or consideration involved in such contract
or series of related contracts would, regardless of amount, exceed the fair
market value for the goods or services provided to the Company thereunder,
provided that such contract shall have first been approved by a majority of the
directors of the Board;

 

(e) any issuance of shares, or securities convertible into, or options or
warrants to acquire, any such shares, and any redemption, change, cancellation,
modification or alteration of Shares, or securities convertible into, or options
or warrants to acquire, any such shares, or any increase or decrease in the
capital of the Company;

 

(f) any change in the Company’s name; and

 

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(g) allocation of public company costs incurred by Harken Energy Corporation and
allocated to the Company.

 

3. Transfer of Shares.

 

3.1 Certain Definitions. As used in this Section 3, the following terms have the
following meanings:

 

(a) “Affiliate” means any corporation or other entity which is controlled by, or
is under common control with a Stockholder. A corporation or other entity is
regarded as in control of another corporation or entity if it owns or directly
or indirectly controls more than fifty percent (50%) of the voting stock or
other ownership interest of the other corporation or entity, or if it possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the corporation or other entity or the power to elect
or appoint more than fifty percent (50%) of the members of the governing body of
the corporation or other entity.

 

(b) “Independent Accounting Firm” means (a) an independent certified public
accounting firm in the United States or England of national recognition (other
than a firm which then serves as the independent auditor for Purchaser or the
Founders or any of their respective Affiliates) mutually acceptable to Purchaser
and the Founders or (b) if the Stockholders are unable to agree upon such a
firm, then an accounting firm meeting such qualifications designated by the
President of the American Institute of Certified Public Accountants.

 

(c) “IPO” means the initial, firm-commitment, underwritten public offering of
Shares, or equity securities into which such shares are converted or for which
such shares are exchanged, pursuant to an effective registration statement under
the United States Securities Act of 1933, as amended, or pursuant to the foreign
equivalent thereof, resulting in the Company, or the successor entity to the
Company as the case may be, becoming listed on a public securities exchange.

 

(d) “Transfer Permitted Date” means the date which is the earlier of (i) an IPO,
(ii) the five-year anniversary of the Effective Date or (iii) termination of
this Agreement.

 

3.2 Restrictions on Transfer. Any sale, transfer or other disposition, whether
voluntarily or by operation of law (“Transfer”) of any of the Shares owned by a
Founder (“Founder Shares”), prior to the Transfer Permitted Date other than
according to the terms of this Agreement, shall be void and transfer no right,
title, or interest in or to any of such Founder Shares to the purported
transferee. Any Transfer of any of the Shares owned by the Purchaser (“Purchaser
Shares”), prior to the Transfer Permitted Date other than according to the terms
of this Agreement, shall be void and transfer no right, title, or interest in or
to any of such Purchaser Shares to the purported transferee.

 

3.3 Transfers Not Subject to Restrictions.

 

(a) At any time prior to the Transfer Permitted Date, either Founder may
Transfer all or any portion of its Founder Shares (i) to an Affiliate of such
Founder, or (ii) with

 

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prior written notice to the Board, to a trust or other custodial vehicle for the
benefit of a Founder, or a relative of such Founder. In each such case, the
transferee shall have delivered to the Company and the other Stockholders a
written instrument agreeing to be bound by the terms of this Agreement as if it
were a Founder or the Purchaser, as the case may be.

 

(b) The provisions of this Section 3 shall not apply to any pledge of Founder
Shares by a Founder which creates a mere security interest, provided that the
pledgee provides the Company and the Stockholders with a written agreement to be
bound hereby to the same extent as the pledging Founder.

 

(c) At any time prior to the Transfer Permitted Date, the Purchaser may Transfer
all or any portion of its Shares (i) to an Affiliate of the Purchaser, or (ii)
with prior written notice to the Board, to a trust or other custodial vehicle
for the benefit of the Purchaser or an Affiliate of the Purchaser. In each such
case, the transferee shall have delivered to the Company and the other
Stockholders a written instrument agreeing to be bound by the terms of this
Agreement as if it were the Purchaser, as the case may be.

 

3.4 Right of First Refusal; Notice of Proposed Sale. If the Purchaser or any
Founder desires to Transfer any of its Shares, or any interest in such Shares,
in any transaction other than pursuant to Section 3.3 of this Agreement, such
Founder or the Purchaser, as the case may be (the “Selling Party”) shall first
deliver written notice of his or its desire to do so (the “Notice”) to the other
Founder(s), the Company and the Purchaser, in the manner prescribed in Section
5.5 of this Agreement. The Notice must specify: (i) the name and address of the
person to which the Selling Party proposes to Transfer the Shares or an interest
in the Shares (the “Offeror”), (ii) the number of Shares that the Selling Party
proposes to Transfer (the “Offered Shares”), (iii) the consideration per Share
to be delivered to the Selling Party for the proposed Transfer and (iv) all
other material terms and conditions of the proposed transaction. The Selling
Party shall attach to the Notice a copy of a bona fide written offer from an
unaffiliated third party.

 

3.5 Option to Purchase.

 

(a) Subject to Section 3.7, if a Founder is the Selling Party, the other Founder
shall have the first option to purchase all or any part of the Offered Shares
for the consideration per share and on the terms and conditions specified in the
Notice. The other Founder must exercise such option, no later than 30 days after
such Notice is deemed under Section 5.5 to have been delivered to it, by written
notice to the Selling Party Founder.

 

(b) Subject to Section 3.7, if the Purchaser is the Selling Party, the Founders
shall have the first option to purchase all or any part of the Offered Shares
for the consideration per share and on the terms and conditions specified in the
Notice. The Founders must exercise such option, no later than 30 days after such
Notice is deemed under Section 5.5 to have been delivered to it, by written
notice to the Selling Party. The Founders shall have the right to purchase the
Offered Shares from the Purchaser pro rata in accordance with their respective
holdings of the Company’s ordinary shares. In the event of a Purchaser Notice B
(as defined below), one Founder may purchase more shares than the other Founder.

 

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(c) Subject to Section 3.7, the Company shall have the option to purchase all or
any part of the Offered Shares for the consideration per share and on the terms
and conditions specified in the Notice to the extent that one or both Founders
or the Purchaser does not opt to purchase the Offered Shares. The Company must
exercise such option, no later than the end of the thirty-day period for one or
both Founders to exercise their options after such Notice is deemed under
Section 5.5 to have been delivered. The Company shall exercise such option by
written notice to the Selling Party.

 

(d) If a Founder is the Selling Party and neither the other Founder nor the
Company exercises its option with respect to all of the Offered Shares within
the periods for such exercise specified in this Section 3.4, the Company shall,
by the last day of such period, give written notice of that fact to the
Purchaser (the “Purchaser Notice A”). The Purchaser Notice A shall specify the
number of Offered Shares not purchased by the other Founder or the Company (the
“Remaining Founder Shares”). If the Purchaser is the Selling Party and neither
the Founders nor the Company exercises their options with respect to all of the
Offered Shares within the periods for such exercise specified in this Section
3.4, the Company shall, by the last day of such period, give written notice of
that fact to the Founders (the “Purchaser Notice B”). The Purchaser Notice B
shall specify the number of Offered Shares not purchased by the Founders or the
Company (the “Remaining Purchaser Shares”).

 

(e) If the Founders or the Company duly exercises its option to purchase all or
part of the Offered Shares, the closing of such purchase shall take place at the
offices of the Company on the later of (i) the date fifteen (15) days after the
expiration of the periods for exercise specified in this Section 3.4 or (ii) the
date that the Purchaser consummates its purchase of Remaining Shares under
Section 3.6(c).

 

(f) To the extent that the consideration proposed to be paid by the Offeror for
the Offered Shares consists of property other than cash or a promissory note,
the consideration required to be paid by the Founder, the Company and/or the
Purchaser exercising their respective options under Sections 3.5 and 3.6 may
consist of cash equal to the value of such property, as determined in good faith
by agreement of the Selling Founder and the Company and/or the Purchaser
acquiring such Offered Shares. To the extent that the consideration proposed to
be paid by the Offeror for the Offered Shares consists of Offeror’s promissory
note, a comparable promissory note of which a Founder, the Company or the
Purchaser shall be deemed equivalent to Offeror’s promissory note. If the
Selling Founder and the Company and/or the Purchaser are unable to agree on the
appropriate value of such property, a determination as to value shall be derived
by an Independent Accounting Firm.

 

(g) Notwithstanding anything to the contrary herein, none of the Founders, the
Company or the Purchaser shall have any right to purchase any of the Offered
Shares under Sections 3.4 and 3.5 of this Agreement unless the Founder(s), the
Company and/or the Purchaser exercise their option or options to purchase all of
the Offered Shares.

 

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3.6 Purchaser’s Option to Purchase.

 

(a) Subject to Section 3.7, the Purchaser shall have an option, exercisable for
a period of 15 days from the date of delivery of the Purchaser Notice A, to
purchase the Remaining Founder Shares for the consideration per share and on the
terms and conditions set forth in the Notice. Such option shall be exercised by
delivery by the Purchaser of written notice to the Secretary of the Company.
Alternatively, the Purchaser may within the same 15-day period, notify the
Secretary of the Company of its desire to participate in the sale of the shares
on the terms set forth in the Notice, and the number of shares it wishes to
sell.

 

(b) Subject to Section 3.7, either or both of the Founders shall have an option,
exercisable for a period of 15 days from the date of delivery of the Purchaser
Notice B, to purchase the Remaining Purchaser Shares for the consideration per
share and on the terms and conditions set forth in the Notice. Such option shall
be exercised by delivery by a Founder of written notice to the Secretary of the
Company. Alternatively, a Founder may within the same 15-day period, notify the
Secretary of the Company of its desire to participate in the sale of the shares
on the terms set forth in the Notice, and the number of shares it wishes to
sell.

 

3.7 Failure to Fully Exercise Options; Co-Sale.

 

(a) If the Founders, the Company and the Purchaser do not exercise their options
to purchase all of the Offered Shares within the periods described in this
Agreement (the “Option Period”), then all options of the Company and the
Purchaser to purchase the Offered Shares, whether exercised or not, shall
terminate. If either or both of the Founders or the Purchaser has, pursuant to
Section 3.6, expressed a desire to sell shares in the transaction, then it shall
be entitled to do so pursuant to this Section 3.7.

 

(b) Promptly, on expiration of the Option Period, the Party wishing to
participate shall notify the Selling Party of the aggregate number of shares the
participating Party wishes to sell. The Selling Party shall use his best efforts
to cause the Offeror to purchase the shares the participating Party wishes to
sell. If the Offeror does not wish to purchase all of the shares made available
by the Selling Party and the participating Party, then the participating Party
and the Selling Party shall be entitled to sell, at the price and on the terms
and conditions set forth in the Notice (provided that the price set forth in the
Offer with respect to Common Stock shall be appropriately adjusted, if
necessary, based on the conversion ratio of any preferred shares to be sold), a
portion of the shares being sold to the Offeror, in the same proportion as
participating Party’s and the Selling Party’s ownership of shares bears to the
aggregate number of shares owned by the participating Party and the Selling
Party. The transaction contemplated by the Notice shall be consummated not later
than 60 days after the expiration of the Option Period.

 

3.8 Termination of Transfer Restrictions. The restrictions on the transfer of
Shares set forth in this Section 3 shall terminate upon the earlier of the
following events:

 

(a) The sale of all or substantially all of the assets or business of the
Company, by merger, sale of assets or otherwise (except a merger or
consolidation in which the holders of share capital of the Company immediately
prior to such merger or consolidation continue to hold immediately following
such merger or consolidation at least 80% by voting power of the share capital
of the surviving corporation); or

 

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(b) The closing of the Company’s IPO.

 

4. Term and Termination. This Agreement shall commence on the date first set
forth above and shall continue until the first to occur of (a) the date of an
IPO or (b) the date on which neither the Purchaser nor any of its Affiliates
holds any of the shares of the Company’s capital stock or any warrant for the
purchase of shares of the Company’s capital stock.

 

5. Miscellaneous.

 

5.1 Successors and Assigns. In accordance with the terms and conditions of
Section 3, this Agreement, and the rights and obligations of the Purchaser
hereunder, may be assigned by Purchaser to any to any Affiliate (such as a
partner, member, stockholder or subsidiary of the Purchaser), and, in each case,
such transferee shall be deemed a “Purchaser” for purposes of this Agreement;
provided that such assignment of rights shall be contingent upon the transferee
providing a written instrument to the Company notifying the Company of such
transfer and assignment and agreeing in writing to be bound by the terms of this
Agreement. Neither the Company nor the Founders may assign their rights under
this Agreement, other than in accordance with Section 3.

 

5.2 Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

 

5.3 Specific Performance. In addition to any and all other remedies that may be
available at law in the event of any breach of this Agreement, Purchaser shall
be entitled to specific performance of the agreements and obligations of the
Company hereunder and to such other injunctive or other equitable relief as may
be granted by a court of competent jurisdiction.

 

5.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the Turks and Caicos Islands, BWI (without
reference to the conflicts of law provisions thereof). To the extent that any
conflict may arise between the terms and conditions of this Agreement and the
terms and conditions of the Company’s Memorandum of Association or Articles of
Association or any other organizational document, the terms and conditions of
this Agreement shall prevail.

 

5.5 Notices. All notices, requests, consents, and other communications under
this Agreement shall be given in accordance with the provisions of the Stock
Subscription Agreement.

 

5.6 Amendments and Waivers. This Agreement may be amended or terminated and the
observance of any term of this Agreement may be waived with respect to all
parties to this Agreement (either generally or in a particular instance and
either retroactively or prospectively), with the written consent of the Parties.
No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.

 

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5.7 Counterparts; Facsimile Signatures. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of which shall constitute one and the same document. This Agreement may be
executed by facsimile signatures.

 

5.8 Section Headings and References. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit or restrict
the contractual obligations of the parties. Any reference in this agreement to a
particular section or subsection shall refer to a section or subsection of this
Agreement, unless specified otherwise.

 

Executed as of the date first written above.

 

COMPANY:

INTERNATIONAL BUSINESS ASSOCIATES LTD.

By:

 

 

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FOUNDERS:

 

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John Kean, Jr.

Address:

40 Mountain Top Road

Bernardsville, NJ 07924

 

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Stanley J. Brownell

Address:

P.O. Box 314

18 Old Turnpike Road

Oldwich, NJ 08858

PURCHASER:

INTERNATIONAL BUSINESS ASSOCIATES

HOLDING CO., LTD.

 

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Mikel D. Faulkner

President and Chief Executive Officer

 

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Exhibit A

 

Management Guidelines

 

The purpose of this document is to set forth the scope of powers and authority
granted to the President and the Chief Operating Officer of the Company named in
the foregoing agreement (hereinafter “IBA” or the “Company”). This list may be
amended from time to time by the Company’s Board of Directors. The above
referenced officers of the Company are hereby charged and empowered with the
responsibility to:

 

  (a) hire the employees of the Company, establish their salaries, duties and
obligations, and generally exercise employer’s rights over the employees of the
Company subject to Board adopted employment policies; allocate shares of the
bonus pool among employees as compensation;

 

  (b) carry out the management of the Company’s affairs in accordance with
applicable laws and generally represent the Company in its ordinary course of
business affairs;

 

  (c) prepare and submit the annual budgets for the Company to the Board of
Directors for approval;

 

  (d) prepare and submit, on a monthly basis, financial reports and any other
written reports for review by the Board of Directors in respect of the
activities of the Company;

 

  (e) prepare and maintain the secretarial records and books of account for the
Company;

 

  (f) create a system of financial controls that produces financial statements
in accordance with U.S. GAAP and that is auditable under generally accepted
auditing standards;

 

  (g) manage the daily operations of the Company’s bank account(s), issuance of
letters of credit and interactions with financial institutions;

 

  (h) determine, the timing and amounts of preferred stock to be redeemed
subject to Board approval; and

 

  (i) any other responsibilities that may be granted from time to time following
an affirmative vote of a majority of the Board of Directors and the above
referenced approval by shareholders.

 

In exercising their duties, the President and Chief Operating Officer shall
require all formal and binding documents to either contain the signature of both
the President and the COO or, in the absence of either the President or COO,
either the signature of the President or COO with the written approval of the
Board of Directors.

 

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The powers of the President and Chief Operating Officer in the day-to-day
management and administration of the Company shall be restricted in that they
shall not, without the prior approval of a majority of the Board of Directors of
the Company:

 

  (a) borrow any money in excess of $500,000 in respect of a single transaction
or a series of transactions not necessarily related to each other but in no
event shall the collective borrowings exceed $1 million without Board approval,
provided, however, that this limitation shall not apply to borrowings approved
in the Company’s Annual Budget;

 

  (b) incur capital expenditures in any single transaction or related series of
transactions in noncompliance with the Company’s Annual Capital Budget in excess
of $250,000, provided however that the such capital expenditures shall in the
aggregate not exceed $500,000 without Board approval;

 

  (c) issue or grant any suretyship, indemnity or guarantee for or on behalf of
the Company in excess of $750,000, provided however that the aggregate sureties,
indemnities and guarantees granted by the President and COO shall not exceed
$1.5 million without Board approval;

 

  (d) enter into any agreement under the terms of which all or a major part of
the business of the Company is sold, encumbered or subcontracted to a third
party in any manner;

 

  (e) encumber any capital assets of the Company;

 

  (f) acquire or dispose of any immovable property or any intellectual property
rights in excess of $250,000;

 

  (g) conclude any joint venture, partnership, or similar arrangement with any
third party;

 

  (h) commit the Company to long term (over twelve months) commitments outside
of the Company’s Approved Annual Budget in excess of $500,000, except
transactions concerning gas trade (acquisition, sale, nomination, transfer,
storage and distribution of gas);

 

  (i) enter into any agreement or contract, or a series of agreements or
contracts not necessarily related to each other, which would result in
obligations for the Company exceeding $500,000, except transactions concerning
gas trade (acquisition, sale, nomination, transfer, storage and distribution of
gas); and

 

  (j) with respect to (g) and (h) above, the aggregate obligations of all gas
trade obligations shall not exceed a VaR (Value at Risk) of $750,000 and such
limit shall be incorporated into the Company’s risk management policy.

 

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