Certificate of Designations


    Exhibit
      10.3

     

    CERTIFICATE
      OF DESIGNATIONS
      OF PREFERENCES AND RIGHTS OF

    SERIES
      A CONVERTIBLE PREFERRED STOCK

    OF

    PETRO
      RESOURCES CORPORATION

    a
      DELAWARE corporation

     

    _______________

     

    Each
      of
      the undersigned, Donald L. Kirkendall and Allen R. McGee, hereby certifies
      that:


     

    1.    He
      is the
      duly acting President and Secretary, respectively, of Petro Resources
      Corporation, a corporation organized and existing under the General Corporation
      Law of the State of Delaware (the “Corporation”).
      

     

    2.    Pursuant
      to the authority conferred upon the Board of Directors by the Certificate of
      Incorporation of the Corporation, as amended, and pursuant to the provisions
      of
      Section 151(g) of the General Corporation Law of the State of Delaware, said
      Board of Directors, at a regular meeting of the board of directors held on
      March
      15, 2007, adopted a resolution establishing the rights, preferences, privileges
      and restrictions of, and the number of shares comprising, the Corporation’s
      Series A Convertible Preferred Stock, which resolution is as follows:


     

    RESOLVED,
      that a series of Preferred Stock in the Corporation, having the rights,
      preferences, privileges and restrictions, and the number of shares constituting
      such series and the designation of such series, set forth below be, and it
      hereby is, authorized by the Board of Directors of the Corporation pursuant
      to
      authority given by the Corporation’s Certificate of Incorporation. 

     

    NOW,
      THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes and
      determines the designations of, the number of shares constituting, and the
      rights, preferences, privileges and restrictions relating to, a new series
      of
      Preferred Stock as follows:

     

    SERIES
      A CONVERTIBLE PREFERRED STOCK

     

    1.    Designation,
      Amount and Par Value.
      The
      series of Preferred Stock shall be designated as the Corporation’s Series A
      Convertible Preferred Stock (the “Series
      A Preferred Stock”),
      and
      the number of shares so designated shall be 3,000,000. Each share of
      Series A Preferred Stock shall have a par value of $0.01 and a stated value
      equal to $3.00 (the “Stated
      Value”).

     

    2.    Definitions.
      In
      addition to the terms defined elsewhere in this Certificate of Designations,
       the following terms have the meanings indicated:

     

    “Business
      Day”
means
      any day other than Saturday, Sunday and any day on which banks are required
      or
      authorized by law to be closed in the State of Texas. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    “Commission”
means
      the Securities and Exchange Commission.

     

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

     

    “Common
      Stock Equivalents”
means
      any securities of the Corporation or its subsidiaries which would entitle the
      holder thereof to acquire at any time Common Stock, including, without
      limitation, any debt, preferred stock, right, option, warrant, other instrument,
      or other subscription or purchase right with respect to Common Stock, that
      is at
      any time convertible into or exercisable or exchangeable for, or otherwise
      entitles the holder thereof to receive, Common Stock.

     

    “Conversion
      Price”
means
      $4.50, as adjusted from time to time in accordance with Section 15 hereof.
      

     

    “Dividend
      Rate”
means
      a
      percentage of the Stated Value per share, as adjusted for any stock split,
      stock
      dividend, stock combination or other similar transactions with respect to the
      Series A Preferred Stock, of 10% per annum, provided, that commencing on the
      one
      year anniversary of the Original Issue Date the percentage of the Stated Value
      per share shall be increased to 15% per annum. 

     

    “Eligible
      Market”
means
      any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ
      Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or
      the
      OTC Bulletin Board.

     

    “Holder”
means
      any holder of Series A Preferred Stock.

     

    “Junior
      Securities”
means
      the (i) Common Stock and all other equity or equity equivalent securities of
      the
      Corporation, and (ii) all equity or equity equivalent securities issued by
      the
      Corporation after the Original Issue Date that do not rank senior to or
      pari passu with
      the
      Series A Preferred Stock.

     

    “Original
      Issue Date”
means
      the date of the first issuance of any shares of the Series A Preferred
      Stock regardless of the number of transfers of any particular shares of
      Series A Preferred Stock and regardless of the number of certificates that
      may be issued to evidence such Series A Preferred Stock.

     

    “Person”
means
      any individual or corporation, partnership, trust, incorporated or
      unincorporated association, joint venture or other non-corporate business
      enterprise, limited liability company, joint stock company, trust, organization,
      business, labor union or government (or an agency or subdivision thereof) or
      any
      court or other federal, state, local or other governmental authority or other
      entity of any kind.

     

    “Series
      A Preferred Stock”
means
      the Series A Convertible Preferred Stock, $0.01 par value, of the Corporation,
      which is convertible into shares of Common Stock.

     

    “Underlying
      Shares”
means
      the shares of Common Stock issuable upon conversion of the Series A Preferred
      Stock.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    3.    Voting
      Rights.
      

     

    Except
      as
      otherwise required by law or hereunder, the Series A Preferred Stock shall
      vote
      together, and not separately as a class, with the Common Stock and all other
      shares of stock of the Corporation having general voting power. The holder
      of
      each share of Series A Preferred Stock shall be entitled to the number of votes
      equal to the number of shares of Common Stock into which such share of Series
      A
      Preferred Stock could be converted at the record date for determination of
      the
      stockholders entitled to vote on such matters, or, if no record date is
      established, at the date such vote is taken or the effective date of any written
      consent. Fractional votes of the holders of Series A Preferred Stock shall
      not,
      however, be permitted and fractional voting rights shall be (after aggregating
      all shares into which shares of Series A Preferred Stock held by each Holder
      could be converted) rounded to the nearest whole number (with one-half being
      rounded upward). Holders of Series A Preferred Stock shall be entitled to notice
      of any stockholders meetings in accordance with the Bylaws of the Corporation,
      as if such Holders owned shares of Common Stock. 

     

    Unless
      the consent or approval of a greater number of shares shall then be required
      by
      law, the affirmative vote of the holders of more than 50% of the outstanding
      shares of the Series A Preferred Stock shall be necessary to
      (1) authorize, increase the authorized number of shares of or issue
      (including on conversion or exchange of any convertible or exchangeable
      securities or by reclassification) any additional shares of Series A
      Preferred Stock or any shares of capital stock of the Corporation having any
      right, preference or priority ranking senior to or pari passu with Series A
      Preferred Stock, (2) authorize, adopt or approve any amendment to the
      Certificate of Incorporation, the Bylaws or this Certificate of Designations
      that would increase or decrease the par value of the shares of the Series A
      Preferred Stock, alter or change the powers, preferences or rights of the shares
      of Series A Preferred Stock or alter or change the powers, preferences or
      rights of any other capital stock of the Corporation if after such alteration
      or
      change such capital stock would be senior to or pari passu with Series A
      Preferred Stock, (3) amend, alter or repeal the Certificate of
      Incorporation, the Bylaws or this Certificate of Designations so as to affect
      the shares of Series A Preferred Stock adversely, including in connection
      with a merger, recapitalization, reorganization or otherwise, (4) authorize
      or issue any security convertible into, exchangeable for or evidencing the
      right
      to purchase or otherwise receive any shares of any class or classes of capital
      stock of the Corporation having any right, preference or priority ranking senior
      to or pari passu with Series A Preferred Stock or (5) pay or set apart
      for payment any dividend on any Junior Securities or make any payment on account
      of, or set apart for payment money for a sinking or other similar fund for,
      the
      purchase, redemption or other retirement of, any Junior Securities or any
      warrants, rights, calls or options exercisable for or convertible into any
      Junior Securities whether in cash, obligations or shares of Corporation or
      other
      property, and shall not permit any corporation or other entity directly or
      indirectly controlled by the Corporation to purchase or redeem any Junior
      Securities or any such warrants, rights, calls or options. 

     

    4.    Dividends.

     

    (a)    Holders
      shall be entitled to receive, out of funds legally available therefor, and
      the
      Corporation shall pay, cumulative dividends on the Series A Preferred Stock
      at
      the Dividend Rate per share. Dividends on the Series A Preferred Stock shall
      accrue daily commencing as of the Original Issue Date at the Dividend Rate
      then
      in effect, and shall be deemed to accrue from the Original Issue Date whether
      or
      not earned or declared and whether or not there are profits, surplus or other
      funds of the Corporation legally available for the payment of dividends.
      Dividends on the Series A Preferred Stock shall (i) be calculated on the
      basis of a 360-day year, and (ii) be payable quarterly in arrears
      commencing on June 30, 2007 and thereafter on each June 30,
      September 30, December 31 and March 31, except if such date is not a
      Business Day, such dividend shall be payable on the next succeeding Business
      Day
      (each, a “Dividend
      Payment Date”).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    (b)    The
      Corporation may pay required dividends (i) in cash or (ii) in shares of Series
      A
      Preferred Stock. In the event that the Corporation elects to pay dividends
      in
      shares of Series A Preferred Stock, the number of shares of Series A Preferred
      Stock to be issued to each Holder in respect of such dividend shall be
      determined by dividing the total dividend then payable to such Holder by the
      Stated Value, and rounding up to the nearest whole share, and the Corporation
      shall, on or before the fifth Business Day following the applicable Dividend
      Payment Date, issue and deliver to such Holder a certificate, registered in
      the
      name of the Holder or its designee, for the number of shares of Series A
      Preferred Stock to which the Holder shall be entitled. Notwithstanding any
      other
      provision of this Certificate of Designations, the Corporation shall not be
      entitled to pay dividends by issuing Series A Preferred Stock unless the Company
      has obtained stockholder approval, if required, for the issuance in accordance
      with the applicable rules and regulations of the Eligible Market.

     

    (c)    Except
      as
      authorized in accordance with Section 3, so long as any Series A Preferred
      Stock
      is outstanding, the Corporation shall not pay or set apart for payment any
      dividend on any Junior Securities or make any payment on account of, or set
      apart for payment money for a sinking or other similar fund for, the purchase,
      redemption or other retirement of, any Junior Securities or any warrants,
      rights, calls or options exercisable for or convertible into any Junior
      Securities whether in cash, obligations or shares of Corporation or other
      property, and shall not permit any corporation or other entity directly or
      indirectly controlled by the Corporation to purchase or redeem any Junior
      Securities or any such warrants, rights, calls or options.

     

    5.    Registration
      of Series A Preferred Stock.
      The
      Corporation shall register shares of the Series A Preferred Stock, upon records
      to be maintained by the Corporation for that purpose (the “Series
      A Preferred Stock Register”),
      in
      the name of the record Holders thereof from time to time. The Corporation may
      deem and treat the registered Holder of shares of Series A Preferred Stock
      as the absolute owner thereof for the purpose of any conversion hereof or any
      distribution to such Holder, and for all other purposes, absent actual written
      notice to the contrary from the registered Holder.

     

    6.    Registration
      of Transfers.
      The
      Corporation shall register the transfer of any shares of Series A Preferred
      Stock in the Series A Preferred Stock Register, upon surrender of certificates
      evidencing such shares to the Corporation at its address specified herein.
      Upon
      any such registration or transfer, a new certificate evidencing the shares
      of
      Series A Preferred Stock so transferred shall be issued to the transferee and
      a
      new certificate evidencing the remaining portion of the shares not so
      transferred, if any, shall be issued to the transferring Holder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    7.    Liquidation.

     

    (a)    In
      the
      event of any liquidation, dissolution or winding up of the Corporation, either
      voluntary or involuntary (a “Liquidation
      Event”),
      the
      Holders of Series A Preferred Stock shall be entitled to receive, prior and
      in preference to any distribution of any of the assets or surplus funds of
      the
      Corporation to the holders of Junior Securities by reason of their ownership
      thereof, an amount per share in cash equal to the greater of (x) the Stated
      Value for each share of Series A Preferred Stock then held by them (as adjusted
      for any stock split, stock dividend, stock combination or other similar
      transactions with respect to the Series A Preferred Stock), plus all accrued
      and
      unpaid dividends on such Series A Preferred Stock as of the date of such event,
      or (y) the amount payable per share of Common Stock which such Holder of Series
      A Preferred Stock would have received if such Holder had converted to Common
      Stock immediately prior to the Liquidation Event all of the shares of Series
      A
      Preferred Stock then held by such Holder together with all accrued but unpaid
      dividends on such Series A Preferred Stock as of the date of such event (the
      “Series
      A Stock Liquidation Preference”).
      If,
      upon the occurrence of a Liquidation Event, the funds thus distributed among
      the
      holders of the Series A Preferred Stock shall be insufficient to permit the
      payment to such Holders of the full Series A Stock Liquidation Preference,
      then
      the entire assets and funds of the Corporation legally available for
      distribution shall be distributed ratably among the Holders of the Series A
      Preferred Stock in proportion to the aggregate Series A Stock Liquidation
      Preference that would otherwise be payable to each of such Holders. Such
      payment shall constitute payment in full to the holders of the Series A Stock
      upon the Liquidation
      Event.
      After
      such payment shall have been made in full, or funds necessary for such payment
      shall have been set aside by the Corporation in trust for the account of the
      holders of Series A Preferred Stock, so as to be immediately available for
      such
      payment, such holders of Series A Preferred Stock shall be entitled to no
      further participation in the distribution of the assets of the Corporation.
      The
      sale
      of all or substantially all of the assets of the Corporation, or merger, tender
      offer or other business combination to which the Corporation is a party in
      which
      the voting stockholders of the Corporation prior to such transaction do not
      own
      a majority of the voting securities of the resulting entity or by which any
      person or group acquires beneficial ownership of 50% or more of the voting
      securities of the Corporation or resulting entity shall, for the purposes of
      this Certificate of Designations, be deemed to be a Liquidation
      Event.

     

    (b)    In
      the
      event of a Liquidation Event, following completion of the distributions required
      by the first sentence of paragraph (a) of this Section 7, if assets or surplus
      funds remain in the Corporation, the holders of the Junior Securities shall
      share in all remaining assets of the Corporation, in accordance with the General
      Corporation Law of Delaware and the Certificate of Incorporation of the
      Corporation, as amended.

     

    8.    Conversion.
      At the
      option of any Holder from time to time, all or any portion of the Series A
      Preferred Stock held by such Holder may be converted into Common Stock based
      on
      the Conversion Price then in effect for such Series A Preferred Stock. A Holder
      may convert Series A Preferred Stock into Common Stock pursuant to this
      paragraph at any time and from time to time after the Original Issue Date,
      by
      delivering to the Corporation (i) a Conversion Notice, in the form attached
      hereto as Exhibit “A”, appropriately completed and duly signed, and (ii) the
      original certificate(s) evidencing the Series A Preferred Stock being converted.
      The date any such Conversion Notice and original certificate(s) are delivered
      to
      the Corporation (as determined in accordance with the notice provisions hereof)
      is a “Conversion
      Date.”

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    9.    Mechanics
      of Conversion.

     

    (a)    The
      number of Underlying Shares issuable upon any conversion of a share of Series
      A
      Preferred Stock hereunder shall equal (i) the Stated Value of such share of
      Series A Preferred Stock to be converted (as adjusted for any stock split,
      stock
      dividend, stock combination or other similar transactions with respect to the
      Series A Preferred Stock), divided by the Conversion Price on the Conversion
      Date, plus (ii) the amount of any accrued but unpaid dividends on such share
      of
      Series A Preferred Stock through the Conversion Date, divided by the Conversion
      Price on the Conversion Date.

     

    (b)    Upon
      conversion of any share of Series A Preferred Stock, the Corporation shall
      promptly (but in no event later than three Business Days after the Conversion
      Date) issue or cause to be issued and cause to be delivered to or upon the
      written order of the Holder and in such name or names as the Holder may
      designate a certificate for the Underlying Shares issuable upon such conversion.
      The Holder, or any Person so designated by the Holder to receive Underlying
      Shares, shall be deemed to have become the holder of record of such Underlying
      Shares as of the Conversion Date. Upon surrender of a certificate following
      one
      or more partial conversions, the Corporation shall promptly deliver to the
      Holder a new certificate representing the remaining shares of Series A Preferred
      Stock. Subject to the request of the Holder and provided that (a) a registration
      statement covering the resale of the Underlying Shares, and which names the
      Holder as a selling shareholder, is effective under the Securities Act and
      (b)
      the Holder confirms its agreement to comply with the prospectus delivery
      requirements of the Securities Act with respect to such Underlying Shares,
      the
      Company will instruct The Depository Trust Corporation (“DTC”)
      to
      credit the Underlying Shares to which the Holder shall be entitled to the
      Holder’s or its designee’s balance account with DTC through its
      Deposit/Withdrawal at Custodian system.

     

    10.   Redemption
      Rights.

     

    (a)    Optional
      Redemption.
      At any
      time after the Original Issue Date, the Corporation shall have the right to
      repurchase (an “Optional
      Redemption”)
      all or
      any portion of the then outstanding shares of Series A Preferred Stock at a
      price equal to the Stated Value (as adjusted for any stock split, stock
      dividend, stock combination or other similar transactions with respect to the
      Series A Preferred Stock) of such shares of Series A Preferred Stock, plus
      all
      accrued but unpaid dividends thereon to the date of payment (the “Redemption
      Price”),
      in
      cash. 

     

    (b)    Mandatory
      Redemption.
      (i) On
      October 2, 2008 (the “Mandatory
      Redemption Date”),
      the
      Corporation shall repurchase all of the outstanding shares of Series A Preferred
      Stock at the Redemption Price, in cash (the “Mandatory
      Redemption”).

     

    (c)    Early
      Redemption.
      To the
      extent that from time to time following the initial issuance of Series A
      Preferred Stock the Corporation issues or sells equity securities at a price
      per
      share of $3.00 or more (as adjusted for any stock dividend, stock split, stock
      combination, reclassification or similar transaction) or issues or sells Common
      Stock Equivalents with a price per share for which one share of Common Stock
      is
      issuable upon the exercise, conversion or exchange of any Common Stock
      Equivalents of $3.00 or more, resulting in net proceeds to the Corporation
      in
      excess of $45,000,000 in the aggregate for all such issuances, then the
      Corporation shall use 50% of any net proceeds in excess of $45,000,000 to redeem
      as many outstanding shares of Series A Preferred Stock at the Redemption Price,
      as equal such excess proceeds (an “Early
      Redemption”).
      For
      purposes of this Section 10(c), the “price per share for which one share of
      Common Stock is issuable upon the exercise, conversion or exchange” shall equal
      the sum of the highest amounts of consideration (if any) received or receivable
      by the Corporation with respect to any one share of Common Stock (i) upon
      the issuance, grant or sale of the Common Stock Equivalents, (ii) upon
      exercise, conversion or exchange of the Common Stock Equivalents, or
      (iii) upon conversion or exchange or exercise of any Common Stock
      Equivalents issuable upon the exercise of a Common Stock
      Equivalent.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    (d)    Notice.
      The
      Corporation must deliver notice of an Optional Redemption or Early Redemption
      to
      the Holders at least thirty calendar days prior to the date of such Optional
      Redemption (the “Optional
      Redemption Date”)
      or
      Early Redemption (the “Early
      Redemption Date”).
      Such
      notice shall state the date of the Optional Redemption Date or Early Redemption
      Date (as applicable), the Redemption Price, the number of shares of Series
      A
      Preferred Stock to be redeemed, and that the Holder is to surrender to the
      Corporation, at the place or places where certificates for shares of Series
      A
      Preferred Stock are to be surrendered for redemption, in the manner and at
      the
      price designated, the certificate or certificates representing the shares of
      Series A Preferred Stock to be redeemed. Upon receipt of notice of an Optional
      Redemption or an Early Redemption, each Holder shall have the option to convert
      any Series A Preferred Stock held by such Holder into Common Stock, in
      accordance with Sections 8 and 9 hereof, at any time within thirty calendar
      days of receipt of such notice.

     

    (e)    Mechanics
      of Redemption.
      Upon
      receipt of payment of the Redemption Price by the Holders of Series A Preferred
      Stock in the event of an Optional Redemption, a Mandatory Redemption or an
      Early
      Redemption, each Holder will deliver the certificate(s) evidencing the Series
      A
      Preferred Stock to be redeemed by the Corporation, unless such Holder is
      awaiting receipt of a new certificate evidencing such shares from the
      Corporation pursuant to another provision hereof. At any time on or prior to
      the
      Optional Redemption Date, the Mandatory Redemption Date or the Early Redemption
      Date, the Holders may convert any or all of the shares of Series A Preferred
      Stock, and the Corporation shall honor any such conversions in accordance with
      the terms hereof.

     

    11.   Reservation
      of Common Stock.
      The
      Corporation shall at all times reserve and keep available for issuance upon
      the
      conversion of shares of Series A Preferred Stock, such number of its authorized
      but unissued shares of Common Stock as will from time to time be sufficient
      to
      permit the conversion of all outstanding shares of Series A Preferred Stock,
      and
      shall take all action to increase the authorized number of shares of Common
      Stock if at any time there shall be insufficient authorized but unissued shares
      of Common Stock to permit such reservation or to permit the conversion of all
      outstanding shares of Series A Preferred Stock; provided,
      that
      the Holders vote such shares in favor of any such action that requires a vote
      of
      stockholders.

     

    12.   Charges,
      Taxes and Expenses.
      The
      issuance of certificates for shares of Series A Preferred Stock and for
      Underlying Shares issued upon conversion of (or otherwise in respect of) the
      Series A Preferred Stock shall be made without charge to the Holders for any
      issue or transfer tax, withholding tax, transfer agent fee or other incidental
      tax or expense in respect of the issuance of such certificates, all of which
      taxes and expenses shall be paid by the Corporation; provided,
      however,
      that
      the Corporation shall not be required to pay any tax that may be payable in
      respect of any transfer involved in the registration of any certificates for
      Common Stock or Series A Preferred Stock in a name other than that of the
      Holder. The Holder shall be responsible for all other tax liability that may
      arise as a result of holding or transferring the Series A Preferred Stock or
      receiving Underlying Shares in respect of the Series A Preferred
      Stock.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    13.   Replacement
      Certificates.
      If any
      certificate evidencing Series A Preferred Stock or Underlying Shares is
      mutilated, lost, stolen or destroyed, the Corporation shall issue or cause
      to be
      issued in exchange and substitution for and upon cancellation thereof, or in
      lieu of and substitution for such certificate, a new certificate, but only
      upon
      receipt of evidence reasonably satisfactory to the Corporation of such loss,
      theft or destruction and customary and reasonable indemnity, if requested.
      Applicants for a new certificate under such circumstances shall also comply
      with
      such other reasonable regulations and procedures and pay such other reasonable
      third-party costs as the Corporation may prescribe.

     

    14.   Reservation
      of Underlying Shares.
      The
      Corporation covenants that it shall at all times reserve and keep available
      out
      of the aggregate of its authorized but unissued and otherwise unreserved Common
      Stock, solely for the purpose of enabling it to issue Underlying Shares as
      required hereunder, the number of Underlying Shares which are then issuable
      and
      deliverable upon the conversion of (and otherwise in respect of) all outstanding
      Series A Preferred Stock (taking into account the adjustments of Section 14),
      free from preemptive rights or any other contingent purchase rights of persons
      other than the Holder. 

     

    15.   Certain
      Adjustments.
      The
      Conversion Price is subject to adjustment from time to time as set forth in
      this
      Section 15.

     

    (a)    Stock
      Dividends and Splits.
      If the
      Corporation, at any time while any shares of Series A Preferred Stock are
      outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes
      a
      distribution on any class of capital stock that is payable in shares of Common
      Stock, (ii) subdivides outstanding shares of Common Stock into a larger
      number of shares, or (iii) combines outstanding shares of Common Stock into
      a smaller number of shares, then in each such case the Conversion Price shall
      be
      multiplied by a fraction of which the numerator shall be the number of shares
      of
      Common Stock outstanding immediately before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding
      immediately after such event. Any adjustment made pursuant to clause (i) of
      this
      paragraph shall become effective immediately following the close of business
      on
      the record date for the determination of stockholders entitled to receive such
      dividend or distribution, and any adjustment pursuant to clause (ii) or (iii)
      of
      this paragraph shall become effective immediately following the close of
      business on the effective date of such subdivision or combination.

     

    (b)    Fundamental
      Transactions.
      Without
      limiting the provisions of Section 7 hereof, if, at any time while any shares
      of
      Series A Preferred Stock are outstanding, (i) the Corporation effects any merger
      of the Corporation into or consolidation of the Corporation with another Person,
      (ii) the Corporation effects any sale of all or substantially all of its assets
      in one or a series of related transactions, or (iii) the Corporation effects
      any
      reclassification of the Common Stock or any compulsory share exchange pursuant
      to which the Common Stock is effectively converted into or exchanged for other
      securities, cash or property (other than as a result of a subdivision or
      combination of shares of Common Stock covered by Section 15(a) above) (in any
      such case, a “Fundamental
      Transaction”),
      then
      upon any subsequent conversion of Series A Preferred Stock, each Holder shall
      have the right to receive, for each Underlying Share that would have been
      issuable upon such conversion absent such Fundamental Transaction, the same
      kind
      and amount of securities, cash or property as it would have been entitled to
      receive upon the occurrence of such Fundamental Transaction if it had been,
      immediately prior to such Fundamental Transaction, the record holder of such
      Underlying Shares immediately prior to such record date (the “Alternate
      Consideration”).
      For
      purposes of any such conversion, the determination of the Conversion Price
      shall
      be appropriately adjusted to apply to such Alternate Consideration based on
      the
      amount of Alternate Consideration issuable in respect of one share of Common
      Stock in such Fundamental Transaction, and the Corporation shall apportion
      the
      Conversion Price among the Alternate Consideration in a manner reasonably
      acceptable to the holders of more than 50% of the outstanding shares of Series
      A
      Preferred Stock reflecting the relative value of any different components of
      the
      Alternate Consideration. If holders of Common Stock are given any choice as
      to
      the securities, cash or property to be received in a Fundamental Transaction,
      then each Holder shall be given the same choice as to the Alternate
      Consideration it receives upon any conversion of Series A Preferred Stock
      following such Fundamental Transaction. To the extent necessary to effectuate
      the foregoing provisions, any successor to the Corporation or surviving entity
      in such Fundamental Transaction shall issue to the Holder a new series of
      preferred stock consistent with the foregoing provisions and evidencing the
      Holders’ right to convert such preferred stock into Alternate Consideration. The
      terms of any agreement pursuant to which a Fundamental Transaction is effected
      shall include terms requiring any such successor or surviving entity to comply
      with the provisions of this Section 15 and insuring that the Series A Preferred
      Stock (or any such replacement security) will be similarly adjusted upon any
      subsequent transaction analogous to a Fundamental Transaction.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    (c)    Calculations.
      All
      calculations under this Section 15 shall be made to the nearest cent or the
      nearest 1/100th of a share, as applicable. The number of shares of Common Stock
      outstanding at any given time shall not include shares owned or held by or
      for
      the account of the Corporation, and the disposition of any such shares shall
      be
      considered an issue or sale of Common Stock.

     

    (d)    Notice
      of Adjustments.
      Upon
      the occurrence of each adjustment pursuant to this Section 15, the Corporation
      at its expense will promptly compute such adjustment in accordance with the
      terms hereof and prepare a certificate describing in reasonable detail such
      adjustment and the transactions giving rise thereto, including all facts upon
      which such adjustment is based. Upon written request, the Corporation will
      promptly deliver a copy of each such certificate to each Holder.

     

    (e)    Notice
      of Corporate Events.
      If the
      Corporation (i) declares a dividend or any other distribution of cash,
      securities or other property in respect of its Common Stock, including, without
      limitation, any granting of rights or warrants to subscribe for or purchase
      any
      capital stock of the Corporation or any subsidiary, or (ii) authorizes or
      approves, enters into any agreement contemplating or solicits stockholder
      approval for any Liquidation Event or Fundamental Transaction then the
      Corporation shall deliver to each Holder a notice which shall specify (A) the
      record date
      for the
      purposes of such dividend, distribution of cash, securities or property or
      vote
      of the stockholders of the Company, or if a record is not to be taken, the
      date
      as of which the holders of shares of Common Stock of record to be entitled
      to
      such dividend, distribution of cash, securities or other property or vote of
      the
      stockholders is to be determined, (B) the date on which such Liquidation Event
      or Fundamental Transaction is expected to become effective, and (C)
      the
      material terms and conditions of such transaction, at least ten Business Days
      prior to the applicable record or effective date on which a Person would need
      to
      hold Common Stock in order to participate in or vote with respect to such
      transaction, and the Corporation will take all steps reasonably necessary in
      order to insure that each Holder is given the practical opportunity to convert
      its Series A Preferred Stock prior to such time so as to participate in or
      vote
      with respect to such transaction; provided, however, that the failure to deliver
      such notice or any defect therein shall not affect the validity of the corporate
      action required to be described in such notice. 

     

    16.   Fractional
      Shares.
      The
      Corporation shall not be required to issue or cause to be issued fractional
      Underlying Shares upon conversion of Series A Preferred Stock. If any fraction
      of an Underlying Share would, except for the provisions of this Section, be
      issuable upon conversion of Series A Preferred Stock, the number of Underlying
      Shares to be issued will be rounded up to the nearest whole share.

     

    17.   Notices.
      Any and
      all notices or other communications or deliveries hereunder (including without
      limitation any Conversion Notice) shall be in writing and shall be deemed given
      and effective on the earliest of (i) the date of transmission, if such notice
      or
      communication is delivered via facsimile at the facsimile number specified
      in
      this Section prior to 3:30 p.m. (Houston time) on a Business Day, (ii) the
      next
      Business Day after the date of transmission, if such notice or communication
      is
      delivered via facsimile at the facsimile number specified in this Section on
      a
      day that is not a Business Day or later than 3:30 p.m. (Houston time) on any
      Business Day, (iii) the Business Day following the date of mailing, if sent
      by
      nationally recognized overnight courier service, or (iv) upon actual receipt
      by
      the party to whom such notice is required to be given. The addresses for such
      communications shall be: (i) if to the Corporation, to 5100 Westheimer,
      Suite 200, Houston, Texas 77056, facsimile: (713) 968-9283, attention Chief
      Executive Officer, or (ii) if to a Holder, to the address or facsimile number
      appearing on the Corporation’s stockholder records or such other address or
      facsimile number as such Holder may provide to the Corporation in accordance
      with this Section.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    18.   Dispute
      Resolution.
      In the
      case of a dispute as to the determination of the fair value of consideration
      other than cash or securities, or the arithmetic calculation of the Conversion
      Rate or the Redemption Price, the Corporation shall, as soon as practicable
      upon
      discovery, and following a good faith effort to resolve the dispute with the
      Holder, submit (a) the disputed determination of the fair value of
      consideration other than cash or securities to an independent, reputable
      investment bank selected by the Corporation or (b) the disputed arithmetic
      calculation of the Conversion Rate or the Redemption Price to the Corporation’s
      independent, outside accountant. The Corporation, at the Corporation’s expense,
      shall cause the investment bank or the accountant, as the case may be, to
      perform the determinations or calculations and notify the Corporation and the
      Holder of the results no later than five (5) Business Days from the time it
      receives the disputed determinations or calculations. Such investment bank’s or
      accountant’s determination or calculation, as the case may be, shall be binding
      upon all parties absent demonstrable error.

     

    19.   Miscellaneous.

     

    (a)    The
      headings herein are for convenience only, do not constitute a part of this
      Certificate of Designations and shall not be deemed to limit or affect any
      of
      the provisions hereof.

     

    (b)    No
      provision of this Certificate of Designations may be amended, except in a
      written instrument signed by the Company and Holders of at least 60% of the
      shares of Series A Preferred Stock then outstanding.

     

    (c)    The
      Series A Preferred Stock is (i) senior to all other equity interests in the
      Company outstanding as of the Original Issue Date in right of payment, whether
      with respect to dividends or upon liquidation or dissolution, or otherwise
      and
      (ii) will be senior to all other equity or equity equivalent securities issued
      by the Corporation after the Original Issue Date.

     

    (d)    Any
      of
      the rights of the Holders of Series A Preferred Stock set forth herein may
      be
      waived by the affirmative vote of Holders of more than 50% of the shares of
      Series A Preferred Stock then outstanding. No waiver of any default with respect
      to any provision, condition or requirement of this Certificate of Designations
      shall be deemed to be a continuing waiver in the future or a waiver of any
      subsequent default or a waiver of any other provision, condition or requirement
      hereof, nor shall any delay or omission of either party to exercise any right
      hereunder in any manner impair the exercise of any such right. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    IN
      WITNESS WHEREOF, the Corporation has caused this Certificate of Designations
      to
      be duly executed as of this 27th
      day of
      March, 2007.

     

    
      	 	PETRO RESOURCES
              CORPORATION 
	 	 
	 	By:             
              /s/
              Donald L.
              Kirkendall                                                            
               
	 	                  
              Donald L. Kirkendall, President 
	 	 
	 	By:             
              /s/
              Allen R.
              McGee                                                                    
               
	 	                   
              Allen R. McGee, Secretary 


    

    


     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
      A

     

    FORM
      OF CONVERSION NOTICE

     

    (To
      be
      executed by the registered Holder

     

    in
      order
      to convert shares of Series A Preferred Stock)

     

    The
      undersigned hereby elects to convert the number of shares of Series A
      Convertible Preferred Stock indicated below into shares of common stock, $0.01
      par value (the “Common
      Stock”),
      of
      Petro Resources Corporation, a Delaware corporation (the “Corporation”),
      according to the conditions hereof, as of the date written below.

     

    
      	 	__________________________________________________________ 
	 	
              Date
                to Effect Conversion

            
	 	 
	 	__________________________________________________________  
	 	
              Number
                of shares of Series A Preferred Stock owned prior to Conversion
                

            
	 	 
	 	__________________________________________________________  
	 	
              Number
                of shares of Series A Preferred Stock to be Converted

            
	 	 
	 	__________________________________________________________  
	 	
              Stated
                Value of shares of Series A Preferred Stock to be Converted
                

            
	 	 
	 	__________________________________________________________  
	 	
              Number
                of shares of Common Stock to be Issued

            
	 	 
	 	__________________________________________________________  
	 	
              Applicable
                Conversion Price 

            
	 	 
	 	__________________________________________________________  
	 	
              Number
                of shares of Series A Preferred Stock subsequent to
                Conversion

            
	 	 
	 	__________________________________________________________  
	 	
              Name
                of Holder

            
	 	
              By:
                _______________________________________________________________ 

            
	 	
              Name:
                _____________________________________________________________

            
	 	
              Title:
                ______________________________________________________________